Category Archives: Thoughts on Finances

2016 Financial Year In Review

By: GenXinvestor

Welcome to my 2016 Financial year in review post.  This is where I take stock of all things financial and examine our financial progress for the year.

First, let me start off by saying that 2016 was definitely a year of surprises.  The stock markets started the year off on multi-year lows and finished on record highs!  There was Brexit and, of course, Donald Trump winning the presidential race!

If you were any type of investor, 2016 was an easy year to make money.  If your strategy is to simply buy and hold passive index funds then you’re likely ahead over 20%.  If you’re a stock picker and bought some blue chip Canadian Bank Stocks in January or February, then you’ve made an easy 50% as the stocks had a strong year.  If you owned real estate in southern Ontario, then you’ve likely made anywhere from 10-18%.  Yes  it was very hard to pick losing investments in 2016.  Unless of course you sunk everything you had into bonds.  

For the most part, I feel that our investment strategy which focuses on building income streams from dividend stocks, other financial assets and rental properties has done very well.  This strategy, along with a strong commitment to saving a high percentage of our income has achieved the following results:

  1. Our net worth has increased year over year by nearly 24% to over $920k!
  2. Our assets have increased by 17% to over $1.6 million.  
  3. Our debt has increased by nearly 11% to just over $690k 

Those results were pretty impressive but I’m even more impressed with the growth of our investment income.  In 2015 we managed to earn $8,428 in passive investment income.  In 2016 we increased that amount by a whopping 94.7%, earning $16,411!  

To be sure we had our share of ups and downs and the above results didn’t come easy.  We struggled to pay down a $50k line of credit, we had problems with our property manager, my wife’s work was slow in the back half of the year etc.  But we managed to stay focused on our long term financial goals and investment strategy and it really paid off.  

I feel like we are well positioned for 2017.  The rental properties are sorted out now so it’s just a matter of filling the vacancies and we continue to buy and hold solid dividend paying stocks.  Both of these items will undoubtedly provide a big boost to our investment income in 2017.  

But what’s just as important as building our passive investment income are ways to reduce our debt and tax burden.  On that front, we continue to follow strategies to pay down our non-deductible mortgage debt.  These include making lump sum payments and increasing our weekly mortgage payment.  All of this saves us thousands of dollars in interest over the life of the mortgage and will help us be mortgage-free years sooner.  Our mortgage payments are the largest monthly expense item so it’s really important that we get it paid off sooner rather than later.    

In terms of reducing our taxes, we’re making use of the contribution room in our RRSPs and TFSAs to move our dividend stocks from taxable accounts to tax-sheltered accounts.  Taxes take a big chunk of most people’s paycheque so it’s really important that we pay attention to them and find legitimate ways to reduce the amount we have to pay.  RRSPs, for my family at least, are a no brainer in this regard.  Not only do they provide decades of tax-sheltered growth for our investments but they give us a nice tax refund that we use to make further investments or to pay down debt.

Well that’s my 2016 Financial year in review.  Thanks for following my journey to financial freedom.  Now it’s your turn.  How did you fare in 2016?  Was it a year of surprises?

Thoughts on Finances November 2015

By: GenXinvestor

Welcome to my Thoughts on Finances November 2015 post where I discuss my investments, debts and how I’m managing the family finances.  Here’s what’s been going this past month and where I see us headed in the next few months.

 

finances November 2015

Paying Down Debt

Saving and investing our money is only one part of the wealth-building equation.  The other, of course, is paying off our debts.  On that front we’ve been slowly grinding along with trying to tackle our HELOC debt.  We used it to fund our home renos and for the downpayment on the rental property.  This debt is proving to be a real drag on our finances and it has really limited my investing activities this year (other than buying the rental property!).

But all of that is OK because I invest for the long term.  So what if I have a few crappy months when it comes to my finances.  By fixing up my house I’ve added value to it and made it more energy efficient.  The rental property will undoubtedly add considerable monthly cash flow as well as an increase to my net worth over time.  What I’ve learned over the years is that building wealth is not a simple linear process. It has its ups and downs too.  The important thing is that I keep my eye on the long term trend and make smart choices with money today.

So my plan to tackle our 50K HELOC will be to use some windfall money that we get in the new year from my work savings plan, bonus and income tax refunds to eliminate as much of the debt as possible.  As it stands now, I’m forecasting that it will be paid off by June.  After that I will be buying up lots of my favourite dividend stocks and index funds and, who knows, maybe even another rental property.

Rental Property

I’m happy that we finished the upgrades on the rental property and that it is fully rented. So far, it has not been very profitable but, then again, we’ve only had it for 2 months.  Things should get better by February when the upgrades are paid for.  As it stands now I’m projecting a cash profit of about $120 for the next 2 months.  Afterwards it should be somewhere around $500-$600 per month if there are no maintenance issues.

Monthly Investing Activity

As I mentioned above, I haven’t invested as much as I would have liked to this month, but I managed to buy more shares in Emera (EMA) and Bank of Montreal (BMO) through my regular, automatic contributions into my DRiP accounts.  I also managed to send off $300 to buy some more shares in Fortis (FTS) on December 1st.

Dividend Increases

In spite of not having a lot of money to invest this month, I was very happy to see that 2 of my companies raised their quarterly dividend.  Telus (T) increased its by 4.8% and Sun Life Financial (SLF) increased by 2.57%.  This is one of the big benefits of being a long term dividend investor.  Year after year my companies raise their dividend payout which effectively gives me a raise for doing absolutely nothing at all.  At my work, I’m lucky to get 2% a year, but as an investor it seems like I get at least that amount every second quarter!

If I Had $10k

What would I do if I had $10k just lying around?  Hands down I would buy TransCanada Corp (TRP).  The stock is down 30% year to date and yields about 5%.  That dividend is projected to grow about 8% on average until 2020.

Hundreds of billions of dollars have been invested in the oilsands over the past few decades and despite the recent slide in oil prices, output for the oilsands is projected to increase over the coming decade.  TRP will benefit from this in the long run as I believe that sooner or later more pipelines will be built to ship Canadian crude.

But shipping crude oil is only one segment of TRPs business.  They’re also involved in power generation and natural gas distribution.  As far as I can see, we will always need electricity and natural gas to heat our homes.

All told, I feel that buying TRP in the low $40s offers an incredible opportunity for the long term dividend growth investor.  I own a small position of TRP in my DRiP account (about 27 shares) and I wish that owned more.

Disclosure: I am long TRP

This article represents my opinion only.  Please consult with a financial advisor before making any investment decisions.  See full Disclaimer for more information.

Photo Credit: Photo by pakorn/Freedigitalphotos.net

Thanks for reading my thoughts on finances November 2015.