Hi all, I'll start my own case study to be challenged about my actual situation and plans from now on. Being from Québec, Canada, my finances (investments, mortgage and income) are treated accordingly (taxes, registered accounts etc).
I have always been quite frugal and not to bad at math$ but discovered MMM only 2 years ago (I was like 7/10 and now 9/10). Actualy, we could shave our expenses by another few thousands/year but we reached the psychological limit of DW and prefer to focus on the Big Picture. I'll throw some numbers and useful informations to get the best feed back.
We 43-44 years old, 2 sons (8-12) and one of our priority is to stay at the same place for at least the next 10 years. Everything we need is less than 20km from our house: schools (from elementary to University), groceries, our both jobs, public services etc. We drive/bike a total of 15,000km/year including our daily comute, vacations and our both sons hockey games and practices. In fact, my job is 20km from home and everything else is less than 5km. We own 2 cars, a 2006 Civic and a 2010 Forester. I do 90% of car maintenance and repairs by myself. Our cars are going strong (good maintenance and reliable models) and there is no need to replace any of them anytime soon. House is pretty new, meet our needs, 1,400 sq.ft. in a nice neighborhood, close to many public parks and playgrounds, low maintenance, energy efficient.
Biggest changes we made since I discovered MMM:
1-We changed our driving habits (-25%km) and bike more (+1,000km)
2-We increased our DIY brain and mucles for a maximum badassity
3-DW work 4 days/week instead of 5 (mondays are not the same anymore!)
4-Gross income went from about 125k$ to 110k$ (less hours worked @ same hourly rate)
5-Bike a lot in neighborhood with the kids
6-Stopped sneaky lifestyle inflation
7-Cook home and brown bag more, eat out less
8-Heavy weight lifting (Starting Strenght) for health and strenght increase
9-Ditched our 2%MER RBC's mutual funds (after reading Canadian Couch Potato and Andrew Hallam blogs)
10-Ditched my bonds (I may get bonds some day when I got no more debt/leverage, investments over 1M$ and income low income)
11-Agressively attacked the mortgage
Financial picture/plan
My RRSP: 345k$ (30%VTI, 40%VBR, 30%VXUS)
DW RRSP: 180k$ (35%ZCN, 35%VTI, 30%VXUS)
RESP: 80k$ (100%RBF556, not possible to switch to ZCN without loosing Québec subsidy, long story!)
TFSAs: 0$ (82k$ room. We sold our high MER RBCs Bonds mutual funds back in 2012 when refinancing our mortgage to lower the principal)
Taxable: 96k$ (100% ZCN)
Mortgage: 54k$ @ 3.5%, renewal may 2017
HELOC @ prime, actualy 2.7%: 96k$
House: 340k$ (market value)
Total assets: 1041k$
Total liabilities: 150k$ (liabilities/total assets 14%) no car loan since 2004
NW: 891k$
Life insurances 500k$ (term) for 250$/year (each)
Disability insurances, check
Cars and home insurances pretty low (high deductibles, few claims)
Investments average MER is 0.15% and about 35% is Canadian stocks, 45%US stocks (25%VTI, 20%Small Cap Value) and 20% is Int. stocks. We dont own bonds anymore. We did not panic in any off the dips since 1999 and for me, it makes no sense to hold bonds while having a mortgage or a HELOC. I usualy trade once a year in every account to max it out and buy the lagging asset to get as close as I can to the target %. I implemented a version of the Smith Maneuvre with the HELOC and bought 5,000 units of ZCN. On the long run (10-15 years) the advantage should be the yearly cashflow (3% dividends) and the capital gain should offset the interest (capitalized).
Now our mortgage is close to 50k$ and the regular payment schedual makes it ends by may 2019 (44 months). I plan to renew in may 2017 with a balance close to 30k$ and get the lowest rate available (variable, 1 or 2 years) for the remaining amortization. If rates are still damn low, I may extend the schedual for a better cashflow.
Actualy, we stash 40% of our take home pay. Gross is 110k$, net is 90k$ (18% taxes). 15k$/year goes to RRSPs, 5k$ to the RESP and 16k$ toward mortgage pricipal. The checking account is always between 8-12k$ and DW has 8k$ in a HISA @ 0.5%. We could transfert 10k$ in her TFSA and buy ZCN to get this money work for us instaed of sitting still.
There is 70k$ available on ou HELOC so I plan to get another 3,000 units of ZCN for about 56k$ (today's price) but the transaction would only occur at the beginning of 2016 (after the december dividend and before march ex. div. date). The reason is to simplify the tax calculation and also gives you few months to comments the idea. After this trade, I can capitalize the interests for at least 15 years with actual low rates and for about 10 years @ 5% interest rate without affecting my cashflow. The dividend income and tax return from this is enough to fill one of the TFSA every year.
With conservatives assumptions, our cashflow for the next 3-4 years allows us to continue maxing out our RRSPs, RESP and catch up the TFSA room while killing softly the mortgage. Our leverage would increase from 14% to 18% for year #1 but then decrease +/-1% per year afterward. To stay as close as possible from our target A.A. we may sell some ZCN from DW RRSP and buy more VTI. Only 1 Norberts-Gambit and voilà!
We want to be FI ASAP, keep our actual jobs for few more years (not intend to start a side gig or step in the actual crazy real estate market) stay healthy and then travel frugaly and keep being active. This year, I negociate 1 more holliday week instaed of an increase and plan to do the same next year. With my 80k$ income (gross) I value more few more days of than few more $$$ @ 38% marginal tax rate.
Now I'm waiting for your feed back/questions, comments
