I started the year with high aspirations. I wanted our household net worth to reach $750,000 and to get there I needed markets to continue chugging along at 8-10 percent. Well, that didn’t happen.

When it comes to market expectations, straight-line goals won’t cut it. Even though it’s reasonable to expect 8 percent growth over the long term (I’m talking decades), it’s downright foolish to expect that growth every single year. Markets fluctuate, in case you forgot. It’s been a while.

My portfolio took a bit of a tumble late in 2018, causing me to miss the target goal for my RRSP by a good $17,000. In fact, my portfolio is $12,000 lower than it was at the half-way point this year.

Indeed, none of my investment accounts hit their targets this year. And that’s okay. I can’t control the markets, only my own behaviour and savings rate.

So if I can take any solace in 2018 it’s that I stuck to my plan and kept saving, investing, and paying down debt. Here’s how that worked out:

Net worth update: 2018 year-end review

2018 2017 2016 % Change
Assets
Chequing account $1,500 $1,500 $1,500
Savings account $15,000 $12,500 $12,500 20.00%
Defined Benefit Plan $198,920 $174,843 $150,853 13.78%
RRSP $162,939 $162,201 $133,454 0.45%
TFSA $29,378 $20,327 $7,359 44.53%
RESP $38,472 $34,442 $25,052 11.70%
Principal Residence $459,000 $459,000 $450,000
Total assets $905,209 $864,813 $780,718 4.67%
Debt
Mortgage $213,678 $225,290 $236,843 (5.15%)
HELOC $3,816 $11,472 (100.00%)
Total debt $213,678 $229,106 $248,315 (6.73%)
Net worth $691,531 $635,707 $532,403 8.78%

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 American Express Cobalt Card, which we use at non-Costco grocery stores and on dining and liquor. Finally, we look for the best credit card sign-up bonuses and time our large annual spending (car and house insurance) around these offers.

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 for $425,000 and developed our basement a few years later, increasing its value to $450,000. Last year I bumped up the market value by 2 percent (which is still less than its city-assessed value), but the local real estate market has since flattened and so I’ve left the value at $459,000 this year.

Final thoughts and a look to 2019

My goal is to amass a net worth of $1 million by the end of 2020. That’s only two full years away, so we’ll have our work cut out for us if we’re going to reach that goal.

We’ll need to increase our savings rate and hope the markets rebound to boost the value of our RRSPs and TFSAs. Even still, we might need a surprise inheritance from a long-lost relative to put us over the top.

Joking aside, it’s not the end of the world if we don’t reach $1 million in two years. You won’t see any Enron-style funny accounting going on to “help” me look good on paper. My long-term focus is on financial freedom, not an arbitrary measurement along the way.

To that end we’re still well on our way towards achieving that goal by 2024. But, one year at a time. Let’s first tackle my 2019 financial goals.

How did this year go for you? Did you move the needle forward on your net worth, despite the recent stock market dip? Let me know in the comments.

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13 Comments

  1. Gene on January 1, 2019 at 7:09 am

    Thanks for sharing these updates. We also track our portfolio monthly and since the summer our net worth is down about 7% despite adding savings into the portfolio since then. So on absolute comparisons we are down around 8.5% since June 2018. However, the plan is to keep our investments where they are now. Last week we sold almost everything and bought back into the markets leaving only 5% in cash, where 5% in cash for us is 5 quarters worth of living expenses. I used the down-market as an opportunity to get rid of some crap investments and convert some better ones into a more concentrated portfolio focused on dividends and capital appreciation.

    Unlike you, I have a much bigger portfolio value target before I want to retire. I won’t disclose my net worth. With two kids, teenage years ahead of us, and lots of travel destinations and adventures to be had, plus extra-curricular activities, I think our expenses will continue to be high until they graduate from University… at least higher than my current portfolio can generate in terms of an income stream. And I like my work.

    • Robb Engen on January 4, 2019 at 10:51 am

      Hi Gene, thanks for this. You’re right about the high cost of living while raising children. We feel that, too.

      My desire to leave my day job is more about achieving balance and doing more of what I love (financial education). If I could replace my full-time salary with online income and cut down my work by 30 hours a week or so, I’d consider that a huge lifestyle win.

      The million dollars is just a milestone, it doesn’t really mean anything. I would not call myself retired, even if I do leave my job in the next 2-5 years. The whole point would be to focus on my online endeavors and work on the things I’m passionate about. The great thing about that is I can do it from anywhere as long as I have an internet connection.

  2. Randy on January 1, 2019 at 8:30 am

    Hey there. Thanks for sharing. My situation is very similar and I too didn’t hit $750k like I wanted to. Shy about $25k due to markets and car/home upgrades. I’m on pace for $1m in 2 years and I’ll checking in here to make sure I’m on track:). Mortgage debt is starting to both me and may prioritize that for the guaranteed return. Your thoughts on that? Right now mortgage is $360k on rough value of $625k. Accelerated b/w with extra $750 monthly straight to principle. 3.24% for another 4 years or so. 40 years old. Would appreciate your opinion. Thanks.

    • Robb Engen on January 4, 2019 at 10:56 am

      Hi Randy, thanks for sharing as well. Good luck in your pursuit of a million in two years. We’ll be cheering each other on!

      I hear you on the mortgage starting to be a nuisance, what with interest rates rising and all. Accelerated bi-weekly with an additional $750/month is pretty aggressive and must be making a big dent in your amortization. Tough to say whether to do any more without knowing your complete picture and other goals and priorities.

      For me I have a target date in mind for when I want the mortgage paid off and so I set my payment amount to achieve that while focusing the rest of my extra cash flow on meeting my other goals (RRSP, TFSA, RESP). If for some reason I have money leftover outside of that, and we’ve got our fun and travel money looked after, then I would put it onto the mortgage for sure.

  3. GYM on January 1, 2019 at 11:16 am

    I don’t think I hit my goal either (I am running numbers later this week) but that’s okay, onwards and upwards! Keep up the great work and thanks for sharing.

    • Robb Engen on January 4, 2019 at 10:58 am

      Thanks GYM! It was a tough year but it shouldn’t be unexpected given the long bull market. We were due for a correction and hopefully nothing more 🙂

  4. R.S. on January 1, 2019 at 11:30 am

    I started 2018 with a net worth of 945k and ended the year with 931k (-1.5%). Roughly 95% of my net worth is in a mix of stocks and bonds and those accounts were down about 5% on the year. The only reason I’m at -1.5% on the whole year is due to the new money contributions I made during the year (~44k). Cool site by the way.

    • Robb Engen on January 4, 2019 at 10:59 am

      Hi R.S., that sounds pretty good, all things considered. Great job with your contributions. Savings rate still matters!

  5. Andy on January 3, 2019 at 10:27 am

    Posts like this are so inspiring that I did my own tracking and analysis for my family this year and while the results were grim we all learned so much and feel empowered. Honestly, in past years with the down market I’d be tempted to tinker and fret about my investment choices, but with all the great info here and also by others I am fortified to keep pounding away with a well diversified, low fee portfolio and investing for the future. Here’s to a great opportunity to buy low in 2019!

    Cheers,

    Andy

    • Robb Engen on January 4, 2019 at 11:02 am

      Hi Andy, that’s great to hear! As an indexer I don’t expect my investment portfolio to “make money” each and every year. Its job is to track the market for as little cost as possible. The markets it tracks “should” deliver returns of 6-10 percent over the very long term, but nobody should be surprised to see losses from time to time.

  6. Andrew Ngui on January 4, 2019 at 8:22 am

    Hi, I enjoyed your articles. I have a question in regards to how to calculate the commuted value of defined benefit pension. I work for the city. Is there a formula or website that you can direct me to?

    Thanks.

    Andrew

    • Robb Engen on January 4, 2019 at 11:39 am

      Hi Andrew, I just take the number that’s listed on the annual statement. Something like, “the commuted value of your pension if you were to leave the plan today would be: $198,920.”

      I get that statement once a year, usually in April or May, and then just add my monthly contributions until the end of the year to get an estimate.

      • andrew ngui on January 4, 2019 at 12:01 pm

        Hi Robb, thank you very much for your reply. I must have missed that in my annual statement. Will check it out when I get a chance tonight. Enjoy and learned a lot from your posts. Much appreciated.

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