It’s the end of June and that means it’s time to check in on our financial progress for the year and update our net worth statement. At the end of 2017 I shared our household net worth had reached $635,000+ and that our goal is to reach $750,000 by the end of 2018. The bigger picture objective is to hit the million-dollar mark by the end of 2020, and then become financially free (day job optional) by 2024.
The stock market has been a roller coaster so far this year but our investments have grown at a modest 3.9 percent clip. I maxed out my RRSP contribution limit prior to the deadline this year and now, due to the pension adjustment, have just $3,600 in annual contribution room going forward. I make this automatic by contributing $300 per month on pay day.
With plenty of room available on the TFSA side we continue to make TFSA contributions a priority and put $1,000 per month into this tax-free shelter. It’s gratifying to see our balance grow into something approaching respectability (for a personal finance blogger!).
We max out our RESP contributions for our two kids (now ages 9 and 6) by setting aside $416.66 per month and investing it in TD’s e-Series funds.
How do we maintain such a high savings rate? We’re not the most frugal family in the neighborhood, but we do have two paid-off vehicles and no desire to replace them anytime soon. And while my salary remains frozen until at least September 2019 (applies to all non-bargaining public sector staff in Alberta), we find creative ways to increase our income through freelance writing, credit card rewards, and by selling the odd item on Facebook or Kijiji. We spend on things we enjoy; like good, healthy food, wine, and travel.
Could we tighten our belts and reach our savings goals faster? Sure, but we prefer to enjoy the journey and strike the right balance between enjoying life today and saving for tomorrow. I think we’ll still get there faster than most people would ever dream.
Here’s a look at the numbers:
Net worth update: 2018 mid-year review
Total Assets – $899,867
- Chequing account – $1,500
- Savings account – $12,500
- RRSP – $174,265
- Defined benefit pension plan – $186,816
- TFSA – $27,113
- RESP – $38,673
- Principal residence – $459,000
Total Liabilities – $219,440
- Mortgage – $219,440
Home equity line of credit – $0
Net worth – $680,427
Now let’s answer a few questions about the way I calculate net worth:
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, which pays 5 percent back on ‘eats & drinks’ so we use it at any grocery store, restaurant, and liquor store that accepts Amex.
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 estimated 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. Last year I bumped up the value by 2 percent (which is still less than its city-assessed value).
Final thoughts
I must admit it’s incredibly motivating to watch our net worth grow and to see just how close we are to reaching the million dollar milestone. Our finances are humming along now on auto-pilot and we’re maxing out all of our available tax-shelters. I’m even looking forward to the next stock market crash as an opportunity to put a big chunk of money to work at a discount.
We’ll keep plugging away for the next six months and see if we can get our net worth up to 3/4 of a million by the end of the year.
How are your finances shaping up for 2018?
