I thought I might post a quick description of my wife and my progress so far. We're in our early thirties, no kids, no plans for any. We have a combined household income of about $150,000.

Home Value: $400,000
Mortgage: $354,000
Investments: $135,000
Cash: $16,000
Other debt: $2,200 (line of credit)

Our total net worth (including home equity) is currently about $205,000. It's been pretty stagnant since about last May. A lot of our net worth is in real estate ($56,000 of home equity, plus another $80,000 in a land banking investment), so our new contributions were pretty much offsetting the market decline all the way down.

We invest a little over $2000 each month into retirement savings, plus another $850/month into a savings account that serves 3 purposes (automobile replacement, emergency fund, and traveling).

Our goal is to retire with a $4 million portfolio (not counting the house) at age 55, and right now, we're on track to just barely make it (assuming an 8% rate of return). If we average 10%, we're laughing, we'll hit $4 million by 52.

Our investments are tax sheltered (RRSP's, in Canada) and the tax refunds are reinvested (about another $10,000/year). Aside from $80,000 invested in land banking, the remaining investments are all low-fee index funds (with a few individual stock picks, just for fun).

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i don't include home equity either, not because of true equity after aggregate costs like 144mph, but because ability to tap that equity in the future is undetermined. of course, you can say the same about stocks and mutual funds, but equity is tied to something that you reside in. anyways, it sounds like ya'll have a good plan.

It's been a while since I posted an update, and a lot has happened. I wanted to wait until a few things settled out before posting more details.

In 2006, my wife and I joined an "investment club." They're the ones that convinced us to refinance our mortgage, taking out $100,000 in equity and investing in a land-banking program. They also talked us into participating in a charitable donation tax shelter scheme. Basically, we donated $11,000 to charities, and got receipts worth $40,000, which resulted in a big tax refund. Factoring in our actual $11,000 donation, our net profit was about $3,000 when it was all said and done. I know, I know, sounds shady, but they assured us it was legal, and we foolishly trusted them. Well, the CRA (Canada's IRS) disagreed, and audited us. In June of this year, the hammer finally came down, and we were ordered to repay our entire refund, plus interest and penalties. The total due was $19,900. We paid this bill using our line of credit.

In February, our second car suffered a catastrophic engine failure, and I sold it for scrap for $200. Rather than replace it, we decided to try and make it work as a one-car household. I've been taking the bus to work for the past 2 years anyway, so it wasn't too much of an adjustment. We've been able to save money by not having to pay the insurance, registration, gas, and maintenance on two cars anymore.

In September, we were dealt another blow, as my wife was laid off. Earlier this week, she had a promising interview, and she's been informed that they intend to make an offer. We're crossing our fingers that it's reasonable.

Since the tax reassessment, we've redirected most of our retirement savings to paying off the line of credit. We also directed our income tax refunds (legitimate this time), a job bonus, and my wife's severance pay toward paying off the debt. We finally paid it off about 2 weeks ago, so we're once again debt-free except for the mortgage. It feels good to have paid off such a huge amount of debt so fast, but we have very little safety cushion right now (just the $1000 recommended by Ramsey's Baby Step 1).

Despite these setbacks, we've been able to grow our net worth since my last update through continuing some retirement savings, paying down the mortgage, and the positive movement of the markets we're invested in. Currently, our net worth sits at around $250,000. That includes the home and the mortgage, but I'm using a very conservative home valuation - namely, the appraisal from our last mortgage renewal, 3 years ago. This summer, an identical house on our street (but with a smaller lot and fewer upgrades) sold for $20,000 more than the valuation I'm using for our home, so I'm confident that the number is accurate, or even pessimistic.

Looking forward, my hope is that my wife's job offer comes through, and the salary is sufficient to allow us to resume our desired savings rate. I want to build our emergency fund up to a healthy level, and replenish the car/travel funds that were drained to pay off the tax debt. I hope to build the car fund up to a comfortable level before our last remaining car dies and forces our hand. Above all else, I want to remain debt-free and grow my net worth.

So, to sum up. Since my last update:

• Car died
• Surprise tax bill for $20,000
• Wife got laid off
• Grew net worth by $45,000

It's been a discouraging year, but I guess it doesn't look so bad when I write it out like that.

So the same people that got you involved in a tax fraud scheme are holding $100,000 worth of your investments? Any chance you can get that back. Because based on what you presented, you should run, not walk, to get your money back. Do you know the assets that are inside your land bank trust? I have very little idea what a land-bank trust is, but asset quality would certainly be something I would be concerned with..... Hindsight is always 20/20, but did you run the charity-idea by your CPA?

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Not exactly - they brokered the deal. The "investment club" (Home Equity Investment Rewards) is affiliated with the land banking company (Syndication and Development). The land investment was around $76,000. We took out $100,000 because it also had to cover our membership fee in the investment club ($4,000), penalties for renewing our mortgage early ($3,000), CMHC insurance (Canadian PMI) on the new, high-ratio mortgage ($8,000), and the rest paid off a line of credit.

The land-banking company bought a big plot of land from a farmer outside Edmonton, then chopped it up into half-acre parcels and sold them to investors like us for $38,000 each. We bought two units, for $76,000. We are the legal owners of the property, we have deeds, and I personally did a title search to verify that they're legit. Our names are indeed on the titles for the properties we bought.

The company managing the deal has the land re-zoned, and has a development plan for the land created. Then they shop it around to developers to actually build it. The added-value is that the bureaucratic red-tape and design work is already done. All the builder has to do is build it and sell the homes. We won't know how much we'll profit until they've finished actually working with the city to have the land rezoned, and designed. The land banking company keeps 1/3 of the properties for themselves, so they too can profit from the value being added to the land. They told us it typically takes 5 years to bring the land to a state to be sold to builders. We bought in August of 2006.

The sketchy part is that when I did the title search on the land, it also revealed how much the land-banking company paid for the land before they chopped it up and sold it to us. Basically, they paid $10,000 per half-acre, which they then turned around (within 1 year) and sold to investors like us for $38,000 per half-acre. They quadrupled their money in one year, while at the same time presenting us with official-looking land appraisal estimates assuring us we were paying a fair price for the land. I now know how the land banking company profits from the deal, and unfortunately, it's clear that they make far more money acquiring these properties and selling them off to investors like us than they make from actually following through on the development. Still, they do eventually follow-through (or else word would quickly get around that nobody ever makes their money back, and they'd be shut down), so I'm still optimistic that we'll at least break even, even if we don't double our money as they've promised.



We own the deeds to the land, so we're free to sell those to whoever we want, whenever we want. But with the strings attached (they're units of a land banking trust, and we can't do anything with the land without approval of 51% of the other landowners), there's not really much point. We're going to just wait it out and hope to at least break even.



Agreed. Hindsight is 20/20, and I've learned a lot about money over the past few years. Back when we participated in this land banking deal, and the charitable donation scam, we were much more naive and trusting. We were invested in high-fee segregated mutual funds (MER: 3.75%!!!) and had never even heard of index funds. Our financial situation is much more mature now.

The tax-shelter scam thing is still weaving its way through the courts. The company running the charities is fighting the tax agency to argue that it's a legal loophole, while at the same time, a class action law suit has been launched against the company, to recover our original bogus "donations." I wrote a cheque to them for $11,000, got back $14,000 from the government, then paid back the government $20,000. So overall, it's a net loss of $17,000 for me (and hundreds of others who were bilked). We've already paid it off (as I said above), so it's in the past for us, but if we can get any of it back, I'm certainly going to pursue any avenues available to me. I chalk it up to another expensive mistake I've made in order to gain valuable knowledge and experience about money (right up there with paying $40,000 for a VW Jetta that didn't even have leather seats). Live and learn - I just hope someone else reads this and is able to avoid the same pitfalls that have set me back so far. I know I'm not too bad off (net worth of $250k at age 34), but it pains me to think how much further ahead I could've been if I'd invested that $40k instead of blown it on a car, or what I could've done with an extra $20,000 this summer, while the markets were down, instead of having to send it to the government. 20 years from now, who knows how much it could've grown.

Anyway, I guess that's the value of these journals, right?

Just a quick update.

The job offer came through for my wife, and she's working again, making about the same money she was before. Instead of resuming investing, though, we've decided to beef up our emergency fund first. (as per Ramsey's Baby Step 3). After that, we're toying with the idea of going at the mortgage full-bore instead of maximizing investing. I've calculated that we could have the mortgage paid off by the end of 2014, if we focused on it.

Current snapshot:

It's been a while since my last update, so here is some fresh information. Since December, we've focused on building up our emergency fund, which now represents 3 months of expenses. Now, we're switching to paying back some money we borrowed from our Car and Travel funds last year to take advantage of the dip in the markets. We owe those two funds a total of $10,000, which we should have fully repaid by October.

Also, we're taking a trip to Hawaii this fall. My wife booked the tickets on her Visa (for the rewards, protection, convenience, etc.), which is why this month's statement shows a balance on our Visas. However, when the bill comes, we'll pay it off completely using the money in the "Travel" fund.

Here are this month's numbers:

Seems like you are in good shape.

Care to elaborate on that Hawaii trip? Which islands are you visiting?

And I'll have to dig back through the history here so I won't ask much about the lank banking scheme. But one question - is it really something that has a fixed value? You don't seem to be updating it. That would be fine if it is illiquid but I'm just wondering.

Hey, DH. The trip was my brother-in-law's idea. He and his girlfriend wanted to go to Hawaii, and wanted to find someone else to go with them so they could share accomodations and keep the costs down. He sent out the invite to the whole family, everybody else said (predictably) "Are you crazy? I can't afford that!". My wife and I, being debt-free with a full emergency fund and no other vacation plans this year, shrugged and said, "Sure, sounds like fun."

I don't know the names of the islands, but we're flying in to Hilo and leaving from Honolulu. We'll be there for 10 days at the end of October. We're really looking forward to it!



Great question. Here's a summary: In August of 2006, we participated in a "land banking" investment venture. We, along with dozens of other investors, each bought 2 half-acre "units" of a big plot of farmland. The company organizing the program then has the land rezoned residential, has full development plans drawn up, and acquires the necessary permits. Then, they shop it around to developers. By this point, all the red tape has been taken care of, and all the developer has to do is build it. In theory, value has been added. This whole process is supposed to take 5 years.

Like I said, we bought in August of 2006. We paid $80,000 for 2 "units" totalling one acre. As with any real estate, we won't know it's true value until we sell, so for now, I'm just using the original amount we paid for the land, assuming it to be a (hopefully) conservative estimate of its true value. If they were honest about their original time estimate, we should be getting our money out within another year or so. However, with the turmoil in the real estate markets, it could end up being a little longer than that. I'm trying to get some answers from the organizers.

We do not plan on participating in this program again, even if we do end up making a profit. At this point, I'd be happy just to break even and get away from this deal.

..on the land banking investment? Curious how it's working out.

Hey, Rick.

The latest is that in July, we received a letter from S&D International (the company running the land banking program), indicating that due to the current economic climate, they haven't done much to develop our land. They asked us whether we wanted them to a) wait another few years and keep trying, or b) put the land back on the market as-is. We voted for b). We just want to get our money out of this deal and back into our mortgage where it belongs. I've given up hope of making much/any profit on this deal.

I'll post some new net-worth numbers next month. I'd been holding off because we'd shuffled some cash around, "borrowed" from one fund for another, and rather than try to explain it, I've just been holding off until everything was paid back. Now everything is straightforward again.

Here are our latest numbers, from earlier this month. After we finished topping off the emergency fund, we repaid some money we "borrowed" from the car and travel funds to invest when the market was lower last year. Since then, I've started throwing extra cash at the mortgage. I would really love to have that mortgage completely paid off in less than 5 years.

Instead of paying down your mortgage have you considered boosting your retirement savings? 118k in the RRSP plan isn't very much for two people. In addition, your TFSA account only has 1600 in it. Do you have a 5k limit/year like we do in the US?

Just curious as to why your preference is the house over retirement. You can't get another opportunity to put in for retirement, while you can always prepay your mortgage.