Net Worth – April 2007

Well it is time again for a net worth update. For those newer readers I do this every two months just to keep a pulse on how things are going.

House $240,000
RRSP $12,600
Old Work Pension $10,500
New Work Pension $800
Wife’s RRSP $5200
Wife’s Investment Account $5000
ING Savings Account $5800

Mortgage $148,400
Line of Credit $0

Therefore my net worth now stands at: $131,500. Overall an increase of +$46,050 or 54.5% from my last check up. Now I know this value looks huge, but keep in mind I did just get my over $7000 tax return and my house value has shot up a lot.

I should point out I determine my house value by looking at similar homes in the market place and account for improvements I make to the house. I’ve been keeping my estimates conservative to ensure they stay realistic. At the same time I’ve been realizing the market is picking up some serious steam lately. For example I recently saw a house very similar to mine with some extra improvements and an extra 100 square feet of space listed for $289,000. I just can’t realistically undervalue my home by more than $50,000 so the value had to come up a bit larger of a jump than normal to cover the gap. I’m acutely aware that by using a conservative market price for my house that if there is a market crash my net worth will drop like a stone. Yet after being through a market like this once before with my last house I know you can’t ignore it either.

Also please note that I’ll submitting a post to the second Canadian Tour of PF Blogs which is going to be hosted by the Money Diva on May 7th. If you have any requests for a topic I’m open to ideas (since I currently don’t have a clue what I’m going to write about).

Canadian Tour of Personal Finance Blogs

The Carbon Age

After working for months (or was it stalling) the Canadian federal government finally rolled out the details of their air pollution/climate change plan. The main focus was on big businesses which generate about half of the pollution in Canada (for a quick summary see here).

There was lots of interesting points in the plan and everyone is already lining up to say ‘it’s great’ or ‘it’s horrible.’ Some like the 55% reduction target of air pollutants like sulfur dioxide (acid rain), nitrogen oxidizes (smog) and particulate. While others dislike how vague the plan is on reducing carbon dioxide being released into the atmosphere and how Canada will not meet its Kyoto targets.

Perhaps not realizing what they have done, the most important thing the government gave industry was the number: $15/tonne of CO2 tax starting in 2010. You see industry has seen this coming. Despite all the rhetoric to the contrary they have not had their heads in the sand. They have bought studies, funded R&D and attended conferences getting to know their options for CO2 reduction. The biggest problem with all their efforts was the economics. How much was avoiding producing a tonne of CO2 going to be worth? Now they know and now the real work begins.

In the next several months we are going to see two things happen. One a lot of current projects will be canceled since they are no longer economically feasible. The second thing will be a series of announcements on new projects starting up. Why? Well to actually engineer, fabricate and construct most of what the facilities required to clean up the emissions to the new standards will take at least four to five years. The deadline of the first phase is 2012 meaning most of these projects will have to start not six months or year down the road, but NOW.

So in the end, Canada has turned the corner and entered a new age: the carbon age. The old rules are now gone for power generation and oil & gas. The entire economics of any major construction project have just changed overnight. So what is an investor to do?

Well let’s follow the money. First you will need lots of engineering for these new projects, so check out any publicly traded engineering firms such as SNC-Lavalin. Then materials to build everything such as steel (from Ispco for example) and concrete. Also there are typically a fair amount of chemicals involved in these processes so you might want to look at Dow Chemical. Then there will be the other big winners of all this: alternative energy production like wind turbines, solar panels, ethanol and biodiesel (there is so many different companies involved in these I’ll leave you do your own research). Perhaps the most interesting change of all for potential investments will be the construction of a Canadian carbon credit exchange. Will the public be allowed to trade? Is so will the credits be in high demand or will the market be flooded and have the price crash like it did on the European exchange?

The other issue swirling around all of this is the fact Canada is currently run by a minority government. So if the opposition really dislikes this plan it might trigger an election and drop Canada back into limbo with its climate change plan. Hold on to your seats, this could be an interesting few weeks.

Taxes Done and Waiting

As I previously mentioned I was expecting a big tax refund this year. Initially I estimated I would be over $5000. Since then I have filed both my wife’s and my returns and now I’m waiting for my over $7000 tax refund. Yes it got that high. I’m not really happy about it and now I’m getting impatient for that money so I can pay off my furnace I installed last month.

I thought it might be useful to review where all these deductions came from and how I paid so much tax in the first place.

First off I paid too much tax due to a large bonus at my previous work place. Then with moving just after paying my CPP/EI for the year (basically I paid CPP/EI twice for the year, once at each job).

This is a few deductions I used:

-I moved over 1400 km which produced a $11,000 moving deduction
– I claimed partial northern living allowance for half the year to get another couple of thousand deducted
-My wife’s business income was low enough she paid no tax and transfered the remained of her basic deduction to me
-Then the RRSP’s also deducted another few thousand dollars

Overall I broke over $15,000 in deductions before I even used any tax credits to finish dropping my tax bill. Yet my biggest disappointment about filing my taxes this year was waiting for my T3 slips for my wife. I honestly got the last one on April 17th. To say I was a bit mad over the wait was a bit of an understatement. I just can’t understand why they can produce T4’s by the end of Feb, but I can’t get a T3 until mid April!