Darts and laurels

When you work in the media (and by association, hang out with journalists) while also being one of those weird people who actually enjoys talking about financial topics, it makes two things more likely to happen. No. 1, the odds that your drunken ramblings might ever see the light of mainstream publication are infinitely increased. And No. 2, how they're received is likely to be all over the map...

I'm "in the news" (so to speak) a couple of times at the moment, and I figured I'd be remiss if I didn't point my loyal readers (Hi mom!) toward the fruit of my overactive brain.

My good friend Andrea is under the mistaken impression that I somehow know what I'm talking about when it comes to financial topics, so she's enlisted me to answer a few basic questions about opaque financial topics on her new financial blog, Unspending. This week, we're talking about net worth: what is it, and why does it matter. This may or may not become a recurring feature, since believe it or not, there's few things I enjoy more than chatting about things like personal finance. So if Andy's pleased with the results, expect more topics to be discussed in a rough Q&A format over there. So far, the early reviews of my thoughts appear to be positive.

But clearly, that's not a universal view. Another friend, who works at the Toronto Star, has been writing an 8-part series about the process of jumping into the real estate market for the first time. I'm something of a contrarian when it comes to real estate, as my B.S.-detector tends to go into overdrive when I'm at a cocktail party and overhear someone bragging about how "you can't lose money in real estate." At any rate, Robyn and I have been having an ongoing debate about Toronto real estate for a few weeks now, the distilled version of which, it turns out, is the focus of her series' final installment: Home, Sweet Home.

As impossible as it is to poke holes in such air-tight financial advice (from a financial advisor, no less) as "never pay off your mortgage," the point I was trying to make isn't so much that real estate is a bad investment, but more that it's quite often a good idea to at least question the conventional wisdom of the massive financial move you're making -- not to mention that 40-year mortgages might not be your best friend.

No matter. Though I'm clearly the villain of the piece, it's all in good fun. And I doubt it'll be the last time anyone takes mock umbrage with something I say.

January net worth -- surveying the damage

I updated my net worth last night, and I was pleased to discover that it actually went up, albeit marginally, despite the stock market carnage that continued through most of the month. Click the chart in the right sidebar for the gory details. Proof positive that automatic savings programs work.

And as for the stocks, not that this really means anything in and of itself (since the only time one should care about the value of their stocks is when you want to sell) but it's nice for a little reassurance that I have indeed chosen solid firms that are better positioned than some to weather inevitable storms. I wasn't worried when the TSX lost 600 points in a day, and I'm not worried now.

2008 goals

I'm slowly emerging from my turkey-induced holiday coma here, and I promise to get back to posting with regularity real soon.

What with today being the busiest day of the year at most gyms, I figured it could be useful to have a look at how good I was at keeping my financial resolutions in 2007. I set a fairly ambitious goal for myself of having a net worth of $40,000 by the end of 2007. At the time, it was in the mid-20s, so that represented an increase of more than 50%.

Well, it didn't quite pan out. I was on track until about August, when the word "subprime" first entered into our collective vocabulary, and I've been moving sideways ever since. Truth be told, I'd probably be in the hole by quite a bit were it not for the fact that the new money I'm adding via savings is doing little more than offsetting equity losses.

When I made the goal, I knew it would be hard to hit, but I still wanted to try. I was swinging for the fences going in, but it doesn't mean the ground-rules double of $35,933 I ended up with is worthless. I'll get home eventually. There was some good questioning of the value of tracking net worth (since ultimately, it's a target most people aren't really in full control of) over at four-pillars recently, and while I accept the point, I still see some use in setting targets to reach for.

As such, I'm setting a new goal of $50,000 by this time next year, for a number of reasons. No. 1, it's a nice round number. And No. 2, it's a challenge to hit. To meet it, I'll have to stick to my aggressive plan of setting aside in excess of 30-35% of my after-tax income into savings every month. But even if I did that, and my holdings did nothing but tread water, I'd still only end up in the mid-40s. So I'm also demanding about a 10% return from the equities I already hold. My portfolio's got about a 4% or 5% yield, so I'm essentially trying to double that in an increasingly skittish market. Let's see what I can accomplish here.

Of course, if my circumstances change in any material way, I'll amend my goals as I see fit. But 50K in one year's time seems like a good starting point.

Surveying the damage -- November net worth

Not exactly a banner month for the ol' portfolio.

Net worth went down by nearly 2% for the month, and that's after the $1000 of new cash I put into it during the month. There were fluctuations throughout, but the real mover and shaker was Biovail.

I didn't write a post on the company's latest woes because frankly, I'm tired of writing about them, but suffice to say it's hard to bounce back when your largest single holding loses more than 10% of its value in a month.

I've been really close to dumping the entire thing, cutting my losses and putting what's left into something steadier, but I still think the market's overreacting to it. They've got cash, and they've got new drugs slowly coming along the pipeline. I just need to be patient. That dividend will tide me over. Time will tell if my instincts are right on this one, but for now there's no denying it's an ugly blotch on my portfolio.

Still, there's no accounting for luck sometimes. The stock market's been open for less than an hour today, for example, and Google Finance informs me I'm already up $500. Much like Kyle Wellwood, this too, shall pass.

Net worth update

You just never know. After a few months of mediocre progress, my net worth jumped an impressive 4% last month, and I barely noticed.

Just goes to show what an automatic savings program and a little luck in the stock markets can do for you.

I'm now at more than $36,500, a little bit off my ambitious end-of-year goal of $40,000 by the end of 2007. I didn't think I had a hope of making it, but two more months like this past one and I just might. if I don't, I was swinging for the fences anyway.

I'll be making my second (and final) RRSP purchase of the year in the next few days. I had planned on diversifying more into U.S. equities, but given the worsening subprime crisis down there, coupled by the undeserved hammering Canadian banks have taken of late, as of this moment I'm leaning toward doubling down on BMO when the cash clears into my account. I'm sure my mind will change in 20 minutes though.

I'll keep you posted.

Paying for vacations

Later this summer, I'll be going to Shanghai for a sort of working holiday. I'm looking forward to the trip immensely, both as a chance to recharge my batteries, but also catch a glimpse of the breathtaking economic growth in China first hand.

The reason this is personal-finance related is I have to figure out a way to pay for the damn thing. I'm still technically a contract worker, so I'll be taking unpaid time off to go. That makes it doubly expensive because not only am I losing out on income via lost hours, I'll be dipping into savings to finance the trip. It's one thing to be swimming for yourself. Or even treading water. But it's quite another to be free-diving below the surface (As an aside, this is definitely why my brief periods of unemployment have tended to make the financial problems they create exponentially larger. One of the advantages of having a job is that not only are you earning money, but you're also not hanging around at home, spending cash on food and entertainment to fill the time every day.)

I'm hoping to write a few stories while I'm there just to make it worth my while, but this will no doubt make a dent in my financial plan. My goal for the year is to have a net worth of $40K by Christmas. With my new place and this trip, that seems like a bit of a stretch at this point, but we'll see just how disciplined I can be.

It's time to put my thinking cap on to drum up a little income above and beyond my 9-to-5er.

Pot pourri

1) Finished moving this week. Predictably, it was a hassle. And predictably, it was expensive. Still -- I like my new place and I'm settling in well. You don't know how much you've missed outdoor space until you get it back again.

2) Got my tax return this week, too. Ordinarily, I'd roll it over into RRSP's again, but this year, with moving-related expenses to pay for, that's not likely to happen.

3) NetworthIQ informs me my net worth is over $33,000 this month. With six months to go in 2007, coupled with my higher cost of living in the new apartment, it might be tough to hit my unofficial goal of $40,000 by the end of the year.

Net worth -- how do you count the 'stuff?'

Quick post to draw your attention to the fact that I've updated my net worth for January 2007 (you can see the graphic on the sidebar to the right)

NetworthIQ tells me I'm now worth $28,727 -- a $1,583 (5.83%) increase from the end of December.

Much as I'm pleased that the little line keeps pointing in the right direction (yay saving!) the reason I thought I'd make this a blog post in and of itself is because of a conversation I had with my girlfriend recently about getting renter's insurance.

We had a break-in a while back. Nobody was home and the only things taken were her jewelry (my iPod, laptop, camera and Xbox were all in plain view but were left untouched) and while it wasn't really traumatic for me, I can tell my girlfriend is still very edgy due to the whole "feeling violated" factor.

As such, she's big on getting renter's insurance. I'm open to the idea myself since it seems surprisingly affordable, but one of the requirements is that we obviously have to have everything in the apartment accounted for and possibly appraised.

My girlfriend asked me to ballpark the total replacement value of everyting we own and I said somewhere between $5,000-$10,000. Her guess was much higher -- something in the neighbourhood of $25,000. At first I thought she was way off, but now I'm not so sure. I know we wouldn't get back exactly what we'd paid for all the stuff -- just the replacement value of it all, but the more I think about it, we have a lot of little things adding up. Electronics alone, I'd say there's a few grand right there. A 35-inch TV, DVD player, Xbox 360 system, two laptops, one desktop, two digital cameras and two iPods. That right there would cost around $4000, minimum. Then you've got a couch, a bed, bedroom furniture, coffee table, chairs, kitchen table...it's all adding up. And we haven't even gotten to the two complete wardrobes for upwardly mobile young professionals.

I think the real answer is probably somewhere between our two guesses. $10,000-$20,000 maybe? I have no idea. I guess that's the insurance company's job.

The reason I'm wondering about this stuff publicly is that right now I don't include any of it in my net worth calculations. If the insurer decides I've got $30,000 lying around in my couch cushions, I'll consider including it in future months. But for now, I don't want to artificially skew my numbers like that.

The rich get richer

News in this morning's Globe about how the richest 2% of people in the world own more than half of the world's assets doesn't really come as much of a surprise to me, although some of the specific numbers did give me pause.

In the world's first ever exhaustive survey on the subject, the UN found that the gap between the super-rich and the desperately poor is indeed widening at an astonishing rate. Compared to their elite counterparts, for example, the poorest 50% of the world's population control less than 1% of the world's wealth. And the gulf has widened sharply over the last 50 years.

Some other findings:

• Assets of $2,200 (U.S., I presume) would place you among top half of the world's wealth distribution
• Assets of $61,000 would place you in the top 1%. That's just an astoundingly low threshold to me. Essentially, if you have a net worth of $61,000, you're among the richest 1% of people on earth
• The vast majority of the super-wealthy live in North America, Europe and the Pacific Rim.

Still wondering how you stack up? Check out this interactive How Rich are You? calculator to see where you rank among the world's wealthiest. It certainly provided some sobering food for thought to me this holiday season. Brings my little petty obsession with my own net worth calculator really into perspective.

How much blogger does $25,465 get you these days?

Apparently, this much.

Just a note to say I've started one of those handy NetworthIQ graphics on the sidebar of this page to help me track my long-term progress.

After entering my data, I see I'm currently worth $25,465 -- a 1.77% increase from last month.

Let's hope that little line keeps pointing up.

I'm losing my will to save

Yes, yes, I know that saving a little bit every paycheque and putting it aside for a rainy day is one of the best things I can do for myself.

And I also know that buying a house as early as possible and socking money into an RRSP in my 20's will put me in a better financial position that about 99% of my peers.

But dammit -- it's hard. I've been a good little saver this year ($7,000 into my RRSP for the year, and it's increased in value by about 15% already) and my automatic savings program diverts a good chunk of my paycheque into a high-interest savings account before I can even sniff it.

Sure, the ever-so-slowly up-moving squiggly line that represents my net worth does give me a nice little sense of accomplishment -- but my self-satisfied smugness is no match from the joy I'd derive from liquidating my Combine enemies on a brand, spanking new Xbox 360 system. Nor is it any match for, say, tossing back mojitos like Lindsay Lohan at a frat party while lounging around on the beach at one of these places, for example.

In short, I need a bit of a break. Christmas is coming up, and in addition to the myriad gifts I'm planning to give to friends and family, I think some treats for me are in order.

But don't worry, pfblogosphere. I'm sure my little anti-frugality protest will be short lived. Come January, I'll once again be waist-deep in the forests of paper that the financial press annually puts out on where to park those tax-free RRSP dollars. And I don't think the new video game console I've been jonesing for qualifies as a buy-and-hold investment.

If I don't re-discover my saving mojo, I'm sure you people will remind me of it.

I'm just sayin' -- if the diet ain't fun, you're not going to stick with it.