Since finishing my second degree in 2015, I’ve made some pretty decent strides in terms of my net worth. So right now: that’s a $110,000 net worth, excluding pension contributions and tangible assets that I own, like my car – basically, whatever I can access at the bank.
Earlier in the year at 27, I was pretty shocked to see that I had cracked the six figure savings mark so fast. So how did I get here?
I was lucky to have my parents put a roof over my head during my undergraduate degree. They also did a very nice thing by supporting my education. This incredible luck (for which I am forever grateful) coupled with working retail and summer jobs let me graduate debt free with a pretty good chunk of savings.
After my first degree, I worked for two years. The first job I made a lowly $10.00 an hour, but still saved 40% of my income. The second was a well-paying one where I saved close to 90% of it (which I credit to making the conscious choice to live rent-free at home for the year – again, sending massive parental gratitude). By the end of those two years, I had about $40,000, which was enough money to go back to school and do an MBA. But unlike my undergraduate degree where I had parental help, this time I was completely on my own.
By picking a cheaper school that offered co-op terms, earning plenty of scholarships, and living in dingy basement apartments, I finished that MBA with an unchanged net worth of $39,286 in January 2015.
At this time I began to realize that I had made a serious mistake by simply holding all that money in cash. This would change in 2015.
2015 – The Year of First Employment
I finished class on Friday, April 10th, 2015 and started a job on Monday, April 13th. Thanks to those co-op terms, my former employer hired me back for a short 6-month contract at a pretty good entry-level pay. What made it even better was that considering the contract would be over by September for both me and pretty much all my colleagues, our boss actually encouraged us to apply for jobs in any down time we had.
This was a pretty fortunate and open scenario to be in – people in the break room would ask “How’s your day?” and others would respond “You know, got XYZ done, now hammering out a résumé.” Pretty rad.
To avoid unemployment, I spent that summer applying for jobs. I must have sent out close to 400 job applications. I started to feel pretty discouraged since progress was limited but by September my luck had changed. I got offered another contract elsewhere in the same organization but this time with a nice bonus behind it: a 27% salary boost versus what I was making before!
It was here where I felt like I had too much money. Having just finished school and still living like a student, I started to save obscene amounts of money, like 50% of my pay check on any given month. My friends and roommates would tell me: “spend it!” but it didn’t feel right. I had been living the frugal lifestyle since I was a kid, so why change it?
So I started to invest it, buying myself some dividend paying stocks on the TSX and crossing my fingers.
By the end of the year, I had increased my net worth just over $14,000 to a total of $53,959.
2016 – The Year of Optimization & Learning
2016 was going to be a year of frugal optimization. “I’m going to see my investments take off and be just like all those successful early retirees!” I said.
And then the 2016 oil crash happened. Brent crude futures dropped from highs of over $100 per barrel to $27 per barrel.
All those dividend paying stocks tumbled too and suddenly, my portfolio was sitting at 20% less than what it had been when I started to invest. I made some big mistakes, realizing some losses and not buying in when I had the chance to for obscenely lowly priced equities.
That whole experience led me to discovering the concept of both diversification and dollar-cost averaging through pre-authorized deposits into TD e-series index funds. I began chucking in my leftover pay check in sums of $1500-$2000 per month into the S&P 500 and International Index. These funds complemented my existing portfolio, which was all TSX focused.
On the job front, I was excelling at work and they greeted me with a full-time gig (yay, benefits!) with another raise of just over 6%. The additional income, an incredible market rally, and my continuous frugal approach saw my net worth jump just shy of $40,000 for the year. By the end of the 2016, I had maxed out my TFSA and was sitting on $93,654 across my bank and brokerage accounts. Never in my wildest dreams did I think one’s net worth could grow that fast with such minimal effort.
2017 – Present
For the past six months, I have continued to optimize my savings rate to about 55% of my pay check while also being amazed at how easy it is for money to make more money. With some lucky stock picking in the TSX (I purposely don’t index invest in the TSX for reasons I’ll explain in another post), I’m now sitting on just over $110,000. Remember – that figure doesn’t include all those pension contributions I’ve made with employer matching, which I estimate to be over $22,000 so far since I’ve started working. If I did, that savings rate would probably be just over 60%.
My strategy this year has shifted to trying to max out my RRSP while also adjusting my 100% equity portfolio to now include some safer assets, such as bonds should the market tank. I realize that the luck equity investors have been experiencing may soon run out, so better be safe than sorry.
If I continue on this torrid pace and my work gives me my much-delayed raise, I imagine I should be close to $135,000 by the end of the year. Keep checking in to find out how I’m doing. Upward and onward!