Decisions

What to do…what to do?

Over the course of this year, I have managed to get our ‘tumultuous’ finances under some type of control.  Overall, I was able to:

– combine our HELOC and mortgage into a five-year fixed mortgage at 2.99% interest, keeping the original bi-weekly payment intact;

– setup an automatic double-down of $350.00 in lock-step with the mortgage payment;

– contribute to my Tangerine TFSA investment account on a bi-weekly basis;

– setup a monthly ‘date night’ fund (have fun with the wife every month);

– began a monthly contribution to an investing cash account ($100.00);

– established a 10-year term insurance policy.

I’m internally debating the decision to lower the double-down amount in exchange for a higher level of investing.  Currently, I’m holding a very small position in Reitmans (TSX: RET-A) and a small investment in the iShares S&P/TSX 60 Index ETF (TSX: XIU).  I would like to expand my position in XIU, but need the capital to do so.

If I wait until I have paid down the mortgage (which will take at least another 5 years to pay down), I lose on 5 years of growth.  My intent is to try and max out my RRSP each year (approx. $14K annually) and potentially move the tax return into either investments or my TFSA.

Should I worry about paying down the mortgage quickly? What do you think?

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Investing

If I only had more time…

Earlier this year, I decided to get our family finances under control.  It was the awakening, the ‘ah-ha’ moment that finally happened, where I began to realize that if we kept up with our spending habits, our HELOC would exceed the $70K it was already at.   Our credit card use was out of control!

Where we are today is much better than where we were eight months ago, but it still doesn’t feel like enough.  My analysis of different funds and different investment strategies has uncovered the ‘what ifs’.

Take for example this particular scenario:

Year  Balance  Yearly Cont. Avg. Rate  Interest Earned   New Balance 
2005  $          3,000.00  $                   – 23.02%  $                  690.60  $          3,690.60
2006  $          3,690.60  $                   – 16.40%  $                  605.26  $          4,295.86
2007  $          4,295.86  $                   – 8.99%  $                  386.20  $          4,682.06
2008  $          4,682.06  $                   – -33.44%  $            (1,565.68)  $          3,116.38
2009  $          3,116.38  $                   – 33.93%  $               1,057.39  $          4,173.76
2010  $          4,173.76  $                   – 16.49%  $                  688.25  $          4,862.02
2011  $          4,862.02  $                   – -9.39%  $                (456.54)  $          4,405.47
2012  $          4,405.47  $                   – 6.30%  $                  277.54  $          4,683.02
2013  $          4,683.02  $                   – 11.93%  $                  558.68  $          5,241.70

Based on that scenario, if I had invested in the TD CANADIAN INDEX FUND I SERIES back in 2005, my $3,000.00 would have grown to $5,241.70.  Let’s alter the scenario:

Year  Balance  Yearly Cont. Avg. Rate  Interest Earned   New Balance 
2005  $          3,000.00  $      1,000.00 23.02%  $                  920.80  $          4,920.80
2006  $          4,920.80  $      1,000.00 16.40%  $                  971.01  $          6,891.81
2007  $          6,891.81  $      1,000.00 8.99%  $                  709.47  $          8,601.29
2008  $          8,601.29  $      1,000.00 -33.44%  $            (3,210.67)  $          6,390.62
2009  $          6,390.62  $      1,000.00 33.93%  $               2,507.64  $          9,898.25
2010  $          9,898.25  $      1,000.00 16.49%  $               1,797.12  $       12,695.37
2011  $        12,695.37  $      1,000.00 -9.39%  $            (1,286.00)  $       12,409.38
2012  $        12,409.38  $      1,000.00 6.30%  $                  844.79  $       14,254.17
2013  $        14,254.17  $      1,000.00 11.93%  $               1,819.82  $       17,073.99

By adding $1,000.00 each year, my returns would have been even greater.  Based on the above scenario, my contributions would have been $12,000.00 over 8 years, and that would have earned $5,073.99.

Most bloggers that I read online have stated that there’s no time like the present to start investing.  Most certainly, though, this is where the unknown known come into play.  Yes, you heard me right…the unknown known.  Let me explain.

Definition: Unknown Known – you don’t know to what extent you know

I know that stocks, funds, etc. will earn over the long run, but what I don’t know is how well they will do over the next 10-15 years.  Will the TD fund as illustrated above perform the same way in the next 10 years? Or will it do worse? Will it perform more likely like the 2008 and 2011 performance, or will it perform like 2005 and 2009?

What do I realize from all this? It all takes time to build the portfolio, to build your dividend investments, to earn that capital that will help things grow.  I have 25 years before official retirement.  I think I have enough time.  I just need to be patient.

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