This is the first time I am doing a year end financial review to show some numbers. Why? Because I have always enjoyed looking at other bloggers’ year end numbers and see how we are in comparison. The numbers also give us a good idea on where we are on our financial independence journey.
Overview of Our Budget System
We started using our current budget system in mid-2011 after our financial epiphany. Each month we break down our after-tax income into 6 different accounts and allocate a certain percentage for each account.
- Necessities/Core Expenses (55%)
- Education (10%)
- Play (10%)
- Financial Freedom Account (10%)
- Long Term Savings for Spending (10%)
- Give (5%)
The percentages listed above are the default suggest values. Over the years we have adjusted all of these numbers to suite our needs. Our necessities percentage is now significantly lower than 55%.
The Number: $44,138.77
In 2016 we spent a total of $44,138.77. This number excludes any business related expenses. As you may recall, Mrs. T and I have a few side businesses; I have a photography business, this blog costs some money to operate, Mrs. T and I have our cookbook business, and Mrs. T has a few other business projects as well.
If we only look at the necessities/core spending, we spent $29.831.40 in 2016.
Here’s an overview of all the numbers since 2012.
|Total Core Spending||Core Spending per Month||Total Annual Spending||Total Spending per Month|
Note: These numbers do not include money that went into our FFA and LTSS accounts. The numbers only represent money that we actually spent.
Some Thoughts on 2016 Numbers
- We successfully reduced our annual spending and core spending in 2016. Our core spending per month decreased by almost $120 compared to 2015. This was mostly contributed by less money spent on things like gasoline, house heating, household items, and baby related items.
- Food spending stayed relatively flat compared to 2015.
- Education spending went up slightly due to Baby T1.0 starting pre-school.
- Give spending was relatively flat compared to 2015. We spent about $200 per month on gifts and charity donations
- Overall we dined out less but still spent a bit of money on dining out. This is mostly due to taking families visiting from oversea out for meals.
- We saved more money in LTSS and FFA in 2016! Woohoo!
- Our annual spending is roughly $2,000 more than Prince’s ex-wife Manuela Testolini’s extravagant $42,500 per month budget. (Can you imagine actually spending $42.5k per month? Wow!!!)
Areas where we can keep a close eye on or improve
While our expenses look pretty good, there are a few areas we an probably keep a close eye on or do better.
- We eat quite well and love eating great food. With Baby T2.0 now eating solids, we’ll continue keeping a close eye on our food budget.
- For work commute I have been trying to drive at a steady speed of 100 km/hr instead aggressively. Our car mileage has improved by roughly 5%. I nee to continue paying attention on how I drive.
- We have been driving more for grocery shopping because we usually bring the kids along and driving is just easier. What we really need to do is to walk to grocery stores more and reduce our gasoline consumption.
- We shop often at Costco and Save-On. Need to improve on getting produce at the local grocery store because things cost significantly less.
Net Worth: +34.4%
When it comes to net worth, I’m not comfortable sharing actual numbers. Hence I’m only sharing percentages.
In 2016 our net worth grew by a jaw-dropping 34.4%!!!
Much of the net worth growth came from our house. Vancouver housing price is absolutely insane right now. Given that the federal government and provincial government have both introduced some laws to try to dampen the hot housing market, maybe the 2017 house assessment will drop slightly. We will have to wait and see.
Note: We track our house value by using the yearly assessment value.
If we only look at our liquid assets, it grew by 29.4% YOY. It is a pretty significant amount of growth. Like everyone else that invests in the stock market, our portfolio value jumped quite a bit after the US presidential election.
The 29.4% increase puts us over a pretty significant milestone. Overall we are very pleased with our net worth increase in 2016.
How We Managed to Grow Our Net Worth
Here are a few things that we have been doing the last few years that have fueled our net worth growth
- We have been maximizing our RRSP contribution room every single year.
- We have been maximizing our TFSA contribution room every single year.
- Once our kids were born, we have been maxing our their RESP every year.
- When all the tax-advantage accounts are maxed out, we then invest in our regular accounts.
- We DRIP our dividend income whenever we can.
- 100% of our dividend income is re-invested.
- We practice frugal living on a daily basis.
- We look at ways to optimize our expenses.
- Focus on increasing our income by side hustle through our businesses.
It’s pretty simple really. We can’t control how the stock market and the housing market will perform, so we only focus on things that we can control.
Financial Independence Progress
In 2016 we received $12,559.74 in dividend income. This amount covered 28.46% of our 2016 annual spending, or 42.10% of our 2016 core spending. Considering that we are aiming to reach financial independence in 2025, we are doing pretty well. Having said all that, about 30% of our dividend income came from the RRSP which is not easily accessible with tax consequences. We will definitely be focusing on our future withdrawal strategy to minimize taxes moving forward.
Our net worth is grew nicely in 2016 and is getting significant. If we were to sell our house, use the proceeds to buy dividend growth stocks, and move to somewhere in Southeast Asia, or a lower cost of living area, we are probably financial independent already. But we choose not to. We are happy living in Vancouver and establishing our roots, I am happy with my work, Mrs. T just recently become a Canadian citizen, and the kids are getting bigger every day. Will our plans change? It might, it might not.
On our recent 1 month stay in Denmark, Mrs. T and I talked about moving to Denmark for a couple of years. We also discussed about moving to Taiwan for a year or so. Having desires to live elsewhere than Vancouver is great but we will need to find a valid way to stay in these countries for an extended period of time.
Mrs. T and I continue to remind ourselves to be flexible. We need to be flexible and fluid with our future plans and goals. Things, plans, and people can all change. We need to be adoptable for these changes.
For now, we are thankful and grateful for an excellent year we had in 2016. We are very much looking forward to what 2017 has in store for our family.