Aug 2018 – Net Worth

Welcome to my net worth posts where I try to prove to myself and you that I wasn’t crazy for leaving work in the fall of 2017 to start my early retirement.   A few important notes:  we are mortgage free and our goal is have our income/investment gains exceed our spending by 102% on a 12 month rolling average (the extra 2% is a buffer for inflation).

Investments

Accounts

RRSP $66,190
LIRA $18,050
TFSA $96,510
Pension $174,450
Wife’s RRSP $94,580
Wife’s TFSA $90,790
Wife’s Taxable $45,770
High Interest Savings Account $33,510

Investment Net Worth $619,850 ($2320 increase over last month from investments)

Home Equity

Estimate $395,000

Income

To keep things simple I’m only going to track what income comes into our main ‘house’ chequing account.  I won’t be tracking my wife’s or my businesses income as those don’t really matter until the money moves over to the ‘house’ account.  Also I won’t track investment gains since that is covered above.

  • Wife’s Monthly Payment to House: $550
  • Child Tax: $341
  • Interest $30
  • Tim’s Payment to House:$142
  • Kid Cell Phone Payment: $55
  • Total Income: $1118

I owed the house a few business expenses that I had paid for in cash previously so I wrote a cheque for that.  And our oldest son got his own cell phone this month and he paid us for half of it.

Spending

Last Month $1105

Well I wanted to balance things out and we more than did it last month.  The above total also includes spending $176 to buy a cell phone for my oldest son and setup his minutes and data for it.  Going forward we agreed to pay his base plan for texting but he is responsible to pay for any additional minutes or data costs after his initial top up is used. The monthly spending also includes spending $100 on a new deep fryer after my old one broke.

Results

Net Worth ~$1,014,850

This Month Investment Gains & Income/Spending Ratio = (2320+1118)/1105 = 3.11 (Target 1.02 or higher)

Sept to July Invest Gain & Income/Spending Ratio = (19989+18652)/35814 =1.08 (Target 1.02 or higher)

Just a note on the multiple month ratio I stripped out all income related to my old job from the early months to provide a more realistic picture for retirement.

Commentary:

Well I expected our situation to improve through August but honestly I wasn’t expected that much of an improvement. So overall we exceed our ratio goal of 1.02 with a 1.08 or putting it another way we have investment gains and income of 108% of our spending during the last year.   So our net worth went up even without me working in the last year.

What is particularly interesting about the result is our investments only gained 3.24% which is a noticeably lower than my longer term average I modeled my retirement at which is 4.5%.  And our spending was a bit higher than I initially had put in the model.  I had expected to spend around $32K plus vacation or roughly $33K when we in fact spent $35.8K (I touched on why that occurred during July’s net worth post).  So we earned less and spent more and still made our overall target.  I’ll discuss the numbers in more detail on a post next month as I have a series planned to discuss my one year of early retirement that I hit next month.

Any questions?

(click to make bigger)

5 thoughts on “Aug 2018 – Net Worth”

  1. If your investment gains consistently are higher than your spending so that your investment net worth increases each year , I’d say you are right in the sweet spot . I’ve told my advisor that this is my goal too and I think it will work , but I am 34 months from pulling the plug . I guess my only question is how do the taxes in the investment gains figure into or affect the ratio ? Are they part of the spending denominator in the ratio ? Or do you just not bother with it ?

  2. Looking forward to your year end post / retirement anniversary post.

    I’m interested in diharv’s questions as well. Taxes is a pain point for us living in Canada.

  3. @diharv – Good question. Taxes paid from investments would show up as an expense in the denominator of the ratio while income tax refunds would show up as income in the numerator. But of course in my case I’m trying to keep the taxes paid as low as possible and according to plan I should be able to keep those hovering around zero. Of course, this won’t always work out and some taxes owing will occur because I can’t always plan for everything. Also keep in mind I should end up with some odd shifts like when taking money out of an RRSP I’ll pay the withholding amount and then even up when the tax refund occurs…so in the short term it will make my spending look higher until the tax refund when it will balance out.

  4. Tim, this is super helpful seeing your post retirement net worth updates. I am very close to pulling the trigger at 44 and seeing you survive the first year, while still gaining net worth is huge! Congratulations! – thanks for this post.

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