Net Worth Update: 2014 Midyear Review
This year has been heavy on spending with not much focus on saving. The spending is purposeful, though, as we borrowed $35,000 on a line of credit to develop our basement, which will increase the value of our home.
The interest rate on the line of credit is 3.5 percent, so using it to pay off the remaining balance on my 4 percent RRSP loan made sense.
Higher inflation, coupled with the needs of a growing family, has caused our day-to-day expenses to spike as well. This is an area we’ll try to tighten up in the second half of the year.
The stock market continues to roar along, with the TSX up 8 percent so far this year. My portfolio increased due to market gains and dividends, even though I haven’t added any new money. Earlier this year I set up a synthetic DRIP where dividends are automatically re-invested for a number of my holdings.
Midyear is a great time to do a financial check-up. Here’s a look at my current net worth:
Net worth update: 2014 midyear review
Total Assets – $663,191
- Chequing account – $1,500
- Savings account – $4,400
- RRSP – $98,847
- Defined benefit plan – $93,356
- TFSA – $4,626
- RESP – $10,462
- Principal residence – $450,000
Total Liabilities – $306,510
- Mortgage – $264,016
- Home equity line of credit – $42,494
Net worth – $356,681
A few questions that routinely get asked after I post these net worth updates:
Banking
All of my day-to-day spending is done with a combination of the Capital One Aspire Travel World MasterCard and the Scotia Momentum Visa Infinite. These cards allow me to maximize my reward points and earn over $800 per year.
I have a no-fee chequing account at Tangerine, which I use for bill payments, email money transfers, and the odd debit purchase.
The rest of my banking is done at TD, including my mortgage, line of credit, and investments. For simplicity, I keep a basic chequing account there and maintain a $1,500 balance to waive the monthly fee.
Pension
Each month I contribute roughly 12 percent of my salary to a defined benefit pension plan that my employer matches. The amount listed above is the commuted value of the pension if I were to leave the plan today.
The plan pays 2 percent of your highest average salary multiplied by the number of years worked. So if I retired at 60 with an average salary of $100,000 I’d receive $60,000 per year from the pension plan.
RRSP / RESP
I prefer to list the current value of these plans rather than discounting their future value to account for taxes and distributions.
I consider a net worth statement to be a snapshot of your current financial picture, so when it comes time to draw from my RRSP and distribute the RESP to my kids, net worth will decrease accordingly.
Principal residence
We bought our home three years ago and, even though the market has gone up, I’ve continued to list the value at purchase price. This year I’ve factored the basement renovation into the equation by increasing our home value by $25,000.
How have your finances fared so far this year?
Nice progress Robb. My finances are similar, I haven’t started to tackle the basement yet but when I do I will likely have it done by a contractor. With mortgage rates so low the focus has been on the RRSP and TFSA, slightly delayed lately though with a vehicle purchase
Hi Dan, it’s amazing how those big ticket items can throw you off course. Savings can’t always grow exponentially every year, you have to pause and consider things like cars, kids, basements, etc.
Great work Robb. Smart call on the basement. Fun and added value for the family.
Mark
Thanks Mark! We finally got the carpet installed on the weekend and you should have seen the girls run around down there like it was a race track 🙂
I started tracking net worth this year. It was a shock to my system to see that we’re sitting at around $380K, which is pleasantly surprising.
While I agree that low interest rates should mean more savings to TFSA and RRSPs, my worry is that when my mortgage opens again in 5 years (just renewed at 2.99% about 1 month ago). I’m expecting the rates to be much higher. I expect to have a balance when it opens and, if the rates are much higher, I worry that it’ll undo any savings I would have gained with the low rate up to that point.
My focus is to throw as much as possible to the mortgage (double-downs and when it opens in 2019) and get the beast off my back. Once the mortgage is paid off, I should be able to allocate approx. $15K per year to TFSAs and RRSPs. Not the ideal, but I still have time (approx. 20 years) before I hang up my hat. 🙂
I basically doubled my mortgage payments for two years, but have eased off now that we started developing the basement. I’d like to have the mortgage paid off early, but not at the expense of saving – I need to find the right balance.
We are a bit behind our savings targets for the year, but the market has been treating us quite well so far, which is nice. The economic environment means we wont’ be seeing some of our bonuses this year, which sucks because we really want to dump more money into the market!
Hi Anne, that’s too bad you’ll miss your bonus. It has been a tough few years. Sounds like we’ll get cost of living increases this year, but it’s hard to get excited over 1% 🙂
I’m curious as to why you chose a line of credit instead of a loan with a fixed rate for the basement.I realize that the interest rate is considerably lower but the rate is usually revolving which will add more time and money to the loan…if I understand the concept correctly.
Hi Karen, at the end of the day the HELOC was the cheapest and most flexible option for borrowing that amount. Hopefully it’ll be paid off by the end of 2015.
Congrats on the nice jump! You also jumped a few spots on our Blogger Net Worth Tracker too 🙂
http://rockstarfinance.com/blogger-net-worths/
Robb,
Good job continuing to get that net worth higher. Sounds like a good plan to use the HELOC to improve the basement. I would think you would get close to a 1:1 return out of it if you’re doing much of the work yourself. Plus, you get to enjoy the final product!
Great stridesyou have made! I really need some renos too although maybe adding up to less than your fabulous new basement. I just hate to dig into other assets. You have me thinking again. Maybe couples are better at forging ahead with such things. 🙂
I am rather stunned that I have seen my assets climb by maybe 130k since retiring in August 2013. And I am living off my investments and savings with no pension existing and neither OAS nor CPP kicking in. Nice to start on an upbeat note.
I must confess I have yet to start moving investments out of stocks like people say retirees ought to. I have also not sold my house yet as tempting as that is in the Toronto market right now. Many decisions lie ahead.
Hi Robert, it sounds like you’re doing just fine. An asset increase of $130K in retirement is pretty darn good, I must say 🙂