January can be a downright depressing month. The days are horribly short – I leave for work it’s dark; I get home, dark again. Some days I feel like I’m living in a Tim Burton movie! However, despite the short days and ruthless, bitter cold, I find a whole lotta sunshine and warmth in the fact I spent next to nothing this month!
After a gluttonous Christmas of booze and food a toned down hibernation period is almost welcomed. It’s an excellent time to focus on health and fitness as beach season will be here before we know it! Lots of gyms offer New Year’s specials, which can be a great way to save on memberships. Money Sense magazine did a great article on gym prices and comparisons with alternative options. Personally, I’ve never been much of a gym guy, opting instead for jogs and some simple home workouts, which all plays into my hibernation frugality throughout the winter months.
One metric I’ll begin to start covering over the next few months/years is my passive income coverage of my monthly expenses. Below is a graph showing my projection for the next seven years. Passive incomes are amounts I receive from my investments (dividends, interest). Basically, anything I get money for where I don’t have to do anything. Financial independence is reached when my passive income is high enough to cover my expenses. Net worth is a nice number to look at, but it doesn’t really take into consideration my ability support myself without working. My passive income ratio is really the number that matters most to me for my goal of financial independence. Currently I’m sitting around 8%, but by the end of 2015 I’m hoping to reach 15%.
Below is my net worth update for January 2015:
The majority of my increase, as usual, comes from contributions to my investments. I’m focusing on my RSP and TFSA this year to max out both accounts to ensure the taxman gets as little of my money upfront. This allows my money more time to sit in tax free accounts where the magic of compounding can set in.
Overall the Canadian markets recovered a lot of the losses incurred at the beginning of the month and basically ended up exactly where it left off. While I look at how the markets are doing each month, mostly out of interest, it’s important to note that despite any fluctuations (up or down) in the market I keep moving forward with my buy and hold strategy. Often making investment moves based on emotions (fear, optimism) can cost you. Note the graph below for the TSX Composite, a bench mark for the Canadian equity stock market:
I’ve pin pointed (with the dot) when the market hit it’s low for the month on January 15th at a price of 14,042. Note the volume in transactions of 353,728,246, which is also the highest volume for the month. Low prices often scare people into selling (or hopefully buying) at the worst of times, as seen by the volume increase. If you had invested in the TSX Composite with $1,000 at the beginning of the month and sold at the low point due to fear it would have cost you $40 versus if you had just stayed in the game until the end of the month you would have come out on par. My point is markets will fluctuate up and down based on market perceptions but the key thing is to just ride it out and continue on with your investment strategy…now get your ass to the gym.by