2012 In Review

Overall, 2012 was a great year financially! There are some things I wish I did differently, but then when I look at the big picture, it really makes me question my love for details.

  1. Improved my down payment fund to over $70,000 and total savings to over $100,000 before buying a condo.
  2. Closed on a condo in the mid 300’s with a 20% down payment.
  3. Made almost $30,000 in mortgage pre-payments in the last five months of the year, paying down almost 10% of the original mortgage balance, and giving me over 25% in equity.
  4. Refinanced my mortgage, lowering the rate half a percentage point from 3% to 2.5%.
  5. Maxed out my 401(k) for the second year in a row!
  6. Increased my net worth by over 50%.
  7. Bought my first (and hopefully not my last) Admiral Shares fund.
  8. Increased my net worth by almost $20k in one month.
  9. Hit the $200,000 net worth marker. (NTF was right – the first $100,000 was definitely the hardest.)
  10. My net income hit the six figure range for the first time! (Last year, my gross surpassed six figures.)
  11. Doubled the amount I have invested to over $70,000.

Now for some visual proof of the good stuff!

My net worth took off by leaps and bounds in 2012, exceeding my original predictions by $30,000! I finished the year off at $211,300.

December 2012 Net Worth Graph

My investments doubling off really helped with this. They saw a rate of return of about 11.2%! Maxing out my 401(k) was a huge help as well, of course.

2012 Investments Growth

Paying down my mortgage wasn’t a bad chunk either, though it still seems incredibly huge. It’s really difficult for me to fathom exactly what having over $200,000 in debt means. Even with my somewhat-aggressive payoff schedule, it still feels like a huge mortgage. No matter how many times I forecast how much I can reduce my balance by the end of 2013, it still seems huge. I’m not sure what I can do to make me feel like it’s less huge other than paying it off. There is definitely a part of me that wonders if it would feel more manageable if it was under $200,000 or some other number. I think it definitely would under $80,000 since that’s the amount my net worth increased by in 2012. I think it probably would under $100,000 too. I’ve just…never had debt before in my life and I’m not a huge fan of it. I don’t want to admit how many times I log into the online servicing website for my new loan wondering if maybe it’s gone down a bit. At least I finally figured out how to make extra principal payments outside of the regular payments.

2012 Mortgage Paydown

Now for the bad…my expenses were really high in 2012. As in, I spent about $50,000. As far as I’m concerned, that’s an obscene amount for a single person, no matter what the cost-of-living is in my city or what my income is or how much I saved. I think that some of the spending wasn’t done very consciously due to the stress of moving, so that’s definitely something I’m going to try to work on in 2013. Before making every purchase, I’m going to try to remember to ask myself a few questions:

  1. Do I need an item of this type?
  2. Do I already have an item of this type at home?
  3. Is the cost of this item worth it to me?
  4. Does this item fit well?
  5. Am I sure this item fits well?

I’m also going to record every purchase manually. I want to kick off some of the fat in my spending from last year. It’s really hard though to think about a $15 purchase when it represents such a small portion of my overall income or when I look at the net worth and savings graphs above, but that’s exactly what I need to keep doing to close the gap on my mortgage debt and my assets. I need to try to think my income is smaller than it is. I’ve adjusted my direct deposit so that my monthly budget, without my mortgage payment, goes into my regular checking account and the rest of my paycheck is siphoned off into a savings account to put into savings, pay down the mortgage, or invest. I think that should help to not just adjust the budget every month to account for overages, but I guess we will see how the year plays out.

2012 SpendingThe main categories here that I can control are:

1) Food

2) Clothing (yeaaaaaaah… I really need to ask the above questions.)

3) Financials: I can do my own income tax return.

4) Internet bill – I can ask for new promotions every few months when mine expires, but I’m really bad at remembering. (This was a good reminder to go do that, but live chat is soooo slow!)

5) Electricity: I can switch my lights to the CFL ones that use less electricity as they wear out and actually program my programmable thermostats.

Readers, what did your 2012 look like?

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15 thoughts on “2012 In Review

  1. 2012 looked pretty good although, I should have spent less and made more.

    I think you should be very impressed with the progress you have made (the substantial increase to your Net Worth and the purchase of your condo) and give yourself a pat on the back. The majority of the entire world made less financial progress than you made.

    I think spending money on clothing is a part of living well and that clothing can be considered an investment (I think dressing well/comfortably has a positive impact on your outlook on life) and shopping might even be good for the soul. In regards to spending; I use a credit card for 95% of my transactions and Wells Fargo has “My Money Map” that shows my spending for each category. If, during a particular month, my spending on eating out is starting to increase; I notice it and then dial back. Another thing I do, is I enter every transaction into a financial software that shows me how much I am spending in each category. I think that having your taxes completed by a professional is still very important; the tax laws are ever changing and I think having a resource on your side will always be helpful. They might know of deductions that you might not have thought about. Some people have spending rules: ie, if the price is over $100.00 they wait a day, over $200,00 they wait two days and over $300.00 they wait three days. I have read of countless others on the internet.

    Now onto the real reason that I wanted to comment on this blog post: the comments about mortgage debt. I believe in good debt and I believe that having a little debt on your primary residence is not that bad of a deal. Plus, you have the assets and the resources to continue making the payments if anything happened. Be comfortable. Your mortgage is not going to eat you for lunch. I found two articles these two articles that I wanted to share:

    1.) http://business.time.com/2012/02/02/are-young-people-too-afraid-of-debt/
    2.) http://www.csmonitor.com/Business/2012/0717/Zuckerberg-s-1-percent-mortgage-Why-does-a-billionaire-need-a-loan

    You are doing phenomenal things and I look forward to reading more about your journey,
    Dwight Groves

    • Thanks Dwight for your kind words and your insight.

      You make a good point about the mortgage debt. I think I would feel more comfortable with it if my other assets (401(k), IRAs, taxable investments, cash savings, CDs, checking accounts) equalled the mortgage balance, regardless of it was from paying down the mortgage or saving/investing more.

      I agree with you in general on clothing. There are certain categories that I don’t fault myself over (e.g. spending that happens due to shifting sizes or stuff wearing out or wanting the occasional new item), but I did make a summary of the spending and I could have saved probably $500-600 if I had better evaluated whether something fit and returned it if it didn’t. I definitely think that shopping for clothes can be good for the soul, as it forces you to look at your body in a mirror and see how beautiful it is.

      I’ve taken my taxes to a CPA the last couple of years but I didn’t have a very good experience and I’m having troubles finding someone else who will do them for under $600-800 and has expertise in the areas I have questions about. I also spend a good amount of time reading IRS publications and news to understand the tax changes.

        • Agreed! If I was to use a CPA, I would want someone local who can answer my questions on things like the Backdoor Roth IRA for me. The cost of just preparing the return is insane for the amount of work that I still have to do myself!

  2. You totally rocked 2012. Maybe in a few years we’ll be talking about how the first million in the hardest :)

    Try not to be too hard on yourself with the spending. You need to enjoy life and saving 50% is amazing.

    I feel the same way about our mortgage, seeing a six figure number is daunting. But I’m glad you figured out how to make the prepayments!

    • Thanks! Maybe we will :)

      Looking at the spending last night was super stressful so I think I’m just going to ditch that idea and try to be a bit more conscious about my spending this year, which should be easier with less moving. I think that just knowing how to make the pre-payments is making me less stressed about the mortgage a bit!

      I think that for me, having this condo to call my own is one of the best ways to enjoy life :) It just makes me so happy knowing that it’s mine forever!

  3. “I’m also going to record every purchase manually.”

    Leigh, did you know that Google docs now allows us to manually update spreadsheets on smartphones? First, you can take any one of your Excel budget sheets and convert to Google docs. Then, download the Google Drive app. From this app you can open Google docs and begin recording by smartphone to your heart’s content!

    • How did you know that manually = on a spreadsheet? :) Thanks for the tip on Google Docs – I had been annoyed that it didn’t do that for ages now. I will definitely give that a try!

  4. “My net income hit the six figure range for the first time! (Last year, my gross surpassed six figures.)”
    Maybe a stupid question, but on a gross of $130K, how do you get to a 6-figure net? Was your bonus income on top?

    Also, one of the biggest regrets I have was not saving more before kids. Once they arrive, they swallow a huge amount of $$$$. So, I think you will be happy you have saved so much a few years down the road if you decide to start a family. My wife stayed home with the kids for 8 plus years, and is just now getting back to part-time work. There is ~$750K gross income right there.

    BUT, please don’t stress too much on the mortgage. Try to put it in perspective.

    • The $130k figure is rounded quite a bit :)

      Thanks for the insight about having kids. I’m hopeful that I’ll have a good amount of savings before having kids.

  5. You did amazing in 2012! I was also going to mention the google drive app, I use it every day. I’m a spreadsheet addict. It definitely helps me stay on track with all the little things that add up quick. Our 2012 was a bit bumpy, but I have high hopes and goals for 2013 that should put us further ahead. To echo Mateo, if you choose to start a family in the future, you will be so happy to have saved as much as you have. I saved one year of income before my son arrived and that didn’t go very far at all lol. And I also cannot find a CPA worth a damn!

    • Thanks – I’ll definitely check out the Google Drive app! My 2012, life-wise was a bit bumpy too with all the moving and stress. I definitely think that financially, I’m not in a bad spot to have kids. I just don’t want them psychologically (yet). I hope 2013 is better to you! :)

  6. after seeing your networth, i realised how much i need to get my arse in gear and build mine up!
    great job in 2012…looking forward to seeing how you do in 2013 :)

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