Last year we reached the million-dollar net worth milestone. The goal itself wasn’t life changing, by any means, but it was something we had been striving to hit for nearly a decade – and it felt pretty damn good!
The truth is we have changed our lives for the better over the last two years. I quit my day job at the end of 2019 to focus on blogging, freelance writing, and my fee-only financial planning practice.
My wife and I run a successful business that has wildly exceeded our expectations. Once we reached the $1M net worth mark we made two new goals. One, to try and reach $2M by the end of 2025. And, two, to adopt a Coast FIRE mentality where we no longer save aggressively for retirement. Instead, we’ll intentionally work less and spend more to increase our overall life satisfaction. (And, yes, we can achieve both!).
We’ll still max out our TFSAs each year, along with the kids’ RESPs. But no more RRSP contributions. On the corporate side of our ledger, we’ll try to limit our earnings so that we can pay ourselves just enough to meet our lifestyle needs. No more contributions towards our corporate investments.
The Coast FIRE approach means we can let our investments grow without actively contributing to them anymore. We’re not ‘retired’. We enjoy what we do. We just don’t need to work as hard or save as aggressively as we have been over the past 10 years. That means more time spent with our family, more time for active leisure, and more time for (and money spent on) travel.
We have been in a fortunate position throughout the pandemic. We work from home. We have a lot of interest in our fee-only financial planning service. I have two steady and reliable freelance writing clients. And, thanks to the loyal readers of this blog, we do receive a decent amount of revenue each month.
The lack of travel and ability to do much of anything over the past 2 years meant accepting more clients and freelance assignments than I probably wanted to. It’s hard to say no when you have nothing better to do.
We’re hoping once we get to the other side of this Omicron wave that we can resume our plans to travel. That will force us to work less, and earn less revenue. The downside is we won’t be able to save as much, which will take some getting used to after 10+ years of trying to maximize our savings rate.
To give you some perspective, this year we contributed $70,000 to our corporate investments. That’s money earned over and above what we needed to pay ourselves and our business expenses. On the personal side of the ledger, we saved $55,000 and put that towards my TFSA, my wife’s TFSA, and our kids’ RESPs.
The stock market was on fire once again in 2021. The S&P 500 was up 29%, the TSX was up 21%, and my global equity holding (Vanguard’s VEQT) was up 22% for the year.
Our savings contributions and stock market performance contributed to another fantastic year in terms of net worth growth. Here’s how our net worth looks at the end of 2021:
Net worth update: 2021 year-end review
| 2021 | 2020 | 2019 | % Change | |||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Chequing account | $5,000 | $5,000 | $1,500 | — | ||
| Savings account | $65,000 | $65,000 | $35,000 | — | ||
| Defined benefit pension | — | — | $224,054 | — | ||
| Corporate investment account | $207,003 | $109,281 | — | 89.42% | ||
| RRSP | $294,664 | $246,391 | $208,614 | 19.59% | ||
| LIRA | $198,365 | $162,218 | — | 22.28% | ||
| TFSA | $160,942 | $88,882 | $49,239 | 81.07% | ||
| RESP | $84,148 | $64,428 | $52,754 | 30.61% | ||
| Principal Residence | $459,000 | $459,000 | $459,000 | — | ||
| Total assets | $1,474,122 | $1,200,200 | $1,030,161 | 22.82% | ||
| — | ||||||
| Debt | ||||||
| Mortgage | $172,161 | $187,059 | $201,665 | -7.96% | ||
| Total debt | $172,161 | $187,059 | $201,665 | -7.96% | ||
| — | ||||||
| Net worth | $1,301,961 | $1,013,141 | $828,496 | 28.51% |
Now let’s answer a few questions about the way I calculate our net worth:
Credit Cards, Banking, and Investments
We funnel all of our purchases onto a few 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 1.25% interest.
My RRSP and TFSA are held at the zero-commission trading platform Wealthsimple Trade. My LIRA is held at TD Direct, and the 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 $424,000 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 2022
Again, I want to acknowledge the immense privilege of being able to work from home and prosper in the middle of a pandemic when so many people have lost so much. My wife and I are incredibly grateful for everything we have.
While I was excited to see our net worth grow by nearly $300,000 this year, I recognize that we cannot expect investments to continue to climb at 20%+ each year. We do need to temper expectations for future returns, which is why I only use a 6% nominal rate of return for future investment return projections.
That said, thanks to this year’s impressive performance we would only need our net worth to grow by about 12% per year for the next four years to reach our $2M milestone. That should be achievable, even as we dial back work and savings with our Coast FIRE approach.
I’ve already shared our financial goals for 2022. Aside from that, we just hope we can put the worst of the pandemic behind us next year and move on with our lives.
How did your finances fare in 2021? Let me know in the comments below.
