Source: StatsCan
Take a look at the most common types of assets:
Family Home median value = $500,000
…same value as the median net worth.
I mean it is not definitive, but what would worry me the most is just how much of someone’s net worth is in their home versus in actual assets.
The only two things I would truly consider in this equation are:
- Retirement assets = $161,800
- Bank deposits = $26,000
So if we look at this, and pretend that..
- Home = $300,000* (remember that the median mortgage is $200K, so we remove that)
- Retirement assets = $161,800
- Bank deposits = $26,000
- Total (if we add it all up) = $487,800
If your home is $300,000 of that… that means it looks like this:
- Home = $300,000 (61%)
- Cash = $187,800 (39%)
It actually isn’t as much as you think it is. It certainly isn’t enough to retire on.
Cut your expectations
Personally, to help me not feel like I have more than I actually do, I only really look at my liquid assets, so this case, it would be $187,800 for the average Canadian.
Depending on your age, this number could be amazing (under 25!), or depressing (over 60).
Amazing at 25 because of compounding interest… it would become $4.5 million at age 65 at a conservative rate of 8% interest but if you are 60 years old, in 5 years you would only have $278,601.
If you use the 25 rule, this is really not enough.
$278,601 / 25 = $11,144 a year in retirement if you retire at age 65.
Ergo … I would absolutely 100% not consider my home in this because my home is shelter, a place to go home and sleep, eat, and that is about it. I can’t eat my home. I could sell it to get money to buy food but then I would need to pay rent.
See what I mean?
If you feel discouraged…
I think it is tricky when looking at these numbers. I use them simply as an educational benchmark, but it has nothing to do with my actual situation or finances.
Everyone’s situation differs – you could have started out with major student debt like I did, or none at all (like my partner), among other advantages or disadvantages, and all of these little things add up and affect your wealth journey.
So just take it all with a grain of educational salt.
And start investing instead of just saving your money.
Until next time..