The end of the year is a great time to review your finances and update your net worth. I’m a personal finance nerd, which means I update our net worth every month or so, and I publish a net worth update here twice a year.
At the midway point this year our net worth had just about reached $575,000. Now I’m thrilled to see that it has jumped over the $635,000 mark!
The financial highlights for this year include a very solid 14.38 percent return for my two-ETF RRSP portfolio (more on this in the new year), plus I started contributing $1,000 per month into my TFSA with the goal of catching up on a few years of missed contributions.
While I haven’t quite maxed out all of my unused RRSP contribution room, I’m only $3,300 shy and hope to make that contribution before the 2017 RRSP deadline. It’ll be a few more years before we can catch up on all of our unused TFSA contribution room, but adding $12,000 per year to it is a good start.
Sadly, no salary increase again this year, which meant manufacturing my own raise through freelance writing, credit card rewards, and selling used items on Facebook and Kijiji.
Another bummer that I hadn’t counted on was the $3,500 I had to put into our vehicles this fall, including new tires and a windshield replacement for the Sante Fe, plus replacing the brakes and leaky struts on the now 10-year-old Tucson.
These unexpected repairs meant I couldn’t finish paying off our home equity line of credit, so that unfortunately will carry over into 2018.
Still, I’m happy to see our net worth increased by more than $100,000 year-over-year. Here’s a look at the numbers:
Net worth update: 2017 year-end review
| 2017 | 2016 | 2015 | % change | |
| Assets | ||||
| Chequing account | $1,500 | $1,500 | $1,500 | – |
| Savings account | $12,500 | $12,500 | $5,000 | – |
| Defined benefit plan | $174,843 | $150,853 | $127,451 | 15.9% |
| RRSP | $162,201 | $133,454 | $119,373 | 21.5% |
| TFSA | $20,327 | $7,359 | $4,227 | 176.2% |
| RESP | $34,442 | $25,052 | $17,642 | 37.5% |
| Principal residence | $459,000 | $450,000 | $450,000 | 2.0% |
| Total assets | $864,813 | $780,718 | $725,193 | 10.8% |
| – | ||||
| Liabilities | ||||
| Mortgage | $225,290 | $236,843 | $248,056 | (4.9%) |
| HELOC | $3,816 | $11,472 | $25,387 | (66.7%) |
| Total liabilities | $229,106 | $248,315 | $273,443 | (7.7%) |
| – | ||||
| Net worth | $635,707 | $532,403 | $451,750 | 19.4% |
A few questions that I often get asked after posting a net worth update:
Credit Cards & Banking
We funnel all of our purchases onto a couple of different rewards credit cards to earn points on our everyday spending.
Our go-to card is the now discontinued Capital One Aspire Travel World Elite MasterCard. We have a grandfathered version that pays 2 percent back on every purchase and comes with a 10,000-point bonus each year. Our secondary card is the new American Express Cobalt Card, and we also use the now discontinued Amazon.ca Rewards Visa for Amazon purchases and for any foreign currency transactions.
We each 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 also 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 in 2011 and even though the real-estate market has gone up I had typically listed its value at purchase price. I’ve since factored our basement development into the equation and increased our home value by $25,000. This year I bumped up the value by 2 percent (which is still less than its city-assessed value).
Final thoughts and a look to 2018
My goal is to amass a net worth of $1 million by the end of 2020. That’s only three full years away, so we’ll have to continue to see $100,000+ increases (and then some) each year to make that happen.
After that, the goal is to reach financial freedom by age 45, which is less than seven years away!
2018 is going to be a crucial year to make sure we’re on track to reach the million-dollar mark.
While we can’t control what the markets do, I can make sure to max out my RRSP, continue to add $1,000 per month to my TFSA, pay off the line of credit, and start putting a bigger dent into our mortgage next year.
By the end of the year I’d like to have a net worth of $750,000. My goal is to have $180,000 in my RRSP, $35,000 in my TFSA, and get our total liabilities down closer to $200,000.
How did your 2017 shape-up? Care to share your financial goals for 2018?
