December 15, 2010, 9:44 am

December Net Worth Update – I’m Glad To Have Assets! (+4.88%)

by: The Financial Blogger    Category: Assets and Net Worth
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Today, I’m glad that I have started to build asset at a young age. At the age of 23, I was borrowing money to buy a land, 2 years later I had my first house and now I am at my 3rd house, I’m building up my RRSP’s, I have invested in my company and those 3 assets are pushing my net worth higher.

In early 2011, my pension plan will help me increase my net worth as I am still working with the 2008 figures. In the meantime, I have decided not to increase its value.

I didn’t do any changes in regards to my company shares. At the moment, I think it is unjustified to increase it over 150K (even thought I made close to this amount in a single year). To be honest, I would not consider an offer below 500K… which I will never receive ;-).

My House is Not an Asset Per Se

Technically, I don’t consider my house as a “real asset”. What do I mean by real asset? In my opinion, an asset is something creating value. My house will increase in value but will not create any. Why? Simply because if I sell my house today, I’ll have to buy another one at the same price (as all houses price will increase accordingly during the same period of time). Therefore, you don’t get much richer… but you worth more ;-).

This is why I include my house in the calculation of my net worth. On the other side, it would not make any sense to not count my mortgage…and having my mortgage in and not my house is stupid as well. Therefore, both are in 😉

Getting my expenses under control

As you can see, I didn’t drop nor increase much my debts during the past month. This is pretty good since I have to factor that all my Christmas gifts are bought and that I already paid for my 1 week vacation in January (we are renting a vacation property for the family before the RRSP season 😉 ).

I’m playing a lot with my lines of credit and my credit cards so I don’t pay interest fees on the latter. This will all be settled when I get my bonus in January… this is why I am not too worried about it.

So here’s the detail for the last month of the year :


CHECKING ACCOUNT $1,000 $1,000 0.0%
$1,639 $2,339 42.7%
RRSP ACCOUNT $17,589 $18,079 2.8%
PENSION PLAN $12,000 $12,000 0.0%
HOME $332,000 $338,640 2.0%
COMPANY SHARES $75,000 $75,000 0.0%
MAZDA TRIBUTE $23,436 $23,002 -1.9%
MAZDA RX-8 $10,800 $10,400 -3.7%
TOTAL $473,464 $480,460 1.5%

Debts :

CREDIT CARD $9,935 $11,849 19.3%
LINE OF CREDIT $19,577 $19,512 -0.3%
HELOC $264,914 $263,714 -0.5%
CAR LOAN $23,436 $23,002 -1.9%
MBNA 1.99% TRSF $10,517 $10,217 -2.9%
TOTAL $328,379 $328,294 0.0%

Total Net Worth : $152,166 (+4.88%)

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Houses don’t really fit into balance sheets well if you’re looking at the future 🙂

A simpler way to look at it (that takes a bit more work) that I like is to look at how much home equity you have now, and what kind of house you expect to live in. The home equity pays for the house, and you need to keep adding to it until it’s equal to the house you want (which keeps rising too sadly). When the conditions are right you can even withdraw from it to invest in something else or spend if you’re not too cautious.

When you look at it like this it’s almost like an RRSP, if your RRSP grows so slowly relative to your expenses that it barely advances apart from your contributions 🙁 The home equity gives you a place to live and the RRSP (or business shares) pays your bills. All my financial plans are based around this idea and I found it helpful to simplify what I really want.

Everyone has a different take on how to calculate assets.
Personally, I feel that your house IS an asset. If you HAD to sell it you could, and move to renting. As for your business, wow – i’d consider it a massive asset given the success you have had.
Now others won’t consider their vehicles.
To each their own!

Hey back with the $150k and more!! 😉 Good job, you got to it as you were planning.

That is exciting! I disagree with the notion that houses don’t create value, because as you mentioned, owning a second home or something that you can rent out creates cash flow for you if you can collect more rent than the cost of mortgage + taxes. This is scalable if you can replicate it across several properties and automate the processes behind it.

Awesome job on the increase!

Personally I think that you should value your house at what you paid for it and not include vehicles in your net worth. This is a more accurate picture of your finances.

Oh how I wish I bought 5 years ago!! I would be such a happy camper now 🙂 I would have only been around 23 or so too.

Where is your mortgage loan? Is it the HELOC?

Great job on the increase, amazing since you just bought a house recently too!

While I understand your point, the house is still an asset with a corresponding liability? You could (hopefully) one day be ignoring hundreds of thousands of dollars in equity…

I think there is maybe some sense in calling your calculation something else, like Modified Net Worth…

by: The Financial Blogger | December 16th, 2010 (11:37 am)

@Ty Webb,

I have to count my cars as I have loan attached to it. when you look at it, my Tribute worth the same thing as my loan, therefore, I calculate a 0$ equity. As for my RX-8, I drop it in value by $400/month. Therefore, I am not using my cars to boost my net worth.

As for my house, I use the price I pay + 2% inflation (the current market is much higher than this) as houses should grow about the same pace than inflation.

Curious on your use of the HELOC. Could you pay off the credit card balance from it an improve cash flow the interest rate difference must be fairly large.

For Value Indexer isn’t calculating equity what he is doing with showing the value and debt? am I missing something.

You can indeed figure out the equity – aside from doing the net equity calculation to see the actual amount I find it useful to also compare it to what you want to have or need to have, similar to how you would base investment plans on the income you need in retirement. Then again if you know you’ll have no mortgage in 20 years that gives you something too.