It is with mixed feelings that I’m writing this net worth report. I say mixed feelings because on one side, I’ve managed to drop my debt this month. I was able to pay off $1,284 in debts in a month which it pretty good! It’s very good considering everything that’s happened over the past 30 months (I’ll get to that in a second). But the problem is that I was expecting a huge income tax refund this year (roughly 6K) that was meant to pay for my pool (for which I will owe $5,500 on it starting in June). Unfortunately, my tax return wasn’t that big…

The Complexity of Taxes in Quebec

There are lot things I like about living in the Belle Province (I mean besides our big student babies who boycott University for 2 months). Unfortunately, taxes are far from being one! Last year, I received a tax refund of 2K. This year, I put 10K in my RRSP (as compared to the usual 3.5K-4K I’m allowed). This is why I was expecting a much bigger tax refund. But what I didn’t consider (since I’m not doing my own taxes) was the other tax credit that I was eligible for last year and that I’m not this year. Guess what; the tax credit totals roughly 3K! So I’ll let you do the math…. My refund check is slightly under 2K instead of being slightly over 5K! So I’ll have to keep my pool loan until next January so I can pay it off with my year-end bonus… Man, I just can’t wait to have this darn bonus to spend to enjoy myself instead of paying off debts each year!

Having said that, I should have definitely called my accountant prior to making my purchase! At least, I’m not going anywhere on vacation this year so my “vacation budget” can be allocated to pay a part of the pool!

Tons of Expenses in April!

Along with my regular budget, I ran into extra expenses once again. But this time, it was quite brutal! It all started with $450 going towards municipal taxes. I was completely aware of this one but it always takes a hit on my monthly budget since I using my employer’s stock (once or twice a year) to pay for my taxes. Since I already paid $900 in taxes and haven’t cashed a single stock yet, this expense should have shown on my line of credit. But the next expense was unexpected and hurt a lot… cars!

In a single week, I had to pay for $2K in car repairs. When I wrote last month that my car was going to be worth less than a Caramilk, I didn’t think it was going to happen so fast! Well this is what happens when you drive 50,000Km in a single year because you are working at 85km from home! It’s a blessing that I’m now working 4km from home! This should not happen again.

So my total “extra expenses” for this month is $2,467. Considering that I just deposited my income tax refund of $1,945 and my current debt level is $1,284 less than the previous month, I’m pretty happy about April. This means that my monthly spending has dropped enough so I could “technically” (without any bad luck!) decrease my debts by $1,806 per month ($1,284+$2,467-$1,945). This is perfect since my main personal finance goal for 2012 is to drop my total debts below the $300,000 level.

My Secret Debt Killer Weapon

As my plan starts to take place and that I seem to be able to pay for 16K of debts by the end of the year, I’m also counting on 2 secret debt killer weapons. The first one is my employer’s stocks which I cash in annually to pay off some of my debts. I currently invest $500 per month and my employer is giving me a “free” 25% contribution. This why my employer stock goes up so fast. It’s because I have $625 per month of new money coming in. I’m trying to not touch this account for the first time this year and trying to accumulate them. However, if I really need extra money to pay off my debts, I should have around $9,500 in this account by the end of the year. 75% of this amount is redeemable once a year (in order to continue the program). So it makes $7,125 available for me to pay additional debts.

My second secret debt killer weapon is not so secret as you know about it already; it’s my year-end bonus. By switching job, I explained that I should not be making a crazy bonus this year. However, now that I’ve started my new job and that I’m already bringing in results, I might be able to get a decent bonus! I didn’t think that it was possible because I’m starting a whole new book of clients, but apparently, everything is possible! So I might be able to count on a few extra thousand to put towards my debts as well.

Looking Forward to May!

I’m definitely looking forward to May right now as I hope that I’ll have a “normal” month. It has been a shaky start to the year with our newborn, a drop in income due to my parental leave and over 3,5K in car repairs (next time, I’m going to sell my RX-8 and buy a skateboard!). I hope that I’ll be able to post a 1,8K decrease in debts for the first time on this blog! Wish me luck!

Assets:

Liabilities :

If you liked this articles, you might want to sign for my FULL RSS FEEDS. Then, you will get my daily post to your email and can read it at any time. To subscribe CLICK HERE

Related Post

I’m a numbers guy.

I work in finance, I blog about finance, you can say without a doubt that I like finance .

You can also assume that I like money too. After all, you can’t evolve in a financial world 24/7 without the love for money. People that don’t know me will tell you that I love money and I’m “that kind of guy”. But these people are wrong. There is a huge difference in liking a great lifestyle and liking money. The problem is that where we live, a great lifestyle is synonymous with making money. If you want to live the good life, you need more than spare change in your pockets.

I’m not greedy, but I use money to motivate me

Most of my motivations in life are not directly related to money. But I know that the generator of all my dreams will be money.

I truly enjoy having my wife at home so she can take care of our family.

I truly enjoy the fact that we go on vacation every year and spend awesome moments together.

I want to show my kids Disney World next year.

These goals are based on my main values: family and enjoying life. However, if I don’t make enough money, my wife will have to go back to work and we will live a stressful life. We won’t go to Virginia Beach or elsewhere for vacation and Amy won’t be able to pick up shells on the beach. We won’t go to Disney and I won’t be able to see the excitement in the eyes of my kids.

Since I’m a numbers guy, the easiest way to measure if I can achieve one of my goals or not is to know how much money I make and how I manage it. This year, I’m focusing on knowing where my money goes instead of making more. I know that money will come, but I certainly need to know how to use it efficiently!

Greed Vs Money

By definition, greed is the love of money. I guess the problem with greed is the fact that putting money or making money a fundamental value. While greed is a poor motivator, money can be an awesome coach!

Greed can push you to do some shady things in order to reach your goal. It’s normal since money comes as the top priority. However, if you simply use money as a goal, as numbers game, it becomes a healthy way to stay motivated.

Most people see money as something bad, something you should not be looking for. They reference money as greed but I think there is a sane way to use money as one of your main sources of motivation. It’s just a matter of the importance you give money in your mind and in your heart. One should not be discouraged because of a lack of money. He should use this as a source of motivation; as a goal to achieve.

What I Like So Much about Money

There is something truly amazing about money. And it’s not related to what it can bring you or the power it holds. The true amazing thing about money is that it’s measurable! There is nothing like a number to set a goal! Let’s take an example. If one of your goals is to bring your family to Disney World, you have 2 ways of dealing with it:

#1 You hope that you will have “enough” money saved and seek a good deal in January

#2 You check right away how much it costs and make a savings plan for it

I’ll let you guess which strategy will work better for most goals . With option #2, you will be able to track your goal on a monthly basis and see how well (or bad) you are doing. This is the magic about money; you simply have to follow a number! It’s simple, it’s easy and it’s not related to emotions (such as “I really want to do this” instead of thinking “Can I afford it?”). There is nothing easier than putting a trip to Disney on your credit card. But hell your trip will become expensive!

Another Example

Before I published my net worth on my blog, I didn’t follow it on paper. Therefore, I was simply making money, spending money and thinking that I might be doing well since my pay check was increasing from one year to another. But the past 12 months showed me that I spend too much and I should revise my expenses.

The fact of publicly reporting my net worth is a means for me to know if I’m heading in the right direction or not. The blog is a powerful tool as I can count on YOU to tell me that I’m doing well or not! Even though I know where to go, your comments are definitely an additional source of motivation for me.

I think that when we can simplify most of our goals to a dollar sign, it makes everything easier. It’s very hard to reach “financial independence” but it’s much easier to reach an “alternative source of income generating 40K/year” which would grant one financial independence. What do you think? Do you use money as a motivator?

image credit

If you liked this articles, you might want to sign for my FULL RSS FEEDS. Then, you will get my daily post to your email and can read it at any time. To subscribe CLICK HERE

Related Post

After telling you that I won’t be disclosing all my blog income info yesterday, it feels awkward to continue with a “Net Worth” article where I tell you exactly what happened with my wallet this month… Oh well, I guess I’ll get used to it. On the other hand, I will still be sharing a lot of info about my sites, just not sharing what could hurt me.

On that topic, before I start with my update, I’d have to say that a talk I had with a well-known blogger back at the FINCON11 should have enlightened me on revealing my stuff. Since this blogger shares most of his stuff online, he admitted that a lot of people who copy his model and therefore faces a lot more competition than he used too. I was expecting this, but I never expected to create enemies… oh well, enough said! Now let’s get back to the topic of the day:

How I Survived a Pay Cut During My Parental Leave

February and March were 2 tough months in terms of personal finance since we had our 3^rd child. While I experienced a significant pay cut due to my parental leave, my level of expenses increased during the same period. This is definitely not a good combination when you are trying to pay down your debts .

March would have been negative as well if I hadn’t paid myself a dividend from my online company. Instead of “suffering” from the pay cut, I decided to pull a few bucks out of my company to compensate for the loss. This was great timing for a dividend because I was able to pay off about $1,500 in debt instead of growing my debt by about $1,500. Yup, this was how much my pay was cut for a month. The parental leave pays up to 75% of your salary but it is capped to a maximum pay check (which I obviously exceed).

During the same month, I decided to buy a treadmill and start working out at home instead of going to a gym. I have been working out for the past 3 years with a “man of steel” consistency. I am not afraid of training 4 days a week at home and was looking for ways to save money. So from now on, I’ll be saving about $50/month from my gym membership. The problem is that before I see this money being saved, I had to pay $600 for the treadmill. I’ll eventually buy myself a set of weights as well in order to be able to do my full work out. So far, I’ve been running 5km (roughly 3 miles) 4 days a week for the past 2 weeks. Since I have plenty of space in my basement, I can build a complete gym without taking space away from anyone else in the family. I must admit that I really like working out at home: I save time and money… it seems like the perfect solution!

In 12 Months, My Car Will Be Worth Less Than a Caramilk

When I updated my assets this month, I realized that next year, for my March 2013 net worth update, I’ll put a $0 value for my RX-8! That’s crazy isn’t it? This is because I amortize $400/month in value since I’ve purchased the car. I think it is fair as a car value should never represent the bulk of your net worth. On the other hand, I don’t think it should penalize your net worth either. This is why I’ve put an equal value to my Tribute and the loan attached to it. Since I’ve paid my RX-8 cash, I thought I would just cut $400 of value each month. The good news is that my car is probably worth about $6,000 – $7,000 today and will certainly still be worth $5,000 next year when it will show a $0 value. The day I will sell it, it will provide a small bump in my assets. But I don’t expect to sell it until it reaches 200,000 km. Since it is at 140K now and I only use it to go to work (it’s 5km away from my house), I guess I’m good for many years .

When you do your net worth, do you include your car? How do you manage its value and the loan?

Here’s the detail of my net worth for March:

Assets:

Liabilities:

Net Worth: $202,267 (+0.42%)

If you liked this articles, you might want to sign for my FULL RSS FEEDS. Then, you will get my daily post to your email and can read it at any time. To subscribe CLICK HERE

Related Post

Doh! I knew this would happen!

Say what! After this whole big speech about “I’m going to concentrate on paying down my debts”, I’ve been fooling around again?

I’ll reassure you right away, this is not the case. My finances are under control, but…

Because there is always a “but”….

We had our 3^rd child at the beginning of the month! This is great news for my wife and I but not for our budget . In fact, a kid means:

-          2 days of dining out expense for breakfast, lunch and supper (‘cause the hospital food is completely disgusting)

-          A drop in my income since I’m on paternity leave for the whole month (more time but less money!)

-          Tons of last minute expenses for the baby (diapers, clothes, etc)

-          A bunch of medical receipts that I need to file claims for to get reimbursement from my insurance

In addition to that, I got my first bill for municipal taxes ($429) along with a $500 cash deposit for my pool this summer. But don’t worry; the pool is being paid in cash. But I’ll get the cash with my tax return… which I will only receive in May or June. Therefore, the $500 deposit has to be taken from my own money in the meantime.

So overall, my liabilities have temporarily increased by almost 2K but I’m not too worried. Starting on March 12^th, I’ll be going back to work with a salary increase and I’ll be able to catch up pretty fast considering the fact that I won’t have to spend $800 in transportation anymore. Yup! I’ll be working 5 minutes away from my house!

On the other hand, when I look at my assets, I’ve noticed that I’m fairly conservative. For example, the neighbor in front of my house sold his for 340K last fall. My house has about 20K more in features (heated floors everywhere + central AC) & materials and is 400square feet bigger. Last year, I added a small increase that equals the cost of my central AC. This year, I’ll do the same thing with the pool. I’m aware that I can’t use the full price of these 2 things and add it to my price as it’s not “worth what I paid for” when it comes to selling my house. However, I don’t consider inflation in the price either. This is why it’s about the same thing.

Then we have our cars. I even out the value of my Tribute with its loan and I drop my RX-8 by $400/month since I bought it. By the end of the year, the car will be virtually worth nothing (less than 2K). However, I’ve done a quick search and the cheapest car I found for this year was selling at 7K.

Finally, I have my company shares. This could be quite arguable as they don’t have a “real liquid value”. However, following our valuation model (we consider 36 times our monthly income minus debts), our company is already worth more than the $196,000 (98K each) that we established. The next update will happen in May after our annual meeting. I can’t wait to have a new evaluation ;-D

I guess the most important point when you do your net worth statement is to be highly conservative with your assets and track down every single expense. You don’t want to boost your net worth artificially. This is called “living on a cloud of dreams” and prevents you from seeing dramatic situations. This is when I realized I was spending too much in 2011 and made corrections for this year.

I’m expecting a good month for March. This is really where we will see if I made a real statement when I said that I was taking care of my finances in 2012.

Here are the details:

Assets:

Liabilities:

Net Worth: $201,426

If you liked this articles, you might want to sign for my FULL RSS FEEDS. Then, you will get my daily post to your email and can read it at any time. To subscribe CLICK HERE

Related Post

When we first started our company back in 2008, we decided to name it M-35. To be honest, my friend wanted to name it M-30 at first…. But the  “M” stands for “millionaire” and the number stands for the age when we arrive. I thought that 3 years was a little too short . So this is why we decided to use M-35 as our official name: because we think we can reach $1M in net worth by the age of 35.

As of my last net worth statement, I’m standing at $203,500 and for the record, I’m 30. Therefore, I have to multiply my net worth by 5 in order to achieve my objective. Out of all my personal and blogging goals, this is by far the most aggressive! But hey! Sometimes, you have to set the bar very high if you want to accomplish awesome things, right?

But setting high goals doesn’t mean anything if you don’t have a strong plan. On the other hand, growing your net worth by 800K in 5 years is a bit too much to swallow in one piece. So let’s take this elephant steak one bite at a time:

Employer stocks: + $43,000

I used to cash my employer’s stock once a year to pay off for different expenses. Starting this year, I’ll be keep them and hope to grow this part of my portfolio. Since I got a new job, I should be able to restrict my expenses. I invest $7,800 per year through my pay check in this stock and I only calculate a growth of 4% for the next 5 years. The growth is related to the DRIP plan where the dividend is around 4% at the moment.

RRSP: + $60,000

I intend to invest $10,000 in my RRSP every year for the next 5 years. Here again, my goal was to be conservative so I used a 4% investment return on my money. This should create another 60K. I will use my bonus to make my contributions.

Pension Plan: +37,000

This one is pretty hard to determine as I have no control over its value. I assume that the pension plan will grow by $6,000 per year with an investment return of 4%. This is how I got the + $37,000 number.

House: +75,000

I’m not counting on my house value to burst, but at 4% over the next 5 years, I would gain $75,000 on the value of my home. Since it is a fully equipped property in a nice area, I guess I should be able to expect to see it grow at this pace.

Debts: -$150,000

Here again, this is a fairly aggressive goal considering that I wasn’t able to pay down my debts efficiently over the past 3-4 years. On the other hand , controlling my finances is my goal for 2012. So if I want to make sense… I need to set my debt repayment plan in line with my goals. While my income will decrease in 2012 due to my job switch, this should only be temporary and I head back to 150K-175K starting in 2013. This is why I think I’ll be able to pay back about 30K per year in debts. It’s easier said than done, so we’ll see how it goes after a year .

And… this makes only $365,000 to add to my net worth

Can you see how difficult it is to create a net worth of 1M$ in 5 years when you start from 203K??? Ouch! According to this plan, my net worth would be 568K at the age of 35. I can say that if I reach this level, I’ll be happy but I won’t be “proud”. However, I have one last Ace in my pocket: my online company! Still… I need the valuation of my shares to rise from $98,000 (as of today) to $432,000. Since I have a partner, I need to be able to claim that my company is worth 864K…. hmm.. is this possible?

Let’s take a closer look and we will see!

Our valuation model is quite simple for the moment: 3 times our annual income minus existing debts + cash. So if I need a value of $864K, I need annual income of $288,000 per year with no debts and no cash. If you divide this number by 12 to reach a monthly income target, we get the round number of… $24,000 per month! In 2011, we made a total of $114,158 or $9,513/month. So this represents a 152% increase over 5 years or an annualized growth of 20% over the same period.

I don’t know if it’s just me but if I break down the number as previously mentioned, it doesn’t seem that difficult. If I consider that my plan this year is to go from 9,5K/month to 15K, I’m already aiming at a 57% increase this year! The worst part is that I think it is quite feasible (not to make 180K this year but to get to 3 months in a row of 15K in 2012).

You can argue that my plan to become a millionaire by 35 is directly related to the valuation I give my online company. And I couldn’t argue with you. However, I will only smile thinking that while I have my day job paying me over 100K per year, I’m doubling my pay check through my online company.

So the race is now on… let’s see if I can make it!!

If you liked this articles, you might want to sign for my FULL RSS FEEDS. Then, you will get my daily post to your email and can read it at any time. To subscribe CLICK HERE

Related Post