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.
