January 2007 Net Worth Update (+4.43%)

1. 1. canadian dollars

   Hi there, can you explain your rationale for not paying down the car loan? Is it because the car loan is at a very favourable interest rate and that you’d rather use the $5000 to invest rather than to pay it off? Only reason I ask is because extra cash in savings, you should pay off the car loan. I know, I know, I’m probably preaching to the choir here.

   Jan 9th, 2007 @ 7:57 am

2. 2. FrugalTrader

   Hello Canadian dollars!

   Ah, you have good eyes. :)

   Yes, you are right, I SHOULD have paid off that car loan YEARS ago but haven’t. The rate is around 5% which is low, however, in hindsight, i should have just paid it off.

   However, now, the remaining payments (about 8 more) are essentially interest free(principle only) as most of the interest was paid up front in the first couple years.

   FT

   Jan 9th, 2007 @ 8:07 am

3. 3. Canadian Dream

   FT,

   Ok I feel better. I’m not the only one who has forgotten to include a pension in their networth.

   Still 4.4% is a nice increase. By the way, does cash include your normal spending money? I just leave my chequing account out of my networth calculations because it is already spoken for when my paycheque hits the account.

   Just wondering,
   CD

   Jan 9th, 2007 @ 1:15 pm

4. 4. FrugalTrader

   Mr. Dream,

   I didn’t include the pension account last month b/c I never knew the balance before. :)

   My chequing/cash balance is our cash balance after all bills are paid at the end of the month. We should probably reduce it a little more, but I like having some cash on hand.

   FT

   Jan 9th, 2007 @ 1:37 pm

5. 5. canadian dollars

   I try not to keep more than $1000 in my chequing day to day cash balance account just to maximize the amount in my savings account. I realize that people with mortgages to pay will want to keep a little extra in their chequing account to draw from though.

   Aside from my car insurance, and gym membership, nothing else is debited directly from my account which is why I keep a relatively low chequing balance.

   Jan 9th, 2007 @ 2:34 pm

6. 6. Ajax

   I have a little advice about the accounting methodology you use in your balance sheet. First, I’m not expert on Canadian tax law, but your registered investment account and pension are subject to federal/provincal tax when withdrawn, correct? If they are, you should probably create an offsetting tax liability against these assets equal to the amount of your marginal tax rate. For example, if your pension is worth $16,000 and your estimated marginal federal/provincal tax rate is 25%, you should create a $4,000 deferred tax liability on the other side of the balance sheet. Effectively the government owns a portion of the value of these accounts. Also, it is rather aggressive to count your cars as assets on your balance sheet. I know that technically they are assets, but in reality their liquidation value isn’t that great. When you use aggressive accounting practices in a personal balance sheet, the larger net worth number might make you feel good about yourself, but in reality you are just fooling yourself.

   Jan 13th, 2007 @ 9:32 pm

7. 7. FrugalTrader

   Hi Ajax!

   Excellent points! I think I will take your advice and on my next net worth statement, I will exclude the vehicles.  In my defense though, I have calculated the values of the cars as LESS than their actual black book values.

   I’ve never thought about the tax liability issue before. I guess I should be calculating tax liability for my non-registered account as it is subject to tax also?

   FT

   Jan 13th, 2007 @ 9:40 pm

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1. February 2007 Net Worth Update (+3.35%) - Million Dollar Journey - Feb 28th, 2007
2. March 2007 Net Worth Update (+1.57%) - Million Dollar Journey - Mar 30th, 2007

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