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:
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.
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.
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.
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?