After reading the book Rich Dad Poor Dad by Robert T. Kiyosaki, we began to wonder about how we viewed money. We’ve spent significant time developing ideas for this blog and specifically how we wanted to share information given our situations. Rich Dad Poor Dad
effectively changed our perspectives on wealth. We will be evolving how we calculate and analyze our net worth based on some key tenets of the book.
First, rearranging assets as income generators, such as rental property and investments. Our principal residence has value. However it doesn’t produce revenue. We will use the same jargon as in the book to describe these traditionally defined assets: “Doodads.”
As we’re resetting our approach, this first monthly update can potentially come across as a terrible month. We’re new homeowners! We were surprised by many unexpected house updates and renovations; therefore our spending has been excessively higher.
Although we had a significant tax refund the previous month, we have incurred additional income tax withholding as our employer changed their relocation policy. Therefore, they withheld income tax as moving expenses are claimed instead of waiting until the annual tax season.
We will display two net worth numbers each month: the traditional way and the Rich Dad way. We will see if this information is helpful to us in our financial planning and goal keeping and will readjust our approach at the beginning of the next year.
Before the net worth update, we will also assess our financial situation using seven criteria discussed on the books’ website.
How much earnings did we keep last month?
-17.4%: This isn’t the desired outcome, we dug 17.41% into our savings and cashflow. This is directly related to our home purchase and additional negative financial hits incurred as discussed in the main article. We want this number to increase positively monthly.
Did our money work for us last month?
0.02%: This isn’t the desired outcome, we didn’t earn any passive income and our dividend portfolio income was so minuscule compared to our earned income.
How much taxes did we pay last month?
35.77%: This will be a baseline. As I mentioned earlier, we paid additional income tax due to a large taxable employment benefit we received during our relocation. We live in Canada and this amount includes both federal and provincial income taxes. We want this number to be as low as possible.
How much of our money went to housing last month?
30.52%: Property taxes, mortgage, rent, utilities, maintenance and home insurance. We want this to be under 33% of our total income. Given that we bought a house and are still renting an apartment (therefore dual expenses), we’re proud that this amount is still under the established threshold.
How much did we spend on doodads last month?
92.69%: This isn’t the desired outcome after buying a $400K+ home. We want this number under 33% and it will decrease as we acquire more income-producing assets.
What is our annual return on assets?
0.07%: This will be a baseline. We had a tiny dividend portfolio at the beginning of the month and are fiercely expanding it. Our next dividend payouts will be more than $0.54 as we currently have an estimated $237.33 of forward-looking dividend payouts for 2021.
How wealthy are we?
2.5 months: This will be a baseline. Our assets cover 2.5 months of expenses. We want this number to increase.
Net worth update for April 2021:
ASSETS: $35K
CASH: $25.3K
INVESTMENTS: $7.6K
- We have increased our contributions to our TFSA because of spare cashflow.
- We have added positions in NASDAQ: PETS, NYSE: V, TSE : BMO, TSE: POW, TSE: FTS, TSE : T, TSE:FFH, TSE : CVE, NYSE: INFY, NYSE: WIT, TSE: DIR.UN, TSE : SU and TSE: BTO.
- We have received dividend income from TSE: VFV and TSE: BCE.
- We’re considering adding or increasing the following positions to our portfolio over the next month: TSE : ENGH, TSE: KL, TSE: VFV, TSE: VXC.
BONDS: $2.1K
DOODADS: $443.9K
HOME: $431.5K
- This will be updated annually in January unless we sell or purchase another one.
VEHICLES: $12.4K
- This will be updated annually in January unless we sell or purchase another one.
- The amount will be based on the average trade-in value of the vehicles.
LIABILITIES: $425.4K
CREDIT CARDS: $6.5K
- We pay off all our credit cards before the due date. Most of our living expenses are charged to credit cards to earn cash back or points. Our expenses are all within budget.
LINE OF CREDIT: $0.0K
HOME MORTGAGE: $418.9K
- Slightly higher as interest has been calculated until the first payment which will occur in May.
Net worth as per Rich Dad: $-390.4 K
Net worth as per the bank: $53.4K
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