2018 Financial Review

It’s the beginning of the year, that means it’s time to do an annual financial review of the past year that we just completed. In case you’re wondering, I did not start publishing these financial reviews until 2016. So this is the 3rd year in a row for writing such articles.

Why am I writing a financial review when almost every other personal finance bloggers are doing the same thing?

Well, Mrs. T and I have always reviewed our financial numbers each year to see where we are on our financial independence journey. So writing an annual financial review is my way to keep us honest and accountable. I believe this kind of posts also help provide readers some idea what it’s like to live in a high cost of living city.

And the other reason is that I like writing these posts with lots of numbers. I’m a numbers nerd afterall… 🙂

Overview of Our Budget System

Before going into the details, I just want to go over the budget system that we use. We started using our current budget system in mid-2011. Thanks to the budget system, our net worth has increased quite significantly. 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 suggested values. Over the years we have adjusted all of these numbers to suit our needs. Our necessities percentage is now significantly lower than 55%.

2018 Total Spending: $57,231.99

We spent a total of $57,231.99 CAD or $42,466.14 USD based on 1 CAD/0.742 USD exchange rate in 2018. 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 like her holistic healing practice and her self-help book.

Here’s an overview of all the numbers since 2012.

	Total Necessities Spending	Core Necessities Spending per Month	Total Annual Spending	Total Spending per Month
2012	$26,210.52	$2,184.21	$44,603.76	$3,716.98
2013	$26,343.00	$2,195.25	$45,260.88	$3,771.74
2014	$29,058.96	$2,421.58	$47,391.96	$3,949.33
2015	$31,256.88	$2,604.74	$47,270.16	$3,939.18
2016	$29,831.40	$2,485.95	$4,7566.96	$3,963.91
2017	$33,887.68	$2,823.97	$51,144.77	$4,262.06
2018	$31,840.75	$2,653.40	$57,231.99	$4,769.33

Note: These numbers do not include money that went into our FFA and LTSS accounts. The numbers only represent money that we actually spent.

A year ago, our 2017 spending was the highest since we started tracking. We spent over $50,000!

A year later, 2018 became the all time high. We spent over $55,000 in a year!!!

What a complete failure when it comes to frugality. D’oh!

Well, before we call 2018 a complete frugality fail by looking at the total spending number, it is important to note that we actually reduced our total necessities spending by over $2,000 in 2018. In 2018 we spent a total of $31,840.75 CAD or $23,625.84 USD in Necessities. This number was lower than 2017 and about the same as 2015.

Ideally, if we could spend less than $30,000 in Necessities per year or $2,500 per month that would be pretty awesome.

Deep Dive into the 2018 Numbers

Taking a closer look at the 2018 spending numbers. Here are what I discovered:

• On average, we spent $2,653.40 CAD or $1,968.82 USD per month on necessities. $714.98 CAD or $513.26 UDS went toward groceries. This was $69.09 less per month ($829.08 total) lower than 2017. I think the reduction in this spending was mostly due to us eating less meat, planning our meals, reducing food waste, and eating produce from our backyard garden. Since summertime, Mrs. T has been drinking celery juice every morning to help alleviate with migraines. Thanks to the daily celery juice, her migraines have almost disappeared. She now rarely experience a headache. If there was a headache, it would be a minor one. Although organic celeries are quite expensive, I think it was totally money well spent. We also have been buying and consuming more organic products in 2018 as a way to eat more healthy.
• Utility expenses like natural gas, hydro, and water stayed more or less the same compared to previous years.
• Phone and internet related expenses increased by about $480. This was mostly contributed to getting Mrs. T a refurbished Google Pixel (her Moto G 2nd Gen was not usable anymore) and switching her from Freedom Mobile to Rogers for better coverages (switching carrier had some initial cost, plus her plan with Rogers is now $3 more per month. But Shaw coverage is way better than Freedom Mobile).
• The amount of money we spent in the Give account increased by about $40 per month or $480 in total. This was because we started another monthly charity donation this year.
• Education spending decreased by about $40 per month compared 2017. Baby T1.0 started kindergarten in September, so for 6 months (July – Dec) we didn’t have any preschool related bills. Baby T2.0 will start preschool in September this year. If I have to predict, I think our 2019 Education spending should be lower than 2018.

What caused the $6,000 increase in 2018?

Seeing how our spending in Necessities had dropped by over $2,000 and spending for Education and Give accounts roughly stayed the same, how did we end up with a $6,000 increase in overall spending in 2018?

Play and LTSS.

We spent $1,500 more in Play in 2018 compared to 2017. We also spent a jaw-dropping $6,500 more in LTSS in 2018. The increases were contributed to the following:

• Throughout the year, we didn’t eat out as much. However, when we were in Maui in Feb, we dined out quite a number of nights with my parents and tried many top-rated restaurants like Matteo’s Osteria and Humble Market Kitchin. Both places had AMAZING food and great services. We also dined out a few times when we were in Copenhagen.
• Mrs. T and I went to a few concerts & shows like Aqua, Moscow Ballet’s Great Russian Nutcracker, and World of Dance in 2018. We also purchased concerts tickets for Pink and Elton John which we will be seeing later this year. All these “experiences” went under the Play account. Instead of depriving ourselves of these fun experiences, we decided to spend the money.
• One of our goals for 2019 is to go camping more. My 3-season two-person tent was no longer big enough for the 4 of us. So we spent some money and purchased an MSR Elixir 4, sleeping bags and pads for the kids.
• Although we travel hacked our way to Maui and saved money on hotel and airfare, we had to pay the daily $40 USD resort fee and also rented a mini-van for the 12 days we were there. We also did activities like Luau and boat tour that cost money. Maui is not a cheap place to go.
• For our month-long Danish trip in the summer, Baby T2.0 was no longer a lap infant and we had to pay kids’ fare for her (which was almost full price anyway). Although we saved quite a bit of money by departing from Seattle rather than from Vancouver, the fare cost for 4 people still added up!
• While Mrs. T’s sister was in Vancouver as an exchange student for 6 months, we went on a few weekend trips together and paid for the trips.
• Mrs. T and I also went on a few stayactions without the kids in Vancouver and Seattle. The stayactions were amazing and allowed us to work on our marriage and be just the two of us, kids free.

So, we spent about $8,000 more in Play and LTSS in 2018. Combined with a reduction of $2,000 in Necessities, it meant we spent about $6,000 more in 2018 than 2017.

However, I have no doubt in my mind that the extra $6,000 was money well spent. We had excellent experiences and great memories. The kids are constantly asking when we’re going back to Maui; Mrs. T still talks about how she high-fived Lene Nystrøm during the Aqua concert; we are looking forward to being outdoor more and camping together this summer; Mrs. T and I are very much looking forward to seeing Pink and Elton John live.

Spending money isn’t the enemy. It is important to evaluate what you are exchange the money for.

Some Random 2018 Numbers

Here are some random and fun numbers for 2018

• Number of days on the road away from home: 83 days
• Countries visited: China, Hong Kong, Taiwan, Denmark, Norway
• New country visited: 1 (Norway)
• Took 3,204,775 steps (54 days missing because I didn’t wear my Fitbit), or 10,304 steps per day.
• Weight at end of 2018: 75.8 kg/167 lbs. Started 2018 at 79.9 kg/176 lbs).
• Number of blog posts published: 67
• Number of draft blog posts: 40
• Number of blood donations: 7 (62 in total, 38 to go to 100, will take me at least another 5 or 6 years)
• Average blog session duration: 6:26 (are my articles that difficult to read?)
• Pages per session: 2.03
• Bounce rate: 61.15%

And some 2018 pictures that I posted on Instagram

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A post shared by Bob Lai (@tawcan)

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Beautiful!

A post shared by Bob Lai (@tawcan) on Mar 5, 2018 at 8:56pm PST

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Breath taking.

A post shared by Bob Lai (@tawcan) on May 12, 2018 at 11:02am PDT

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Lines and more lines.

A post shared by Bob Lai (@tawcan) on Aug 21, 2018 at 10:41am PDT

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The inner kids come out when there's a giant pile of leaves.

A post shared by Bob Lai (@tawcan) on Oct 13, 2018 at 2:52pm PDT

Net Worth: +2.83% in 2018

Since I don’t blog anonymously and have gotten recognized in public in 2018, I am not going to share the actual net worth number for sake of privacy. Instead, I will just share our net worth increase in percentages.

Throughout the past number of years, I’ve found Wealthica as a great way to track our net worth and portfolio. If you don’t want to bother with a big Excel spreadsheet, I’d recommend checking out Wealthica.

In 2018 our net worth increased by 2.83%. If the market didn’t nosedive in December, we would have ended up with a higher net worth increase in 2018. We see a decrease in our net worth between October 2018 and Jan 2019 (we track every quarter).

Since we have significant of our net worth invested in the stock market, it makes sense that our net worth will fluctuate due to market performance. Mrs. T and I are totally OK with it. Rather than losing sleep on things that we have no control over, we would rather focus on things in our lives that we have control over. So we continue focusing on saving money, investing, and having a long term view.

Despite a small increase in our net worth, an increase is an increase. So we are grateful and happy to see a growth in our net worth.

Growing Our Net Worth

For the most part, we follow these simple steps when it comes to growing our net worth.

• We maximize our RRSPs every year.
• We maximize our TFSAs every year.
• We maximize kids’ RESPs every year.
• We try to invest as much money as possible in taxable accounts once we maximize tax-advantaged accounts.
• We DRIP our dividend income whenever we can.
• We re-invest 100% of our dividend income.
• Income from side hustles goes straight to FFA for investing in stocks and other appreciating assets.
• We try to optimize our expenses by finding the right balance between saving for the future and spending for the present.

Since started our FI journey, we’ve continued to follow these simple steps every single year. 9 years into our FI journey, we’ve done quite well financially. So we will continue with the same old same sold – earn money, budget, save, and invest. There’s no need to make things more complicated when simple steps are already working for us.

Financial Independence Progress

In 2018 we received a total of $18,734.29 in dividend income. This accounts for 32.7% of our 2018 expenses or 58.8% of our Necessities. We are getting and getting closer to rely on our dividend income to pay for all of our expenses.

For 2019, our focus is to continue growing our net worth and dividend income. Having struggled with my mental wellness the past year, we also want to focus on eating more healthy, exercising more, spending more quality time together, travelling more, and laughing more.

Here’s to an excellent, exciting, joyful, and healthy 2019!