Welcome to the Million Dollar Journey February 2013 Net Worth Update. For those of you new to Million Dollar Journey, a monthly net worth update is typically posted near the end of the month (or beginning of the next) to track the progress of my journey to one million in net worth, hopefully by the time I’m 35 years old (end of 2014).  If you would like to follow my journey, you can get my updates sent directly to your email or you can sign up for the Money Tips Newsletter.

Lets start with the stock market which basically traded sideways for most of February, but regained some strength at the end of the month.  The TSX gained about 1.3%, and the SP500 approximately 1.2%, both including dividends.  The relatively encouraging market returns helped prop our RRSP (+1.39%) and leveraged dividend portfolio (+5.36%).  Mind you, most of the dividend portfolio gains is due to moving $5k into the account, which means my investment loan increased by $5k as well.

I’ve been really behind in the TFSA strategy where most of it is sitting in cash.  I’ve written about putting REITs in the TFSA, but the problem is that most REITs have been on a tear over the past few years.  So I’ve decided to amend the strategy to include sustainable dividend paying stocks that have higher than average yield, but have been oversold.  The equities I have my eye on are HR.UN, IPL.UN and CPG.

On to the numbers:

Assets: $829,800 (+4.03%)

  • Cash: $4,500 (+0.00%)
  • Savings: $20,000 (+0.00%)
  • Registered/Retirement Investment Accounts (RRSP): $139,000(+1.39%)
  • Tax Free Savings Accounts (TFSA):  $52,200 (+0.38%)
  • Defined Benefit Pension: $41,600 (+0.73%)
  • Non-Registered Investment Accounts: $145,000 (+3.57%)
  • Smith Manoeuvre Investment Account: $118,000 (+5.36%)
  • Principal Residence: $309,500 (+3.00%) (purchase price adjusted for inflation annually)

Liabilities$99,800 (+5.39%)

Total Net Worth: ~$730,000 (+1.15%)

  • Started 2013 with Net Worth: $690,400
  • Year to Date Gain/Loss: +5.74%

In my last update, readers suggested to chart my net worth progress over time.  Below are the net worth values since Dec 2006 with data points taken semi annually.

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 (accounting for regular bill payments – ie. our credit card bill). 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 has proven useful.


Our savings accounts are held with PC Financial and ING Direct. We usually hold a fair bit of cash 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.  We also need cash to cover any future tax liabilities.

Where Does the Savings Come From?

We don’t live a lavish lifestyle (how we save money) and do not carry any bad debt.  The only debt we have is an investment loan (which pays for itself), so we end up pocketing a majority of our earnings.  Our earnings come from salaries, private business income (via dividends to shareholders), and eligible dividends from publicly traded companies.

Real Estate

Our real estate holdings consist of a primary residence and REITs plus a rental property. The value of the principal residence remains valued at the purchase price (+inflation) despite significant appreciation in the local real estate market.


The pension amount listed above is the value of both of our defined benefit pension plans.  I basically take the semi annual statement and add the contribution amounts (not including employer matching) on a monthly basis.  The commuted value of the pensions are not included in the statements as they are difficult to estimate.

Stock Broker Accounts

Another common question is which discount broker do I use?   We actually have accounts with multiple institutions.  I’m hoping to reduce the number of accounts that we hold in the near future.  Here is a review of some of the more popular online stock brokers.

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Nice! We were up about 2% in February – in flat months most of our growth comes from paying down principal on debt.

Any plans to start predicting when your net worth will reach the end of it’s Million Dollar Journey?

I know that you are making money on your investment loan but at what point will you ditch the loan and only invest what you are able to contribute?

If you only invested your own cash then your profits would be all yours to reinvest or blow on fun stuff.

@Mrs. Pop, congrats on the growth!

@Steve, knowing my personality and procrastination tendencies, likely around December 2014. :)

@Jane Savers – right now i’m taking advantage of the low interest rates and basically free money (after accounting for the tax deduction). If interest rates become high again, or if the balance becomes too large, I will simply use my savings to pay down the loan.

Let me be the last person (I’m sure) to mention that you shouldn’t be comingling your personal residence and investments. :). That’s right behind including cars.

I see no issue with including a personal residence as long as you aren’t trying to estimate its market value, which could be misleading. FT only adjusts for inflation, therefore it seems completely reasonable. Otherwise, buying a house and paying off your mortgage would result in a decreased net worth… That just doesn’t make sense.

@Chris: two schools of thought on ‘net worth’. One includes primary residence, the other excludes.

My own preference is the latter.

If FT sells his PR, the only way he can reap that capital is if he then rents, which will eat away his profit. This is the opposite of a liquid asset.

Not to mention PR is an “asset” which requires continual capital investment in order to keep its value from declining (eg. Buy $200,000 of Coke stock and forget about for 30 years. Try buying a house for $200,000 and then never spending another cent on it for 30 years. Look at the Vancouver MLS for examples.).

Ok I agree that in some cases it makes sense not to include a PR, for example when considering funds available for retirement, since this can’t be converted easily to cash. However, for the purposes of tracking financial progress I think it works. Otheriwise buying a house would suddenly drop our net worth significantly, which doesn’t represent the financial progress we have made. I understand the point made but I will certainly continue including my PR in my net worth, unless it is for the reason of assessing retirement goals.

For my own net worth, I don’t include PR. The reason – I view it as an expense. Same with any vehicles. They are necessary expenses, but I have to work (input $$) to maintain my ownership of them.

I forgot to say – FT – Congrats! When you look back over the years, it is impressive what you have accomplished.

Good work and keep it up!

@Chris: you either pay mortgage or you pay rent. Have you ever figured out what you pay over a life-time? It probably works out to around the same amount. A mortgage is just a way of paying for your all your rent in a shorter time span.

50 years of paying rent @$1,000/mo = $600,000
50 years of paying mortgage+land tax+upkeep = ~$600,000

$300,000 purchase, $225,000 mortgage, $75,000 down-payment, 25-yr/4% interest, $2,000 taxes, $1,800 maintenance.

Just an example.

p.s. — add “Home Insurance” costs in the above example.

I agreed that I appreciated your point. For me, tracking my financial progress, I like to include my home.

Your example is enlightening, but the assumptions don’t quite work for me. I’m under 30 years old and owe less than $50k on my mortgage that I took a bit more than 3 years ago. Will easily be paid within 5 years of purchasing. Additionally I don’t think you can rent a $300k house for $1000/month, at least not where I live. Hard to find a decent apartment for that. Not really apples to apples then if in one case you are talking about a house and in the other it’s an apartment.

In any case, I’m not trying to make an argument on rent vs buy. For me that choice has nothing to do with finances and everything to do with pride of ownership and enjoying doing yardwork/gardening and home improvement/renovations. These are hobbies to me that make me happy and for that reason I like owning a home.

I don’t think your are accurately valuing your employer pension plans.

Rather than the amounts that you have contributed you should be using the commuted value which should be supplied to you annually or twice a year.

The commuted value is the amount of pension earned to date, but payable at a future date. To deliver that amount of pension an annuity is priced for present day.

Commuted values are currently high due to the high price of annuities because of low interest rates.

The commuted values will give you a present value of your pension but should only come into play if you leave your employer or get divorced, sued etc.

Defined benefit pensions are guaranteed income for life. They as much a part of your pay as your paycheck. Hopefully the government will protect the remaining DB plans out there.

When interest rate rise ( not if) the DB pension immediate liabilities will be reduced. The sum of all of the commuted values will decrease. Plus higher interest rates mean the pension funds themselves should perform better. But the amounts paid to pensioners drawing from the plan should be exactly the same.

The pension scare is not real unless everyone calls for their money today. I’d rather have the future guaranteed income.

Either way the value of your pension plans should be better reflected in your report. As Scotia Bank likes to say “You’re richer than you think”.

The psychology of personal finance is very intriguing.

Anyway, nice uptick, FT.

Reread pension note.

You are correct in methodology, I am quick on the draw.

Please pardon the rant.

I don’t see any reason not to include the residence or even a depreciating asset.

Doesn’t matter if selling and renting represents a future liability towards net worth, so does paying insurance premiums for the rest of life but no one would advocate including insurance premium costs as a drag on net worth.

Considering a residence an investment is a completely different story, but clearly there is value and worth (and a significant % of total worth for most Canadians) in the home itself.

In addition to the insurance premium analogy, one might as well consider future earning potential into their human capital and worth calculation. Congratulations FT, you are a multimillionaire! Too bad you have future liabilities though.

My opinion is that if you sell it (no matter what the value), then it’s an asset. If it has significant expenses associated with it, it will affect cash flow, which will affect savings when it comes to net worth reporting.

As per SST, there’s a number of reasons not to include your home value in your net worth, or more specifically, as part of your investments.

I haven’t run the numbers, but I’m not sure that comparing home ownership vs. renting makes home ownership a smart investment. If you don’t own a home, you have to pay rent, which isn’t that far off a typical mortgage anyway.

In addition, it’s unlikely you’ll ever realize that return as an investment. While the notion of using your home’s value as retirement income is common, I believe I’ve seen a past study that shows people basically live in their home until they pass away – negating it as an investment.

Basically, you have to pay to live somewhere, so the idea of releasing that growth doesn’t actually become realized.

Aren’t we confusing the issue here? Net worth is the value of all assets minus value of liabilities. Quite simple. Perhaps estimating value of some assets may not be so simple but I digress.

Net worth has very little to do with retirement planning. Or even cash flow. Cash flow can affect future net worth but is not part of the net worth equation.

The part about the net worth calculation that I continue to be uncomfortable with is known future debts. I’ve chosen to include capital gains taxes and RRSP withdrawal taxes in my liability column. Most do not. Without these liablities, I’d be less than $1,000 away from my “Million Dollar Journey” at the end of Feb.

I’ve heard both sides of arguments on whether to include your home or not. Personally, i do include it as I am building equity in it every month, where as if i were renting, i would not. Also, if i were to take a lump sum from my savings and put it onto my home, I feel this should have no effect on my networth. If i didnt use my primary res as an asset, a 20k lump sum from my savings would result in my networth going down, and that’s not accurate. I would include cars as well personally.

That being said, i dont think there is a right or wrong. The point of a networth calc is to make sure you are moving in the right direction. As long as you are consistant, it doesnt matter how you figure it out.

The one thing i do when calculating my own networth, is that I don’t change the price of my primary residence. I keep it at my purchase price and just offset it with my mortgage. Its a little more conserative and i feel comfortable with that.

Houses are a lot more expensive than most people appreciate. Many of the costs do not immediately come to mind when you think of “house maintenance costs”. $1,800/year is a gross underestimate. Think of these costs: Roof replacement, siding, deck repairs/replacement, landscaping costs, renovations/upgrades, house insurance, and the list goes on. It’s probably more like $5,000/year at a *minimum*.
I include my residence in my net worth just because, as mentioned above, I put money in to it and there is residual value if I sell it, but I am fully aware that it (the house at least, not the land) is a depreciating asset that requires regular infusions of cash to keep its value.

You make a good point about the land value and the actual physical home beign a depcraiting asset. What would you do with a condo apartment? That’s what i currently own and i cant seperate the land from the apartment. I do of of course have upkee fees as well (monthly condo fees)

trollmonger is absolutely right. He brings a very essential point. FT’s RRSP is not really worth $139K since a good chunk of it belongs to the government as taxes when he will withdraw it. Therefore this net worth update should reflect this fact.

It’s a little like being in a store and seeing something for sale at $9.99 and then going to the counter and being asked to pay $11,30. The $9,99 is the fantasy world price (a world without HST).

Similarly, the $139k is FT’s fantasy world RRSP value, one without taxes…

An adjustment based on FT’s expected future tax rate is essential.

As for the house, unlike renting, he can always borrow back most of the equity and die broke. I would leave it in.

I’ve been asked about the tax liability of the RRSP before, and it’s true, it will be taxed eventually, but the question is how much will it be taxed?

What if I decide to take an early retirement and decide to gradually draw down my RRSP so that no tax is payable?

I am very confused about this set of comments.

So if I had 0 in investments, yet owned (outright) a home worth $50,000,000…

my networth would be… 0

(makes no sense to me)

The plan with an RRSP is to try to pull it out with as little tax owing as you can. It’s not possible to estimate what this tax impact will be at this stage so it’s just best left how it is… an early retirement can use a good chunk of an RRSP with very little to no tax.

>>>>Similarly, the $139k is FT’s fantasy world RRSP value, one without taxes…

Ah yes, fantasy world without taxes. You’re talking about Alberta, right? :)

Sampson, it makes a lot more sense if you say:
Networth: $500,000. And what good is that going to do you since you never expect to do anything with it? There’s a purpose to measuring your networth, normally tracking retirement savings growth or debt repayment, and for most of us home ownership contributes nothing to our goals. Home ownership just…is. It’s technically an asset, but realistically, there’s almost nothing we can do with it.

Anyway, it’s semantics. I just assumed house value has little to nothing to do with net worth in a practical sense. In a technical sense, yeah, it counts I guess.

Consider this scenario:

FrugalTrader and Mrs. FrugalTrader decide to split up (hoping this doesn’t happen, buddy… I’ve seen how nasty it gets).

To keep things “simple” they decide to liquidate everything and go their separate ways. To do this, they need to sell everything, split the result 50/50, move to a different neighborhood they can both afford with the cash flow at the time (with near $500k each that won’t be too hard), but close enough to share the kids.

So, what happens to the house?

It gets sold. It’s an asset that needs to be split (which will include costs, which should probably be taken into account). As do liabilities. They need to figure out the net worth through immediate liquidation, and split the difference that results.

Now, there’s some wiggle room in this. A very short sale on a home will give a much lower price than waiting a few months for a good offer. As will doing an auction (which is more common in some parts of the world). The timing of liquidating investments will have varying tax implications. There’s much more to this, but it should give the gist. All of this means that it’s near impossible to have just one number that represents Net Worth. Really Net Worth should be a “reasonable” range. If I had to sell everything today (and pay the tax implications), then in the best case the net at the end of the day would be at least $x, and at most $y. It seems that FT keeps this in mind by going with a somewhat conservative “inflation” based valuation of the residence. That probably counteracts not taking into account the tax liabilities of liquidating the investments (though now investments are growing sizable enough that the balance is likely tipping).

If you have to go with just x or y or z (which is between x and y), then as long as it’s consistent the measurement is reasonable for tracking against some goal. The only thing that value really affects is whether he’s “won” the game of getting to $1 Million by a particular date.

A side question (related to all of this) that I’ve often wondered while reading this is: what does a $1 Million net worth mean in the context of this blog? It seems to be the sum of the assets and liabilities of a small family. But if Mr & Mrs FT were to split the moment the magic $1M goal was hit wouldn’t he really only have a net worth of $500k (and potentially much less if the kids are to get some of their due)?

Just a thought.

This is unrelated to this topic, but given that most readers use Questrade I thought this would be useful.

Calculating capital gains outside of a registered account is a very large annoyance. Questrade gives a CSV that you can export with the data that you will need to use, but if you want to use this CSV, you still have to make a lot of adjustments to calculate capital gains.

I created an excel file that should be useful. When you post this questrade data in questrades export format, it automatically calculates all of your capital gains for that year based on the CSV (as long as you sort the data according to ticker, and then date lowest to highest).

I want to share this with all of the readers so that it can be perfected. If you are interested in playing with this spreadsheet and especially updating and proofreading it, email FT for a copy.

Hi FT,

I noticed that you verify these postings before putting them up…this is more of a request to you than it is a comment. I find entering capital gains from non registered accounts so tedious, I was wondering if you wanted to make a post regarding this. Someone has to have created an excel file that can handle various data outputs from discount brokerages, it could be worthy of a discussion.


Sarlock: Present value of future tax payable is always estimable based on your current plan, if you have any. Plans can change so you adjust the estimate accordingly.

FT: I have a DB pension, so withdrawing my RRSP will always result in a tax liability (after age 60), no matter how slow I take it out.

I think calculating in future taxes is beyond the purposes of this exercise. You’d also have to consider future capital gains taxes on the investment loan increase… which again is determined by when you plan to sell them (if ever). Complex and not really necessary for calculating a net worth that is just used to compare against an arbitrary goal ($1 million).

Hey FT,

I’ve been following your blog off and on for some time now, and have been trying out all the strategies you suggest (which are all very good strategies btw), but it seems really difficult starting out to grow my net worth to the degree that you seem to have been able to. I was looking at some of your past posts and you claim that you and your wife graduated with 40k in student debt, a 25k car loan, and a 100k mortgage (I am in a very similar situation). I’m assuming you had at least some assets which would include the unstated value of the house, worth a minimum of 100k. That means your 2003 net worth was, at minimum, -65 000 plus whatever other assets you had at the time.

By June 2007, your claimed net worth was 254 695. This means that your growth over that time period was at most 319 695 (254 695 + climbing 65k out of the hole). Therefore your net worth increase for the years ’03-’07 was on average 79 924 per year.

I am in what seems like a similar situation to you (tens of thousands in student debt, car loans, mortgage, engagement ring, etc), but I am having great difficulty saving a fraction of what you were able to. How did you get through these first few years with so much gains?

Congratulations MDJ. I think we are probably in a similar position to you. I tend to focus more on dividend paying stocks, with a goal to drive $50k in passive income from these. I view the net worth that results as more of a byproduct, but find this nicely tracks dividend income increases over time. We currently track to $27k /yr of dividend income. I expect networth to cross the $1M mark in another year or so. Its great to read your story and see the application and hard work.