Welcome to the traditional monthly net worth update - The June 2008 edition. I keep writing these updates to give myself a little heads up on how the finances are doing and it seems that most readers find them enjoyable also.

Lets start off with our income and expenses. Even with our reduced income due to maternity, we have gratefully found that our savings is still on the rise. This is due to reduced spending in combination with increased alternative income. I do expect some larger expenses coming up as we’ve barely scratched the surface decorating the new house. Window coverings anyone?

How about those markets? Just last month, I was touting that the TSX was making all time highs, but we seem to be in a correction zone as of late. If you take a peek at the numbers below, you will notice that my RRSP’s have made quite the gain which seems to go against the current market direction. This is due to a micro cap play going crazy on rumors which has benefited my portfolio nicely. On the flip side, my Smith Manoeuvre portfolio, which is financials heavy, didn’t fare as well.

Here are the numbers:

Assets: $ 598,676 (+5.41%)

• Cash: $4,500 (+0.00%)
• Savings: $31,000 (+15.67%)
• Registered/Retirement Investment Account: $58,200 (+5.43%)
• Pension: $ 22,350 (+0.00%)
• Non-Registered Investment Account: $19,400 (+1.04%)
• Smith Manoeuvre Investment Account: $49,726 (+95.77%)
• Investment Property: $ 124,500 (+0.00%)
• Principle Residence: $275,000 (+0.00%) (purchase price)
• Vehicles: $14,000 (2 vehicles) (-6.67%)

Liabilities: $288,193 (+9.24%)

• Investment Property Mortgage: $93,300 (-0.21%)
• Principle Residence Mortgage (readvanceable): $136,514 (-0.43%)
• HELOC balance: $50,379 (+99.76%)
• Other Liabilities: $8,000 (-0.00%)

Total Net Worth: ~$ 310,483 (+2.09%)

Started 2008 with Net Worth: $279,300

Year to Date Gain/Loss: +11.16%

Another month, another modest gain. One big thing that pops out about this net worth update is that it’s the first month that my Smith Manoeuvre portfolio balance is worth less than the HELOC owing. If it wasn’t for the fact that I’m investing for the very long term, I would probably be very nervous right now. However, as I have a lot of cash in the trading account, I’m waiting for my strong dividend payers to get even cheaper so that I can buy more.

Interested in seeing how my net worth has progressed up to this point? Check out my history of net worth updates.

Time again for the monthly Smith Manoeuvre Portfolio update, June 2008 edition.

For those of you just joining us, The Smith Manoeuvre is a Canadian wealth strategy that utilizes a home equity loan to invest in income producing assets. The result is a tax deductible loan and portfolio that increases as you pay down your mortgage.

The markets are currently in correction mode which means it may be a good time to add to my positions. All the financial yields are up.  It seems that some economists are predicting a global market crash, however, don’t let that phase you.  If the markets do correct, see it as a good time to jump in!

Onto the business at hand, the portfolio. In terms of trading, the Bank of Nova Scotia position was doubled in addition to a small new position in the fundamental index ETF for U.S small-mid caps. Along with that, we initiated small new positions in BMO and a mutual fund management company that I was eyeing last month, AGF Management.

Total Portfolio Cost Base: $20,042.46

Total Dividends / Year: $796.75

Portfolio Dividend Yield: 3.98%

As you can see, the portfolio is still heavily weighted in financials, but it’s starting to get diversified into utilities like TRP and FTS, along with a small position in the U.S small-mid cap index. I’m looking into more ways to diversify the portfolio, and still meet the CRA tax rules for a leveraged investment loan. One goal of the portfolio is to have a larger growth portion. Any ideas?

Stay tuned, the June net worth update will be posted later today.

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Copyright 2008 MillionDollarJourney - All Rights Reserved

On a recent episode of the Suze Orman TV show, she announced that you can go to her website and get her Online Will & Trust kit for free (usually $13.50). Via Slickdeals.

• Go to SuzeOrman.com.
• Click on Will & Trust Kit link on upper left menu.
• Click the orange Gift Code button.
• Type in the code “people first”.

I signed up for the initial profile successfully, but haven’t finished the questionnaires. The software includes the ability to create a will, a revocable trust, Financial Power of Attorney, and an Advanced Directive / Durable Power of Attorney for Healthcare.

I’m not sure how this compares to a more established legal service like LegalZoom which offers wills starting at $69, but you can’t beat free. I suppose if you have substantial assets an estate attorney would be worth the money. I just wish Suze wasn’t staring at me with those ice-blue eyes on every other screen…

Do you have an ING Direct savings account with unused referrals? People want them! The first 25 people who comment below and leave a working contact e-mail (name not required, e-mail will not be shared) will get one filled by me for free, which is $10 for you. I’m all good for now. Just look for a message from me to your e-mail address with further instructions later this evening.

Due to comment moderation, your comment may not show up right away. One referral per person. Late night readers get lucky this time. Thanks!

Some great articles by The Money Writers this week:

The Digerati Life has written another great article that explains the ups and downs of the stock market in “A Stock Market Reality Check: What Investment Risk Actually Looks Like.” It shows that historically, down periods are followed by much higher markets.

My Dollar Plan lists 11 Fun & Frugal Summertime Activities.

Lazy Man and Money asks “Are Your Resources Swallowed Up By Parkinson’s Law?” I truly believe in Parkinson’s Law as I am most productive when there is a tight deadline.

The Sun’s Financial Diary reviews a U.S based discount brokerage in his article “TradeKing Review: A Discount Broker with Loads of Features.”

Brip Blap shows us how to be a location independent family, part 1.

Money Smart Life has written about a popular topic these days.. how to save on gasoline! For some great tips check out his article “Save Money on Gas - Small, Easy Gas Saving Tips Take a Big Bite Out of High Gas Prices.”

Generation X Finance gives us A Reminder to Keep Your Beneficiaries Up-to-Date.

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Copyright 2008 MillionDollarJourney - All Rights Reserved

Canadian Capitalist and Canadian Dream have both responded to my post on choosing between family and money. Canadian Capitalist says that “Passive Investing lets you have a Life.” Meanwhile, Canadian Dream has own thoughts in “A Reply to Money and Family.”

Mrs. Micah hosted the latest Carnival of Personal Finance. We submitted a primer on how to buy and sell shares on the stock market.

Mr. Cheap from Quest for Four Pillars has an interesting article that features an alternative to net worth. The theory is to instead of calculating total net worth, to calculate how many years you could LIVE on your net worth. Basically give those who are more frugal a higher score.

WhereDoesAllMyMoneyGo has a detailed article explaining the P/E Ratio or Price Earnings Ratio.

Thicken My Wallet and The MoneyGardener responded to my post about a potential global market crash. Thicken My Wallet asks “How bad will the economy get and what can I do?” While The MoneyGardener asks “are you ready for the market crash?”

The Dividend Guy gives us 3 Possible Actions to Take with a Dividend Decrease.

Can I get Rich on Salary has an inspiration writeup in “Success Stories: Age 49, Beating Back Brain Cancer, and Beating the Market to the Tune of $3,000,000.”

The Financial Blogger shows us How to Find a Good Financial Advisor.

More great stories from around the blog world will be posted tomorrow.

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Copyright 2008 MillionDollarJourney - All Rights Reserved

As of yesterday, Vanguard started the trading of a new investment that attempts to track the entire global stock market in just one fund. Dubbed the Vanguard Total World Stock Index Fund, here are some details from an older press release:

The new fund will seek to track the performance of the FTSE All-World Index, a float-adjusted, market capitalization weighted index designed to measure the equity market performance of large- and mid-capitalization stocks worldwide. The fund will invest in a broadly diversified sampling of securities from the target benchmark, which comprises more than 2,800 large- and mid-cap stocks of companies in 48 countries.

The current balance is about 41% US and 59% International. The ETF version (VT) features an expense ratio of 0.25% but has to be bought in a brokerage account. The mutual fund version (VTWSX) can be bought and sold for free at Vanguard ($3k minimum) and has an expense ratio of 0.45%, along with a 0.25% purchase fee and a 2% redemption fee on shares redeemed within 2 months of purchase.

Although you could basically replicate this fund with the proper mix of the Total US Stock Market ETF (VTI) and FTSE All-World except-US ETF (VEU) funds at a lower expense ratio, you’d also be subject to double the commissions when buying and selling. Besides, I think it’s just cool that you can now passively invest in the entire world with one ETF. For example, if China eventually becomes 25% of the world’s stock market value, then 25% of this fund would be invested in China without you having to lift a finger. If somehow India or Russia explodes instead, then you’ll still hold their share.

Via Bogleheads. More asset allocation information here.

Y’all know how much I like them free razors. And this one comes with a trimmer! Via SlickDeals.

• If you’re at work, turn the sound down. Although not obscene, this involves is a pillow fight with lots of girls squealing. My wife was very curious as to what I was doing online…
• Now go to TrimFlixx.com and enter your birthdate (must be 18 years old to get the free razor).
• Upload an image when asked, any will do. If you need one, try downloading this to your Desktop first for some laughs at the expense of the world’s richest man.
• Finish and play the movie, and then click on the Save button on the bottom. Check the box “Throw in a Free Sample while you’re at it.” and fill out your info. Hope it comes!

This is a guest post series by Brian Poncelet who is an independent certified financial planner (CFP) working in the financial services industry since 1994. Along with insurance, Brian Poncelet focuses on mortgage and retirement planning.

The justification for the purchase of insurance is endless but in general, insurance is typically purchased to alleviate the financial burden that is thrust upon the family upon the death or disability of a family member. Even the most well planned investment portfolio has limitations if the family is forced to sell off assets for less than optimal prices in a down market just to be able to pay for capital gains taxes and/or basic living expenses.

A well planned insurance portfolio takes into account many factors, the least of which should include:

• burial, legal and capital gains expenses
• living expenses for a minimum of 2 years
• existing debts (mortgage, lines of credit, credit cards)
• number and age of dependents (children, parents: allocate $50,000, special needs children: allocate $100,000)
• future expenses (education: allocate a minimum of $40,000 per child for four years of education, new car, home maintenance, emergency fund)
• marketability of a stay-at-home spouse to re-enter the job market and find a fair paying job with benefits

Case Study

2 parents age 35, husband earns $80,000, and wife earns $20,000. They have 2 children age 3 and 8 and carry a $200,000 mortgage. They have $100,000 in RRSP/non-register funds. How much life insurance is required on the husband?

• Mortgage: $200,000
• Children Education: $80,000 ($40,000 x 2)
• Two years salary: $80,000 X 2 = $160,000
• Emergency/Miscellaneous: $30,000
• Total Minimum Insurance Needed: $470,000

The above example is basic and does not factor in how many years the income stream will be required. For example, you may want your spouse to be able to stay at home until the children are no longer dependent. By searching “income replacement” on the internet you will find some excellent calculators to help you further define your insurance need.

Additional factors to consider:

1. Pension Income. Pension income from the deceased spouse employer: typically a maximum of 60% is allocated the surviving spouse.
2. Inflation. The effect of inflation on:
   • The insurance policy: even if debt is paid off, an insurance policy worth $300,000 today will only be worth $245,000 in 10 years assuming 2% inflation.
   • Assets: I frequently hear “my wife will use my RRSPs to fund retirement”. How much will $100,000 be worth in 15 years? Will that be enough to allow the family to make their yearly trip to Florida or buy a new car when necessary or send your daughter to that elite school for artisans in Paris?
3. Group Insurance. Existing employer group insurance: remember this insurance is only good if you are still working for the company. Unless you have been with the company for at least ten years I would treat this amount as zero.
4. Bank Mortgage Insurance. Existing Group mortgage insurance with bank: the amount of the insurance decreases with the outstanding mortgage balance. Only the residual mortgage balance is paid off. Also, if you change mortgage carriers you cancel the existing coverage and are forced to reapply at the new institution at higher rates as you are now older. If there are any health issues you may not qualify for the new insurance. More on this topic can be found in the Toronto Star at or a CBC video is the best I have ever seen. Both discuss term insurance. If you are going to consider that route, I recommend Term 20 or 30 rather than Term 10. Many people buy a bigger house around the 10 years mark, will not be debt free and have upcoming expenditures (education). The rate increases can seem to be significant in light of other expenses. It is best to defer this rate change for 20 to 30 years especially with a long term mortgage.
5. Loss of future asset growth - contributions to RRSP or pension plan or simple long term growth on liquid assets.
6. Goal modification. Will you have to modify your future cottage or recreational plans if future savings contributions cease or are diminished?

In the next edition of the risk management series, Brian Poncelet will discuss Disability Insurance detailing how it works and all the terminology involved.

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Copyright 2008 MillionDollarJourney - All Rights Reserved

Excerpted from the interesting Early Retirement page of Philip Greenspun, a fellow who says he retired at age 37.

Ask a wage slave what he’d like to accomplish. Chances are the response will be something like “I’d start every day at the gym and work out for two hours until I was as buff as Brad Pitt. Then I’d practice the piano for three hours. I’d become fluent in Mandarin so that I could be prepared to understand the largest transformation of our time. I’d really learn how to handle a polo pony. I’d learn to fly a helicopter. I’d finish the screenplay that I’ve been writing and direct a production of it in HDTV.”

Why hasn’t he accomplished all of those things? “Because I’m chained to this desk 50 hours per week at this horrible [insurance|programming|government|administrative|whatever] job.

So he has no doubt that he would get all these things done if he didn’t have to work? “Absolutely none. If I didn’t have the job, I would be out there living the dream.”

Suppose that the guy cashes in his investments and does retire. What do we find? He is waking up at 9:30 am, surfing the Web, sorting out the cable TV bill, watching DVDs, talking about going to the gym, eating Doritos, and maybe accomplishing one of his stated goals.

Retirement forces you to stop thinking that it is your job that holds you back. For most people the depressing truth is that they aren’t that organized, disciplined, or motivated.

Could this be me? Nah, my goal is to be a beach bum and do nothing.