Welcome to another net worth update. I’ve been tracking and reporting my net worth twice a year for the past decade or so. It’s a good way to check on our financial progress and keep us on track with our goals.
We’re at the stage of our journey where forces outside of our control can have a major impact on our net worth. Our overall portfolio surpassed the $1M mark earlier this year, and that means a 10% increase or decrease on our investment returns moves the needle by $100,000.
Let’s be honest, outside of setting up an appropriate asset mix and choosing your investment vehicle(s), your returns are largely out of your control and can vary widely in the short-term.
So, while we try to keep the net worth needle moving forward, I’m careful not to take too much credit for an increase in portfolio value that has more to do with market returns rather than our own contributions.
Speaking of returns, well they have been excellent so far this year. Global stocks, represented by Vanguard’s All Equity ETF (VEQT), are up about 14.3% YTD. As you know, that’s where the bulk of our money is invested.
As for contributions, we’ve started filling up our TFSAs again and have each contributed $17,000 so far (on our way to a goal of contributing $28,000 each by year-end).
We’ve dumped $36,000 into our corporate investing account this year, and plan to contribute about $66,000 by year-end if all goes well. We’re able to do this thanks to consistently strong business income that continues to grow year-over-year (#blessed).
Critics of advice-only planning say people don’t want to pay upfront for advice.
My advice-only peers all tell me I’m not charging enough.
Meanwhile we’ll hit $500k in revenue this year with just $25k of expenses.
It’s possible to make good money and charge a fair price.
— Boomer and Echo (@BoomerandEcho) May 2, 2024
We also re-organized the kids’ RESP account to follow Justin Bender’s RESP strategy for family RESP accounts. The gist of it is that our oldest daughter has her portion of education savings invested in VEQT + VSB, while our youngest daughter has her portion invested in XEQT + XSB.
We now contribute to the RESP annually in January and do our rebalancing then to get to our target asset mix (more conservative as they get closer to post-secondary age).
Finally, we renewed our 1-year mortgage term at the end of April – opting for a 3-year fixed rate term this time around. We also switched lenders from TD to Pine Mortgage. So far, so good.
Now, let’s look at the numbers.
Net worth update: 2024 mid-year review
Total Assets – $2,146,728
- Chequing account – $12,000
- Corporate cash – $50,000
- Corporate investment account – $386,706
- RRSPs – $344,493
- LIRA – $228,678
- TFSAs – $34,499
- RESP – $114,352
- Principal residence – $976,000
Total Liabilities – $491,116
- Mortgage – $491,116
Net worth – $1,655,612
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 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 and the kids’ RESPs are held at TD. My wife has her own chequing and savings accounts at Tangerine.
Our RRSPs, TFSAs, and my LIRA are held at the zero-commission trading platform Wealthsimple Trade. Our corporate investment account is held at Questrade.
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 last 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.
Astute readers will notice that the price of our previous home went from $459,000 to $555,000 from 2021 to 2022. That ended up being the sale price, so you can see that I was pretty conservative with the house value over the years.
Final Thoughts
We’re enjoying a more “normal” year with our finances after a tumultuous couple of years building our new house. Inflation is cooling off, interest rates are starting to fall, and maybe we’ll get that so-called soft-landing after all.
We also have a good plan to fill up our TFSAs over the next five years or so.
Recent changes to the capital gains inclusion rate will affect our corporate investing account, but it’s still advantageous to shelter excess money inside our corporation and invest for the future.
We’re taking a flexible approach that will see us having money in lots of different buckets for retirement (RRSP, LIRA, TFSA, corporation). That will help smooth out taxes as we navigate our way to and through retirement.
Finally, we’re looking forward to continue travelling this year as we visit London, Paris, Zurich (Taylor Swift!), Lauterbrunnen, Lake Como, and Venice on what is sure to be an epic trip in July.
We’re also heading back to our happy place this fall with an eight-day stay in Edinburgh in October.
How’s your 2024 shaping up?
Robo-advisors have been around for a decade and, while its promise to disrupt the traditional financial services model has so far fallen flat, the concept of an automatically rebalanced, low-cost portfolio of index funds is still incredibly sound.
The investing landscape continues to evolve and when Vanguard introduced its suite of asset allocation ETFs in 2018, the robo-advisor model suddenly looked less appealing.
Indeed, for a fee of only 0.24%, DIY investors could build their own globally diversified and automatically rebalancing portfolio with just a single fund.
There was just one problem. For many investors, the idea of opening their own discount brokerage account, transferring existing accounts over to the new platform, and buying their own ETFs (even just one ETF) on a regular basis is quite daunting.
Wealthsimple Trade has elegantly solved that problem with a neat feature to automate contributions AND investment purchases.
If investing has largely been solved with index funds
And investing complexity has largely been solved with asset allocation ETFs
The missing ingredient was how to automate the investment purchase to truly take a hands-off approach with your low cost asset allocation ETF 👇
— Boomer and Echo (@BoomerandEcho) April 16, 2024
Log-in to the Wealthsimple mobile app, tap your profile in the upper right, tap the settings gear in the upper right, and tap “automations”.
Tap “recurring investments”, tap “set up a recurring investment”, enter your chosen asset allocation ETF ticker symbol in the search field, and then tap the appropriate ETF.
Set up a recurring investment pic.twitter.com/5DYRVeq1QG
— Boomer and Echo (@BoomerandEcho) April 16, 2024
Tap “buy”, tap the order type drop down in the upper right (should say “market” or “limit”), and tap “Recurring” at the bottom of the list.
Change “market” order to “recurring” pic.twitter.com/sUqOcVJVI9
— Boomer and Echo (@BoomerandEcho) April 16, 2024
Now set up the amount you want to contribute, your start date, the frequency of contributions, your funding source (i.e. chequing account), and which account type you’re contributing to.
Tap “Review”, and the tap “confirm recurring investment”.
Review your order and hit submit.
You’ve just set up automatic contributions that will automatically purchase shares of your chosen asset allocation ETF on a regular schedule. pic.twitter.com/bTKJ1z9IyV
— Boomer and Echo (@BoomerandEcho) April 16, 2024
This process will even buy fractional shares of your ETF, meaning every single dollar of your contribution will go towards your ETF purchase.
There you have it – you’ve just created your own DIY robo-advisor – a completely hands-off and automated investing experience!
Wealthsimple Trade also has an impressive promotion on right now where you can get a 1% match (no limit) when you deposit or transfer more than $15,000 into your account. The more you fund, the more you earn.
Use my referral code – FWWPDW – and we’ll both get $25 when you open and fund your account.
This Week’s Recap:
When looking at your financial projections over time, your numbers tell a story about what’s possible (or not).
No new posts from me for a few weeks as the kids’ school and activities wind down and we furiously scramble to get our work done before our upcoming trip to Europe.
From the archives: Build if/then statements into your financial plan.
I’ll have our bi-annual net worth update at the end of the month, and then we’re heading to Europe for three weeks so expect posts to be more sporadic.
Weekend Reading:
First up, I was absolutely gutted to find out that one of my favourite financial writers, Jonathan Clements, was diagnosed with cancer and only expects to live another year. Truly heartbreaking. All the best to you and your family, Jonathan.
From the Jonathan’s Humble Dollar blog – should we worry about markets being overvalued?
A professional retirement coach shares the three biggest mistakes that retirees make.
Tennis legend Roger Federer won 80% of his matches, but just 54% of all the points played. This is analogous to investing, where markets go up on slightly more days than they go down. The trick to getting legendary results with your portfolio is to stay invested and contribute regularly.
How do social media comparisons impact regular investors? Paging Roaring Kitty.
Marc at Loonies and Sense shares a really neat way to visualize the global markets.
Here’s Robin Powell on why picking the next Google or Amazon is extremely difficult:
“Why spend effort, time and money looking for needles when you can easily and cheaply buy the haystack?”
How Canada’s broken account transfer system led Wealthsimple to automatically reimburse transfer fees.
Morningstar’s Christine Benz took a six-week break from work and came back with some insights on retirement and life.
Many Canadians underspend in retirement for no good reason. Here’s what they can do (subscribers):
“They found retirees consistently spend approximately 75 per cent of what they could afford to based on available assets, with underspending increasing as retirees get older. Yet, they also found that after controlling for different levels of wealth, retirees with a larger proportion of guaranteed income spent more each year than retirees with a larger proportion of investments.”
Baby Boomers face a retirement like no generation before them, and rather than being the ‘beginning of the end,’ it’s the beginning of a new life phase.
A Wealth of Common Sense blogger Ben Carlson shares why his savings rate hit an all-time high in 2021, and why he feels that was more of a mistake than an accomplishment. I’ve had a similar experience.
Borrowers leaving money on the table by not negotiating their mortgage renewal rates.
Finally, is flying in Canada getting more expensive? It certainly seems that way.
Have a great weekend, everyone!
When I first create a financial plan for a client I tell them that this is my initial interpretation of their current situation and future goals mapped out over time. It’s a projection or road map based on their current trajectory.
I’m looking for clues, patterns, red flags, and opportunities. The numbers are telling a story about what’s possible.
Here’s what I mean.
A typical net worth projection during your working years goes up and to the right. That makes sense, as you earn income, contribute to your savings, get a rate of return on your investments, and pay down debt.
But working families also have competing financial priorities. Income interruption from parental leave, child care, vehicle payments, home renovations, even upsizing a home are all real possibilities that young families are dealing with.
Your house is your largest asset and you’re deep in mortgage debt. You have little in the way of savings and feel like you’re not making any progress while you’re dealing with one-time, temporary costs. But zooming out you can see a light at the end of the tunnel.
Child care costs subside, income increases, and mortgage payments no longer feel like they’re taking up all of your disposable income. You start making some meaningful progress on your retirement savings goals and your net worth heads up and to the right.
Once the mortgage is paid off, you have options to ramp up savings and even ponder early retirement.
At this point I’m looking for clues as to whether you’re on the right track to retire early, or if you’d need to downsize your home to ensure you can maintain your lifestyle throughout retirement, or if you can afford to delay taking CPP and OAS to secure more lifetime income.
I recently wrote about a concept called your home equity release strategy and it’s becoming more and more important to think about, especially in high cost of living areas where retirees may be sitting on untapped home equity of $1M to $2M (or more).
In the above example, the retired couple downsize their home at or shortly after retirement to eliminate their mortgage, add precious home equity back into their savings, and ensure they can maintain their lifestyle throughout retirement.
There is still a slight danger of running out of money in their old age, but they do have the paid off home equity in their downsized home to fall back on, just in case.
Another option is to sell the family home and rent throughout retirement. This has the added benefit of being able to maximize retirement spending, but with the trade-off of not having a fall back option to sell the home in case of unplanned spending shocks or poor market returns. A prudent spending plan is paramount in this case.
What about singles? In my experience, singles can have a difficult time in two phases of life.
One, buying a house as a single in a high cost of living area may be incredibly challenging.
Two, without the benefit of a partner with whom to split income in retirement, singles face higher tax rates and are more likely to incur Old Age Security clawbacks.
In the above scenario, this single individual was fortunate to receive a small inheritance in her late-40s to finally be able to afford a condo in her desired location and price range.
If she keeps her spending consistent with the lifestyle she enjoyed in her final working years then it’s possible that she won’t have to sell that condo to fund her long-term retirement spending. But, in many cases, singles who buy a home are more likely to have to downsize or sell their home to maintain their lifestyle.
Finally, several of my clients are interested in the “die with zero” approach to retirement planning. I don’t love it, because spending every dollar and having your last cheque bounce leaves no margin of safety for unplanned spending shocks.
So, for homeowners looking to maximize spending, I prefer to show them a “die with zero, but stay in your house” scenario. This way, you have a fall back option to sell your home and move into a retirement facility if necessary as you run out of money.
Your numbers tell a story about what’s possible. Projected over time, we can start to see patterns, red flags, and opportunities in your financial plan. We’re looking for clues to see if you’re on the right track or need to change course.
I’ll be honest, more often than not these net worth projections show that my clients can spend more than what their current budget suggests.
But, often we do see red flags that suggest clients will need to make difficult choices about working longer, downsizing or selling the home, or reducing spending to ensure they won’t run out of money.
Want to know what kind of story your numbers tell? Reach out to me and we’ll come up with a financial plan.
This Week’s Recap:
Have you considered your home equity release strategy?
How much do you plan to spend in retirement?
Here’s how I plan to catch-up on my TFSA room.
Promo of the Week:
We activated player two for our rewards cards strategy, meaning earlier this year I signed up for the American Express Business Gold card, hit the minimum spend target to reach the welcome bonus, and then referred my wife (player two) to get the same card in her name.
The result is 15,000 additional Membership Rewards points for me for the referral, and now my wife has a chance to earn 75,000 Membership Rewards points after spending $5,000 in the first three months.
We activated player two for our rewards cards strategy, meaning earlier this year I signed up for the American Express Business Gold card, hit the minimum spend target to reach the welcome bonus, and then referred my wife (player two) to get the same card in her name.
The result is 15,000 additional Membership Rewards points for me for the referral, and now my wife has a chance to earn 75,000 Membership Rewards points after spending $5,000 in the first three months.
Weekend Reading:
Should I pay myself dividends from my company to avoid CPP premiums?
Many Canadians own foreign property. Whether its stocks, ETFs, bonds, real estate, or even crypto, you may have some tax obligations to consider.
Private credit funds are pitched as safe and stable, but investors aren’t getting anything special for the high risk and fees.
Is $1 million in savings enough to retire on if we withdraw 4% per year?
A fantastic conversation with the Canadian Couch Potato Dan Bortolotti on the Rational Reminder podcast last week:
A Wealth of Common Sense blogger Ben Carlson asks how would you invest $14 million?
RRSP to RRIF, and LIRA to LIF: Here’s how it all gets done.
How Wealthsimple is trying to beat the big banks at their own mortgage game:
“I’ve seen mortgage cashback gimmicks in the past, but this one is more interesting. Unlike other lenders’ rebate offers, Wealthsimple’s calculator makes it easy to estimate the savings — and they have compelling savings options.”
Here’s why variable rate mortgages are the best bet to save you money after Bank of Canada cut.
Dr. Preet Banerjee explains why AI outperforms humans in financial analysis, but its true value lies in improving investor behaviour.
Andrew Hallam shares the surprising truth: children likely increase your wealth.
Anita Bruinsma explains why divorcing parents are facing tough choices amid sky-high real estate prices.
The one place in airports people actually want to be: Inside the competition to lure affluent travelers with luxurious lounges.
Finally, Nick Maggiulli looks at when maximizing credit card rewards is worth it and when it is not.
Have a great weekend, everyone!