Annual Financial Review: 2022
Hey everyone!
We’re at the year end, the perfect time to take a look back at my finances and see how I did over the past year. This annual financial review is a great way for me to see where I've made progress and where I can improve in the coming year.
First, let's take a look at my income. This year, my total income was $71,229. $66,950 base, $4,279 bonus. I was able to secure a promotion to a full-time role at my corporate company near the end of 2021. This saw my income get a nice bump, and that helped in 2022. We also received our first bonus which although was only for 1/4 of the year was a nice unexpected bonus, 80% of which went to our RRSP investments.
Next, let's look at my expenses. My total expenses for the year were $52,206. My biggest expenses were Investments, Rent, Food, and shopping.
Now, let's see how my net worth has changed over the past year. My net worth at the beginning of the year was $14,447, and at the end of the year it was $19,961. That means my net worth has increased by $5,514 or a YoY growth of 38%. While it’s a small amount in absolute terms, we should celebrate our small wins. Especially because the market was hurting this year, with most asset classes across the board being down YTD. However by dollar cost averaging throughout the year, and trying to focus on accumulating more shares of our index fund we were able to grow our portfolio. While still being down YTD like most others, instead of being down 10-15% like the index, we’re only down 5% since we’ve been consistently buying on the way down. It feels like swimming against the current, but eventually the tides will turn and we’ll be glad we kept accumulating (that’s what I tell myself anyway). Will the markets recover in 2023? I don’t know, but since we’re in our accumulation phase, the lower the prices go, the better (it just doesn’t always feel that way).
Another important financial metric to consider is my savings rate. My savings rate is calculated by taking my total savings for the year (including contributions to retirement accounts) and dividing it by my total income. This year my total investing/saving accounted for: $25,319, giving us a 35.6% savings rate. I can’t really believe it added up to that much. But following Ramit Sethi’s advice, we created an automatic money system where a fixed amount of money get moved to investments and savings every time we get paid. We paid ourselves first, and it paid off. Moving forward our stretch goal for next year is to invest $25k, and save $5,000 in our emergency fund.
Up next the fun catergory: Travel. One of my rules is to try and do one bucket list item a year. This year it was Machu Picchu. We created a sinking fund trip, moving $150/paycheck to a seperate checkings account. My partner and I saved $3500 each for the trip. The 18 day trip including all flights, the 5-day Machu Picchu hike, food, accommodation, etc. all came to around $2700. Although I ended up close to $3500 when considering all the new warm clothes I “needed” to buy for the Machu Picchu hike (that 100% Merino wool is $$). Overall it was a amazing trip, and using the sinking fund for the first time helped with spending all the money on the trip without feeling guilty. Next year we’re hoping to do 2 trips:
1. A cruise to the Caribbean with a bunch of our friends.
2. Mexico to visit our the 2nd World Wonder: Chitzen Itza
Finally, let's take a look at my debt. My total debt at the beginning of the year was $25,413, and at the end of the year it was $23,459. My debt decreased by $1,954 over the past year. My goal for next year is to reduce my debt by $2,000. I am in no rush to pay down the debt because $22,000 of the debt is student loans. The interest on these loans are not only tax deductible, but due to COVID, Canada has paused interest rates on Federal Student loans, so it accruing very little interest. With how high inflation currently, is my strategy is to pay it down as slow as possible, because if it’s accruing no interest, and the dollar value keeps dropping due to inflation, it makes sense to pay it off later. Also due getting student loans before my first credit card, it’s currently my longest credit on file and ironically, paying it off could negatively effect my credit score. However everyone has different tolerances for debt, so I don’t recommend this strategy for everyone.
Conclusion:
Overall, I'm happy with my progress this year, being able to improve financial during a tough financial year is something to be proud of. I stuck to the core principles, Dollar Cost Averaged, bought low-cost index funds, automated my investing system, and saved up a small $1,000 emergency fund. But I still have some areas to work on. My main goals for the coming year are to increase my emergency fund to 3 months of expenses, invest a total of $25,000, increase my savings rate, and save up for a Caribbean Cruise, and a short trip to the pyramids in Mexico. I'll be keeping track of my progress and updating you all on my progress throughout the year. Thanks for following along on my financial journey!
