Our finances were still in flux at the end of 2022 because we didn’t have a possession date for our new house, and hadn’t put our existing house on the market.
Well, we took possession of our new house at the end of April this year (and we’re absolutely loving it!). We sold our other house for $555,000, which was slightly below the list price but more than our assessed value and expectations. I’ll take the win!
The new owners took possession about a week after we moved out, which worked out nicely.
As a planner, I stressed about the unknown variables like cost overruns on the new house and whether we’d be able to sell our house on time and for a reasonable price. After a year of uncertainty, things worked out slightly better than expected.
But the new house is a significant upgrade for us and we needed to make some trade-offs and adjustments to our finances.
First, our goal was to fully finish the new house, including landscaping and window coverings (no someday, maybe projects). That meant holding back some of the cash we received from the sale of our house to complete these projects, rather than throwing extra funds onto the mortgage or back into our TFSAs.
Another goal was that we’d be able to continue living our same lifestyle, including traveling extensively, even though we’re saddled with a larger mortgage at a higher interest rate. That meant adjusting how much we pay ourselves.
Business owners tend to underpay themselves (at least in my experience) and we were likely no different. But we bumped up our personal income by $6,000 each (a 7.1% raise), which will help cover the higher mortgage payments and still allow us to spend on travel, max out the kids’ RESPs, and start contributing annually to our TFSAs again.
On the corporate side, we shored up cash just in case things didn’t go well with the house sale. Everything worked out fine, though, so we comfortably began paying ourselves more and started investing within the corporation again. The goal is to invest $50,000 by the end of 2023.
Finally, our investments have grown significantly year-to-date as Vanguard’s All Equity ETF is up 9.34% so far in 2023. Again, what a difference a year makes!
Now, let’s look at the numbers.
Net worth update: 2023 mid-year review
Total Assets – $1,899,140
- Chequing account – $12,000
- Corporate cash – $75,000
- Corporate investment account – $262,420
- RRSPs – $290,442
- LIRA – $191,463
- TFSAs – $0
- RESP – $91,815
- Principal residence – $976,000
Total Liabilities – $508,894
- Mortgage – $508,894
Net worth – $1,390,246
Our 10-year plan is to stay in the new house while our kids finish school and decide where they want to go for their post-secondary education. We’re open to the possibility of moving to be closer to them, staying put, or doing our own thing. We’ll see when the time comes.
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 few different rewards credit cards to earn points on our everyday spending.
Our go-to card is the American Express Cobalt Card, which we use for groceries, dining, and gas. We also look for the best credit card sign-up bonuses and time our large annual spending (car and house insurance) around these offers. One I’m using currently is the American Express Aeroplan Reserve Card.
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.
My RRSP is 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.
We bought our home this year for $976,000, so that’s the price I’m using for our net worth calculation. I typically adjust the purchase price by inflation each year but I’ll likely keep listing it at the purchase price for a few years.
I debated whether to continue sharing these net worth updates or not. I decided to keep sharing, not to brag about numbers going up on a spreadsheet but to show you that life can be messy and complicated, and even a financial planner doesn’t fully optimize every dollar.
We all have unique goals and preferences, and to get what we want often involves trade-offs. Here we are, with empty TFSAs and a larger mortgage than we had in our 30s.
But we also have other advantages that many people don’t have, such as owning a small business that continues to exceed our wildest expectations. We’re happy to save and invest within the corporation, and pay ourselves a sensible income that allows us to live a good lifestyle and meet our personal savings goals.
We’re also incredibly happy with our new house, and excited that we can live in our dream home while still traveling the world.
I’ve seen too many retirement plans that end up with several million in the bank at age 95. Our goal is to try to strike the right balance between spending now and saving for the future. Economists call that consumption smoothing. I call it maximizing our life enjoyment.
I’m looking forward to traveling again this summer – we’re heading back to Scotland and then over to Amsterdam in August. I’m also looking forward to investing that $50,000 in our corporate investing account before the end of the year. Balance!
How’s your 2023 shaping up?