Posted by: saveafewbucks | September 1, 2010

Net Worth Update: August 2010 (+5.64%)

This dang time thing again… Slowly (ever so slowly) waiting for my finances to improve. This is difficult. Despite the 5.64% improvement in my overall net worth, I’m still in the hole $20,513.

The slight increase was due to the following:

1. Back payments for my Employment Insurance came in which allowed me to pay off some of the debt I had. It’s also allowing me to (just barely) make ends meet so I’m not going further and further into debt.

2. The increase as a result of that income was reduced by a decline in my investments (TFSA) of 11.36%.

3. There was an additional decrease in my retirement account both from a decline in the value of my investments as well as an RRSP withdrawal of cash I had sitting in the account. Note, I NEVER recommend taking money out of your retirement account. EVER. But I needed it to pay my bills due to a mix up (my fault) with my line of credit (which has now been converted into a loan). The total decline of my RRSP portfolio as a result was 30.29%. (Eff!)

Learning the Hard Way

Despite the increase in my net worth, there have been many lessons I have learned from this period financial hardship. Lessons on what I should not do!

1. Don’t put money in your RRSP when you’re temporarily employed. This should be common sense… But I blame it on the stupid naive hope and unrealistic expectations that I would find another job immediately. What had happened was that I was laid off in March of this year. Then obtained a contract position a few weeks later. The company treated me as self-employed and thus was not making source deductions on my behalf. Thus I put some of the excess money I earned in my RRSP so that I would not be hit with a huge tax payment at the end of the year. I had assumed that it wouldn’t be so difficult to get another position given the speed at which I had obtained the contract position (wrong!), so I didn’t keep the funds liquid (which I should have).

2. I kept a minimal cushion of cash in my bank account. After reading many personal finance blogs this is a cardinal rule that I know and should have followed. But I didn’t. Now this is a mix of a few mistakes. One being that I spent money like I was still employed. Another is I had put money in my RRSP. Last was that I was relying on my line of credit to pay bills. Now the last one isn’t too bad.  I mean that’s what it’s there for right? To be used in times of need? But due to a series of miscommunications (I won’t bore you with the details), the line of credit was converted to a loan this month… And I didn’t know until I tried to make a payment from it. Oh gosh… Next time I will keep a cash cushion.

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