August 2008 Net Worth Update (+1.27%)

Welcome to the recurring monthly net worth updateThe August 2008 edition.

This summer is turning out to be a little expensive. As predicted a few months back, now that my wife is back on her feet and settled into the baby routine, she is now in home decorating mode! Of course with a new house requires new furniture right? If it were up to me, I’d stick with our older furniture until it falls apart.. But who am I kidding, I am the lacky and have no say when it comes to interior decorating. Thus far in 2008, we have spent over $7,000 on new (depreciating) furniture and appliances for the new house with more to come in the very near future. Ah, the joys of home ownership.

Enough rambling, here are the numbers:

Assets: $ 593,050 (+0.56%)

  • Cash: $4,500 (+0.00%)
  • Savings: $28,000 (+14.29%)
  • Registered/Retirement Investment Account: $55,300 (-1.60%)
  • Pension: $ 22,350 (+0.00%)
  • Non-Registered Investment Account: $18,400 (-4.17%)
  • Smith Manoeuvre Investment Account: $51,000 (3.08%)
  • Investment Property: $ 124,500 (+0.00%)
  • Principal Residence: $275,000 (+0.00%) (purchase price)
  • Vehicles: $14,000 (2 vehicles) (+0.00%)

Liabilities: $276,922 (-0.23%)

  • Investment Property Mortgage: $92,900 (-0.21%)
  • Principal Residence Mortgage (readvanceable): $125,242 (-0.51%)
  • HELOC balance: $50,780 (+0.41%)
  • Other Liabilities: $8,000 (-0.00%)

Total Net Worth: ~$ 316,128 (+1.27%)

Started 2008 with Net Worth: $279,300

Year to Date Gain/Loss: +13.19%

Looking over the numbers, it was a strong month for cash savings as income was higher than expected. Some of my investment accounts are taking a beating due to a couple Chinese stocks that won’t cooperate. Other than that, she’s holding steady!

Some quick notes and explanations to net worth questions I get often:

The Cash

The $4,500 cash are held in chequing accounts to meet the minimum balance so that we pay no fees. Yes, we do hold no fee accounts also, but I find value in having an account with a full service bank as the relationship with a banker can prove useful.

Savings

Our savings accounts are all held with PC Financial. We hold a fair bit of cash due to a cash liability coming in the near future along with the fact that we typically have some cash on hand in case “something” comes up. The “something” can be anything that requires cash such as an investment opportunity that requires quick cash or maybe an emergency car/home repair.

Real Estate

Our real estate holdings consist of a primary residence plus a rental property. The value of the principal residence remains valued at the purchase price despite significant appreciation in the real estate market that we’re in. The rental property value was it’s appraised value in 2006. I’m considering raising the reported values of the homes at the rate of inflation starting January 2009.

Let me know if you have any other questions and I’ll add it to next months net worth update.

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FT

FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Chris L
12 years ago

I suspect a portion of all high income earners is “passive” for they aren’t paid hourly or based on any salary. Commission might be a better word, but you can bet a large portion of Donald’s income is due to work that is farmed out. He could go hands off and depending on the skill of his replacement could yield equal income. If he hired right, he could likely exceed his income. Once you get high up in pay, the rules change significantly. It’s once all your bills are paid and your quality of life is met can you begin to truly live life as it exists for the privileged. Net worth means nothing if it’s used improperly. I think passive income is therefore more important, but perhaps less so in the earliest of stages. Net worth must come first before PI comes and PI is almost always only a factor of your net worth. Any asset producing PI has value to someone else.

DAvid
12 years ago

Since properly assembled net worth can be converted to income production fairly easily, does it really matter which measure you use? If one manages a portfolio in it’s early years for growth, eschewing income, does it have less value than the portfolio managed entirely for income? I think not. As most of us find our needs change, so will we adjust or portfolios, converting their purpose from growth of value to generation of income!

As long as I can extract my net worth, it has the same value as a metric as would ‘passive income’.

DAvid

Jon Kepler
12 years ago

Do Donald Trump, Richard Branson and Steve Jobs profit primarily from passive income? I guess it depends on how you’d define it, but I’d say ‘no’, as they can’t leave their businesses alone long term without creating a nose-dive in sales. Because of this, I’m tempted to believe that a high net worth is significantly more important than simply creating hands-off income.

Chris L
12 years ago

PI is what everyone is really looking for and it’s closely tied to net worth… but only if net worth is used properly. A high net worth *invested* properly yields a high PI. If my net worth is held in cash, say $500k I haven’t reached my full potential for a high PI. I always aim to yield 10% return on my net worth to put all my money to work for me. Currently that is what my properties return and I always base this return on the current value of the properties i.e. what I could sell them for today. My goal is to reach 500K in net worth, then I know that I can match this to 10% to yield $50k in passive income. Always have to keep an eye on both!

Kelly Parks
12 years ago

I agree that passive income is a better gauge then net worth. Depends on what you want to count towards your assets as well could really flucuate your net-worth?
Is your car really an asset?

Financial Freedom
12 years ago

I admire your journey to earning 1 million dollars by 35. But i personally feel that being financially free involves more than just increasing your networth. Perhaps a better gauge would be to have passive income that far exceeds monthly expenditure.

I have also recently started on a plan to be financially free by 2022 with the desired end goal of $2800 per month (not adjusted for inflation yet). I am now only at a miserly $190 per month passive income.

Do visit my website to see the long journey that I still have ahead.

Jon Kepler
12 years ago

Furniture is one of those always-underestimated expenses, especially when you find something you just HAVE to have. I know the feeling; I’m probably at the five figure mark for furniture this year, and there’s still more to go.
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Also, couldn’t get the trackback feature to work for some reason, but here’s the blog link anyway:

http://www.jonkepler.com/1/post/2008/08/weekend-edition-iv-links-of-the-week.html

moneygardener
12 years ago

Your YTD net worth gain is impressive FT.

DAvid
12 years ago

Just let us know if you choose the leopard skin print! Looking forward to seeing your shed in 2010!

DAvid