2016 Financial Round Up!
There’s a lot I can say about 2016, in regards to finance and otherwise, but it’s slightly difficult because I don’t feel comfortable revealing all my numbers. I had a major net worth “goal” that I was targeting for year end 2016. And I would be past it if I didn’t contribute to a DAF. Maybe I’ll hit that goal again in a few months after I get my tax refund and continue to save. Don’t really know. Don’t really care. The net worth number at age 31 isn’t so important. I mean, the fact that it’s not negative puts me years ahead of so many of my peers. You shouldn’t compare to others though. How about you compare to you former self. Here’s where I was at year-end two years ago:
What have I accomplished in the past two years? Let’s see:
- Drastically reduced my housing expenses by moving away from the beach.
- Significantly reduced my automobile expenses in terms of gas, toll roads, and less frequent maintenance due to putting less miles on my car.
- Spent so much less time commuting which was a non-financial life win in so many ways.
- Drastically reduced my spend on social sports. Social sports are a ton of fun, but I drove all over creation and it probably prevented me from forming authentic friendships with anybody because I was all over the place
- Have not internationally traveled since the above referenced Europe trip.
Those are all things that I refrained from doing though. What are the things that I DID do?
- Started working out regularly and lost over 25 lbs.
- Sold my condo which massively boosted my investment portfolio.
- Started cooking my own breakfasts and dinners and did not feel like a hopeless child in the kitchen
- Increased “passive” (non-work) income by a huge margin. (See below..)
- Started a blog that people actually read and comment on.
- Oh, and 2016 was my last full calendar year of employment in the family business. So that’s pretty exciting.
Because I knew that I had exciting travel adventures ahead, I definitely had some extra motivation to keep my spending in check in 2016 and allocate more $$ towards saving for travel. But I don’t feel like I’m depriving myself. It’s almost as if I’ve taught myself to be content with less expensive alternatives. I still splurged for some travel adventures that are above my $100-per-day target, like Camp Mustache SE (only 2 weeks away!) and FinCon. I also pre-paid for some future lodging in the form of 4 weeks in Albuquerque. I’m not viewing the ABQ portion as necessarily part of the epic road trip, it’s more like somewhere cheap while I wait for better road trip weather conditions in the places I really truly want to go to. Nevertheless, I’m excited to explore ABQ just the same as I’ve never been there.
There’s also the 1 week I booked in Omaha to take advantage of AirBNB Weekly discount for the Berkshire Hathaway Annual Meeting. I recently wrote about my real estate windfall. That’s only part of my recent personal financial story though. I sold that real estate in August 2015 and I’ve been keeping track of my net worth ever since the immediately subsequent month. I use ThriftyGal’s Google Sheet, linked at the bottom of her November 2015 financial update post. It’s pretty user friendly and gets the job done rather nicely.
Monthly Savings Rates Since Real Estate Windfall
Below is my exact savings rate percentage for every month in between September 2015 and December 2016. To calculate my savings rate, I take my after-tax income, I subtract my expenses. Then, I divide what is left by my after tax income. The result is my savings rate. Any additional taxes, such as estimated taxes, gets recorded as an expense. Similarly, my 401(k) and HSA deductions all happen pre-tax and are completely ignored in this calculation.
That does means that in a month like December, the savings rate percentage is a bit understated because I maxed out my new HSA for 2016. But the formula is the formula. Too lazy to change it now.
December was clearly a fantastic month on the savings side of things. It was also a rather strong month for my investments. You’ll notice that December of last year (4th row) was also a very high savings rate month. I get a little bit of extra compensation every December. As for August 2016, (the other 75% savings rate month), I paid August’s rent in July, had a few different signup bonuses post in August and it just happened to be an inexpensive month.
What does that mean for my overall net worth?
Net Worth Growth
My average monthly change in net worth over the 16 recorded months in the table screenshot above is right around +1.25%. The highest month being just under 8%, the lowest being a slightly larger loss than -2%. Four months were over +3%, while the vast majority of the months were in between -2% and +2%. 16 months of 1.25% is a total net worth increase of about 20% over that time period. Not too shabby. And that cumulative 20% is after putting a not-small sum of $17,000 into a donor advised fund.
Can that continue? Pretty damn unlikely. So far, I’ve had a combination of an equity bull market as well as cashing out on some astronomical real estate growth. Plus, I’ll be lacking a job for the majority of next year. Not exactly a slam dunk combination for future sustaining portfolio growth. But anything can happen.
Of course, this also means that I have not experienced a major market drop over the course of my investing career. Psychologically, that’s a bit scary. If you haven’t experienced a bear market, you’re probably a little over-confident with your equity exposure. For that reason, It seemed fairly prudent for me to take some risk off the table in light of stepping away from my job. I’m actually considering taking some profits from my stocks after the 1st of the year and increasing my fixed income exposure a bit further. Nobody ever got poor taking profits. Everyone I talk to who takes a break from work to do extended travel says they wish they had more cash to re-establish their life post-travel. I’ll post an update on my portfolio shortly.
Passive Income Stats
2016 was absolutely a banner year for passive income. Passive income for me being anything that didn’t involve my going into the office:
Bank/Brokerage Interest, including Signup Bonus Incentives – $3515
Fund Dividends (Bond Interest, Stock Dividends, Capital Gain Distributions) – $3589
Realized Capital Gains (Allocation changes that had gains minus tax loss harvesting) – $2051
Compare these numbers to 2015:
Bank/Brokerage Interest, including Signup Bonuses : $1,365
Fund Dividends: $1,451
Realized Capital Gains From Investments : $1,152
Clearly taking $100k out of an illiquid real estate asset did wonders for giving me the available capital to chase bonuses, as well as to generate dividends from increased investments. The bank/brokerage bonus chasing is, I don’t think, easily repeatable, though there are are some banks that I’ve rinsed and repeated so many times, that you really have to wonder why they continue to open new accounts for me. Like, seriously, Chase sends me these coupons in the mail every month.
Neither the 2015 nor 2016 numbers include any dividends inside of my retirement accounts.
Honestly, nothing too exciting on the December spending front. The main reason December is higher than November is that my Black Friday Laptop got billed in December. I feel like I ate out way more in December than November, but the food spending is actually somehow slightly lower. In the personal care category, I had a hair cut and a much needed massage in December. And apparently I bypassed having a hair cut in November. Whoops!
Readers – how was your 2016 financially?