Example: Getting Started with Your First Investment

This walkthrough shows how to set up tracking for a straightforward leveraged investment. You'll see exactly what to record and how the balances change at each step.

The Scenario

You have a HELOC with $0 balance. You want to invest $10,000 in a diversified ETF portfolio. Here's the complete flow from borrowing through your first interest charge.

Step 1: Borrow the Funds

On January 2, you initiate a $10,000 advance from your HELOC. The money arrives in your brokerage on January 4.

Event: Borrowing To Invest

• Amount: $10,000
• Credit withdrawal date: January 2
• Brokerage deposit date: January 4

Balances After:

You now have $10,000 of borrowed money in your brokerage, waiting to be invested. Your debt is 100% uninvested—technically deductible since you intend to invest, but not yet clearly connected to specific investments.

Step 2: Buy Securities

On January 6, you purchase 350 units of XEQT at $28.50 per unit, for a total of $9,975.

Event: Investment Purchase

• Date: January 6
• Symbol: XEQT
• Units: 350
• Price per unit: $28.50
• Total: $9,975
• Fee: $0
• Borrowed amount: $9,975 (using all for the purchase)

Balances After:

Most of your borrowed money is now invested. You have $25 left over (the amount that didn't fit into whole shares). Your XEQT position is 100% borrowed-funded.

Step 3: Record the First Interest Charge

On January 31, your HELOC statement shows $52.50 in interest for January.

Event: Interest Charge

• Date: January 31
• Amount: $52.50

Calculation: The app divides January into intervals based on your balance changes:

• January 2-5 (4 days): $10,000 uninvested
• January 6-31 (26 days): $25 uninvested, $9,975 invested

Since invested principal is clearly deductible and uninvested is treated conservatively:

• Invested portion: ~$51.19 (the vast majority)
• Uninvested portion: ~$1.31 (small amount on the $25)

For this example, let's say all $10,000 was at the same rate. The app calculates:

• Eligible interest: $51.19 (based on $9,975 invested for 26 days)
• Non-eligible interest: $1.31 (based on $25 uninvested)

Balances After:

You've been charged $52.50 in interest. About $51.19 of that is deductible—once you pay it.

Step 4: Pay the Interest

On February 5, you make a payment of $52.50 to cover the January interest.

Event: Credit Payment

• Date: February 5
• Amount: $52.50

Calculation: Your payment exactly covers outstanding interest. No principal is paid.

• Eligible interest paid: $51.19
• Non-eligible interest paid: $1.31

Balances After:

You've now paid $51.19 of deductible interest. This is the amount you can claim on your tax return for this year (so far).

Running Summary

After these four events, here's your complete situation:

Credit Account:

• Total Debt: $10,000
• Deductible (Invested): $9,975 (99.75%)
• Non-Deductible (Uninvested): $25 (0.25%)

Brokerage:

• Cash: $25 (all borrowed)
• Holdings: 350 XEQT ($9,975 cost, 100% borrowed)

Tax Impact:

• Deductible Interest Paid: $51.19

What's Next?

Going forward, you'd repeat steps 3-4 each month:

1. Record Interest Charge events as they appear on your statement
2. Record Credit Payment events when you make them

If you receive distributions from XEQT, record those too—especially if they include return of capital.

When you eventually sell or rebalance, record those sales and any new purchases.

Key Takeaways

1. Borrow first, then invest. The borrowed funds need to exist before you can use them for purchases.

1. Most of your interest is deductible because most of your debt is invested. The small uninvested portion creates a tiny non-deductible slice.

1. Interest becomes deductible when paid. Recording the charge creates "outstanding" interest; recording the payment makes it deductible.

1. The app tracks everything. You just record events; balances and calculations happen automatically.