We need to talk about your plummeting net worth

We need to talk about your plummeting net worth

Thus, the net worth of Canadians fell by approximately $331.7 billion between July and September. Shit, huh?

Just over a year ago, as real estate prices and stocks soared, I asked in this newsletter if net worth was the most overrated statistic in personal finance. This question is just as relevant today.

Net worth is the surplus left over when you subtract the amount you owe from the value of the assets you own, including investments and real estate. Last year was epic for net worth gains, while 2022 was the opposite. How good of a measure of financial success can net worth be when it’s so volatile?

It’s not like tracking your net worth is a waste of time. You definitely want to establish a pattern in your life of steadily increasing your net worth over decades by paying off debts and increasing your investments. But net worth is a volatile number that will make you feel good some years and anxious others.

This is definitely a year to feel anxious. House prices are down sharply from February’s peak, stocks have been up and down and even supposedly innocuous bonds have fallen. It would be normal to end the year with a home that lost value in 2022 and a balanced portfolio of investments that did the same.

When I wrote about net worth last time, I suggested not getting too attached to the net worth of the day figure because asset prices could fall. Going into 2022, my advice is to treat today’s dips as just as temporary. Over the next two years, housing prices will stabilize and begin the next higher stage. Stocks have already pared their worst losses of the year and bonds have had a nice little rally in the last month or so. Your balanced portfolio may be finding its balance.

Expect the real estate and financial assets you own to build your net worth gradually and reliably over periods of five to 10 years or more, with sharp short-term ups and downs. If you keep saving, investing, and paying down your debt, you’re doing all you can to make sure your personal net worth tells a good story.

As for the sharp decline in net worth in the third quarter, Canadians still had household wealth valued at $15.1 trillion. That’s $2.7 trillion more than at the end of 2019.

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Rob’s Personal Finance Reading List

From Toronto to Edmonton and back

A first-person account of a woman who moved from Toronto to Edmonton because real estate prices are so much lower. Beyond the cheap house she bought, pretty much everything else wasn’t right. She is now back in Toronto.

Dollarama Rules

Summary of a discussion on social media about items being cheaper at Dollarama than at other stores. The price difference on some items is striking.

Time to raise your tip level?

Consider trying to tip more generously this holiday season, if you can afford it. I know tip fatigue is a thing right now, but people in the service industry rely on tips as part of their income. Ask an Uber driver about it.

Defending the $20,000 New Year’s Eve Dinner

The Ottawa Citizen’s food critic is defending a chef who offered to cook a $20,000 dinner for four on New Year’s Eve. The offer was criticized on the grounds that some households are struggling to afford the ‘grocery.

Ask Rob

Q: I want to invest $100,000 through my online brokerage account to buy US securities with US dollars. I recently heard of a dollar trading strategy called Norbert’s Gambit. It seems a bit complicated, but I would like to know your opinion. I have US/CAD cash accounts with my broker. Should I just do it this way?

A: Norbert’s Gambit is a long-standing strategy for avoiding exchange fees when converting Canadian dollars to US dollars in your investment account. It’s quite a complex process, so much so that financial bloggers have written step-by-step manuals. Using a US dollar account will reduce exchange costs, but you will still need to convert Canadian dollars to US dollars when funding your account. I guess it all comes down to how aggressive you want to be to reduce your investment costs.

Do you have a question for me? Send me. Sorry I can’t answer each one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

Federal government thoughts on energy saving consumption at home and in your vehicle.

The cashless zone

I totally enjoyed the new movie Harvest timewhich documents the making of the 1972 Neil Young album To harvest. Here is a cover of a hit song from the album, Gold heart, by soul artist Charles Bradley. In the film, Neil offers just a small taste of an excellent banjo version of Gold heart.

From the Twitter universe

A little dust on how many Statistics Canada inflation data we can trust.

In case you missed these Globe and Mail articles on personal finance
  • The best holiday gifts under $50 for every type of person
  • That big beefy truck or SUV is killing it. Your finances, i.e.
  • How does the normal retirement age in Canada compare to that of other countries?

More Rob Carrick and Financial Hedging

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