2021 Q1 Financial Update

Welcome to April, and we are well on our way into 2021! RRSP season is over, my taxes are in, and I’ve been enjoying the beautiful weather outside with my family. It’s time for my Q1 2021 Financial Update.

Related Post: My 2020 Year in Review

What have I been up to?

Since January I’ve been reading lots of blogs, listening to podcasts, and learning, learning, learning. I’ve also been putting in extra effort to connect with like-minded groups and to reach out to members of the Canadian FI community. It has been rewarding, as I’m sure most FIers can agree, that researching and chatting about personal finance topics scratches a certain itch.

Here’s the quick list of the stuff I’ve been learning about:

• The Smith Maneuver – www.smithman.net
• Dividend stock investing
• Looking at buying another rental property
• What to invest in my TFSA and the TFSA withholding tax

The Smith Maneuver

The Smith Maneuver converts the mortgage on your primary residence into a tax-deductible investment loan.

I’m interested in the SM as I want to focus on wealth-building and this is something I could deploy and manage myself. 

Last month, I met with two Smith Maneuver Certified Professionals (SMCP) to help answer my questions and learn about their costs and recommendations.

My current mortgage doesn’t have a HELOC portion, so I would need to break it, pay the penalty, and sign a new one.

For now, this is on the back-burner until I can tell if the cost is worth it.

Dividend Investing

Let’s just say I was getting bored with my core four Canadian Couch Potato (CCP) Model Portfolio, so I wanted to see what else I could invest in.

I’m torn, as the irrelevance of dividends compared to total return is on my mind, but having an additional income stream in a down market is enticing.

I’ve looked to Canadian dividend investors like Mark (MyOwnAdvisor.ca) and Bob (Tawcan.com) to see what I need to do to get my feet wet.

From the research I did, it became apparent that dividend investing comes with a large upfront time effort, and then you should monitor your companies to ensure they still meet your criteria for a company you want to invest in. Reading quarterly reports and reviewing your metrics with a website like SimplyWall.st will accomplish this.

I realized that this is more involved than what I’m looking to get into right now but since I was planning to start with a small dividend paying stock allocation and build that up over time, the best approach would be to buy a dividend index ETF like VDY and split it once I have enough invested.

Another Rental Property

I’ve been considering buying another rental property, but I’ve felt stuck on where to start. The reason I have a rental right now is that I never sold my condo when my wife and I bought our house. Instead, we used equity from the condo for our down payment. My condo isn’t the best rental investment (knowing what I know now) which I’ll get into why below.

I was going to go in on a new property with my sister and her husband. I have HELOC room on my rental mortgage so I thought I was good there…until I looked at how much similar condos are selling for.

If I pulled money out of my LOC, I had the potential to owe more than what my condo is worth. Also, a friend of mine helped walk me through the Rental Property Calculator and what a cap rate means. Assuming the same rent and expenses as my current place, my cap rate is around 2.5% whereas I would borrow the money at 2.94%.

This was not the wealth-building venture I was looking for.

TFSA and the Withholding Tax

I was all excited to invest some USD cash I had in my TFSA into dividends until I learned about the U.S. dividend withholding tax and realized dividend investing in U.S. stocks in a TFSA isn’t tax efficient.

I opted to buy a non-dividend generating ETF instead.

Related Post: How a TFSA Works

Connecting with Friends and the FI Community

This year I’m making it a point to stay connected. I’ve already seen the mental benefit it has on me when I’m reaching out to friends to have quick calls. Texting is just OK, I find calling someone is much better and fills my cup.

For the FI community, my plan is to be more engaged in the community and to reach out and try to make new friendships. So far that has been going well.

Connecting with friends and contributors of the ChooseFI Canada Facebook group is a great place to start. If you’re not already a member, I recommend joining. It’s a great group of 3,300+ members, and the group continues to grow.

Other Things I’ve Done This Quarter

• I submitted our taxes for some nice refunds!
• I opened up a WealthSimple TFSA account by accident. I’ve been using SimpleTax for a few years and now that it’s under WealthSimple, it had my walk through the account creation. I’ll consider it FI research. 🙂
• I cleaned-up and rebalanced my RRSP back to my core 4 (Canadian Equity, US Equity, International Equity, and Canadian Bonds).
• I also opened up a Questrade TFSA account as I had some USD cash sitting around and I wanted to get it invested. I’m considering transferring my RBC Direct Investment accounts over to Questrade eventually as well.

Finally: The Numbers (March 30, 2021)

Net Worth: +$17,694.88

Liquid assets are up $16,162.88. This is largely from investment gains and a bit from our contributions.

Savings Rate: +51.76%

My personal savings rate is 36.69%. Below my goal of 40% but still very good. My focus is on contributing to my wife’s spousal RRSP and I contributed as much I could for Jan-to-March. 

My wife submitted her cheque for her pension buy-back in February. This puts her savings rate at 69.02%! She saved her top-up pay from 2019 to be able to make this contribution. This is a nice big upfront amount to our savings for the year.

That brings our combined family savings rate to 51.76% for this quarter. This is fantastic! We’re in the 50% club! Even if it’s only for a little while.

Next Up

I have a bunch of ideas for posts in the future. I plan to break down the things I’ve been learning this year and simplify them as much as possible (with pictures!)

Let me know your thoughts in the comments below!