Posted by I’m always excited to update our investment balances and track our net worth at the end of the quarter. It’s a nice milestone to see whether we’re meeting our financials goals.
Given expected market fluctuations, I’m less concerned about the absolute balances, but more concerned with the amount of savings and contributions we have made to each account.
To recap, our financial priorities for 2022 were:
- Continuing with company plans top-ups, such as pension plan matching and employee stock purchase plans
- Maxing out my RRSP contribution limit
- Grinding down Mr Loonie Journey’s RRSP contribution limit to manage his 2022 taxable income, but preserve some room for the next 2 years
- Grinding down Mr. LJ’s TFSA contribution limit
- Increasing payments on our variable mortgage to match any interest rate increases
Financial Goals Progress
Plans are great, but life happens. Good and bad changes happen.
In Q1, Mr. LJ switched jobs with a better career opportunity (and not to mention better compensation and benefits!) With the change, he had the month of February off so our absolute dollar savings in the quarter was lower than expected. But all for a good reason! Despite that, we still progressed against the savings goals for 2022.
Increasing mortgage repayments
As expected, the Bank of Canada raised rates by 25bps. On our hefty $800K mortgage, this adds about $80 more in interest per biweekly payment. Given that, we’ve also added an extra $80 to our biweekly payments to account for the interest rate increase. This ensures that our mortgage repayment end date isn’t pushed further out due to interest piling up.
With the Bank of Canada expected to raise rates by another 50bps in the upcoming announcement, our extra payments will continue to increase. When we signed up for a variable mortgage, we knew interest rate risk was always a possibility. We budgeted and bought a property where we could absorb some level of rate increases. However, if the BoC raises rates back into the ~5% range as seen earlier in the 2000s, we will have to re-evaluate our ability to keep up with these extra payments.
Net Worth Update
While it is easy to try to assess progress using the net worth dollar amount, we cannot control stock prices and macroeconomic factors (e.g. inflation). If the past two years have taught us anything, it’s that uncontrollable events have the greatest impact on our portfolios (e.g., COVID in March 2020, Russia-Ukraine war).
With that in mind, I want to focus these quarterly financial goals and net worth updates on what’s within our control.
Within our control
Goals: We followed through and are tracking well against our top 5 financial goals.
Savings & Contributions: We contributed (a whopping) $37K to our various TFSAs, RRSPs and pension plans. While $37K sounds large, it was all to our expectations based on what we had previously planned (e.g., automatic contributions from our paycheques, rolling any bonus payout into investments). The only thing that exceeded expectations was a “higher-than-expected” bonus payout from my employer, which added an extra $10K we weren’t expecting.
Asset Allocation: We were on target for Canadian and US equities, but we were underweight on international equities. A part of that is due to the outsized declines we have seen in the international markets. We are also overweight in cash, as I received my bonus in mid-March and have yet to fully invest it.
In April, we will invest most of the excess cash into international equities to rebalance towards our target asset allocation.
| Target Allocation | Q1 2022 | Acceptable Deviation (<2.5%) | |
| Cash | 0% | 5% | No |
| Bonds | 0% | 0% | Yes |
| Canadian Equities | 26% | 26% | Yes |
| US Equities | 42% | 41% | Yes |
| International Equities | 32% | 28% | No |
| Total | 100% | 100% |
Mortgage: We repaid $7K of our mortgage, which is inclusive of any lump sum payments. I was disappointed at how small this amount was in comparison to our ~$800K mortgage. It feels like we will never fully repay our mortgage at this rate. With interest rates increasing, our dollar repayments will increase but the amount paying off our principal will remain the same. That’s a bummer …
Outside of our control
I don’t find looking at the overall net worth number to be valuable, as forces outside of our control shouldn’t dictate whether we have been successful this quarter. This is particularly relevant during our wealth accumulation phase, which is where we’re at now. If we were in our retirement drawdown phase, I would pay more attention to the market up and downs to appropriately plan for withdrawals.
Portfolio Returns: Not surprisingly, our portfolio returns were down 1.2% in Q1. This follows the general trend within the broader markets. However, our aggressive savings & contributions more than made up for this dollar loss.
Overall
Overall, we had a great Q1. We did what we planned to do. Although markets weren’t on an upward trajectory, that doesn’t bother us much. We continue to invest when our paycheques come in. We’ll do a bit of rebalancing by buying more international equities as they’ve taken a hit in the past few months.