November 1 Net Worth Update

Assets:

  • Cash and Investments  $87,912
  • House $250,000

Liabilities:

  • Heloc  $63,927
  • Credit Cards  $900

Net Worth  $273,085

I forgot to do an update on October 1, but since September 1 my Net Worth has increased $5650. Partially due to savings and paying down debt, and partially due to an upswing in the markets. I am pretty happy with that.

I also have $300 in A/R for a bookkeeping job I did that I haven’t been paid for, but I didn’t include that. Hopefully they will pay this month so I can include it in my December 1 Net Worth update.

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Retirement soul searching

A while back I contacted a gentleman who used to work for the government in the CPP department. He offers his services, for a small fee, to calculate what your CPP will be at different ages. I asked him to calculate what I would get at age 60 and 65. My CPP situation is a bit complicated because I am also receiving a CPP Survivor’s benefit and the formula CRA uses to calculate that puppy is way complex.

Anyway, he told me that if I started getting CPP benefits at age 60 I would get a combined benefit of $828.48 until age 65, at which time it would drop to $740.05. If I wait until 65 to start getting CPP, my combined benefit would be the maximum, which is currently $1012.50. CPP is indexed for inflation, so these figures are all in 2013 dollars.

He calculated that if I die before age 79 I would be better off taking it early, but I die after age 79 I would be better off taking it age 65.

So, based on these figures I sat down yesterday and did some spreadsheets with different scenarios. I am using $30,000 per year as what I need to live a fairly normal life, close to what I live now. So, that is $2500/month. My target retirement nest egg is $350,000.

If I were to retire at 60, I would have to work part time until Old Age Security (OAS) kicked in at age 66. Here is what that scenario looked like.

Age Part time work/month CPP Combined benefit OAS Draw down from investments Total
1 60 1000 828.48 671.52 2500
2 61 1000 828.48 671.52 2500
3 62 1000 828.48 671.52 2500
4 63 1000 828.48 671.52 2500
5 64 1000 828.48 671.52 2500
6 65 1000 740.05 759.95 2500
7 66 740.05 546 1213.95 2500
8 67 740.05 546 1213.95 2500
9 68 740.05 546 1213.95 2500
10 69 740.05 546 1213.95 2500
11 70 740.05 546 1213.95 2500
12 71 740.05 546 1213.95 2500
13 72 740.05 546 1213.95 2500
14 73 740.05 546 1213.95 2500
15 74 740.05 546 1213.95 2500
16 75 740.05 546 1213.95 2500
17 76 740.05 546 1213.95 2500
18 77 740.05 546 1213.95 2500
19 78 740.05 546 1213.95 2500
20 79 740.05 546 1213.95 2500
21 80 740.05 546 1213.95 2500
22 81 740.05 546 1213.95 2500
23 82 740.05 546 1213.95 2500
24 83 740.05 546 1213.95 2500
25 84 740.05 546 1213.95 2500
26 85 740.05 546 1213.95 2500
27 86 740.05 546 1213.95 2500
28 87 740.05 546 1213.95 2500
29 88 740.05 546 1213.95 2500
30 89 740.05 546 1213.95 2500
31 90 740.05 546 1213.95 2500

Then I looked at what it would look like if I worked until age 65. Note that the previous scenario took me to age 90, and this one goes to age 95. Not sure why I did that. I guess because I based them both on 30 years.

Age CPP Combined benefit OAS Draw down from investments Total
1 65 1012.5 1487.5 2500
2 66 1012.5 551 936.5 2500
3 67 1012.5 551 936.5 2500
4 68 1012.5 551 936.5 2500
5 69 1012.5 551 936.5 2500
6 70 1012.5 551 936.5 2500
7 71 1012.5 551 936.5 2500
8 72 1012.5 551 936.5 2500
9 73 1012.5 551 936.5 2500
10 74 1012.5 551 936.5 2500
11 75 1012.5 551 936.5 2500
12 76 1012.5 551 936.5 2500
13 77 1012.5 551 936.5 2500
14 78 1012.5 551 936.5 2500
15 79 1012.5 551 936.5 2500
16 80 1012.5 551 936.5 2500
17 81 1012.5 551 936.5 2500
18 82 1012.5 551 936.5 2500
19 83 1012.5 551 936.5 2500
20 84 1012.5 551 936.5 2500
21 85 1012.5 551 936.5 2500
22 86 1012.5 551 936.5 2500
23 87 1012.5 551 936.5 2500
24 88 1012.5 551 936.5 2500
25 89 1012.5 551 936.5 2500
26 90 1012.5 551 936.5 2500
27 91 1012.5 551 936.5 2500
28 92 1012.5 551 936.5 2500
29 93 1012.5 551 936.5 2500
30 94 1012.5 551 936.5 2500
31 95 1012.5 551 936.5 2500

Then I did some number crunching to see how much I would need to save between now and retirement to reach these goals. The results are a bit scary, and were based on some assumptions that may or may not come to pass such as downsizing my home to get some equity out and pay off about $50,000 of the heloc. Also being left with 30-40 K of the life insurance after paying out my late husband’s share of the house.

Anyway, to semi-retire at age 60 (I am currently 54) I would need to save about $2700/month between now and then. That is a big number, but not entirely out of the question. In addition to my wages I have a side hustle that brings in about $1000/month. I also get a CPP Survivor’s Benefit of $375/month. So, out of my net pay I need to save $1325. My net pay varies from month to month because I make an hourly wage, so it depends how many working days are in a month, but on average I probably bring home about $3200 per month. So $1325 is roughly 40% of my take home pay. Which is doable, especially if I don’t do stupid stuff like buy clothes that I don’t need or get take out food. I am also saving $200/month towards a future car purchase, $100 per month for vacations, and $150/month for insurance and other big expenses. But, I don’t calculate these into my retirement savings as these are short term savings and will be spent eventually.

So my challenge for November is to save $2700 to see if I can do it. This is on top of the $1000 I pay on the heloc every month. I am going to have to watch my spending very closely. No stupid purchases. Take my lunch every day. The car is full of gas, but I don’t know if I can make it a full month on one tank. I have never paid that much attention to it. Only buy groceries I need, no junk food.

I guess the thing is, now that I sit down and write this all out is that I wouldn’t mind working until 65 (or even 66) if I was working at a job I enjoyed. I like working, I just don’t like my current workplace. It’s values and ethics don’t match mine. I feel it is bringing me down. But the pay is pretty good, especially for my level of education (never finished university) and field of work (bookkeeping). I peruse the job ads every day and the wages being paid are all less than what I make. The only way I could make more would be to go back into accounting, which I didn’t enjoy. So, maybe the answer lays in finding a job that I enjoy more, even if it pays a little less. Or start my own bookkeeping business, but that is a scary thought.

If I didn’t have the damn heloc, and I didn’t have to pay out my husband’s share of the house my finances would be a lot easier. I guess we have to pay for past mistakes sooner or later.

 

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Conflicting Emotions

I met with a bankruptcy trustee this week regarding my late husband’s estate. He hadn’t filed his taxes for several years and owes mega bucks to the CRA. On the one hand I am not responsible for paying his taxes, but on the other hand they can go after his share of the house. So, I will have to buy out his share of the house, which after everything is said and done could be around $60,000. That is actually less than what I originally thought it might cost me, so I guess that is good. But, I feel conflicted about declaring his estate bankrupt. He would have hated that. But, I have to do what I can to preserve my retirement funds for my future. Besides if he didn’t want to be bankrupt he should have paid his damn taxes. So many thoughts and emotions swirling inside of me. Guilt, anger, grief, relief. sadness, even a touch of happiness, which brings on more guilt for being happy.

I have to meet with the trustee again next week and give him some paperwork and pay a retainer of $7000. Now, I ask you, how do people that are bankrupt afford $7000? I am in an unusual situation because it is my late husband that is bankrupt, and I have his life insurance money squirrelled away. But, isn’t the point of bankruptcy that you have no money to pay your debts?

This is going to be a stressful process, but I have to do it to move on.

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Clothes Shopping, house quandry

I will admit I like to shop for new clothes. Even when I don’t need anything, I just like to shop. It makes me happy to have new things. I don’t have a shopping addiction or anything. We’re talking a few things from Wal Mart or a ladies clothing store. But, now that I am on my own, and trying to get my finances in order, I feel guilty whenever I buy something.

I’ve been thinking of a solution and I think I will take $50 per month and put it in an envelope in my purse. That way I will limit what I am spending, but if I really want something I will have the cash.

Also, I have to either quit getting my groceries at Wal Mart or quit making a detour through the clothes department every time I get groceries. I always think “I’ll just see what’s new”, and before you know it I have picked out something. Silly, really, because I have tons of clothes. And what I really need is to get out of debt and get on with saving for retirement.

Still waffling on what to do about the house. Everything I need is here: Garage, three bedrooms, two bathrooms, air conditioning, basement, main floor laundry. If it wasn’t for the stupid heloc I wouldn’t feel pressure to downsize. And while we are talking about being stupid, I was stupid to let the heloc get so out of control. Too many years of living beyond our means is what it boils down to. If I ever get into a serious relationship with a man again, which I seriously doubt, I am going to make fiscal responsibility more of a priority.

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Net Worth Update – September 1, 2013

Assets

  • Cash and Investments  $84,166
  • House $250,000

Liabilities

  • Heloc  $65,574
  • Credit cards  $1157

Net worth $267,435

The credit cards will be paid off right away. The only reason there is a balance is because of a large vet bill in August. I have decided to leave the life insurance money off my Net Worth statement because I will have to pay most, if not all, of it to the government for my late husband’s taxes if the accountant ever gets his butt in gear and gets them figured out.

I also loaned my son $1000 this month until the sale of his condo closes.

My goal for September is to increase my net worth by $2000.00.

 

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An Epic Week for Debt Repayment

Last week I made the biggest payment I will probably ever make on my HELOC. First of all, I finally sold the truck. I got $5500 for it, and gave the salesman that sold it $300, netting me $5200. Then I got the cheque for the hail damage which was $3200. I also took $5800 out of my TFSA that was only earning 1.35%, so all that, combined with my regular payment, totalled $15,150. That brings the balance on the HELOC down to around $65,000.

I also decided to stop putting $200/month into my TFSA, for the time being,  because I am only getting 2.25% interest since CWB put their rate down. I will put that $200 on the HELOC also. It doesn’t make much sense to get 2.25% when the interest rate on the HELOC is 3%. I have enough in my TFSA to cover my  expenses for 6 months or more in the event of an emergency, so I think when I decide to start making payments into it again I will put them in my ING Streetwise fund.

I am slowly coming to the realization that too much cash in my asset allocation is not a good thing. For a very long time I was scared of equities and put most of my money in GIC’s and savings accounts. Now I realize that to keep up with inflation, and hopefully get a better yield, I need to have some money in equities. I still don’t have a very high risk tolerance. If interest rates were higher I would still go with GIC’s, but the best rate I can find right now is 2.7%, and that just isn’t good enough. So I am putting money into ING’s Streetwise Balanced Fund, which includes equities and bonds.

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Starting my Financial Wellness Journey

Where to start? Well, I am 54 years old, and was widowed 8 months ago. My husband had a stroke and died unexpectedly. When he died we had a home equity line of credit of about $93,000 and about $22,000 on our mortgage. I had about $80,000 in savings.

I was able to pay off the mortgage with part of his life insurance proceeds. So I now own the house free and clear, thank goodness.

The other fly in the ointment is that he had not filed his taxes for several years, so I have the rest of the life insurance money in a savings account waiting to see what that is going to come to.

I have paid the HELOC down quite a bit in the past few months, and this month I will be withdrawing $5500 from my TFSA that was only earning 1.35% and putting that on it.

I was hoping to have a nest egg of $350,000 in place by the time I was 60 so that I could semi-retire and just do books from home. I haven’t totally given up on this, but it doesn’t look good.

I might eventually sell the house and down-size to a condo, but I have a dog and cat to consider, so I haven’t made a decision about that.

At the moment this is a snapshot of my finances:

  • Chequing: $2600
  • Life insurance money: $100,000
  • Investments and Saving: $87,173
  • Line of Credit: $-80,724
  • House: $250,000

So, that is it in a nutshell. This blog will follow me as I try to get rid of the HELOC, and build my nest egg to at least $350,000.

 

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