We have entered the tax filing period for personal income tax. If you read our last two articles you would have considered tax loss selling in 2016 and maybe even made some charitable donations to take advantage of graduated tax credits while preparing your 2016 tax return. Our to do list for 2017 includes creating a net worth statement as a baseline, much the same as your doctor recording blood pressure and cholesterol readings that future readings can be compared to.
Your Net worth statement reads like a personal balance sheet.
Step 1- List all your assets including savings, Tax Free Savings Account, registered account values (RSP, RIF, LIF, LIRA)and other asset values car, toys, home and other real estate, loans or mortgages owed to you, collections (Art, coins, jewelry, antiques). Write the total.
Step 2- List all of your debts/liabilities. Credit card debt, lines of credit, student loans, personal loans, and mortgages. Write down the total of your debt.
Step 3- If you subtract the value of your debts in step 2 from the value of your assets total in step 1 the result is equal to your net worth.
You should perform this calculation on an annual basis so put your net worth result with your important papers so that you can compare the values from year to year. If your net worth is not increasing year over year, you are doing something wrong. Make this a goal to improve this number every year. In order to improve net worth you will have to exercise discretion on all of your spending;
- Limit your monthly dining and fast food consumption.
- Buying cars or trucks reduces net worth because they depreciate in value. The newer the vehicle the greater the depreciation and affect on your net worth. Multiple vehicles also will affect how much you pay for maintenance and insurance.
- Consumption of cigarettes and alcohol and playing lotteries and casino games will affect your ability to save. These are sin taxes and habits that can lead to long term negative affects with health and financial health.
- Monitor credit purchases and avoid increasing limits or using your card if you cannot afford to pay off balance on a monthly basis.
- Avoid keeping up with Jones, their credit and net worth is not your problem.
- Investing your money can significantly impact net worth. Perform regular reviews of your investments to avoid catastrophic net worth events. It is investing and not gambling after all.
If you are interested in improving your net worth numbers contact us for valuable information that can set you on the path to greater financial health.
This article was prepared solely by Mark Nichol, Roy Collings, and David Storrie who are registered representatives of HollisWealth® is a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trade name and business name under which Industrial Alliance Securities Inc. operates. The views and opinions, including any recommendations, expressed in this article are those of Infinity Wealth alone and not those of HollisWealth. The comments contained herein are general in nature and professional advice regarding an individual’s particular situation should be obtained in respect of any person’s specific circumstances. HollisWealth and the Industrial Alliance Securities Inc. (iA Securities) companies do not provide income tax preparation services nor do they supervise or review other persons who may provide such services. Infinity Wealth is a personal trade name of Mark Nichol, Roy Collings, and David Storrie.