Our Finances

Net Worth Update – May 2021

ThinkingOfMoney

This is a big update. We bought a house. So while our Net Worth has tanked, our happiness has increased. There is more to FIRE than just saving every single dollar no matter the cost to your mental health or well-being. We have been renting for the last five years, and have lived in 3 different apartments in that timespan. We’re tired of moving around, we’re tired of not hanging pictures on the wall, and not feeling like our home had any permanence. Our last apartment was also the worst place we’ve ever lived. We were living close to the centre of town, in a building that was primarily made up of AirBnB units – which means there was no sense of community and we had to listen to people returning from parties all through the summer. We have literally woken up to the sound of vomiting at 3am coming from the hallway. We’ve moved to a small detached house with a very large yard in a quiet older neighbourhood. I feel like a weight has been lifted off my shoulders. The house needs some work, the yard needs some work, and I am excited for all of it – even knowing the $$$ we’ll have to pour into this house to clean it up.

What Happened This Month?

Our Net Worth tanked. Calculating Net Worth can be subjective. I’ve always calculated it by adding up our cash & retirement accounts, substracting any credit card amount owing and also adding the estimated selling price of our rental condo and subtracting the mortgage. Last month our Net Worth was $668K. At the end of May, we’re down to $33,363.58. However I’m now splitting up our Net Worth into two calculations: Net Worth and Retirement Assets (or FIRE Assets). Our Retirement Assets are $(124,636.42). Yes, that is a negative number.
So how did this happen? What the hell happened in May… We put 20% down on the house. Originally we weren’t planning on doing this, as interest rates are so so low, that we actually thought we could take the hit of mortgage insurance (the insurance you’re required to pay if you put less than 20% down) and instead, investing our cash.
However another option came up. We could pull equity out of our condo, save on the mortgage insurance by still putting 20% down, take advantage of the low interest rates on the 2nd condo mortgage, and still have cash left over to still invest. So this is what we did.
We took out a 2nd mortgage on our condo in the amount of $150,000. This means we only had to put $8,000 of our own cash towards the down payment.
The difference between Retirement Assets and Net Worth is that when calculating our Retirement Assets, I am not taking into account any equity in our principle residence, nor the selling price, but I am taking into account the outstanding mortgage. I saw someone on Instagram doing this – I believe it was Budgets and Boba who introduced me to the concept of FI Assets. The idea is that because we plan on living in our principle residence for the foreseeable future, we cannot live off of the value, and therefore there is no benefit in including the equity or value of the home in our calculation. However we still need to take into account the remaining mortgage. Our Net Worth is higher because for this calculation I am taking into account our equity. It would probably be better to take into account the estimated selling value of our home less the mortgage outstanding (as we do with the condo), but we JUST purchased the home so I’m making the assumption that the value hasn’t gone up in the span of the three-ish months or so since our offer was accepted. HOWEVER, our realtor did tell us that it would probably sell for $100k more today… because this market is insane. But none of us know what the market will do in the next 6 months, year or five years…. we’re well aware that the value of our home could plummet at any time – which is why I do NOT think now is the time to be trying to make money in the housing market – that’s just me, I’m sure there are tons of people doing it and killing it but that’s too risky for me.

Expenses Breakdown:

Food: $969. Eugh. We went a little crazy in May on restaurants – packing (and laziness) will do that. Over $400 of this was restaurants, another ~$400 on groceries and $70 on alcohol.

Dog: $2,798. Most of this was the amount we actually paid for our dog, the remainder was for food, toys and gear. I’m looking forward to documenting this more.

Home Expenses: ~$17,500. UGH. So most of this was actually the property transfer tax. YUCK. This is one of those closing costs that you don’t get back. This really should be considered as part of your home cost – especially when it comes time to sell and you’re thinking of how much money you “made” off of the sale.

Compared to last month it looks like our Retirement Funds are significantly increasing, and while they are, obviously our apartment equity took a major hit in May which is the biggest reason for the dramatic change in this graph.
I cheated a bit with this graph – I removed the house closing costs from May expenses. I’m always hesitant to do this with one-off expenses because it’s so easy to say “Oh but in April, we bought a couch, we won’t do that every month.” Or “But we went on vacation in January, that doesn’t take place every month.” However, house closing costs (property transfer tax, title fees, lawyer fees) REALLY will not happen again until our next home purchase so for me it made sense to exclude these.