We’re nearly halfway through the year and so it’s time for my bi-annual net worth update and review for 2017. I was happy to surpass the $500,000 net worth milestone last year and, after paying off our car loan in October, looked forward to cranking up our savings rate and refilling our TFSAs this year.

Everything is going according to plan and we’re on track to meet our savings goals while not adding any new debt. That’s important because to reach my big hairy audacious goal of Freedom 45 our savings rate will need to remain high and we’ll have to avoid the evil temptation of lifestyle inflation.

We’ll accomplish this by keeping our big-ticket purchases in check. We built a house six years ago and plan to stay put for a couple of decades. Our vehicles are paid-off and we keep them in good shape – it helps that I live close to work and we put less than 20,000 kilometres per year (combined) on the two vehicles.

Getting the big things right means money left over to plough into different savings vehicles like our RRSPs, TFSAs, and the kids’ RESPs. We’re saving more than one-third of our income and that amount might be closer to 40 percent by the end of the year.

Net Worth Update: 2016 Year-End Review

Here’s a look at the numbers:

Net worth update: 2017 mid-year review

Total Assets – $822,862

  • Chequing account – $1,500
  • Savings account – $12,500
  • RRSP – $152,569
  • Defined benefit pension plan – $162,848
  • TFSA – $13,812
  • RESP – $29,633
  • Principal residence – $450,000

Total Liabilities – $248,566

  • Mortgage – $242,669
  • Home equity line of credit – $5,897

Net worth – $574,296

Now let’s answer a few questions about the way I calculate net worth:

Banking

We funnel all of our spending onto the Capital One Aspire Travel World Elite MasterCard. The card pays 2 percent back on every purchase and its new no more tiers redemption program makes it easy to cash in points.

We have no-fee chequing accounts at Tangerine, which we use for bill payments, email money transfers, and the odd debit purchase.

The rest of our banking is done at TD, including our mortgage, line of credit, and investments.

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 that means 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

The right way to calculate net worth is to use the same formula consistently over time to help track and achieve your financial goals.

My preferred method is to list the current value of my RRSP and RESP 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 nearly six years ago and, even though the market has gone up, I’ve continued to list the value at purchase price.

Final thoughts

Overall it’s great to see our net worth grow by more than $40,000 since the end of last year. One-quarter of that increase can be chalked-up to the surging stock markets – my RRSP portfolio is up 8.2 percent on the year.

The rest of the increase is due to good old-fashioned saving: $1,000 per month into the TFSA, $1,000 into my pension, $500 into the RESP, $1,000 onto the line of credit, plus the mortgage balance decreases by roughly $1,000 per month. It starts to add up quick!

At this rate we should be on track to reach a net worth of $625,000 by the end of 2017.

The two major measuring sticks I’m using for my longer-term planning are:

  • $1,000,000 net worth by 41
  • Financial freedom by 45

The million-dollar milestone is just that, a post I’m trying to hit on the way to financial freedom.

I plan to reach financial freedom by age 45 and what that means to me is the income earned from my investments and online business will be greater than our household expenses – a sign that I’d no longer have to work as a salaried employee. To get there we’ll need to pay off our mortgage and have a big, fat investment portfolio.

Each of these updates brings us closer to our goal, and the closer we get the more motivated we become to achieve it. How is 2017 treating you, financially?

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13 Comments

  1. Darrell on June 26, 2017 at 5:42 am

    You are doing well with sticking to the plan.

    Q: are your savings of 12,500 in a HISA making interest each month?

    Continued success .. thanks for sharing your Tracking Results

    • Echo on June 26, 2017 at 10:13 am

      Hi Darrell, thanks for the kind words. Yes, the savings is in a HISA and earning interest.

  2. My Own Advisor on June 26, 2017 at 7:37 am

    Very well done Robb.

    I think those remains great yardage sticks:
    1) $1,000,000 net worth by 41
    2) Financial freedom by 45

    I hope you nail them. You certainly seem to be saving a bundle and you’re very disciplined.

    We continue to work on my wife’s RRSP – the goal is to max that out by the end of 2018. So far, so good for 2017 contributions though; >$1,500 per month into that account.

    For your RRSP to be up >8% you must be invested outside of Canada. 🙂

    Cheers,
    Mark

    • Echo on June 26, 2017 at 10:15 am

      Hi Mark, thanks – you’re killing it as well!

      VXC makes up 80% of my RRSP and it has done very well year-to-date.

  3. Dividend Earner on June 26, 2017 at 9:39 am

    Well done. Keep at it. Saving is the first step.

    As for Financial Freedom by 45, it is mostly dependent on your portfolio regardless of the home value. Being that you are indexing, what’s the ratio of earnings from investment income and online business you plan on having? I don’t know what the income percentage an index portfolio generates.

    I don’t want to challenge your plan but I have a 750K portfolio and the income it generates is still far from what I need to pay bills with 2 kids in the house. I would be curious what ratio you expect to have covered by your online business.

    I reached the million dollar net worth about 4 years ago and figured net worth tracking was not valuable (home and credit cards) and I switched to portfolio tracking. My goal is to reach $1M portfolio in 3 years and grow it by $250K through dividend income, investment return and new investment.

    All the best.

    • Echo on June 26, 2017 at 12:06 pm

      Best case scenario is that I earn enough from the online business so that I don’t have to touch any investments. Kids are expensive, I get that, and ours will be 15 and 12 in the year I turn 45. I might choose to work a bit longer to pad the stats, so to speak, until our kids are through their high-school years.

      Financial freedom date (Dec 31, 2024) includes having saved at least one-year’s expenses in cash, so there will be a built-in buffer to top-up our income, if needed.

      Not coincidentally, that’s also our mortgage-freedom date and our fixed expenses drop by $1,400 per month.

      • Devin on June 26, 2017 at 12:54 pm

        Have you considered working longer so that you can leave a larger legacy for your kids? I think there are pros and cons with leaving significant amounts of money for children, but it is a choice some people will make.

        Personally I would consider working at least until my kids graduate from high school regardless of the size of my portfolio. Maybe if I disliked my job I would make a different choice!

        • Echo on June 26, 2017 at 8:41 pm

          Some days are better than others!

          I hear what you’re saying. I don’t plan to leave a large estate as I’d rather gift money to our kids (and charity) while I’m still alive.

          Quitting full-time employment doesn’t mean full-stop retirement – I enjoy blogging and offering financial education so I’ll pursue those things and hopefully earn an income while doing so.

  4. Sarah on June 26, 2017 at 4:02 pm

    It’s great that you’re getting an actual 2% for your pension! I was shocked when we started researching my husband’s federal govt pension and realized that it is, in fact, NOT a 2% pension but a more complicated formula using CPP as part of the 2%. So you only end up getting 1.375% on the first $50k of your averaged salary (the AMPE – the maximum income amount used to calculate CPP) and then 2% for anything over that amount. Kinda shady IMO as everyone truly believes they’ll get 2% at retirement when it fact that 2% is a combo of pension & CPP!

    • Echo on June 26, 2017 at 8:47 pm

      Hi Sarah, you’re right – many pension plans are different and it’s so important to understand exactly what your benefits will be in retirement (as well as how they integrate with CPP).

      While my pension may sound “great” in terms of retirement benefits, it’s quite painful for current employees to have to contribute 12-13% of their income into the pension plan to keep it afloat. Something has to give.

  5. Duvan on June 27, 2017 at 8:57 am

    Thanks for sharing the update. Not sure if you include your investment income into the 40% savings calculation? I find that different personal financial bloggers use different approach to the calculation. But as the income from investments grows and become substantial, will you account for it in the savings calculation?

  6. Jane on June 27, 2017 at 3:25 pm

    Thank you for sharing your journey to financial independence. It’s very helpful; as well are the comments from others!

  7. Owen on June 28, 2017 at 7:37 am

    Nice update. Congrats on your progress! Saving $4,500 per month is no small feat.

    Does your DB pension regularly share your commuted value number or where does that number come from? When my wife left her previous previous employer we had to wait anxiously to find out the commuted value before we could decided between keeping the benefits at retirement or taking the commuted value. We ended up taking the commuted value but it would have been nice to know what it was ahead of time.

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