Happy New Year! May 2021 bring you happiness and financial success.
Being isolated like the rest of the world has been really tough but thank goodness it wasn’t tough financially. Sure our grocery bill doubled but that’s a 1st world problem.
Adjusting to change, we made some decisions that will serve us well going forward. Here are some notable 2020 financial achievements:
- $164,567 YOY increase in net worth, which is a 21% YOY increase
- $4,760 dividends received in my taxable account and $6,357 in forecasted 12-month forward dividend income (assuming no additional capital added)
- $82,969 of new money contributed to my investment portfolio, which is an all-time high
- 40% savings rate, which is an all-time high. This could have been over 50% but we decided to reduce our mortgage principal and payoff one of our car loans.
- $24,010 of extra debt reduction (mortgage and car loan) set me up to be debt-free by the end of 2021
Half-way through the year, I was thinking 2020 would be tough on my financials. Continuing to contribute money to my accounts has proven that the savings rate is the most important thing we can control. 2020 has set-up our net worth to be over $1,000,000 in 2021. I’ll be a millionaire in 2021 … BOOM!
Now that we highlighted a handful of 2020 successes, let’s get to the charts.
2020 Charts
Having a good job of 22 years has blessed me with many things including a rising income. I’ll admit, because I started retirement planning late my higher income has been very helpful. It’s allowed me to reduce debt and build an investment portfolio much quicker. Still, it would have been easier to start early but life happens.
My net worth increased $164,567 in 2020, which is higher than the previously year’s $150,132 increase. Honestly, things weren’t looking good half-way through 2020 but continued focus on debt reduction and contributions to the portfolio did the trick. Of course, a great November helped too.
In 2020, my house increased $39,763 compared to only $8,616 the year before. The equity in my house is currently 35.9% of my net worth compared to 33% the year before. This doesn’t thrill me but the house did jump nearly $40,000 and it won’t do that all the time. I’d like to see my home equity no larger than 25% of my net worth.
I do love the continued growth of the net worth since I started to take my finances seriously. I’m forecasting a net worth (including the home) to be around $1.7M by the time I retire in 4-5 years. In the chart below, I felt compelled to write that I was on my way to becoming another retirement statistic in America. I often joked with my kids that I would live in their basement but was it really a joke?
Summary
I’ve written often that your significant other needs to be on the same page to improve your financial situation. Fortunately, my wife and I are connected at the hip on this focus. You are swimming upstream against a strong current if you don’t take the time to get things right with your spouse.
2021 should bring a $1.1M net worth and no debt that will set me up for a tremendous 2022 savings rate. If all goes as planned, I’m betting my 2022 savings rate will be nearly 65%. That’s good old-fashioned financial planning that anyone can accomplish. Debt reduction and high savings rate is how it gets done.
Thanks for reading!
Mr. TLR