Back in 2012 I decided to start sharing my net worth updates twice a year. I’ve always been transparent with my finances because I think it’s helpful for readers to know where I’m coming from and how I manage my own money. I’m a real person and wrestle with financial decisions just like everyone else. This blog has been a great outlet for me to share my thought process and get valuable feedback from readers.
Somewhere along the way I made a goal to achieve $1M in net worth by the end of 2020. I accept that it’s a vanity metric that doesn’t really mean anything. When people dream of being a millionaire they’re likely thinking about spending $1M rather than having $1M in wealth.
Still, I thought it was a stretch goal worth striving for along the road to financial freedom.
When I shared my mid-year review at the end of June I didn’t think I had much of a chance to reach the $1M mark. Stocks had dropped 34% in March and hadn’t quite recovered those losses by mid-year. What a difference six months can make! My own RRSP surged in value by nearly $30,000 while my TFSA grew by $10,000 (with no new deposits).
Meanwhile, we’ve lived on the cash payout from my pension and so we were able to save and invest inside of our corporation to the tune of $100,000.
All of this meant that our total assets grew to $1.2M while our only liability – our mortgage – dipped below $200k. We made it!
Here’s how our net worth breaks down as 2020 comes to a close:
Net worth update: 2020 year-end review
| 2020 | 2019 | 2018 | % Change | |||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Chequing account | $5,000 | $1,500 | $1,500 | — | ||
| Savings account | $65,000 | $35,000 | $15,000 | 85.71% | ||
| Defined benefit pension | — | $224,054 | $198,920 | — | ||
| Corporate investment account | $109,281 | — | — | — | ||
| RRSP | $246,391 | $208,614 | $162,939 | 18.11% | ||
| LIRA | $162,218 | — | — | — | ||
| TFSA | $88,882 | $49,239 | $29,378 | 80.51% | ||
| RESP | $64,428 | $52,754 | $38,472 | 22.13% | ||
| Principal Residence | $459,000 | $459,000 | $459,000 | — | ||
| Total assets | $1,200,200 | $1,030,161 | $905,209 | 16.51% | ||
| — | ||||||
| Debt | ||||||
| Mortgage | $187,059 | $201,665 | $213,678 | -7.24% | ||
| Total debt | $187,059 | $201,665 | $213,678 | -7.24% | ||
| — | ||||||
| Net worth | $1,013,141 | $828,496 | $691,531 | 22.29% |
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 Scotia Momentum Visa Infinite Card, which we use for non-Costco groceries and gas. I’m also using the HSBC World Elite MasterCard, which came with an incredible 100,000 point welcome bonus. 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 1.5% 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. You know all of this from my post about how I invest my own money.
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.
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. The next year I bumped up the market value by 2% (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.
Final thoughts and a look to 2021
It’s an immense privilege to be able to work from home and prosper in the middle of a pandemic when so many people have lost so much. I acknowledge this privilege and I’m incredibly grateful for everything we have.
What’s next after reaching the $1M milestone? They say the first million is the hardest, so why not aim for $2M by the end of 2025 (my age 46 year)?
We had big plans for 2020 after I quit my job. Since I can truly work from anywhere we planned to travel more and put that location-independence theory to the test. That obviously didn’t happen.
We’ll see what 2021 brings, particularly in the last half of the year. I’m forever an optimist so I’m hopeful there’s a return to ‘normal’ somewhere on the horizon. Until then, we’ll focus on our family and make the most of our time at home. We’ll continue to save and grow our business. And we’ll continue to dream of better days ahead.
How did your finances fare in 2020? Did you stay invested through the ups and downs? Let me know in the comments below.
