It’s time for my biannual net worth update where I share all of the numbers on my quest to reach millionaire status by the end of this year. It’s not going to be easy, as the global pandemic has impacted everyone’s finances to some degree.
I want to start by acknowledging how incredibly fortunate we are to be in good health and have the ability to earn an income working from home. Despite the odd grumbling about home schooling and cancelled travel plans, we know how lucky we have it and are grateful every day.
Remember plans? We had plenty of them heading into 2020. After quitting my job back in December, we hoped to spend much of 2020 travelling around Europe, the U.K., and Victoria. We managed to squeeze in a trip to Maui for a week in February before travel restrictions were put in place indefinitely.
As for our finances, well it’s been a year of transition. My wife and I originally planned to pay ourselves dividends from our online business. But then I had the opportunity to take the commuted value of my workplace pension, which came with a large cash payout. So, we shelved the dividend plan and decided to live off the pension payout for the remainder of the year.
I opened a locked in retirement account (LIRA) to house the remainder of the pension payout. I can’t touch this money until at least age 55 and it’s currently invested in the Vanguard All Equity ETF (VEQT).
The cash payout was more than we can spend this year and so I stuffed $30,000 into my TFSA to fully max it out for the first time since 2011. That felt good!
We also maxed out the small amount of available contribution room in both my wife’s and my RRSP.
How have my investments fared? Stock markets fell more than 30% in March, the fastest decline of that magnitude in history. But investments found a bottom on March 23 and have climbed steadily(ish) ever since. My RRSP is down 6.12% on the year while my TFSA is down 2%.
Finally, I opened a corporate investment account to start to invest excess business income beyond what we pay ourselves (nothing, this year) and beyond our operating float. I’ve included this new account in my net worth update to be completely transparent with how our finances are set up.
Now, let’s look at the numbers.
Net worth update: 2020 mid-year review
Total Assets – $1,070,597
- Chequing account – $5,000
- Savings account – $85,000
- (New) Corporate investment account – $30,000
- RRSP – $215,662
- (New) LIRA – $140,875
- Defined benefit pension plan – $0
- TFSA – $81,625
- RESP – $53,435
- Principal residence – $459,000
Total Liabilities – $194,261
- Mortgage – $194,261
Net worth – $876,336
You may have noticed the large amount of cash in our savings account right now (up from $35,000 in my last update). A good chunk of that is leftover from the cash portion of my pension payout and will be spent by the end of the year.
Now let’s answer a few questions about the way I calculate net worth:
Credit Cards, Banking, and Investments
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 discontinued Capital One Aspire Travel World Elite MasterCard. We have a grandfathered version that pays 2% back on every purchase and comes with a 10,000-point bonus each year.
*Cardholders have received notice that the 10,000 bonus points have been axed and the 2% reward on spending will be reduced to 1.5%. In other words, time to find a new card.
Our secondary card is the Scotia Momentum Visa Infinite Card, which we use for non-Costco groceries and gas. Finally, we look for the best credit card sign-up bonuses and time our large annual spending (car and house insurance) around these offers.
Our joint chequing account is held at TD, along with our mortgage and kids’ RESPs. My wife has her own chequing and savings accounts at Tangerine. Our high interest savings account is held at EQ Bank, which pays 2% interest.
My RRSP and TFSA are held at the zero-commission trading platform Wealthsimple Trade. My LIRA is held at TD Direct, and the new corporate investment account is held at Questrade. My wife’s investments are held at Wealthsimple.
RRSP / LIRA / 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, LIRA, 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/LIRA and distribute the RESP to my kids, my net worth will decrease accordingly.
We bought our home in 2011 for $425,000 and developed our basement a few years later, increasing its value to $450,000. The next 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 – with nothing selling in our price range – and so I’ve left the value at $459,000 for the past three years.
COVID-19 has certainly thrown a wrench into our plans and most likely killed any hope I had of reaching the million-dollar mark by the end of 2020. Still, this was always a stretch goal – something to strive for over the last 10 years. I won’t get kicked out of the personal finance blogger guild if it takes a few extra months to make it.
Again, we’re so fortunate to be able to get through this pandemic with a few mild annoyances while still improving our financial position. The same can’t be said for many other Canadians.
Have you managed to keep your finances on track in 2020? Let me know in the comments.