2016 In Review

2016 was a year full of huge highs and lows! I started the year with a pretty solidly ambitious plan and despite the various life changes that happened, the year actually turned out pretty well financially, all things considered. You should note while reading this post that my husband and I have separate finances and that everything described in this post is only about my finances or my half of the shared finances.

Goals

First, let’s review the measurable goals I set out for the year.

4) Contribute the maximum to all tax-advantaged accounts available to me.

Success! I maxed out my pre-tax 401(k), got the full employer matching, maxed out my after-tax 401(k), maxed out my Roth IRA, and my HSA. I also contributed the maximum I could to the Employee Stock Purchase Plan and sold it all right away.

5) 7,000 steps per day.

Success! I averaged about 9,100 steps per day, which means I blew this goal out of the water. I got more steps as the year went on (as we got out of winter), so 7,000 steps seemed like a stretch goal last December and it was – I didn’t reach it in January or December, but I did every other month this year. My goal going forward is to average 10,000 steps a day each month. My FitBit One is really helpful at measuring this and then every few months or so, I put the month summary data into a spreadsheet so I can compare by month.

Over the course of 2013-2016, I increased my weight up about 20% to my heaviest-ever weight in mid-2016. With a lot of the job stress, I had stopped prioritizing exercise without changing my diet and it was starting to show. I saw a nutritionist partway through the year who helped me make some small diet changes, started drinking almost entirely water (I probably drink 1-2 sodas per year, have maybe 12 drinks of alcohol throughout the year, though I did keep my one small glass of juice with breakfast) and really significantly re-prioritizing exercise. Combined with reduced work stress after the layoff, those changes all made a huge difference and I’m now only up about 10% from what I weighed four years ago, which is much more reasonable.

6) Spend no more than in 2015 ($48,000).

Fail! Hah, this goal was a complete fail, with all the life that happened. I’ll go into more detail below.

7) Save 70% of my net income before tuition savings account withdrawals. (This is achievable if I spend no more than $48,000.)

Fail! This goal was also a complete fail, since I spent way more than $48,000. My savings rate, before tuition withdrawals was 47% for the year or 38% after tuition withdrawals.

8) Increase my liquid funds (including my stock index funds outside of retirement accounts and my Series I Savings Bonds, but ignoring the grad school savings accounts) to two years of living expenses. This means adding $40,000 to my general savings account in 2016, some of which will probably be put into Series I Savings Bonds and/or CDs.

Success! At its maximum, I got this figure up to 2x expected annual living expenses, ignoring the mortgage payment, so I’m going to call this goal a success! Of course, I hadn’t planned on getting married and thus being in a tax bracket higher than 10-15% at most while on my planned break (which I will go into more detail on later), so I’m still trying to figure out what my exact plan for covering living expenses is here.

9) Pay down the mortgage with what’s left. I anticipate having about $0 left after all of the other goals in 2016. (I don’t anticipate being able to meet the liquid savings goal in 2016 – my current figures show me coming up about $5,000 short.)

Pass! I’m going to call this goal a pass. I didn’t make any extra mortgage payments, but that is perfectly fine based on how my husband and I plan to handle the condo going forward (which I will talk about soon!)

10) Turn my “taxable assets – debts” figure around so that taxable assets are > debts. (This is my “golden” goal for 2016.)

Success! I did achieve this goal, though not in the way I had originally planned. In fact, I only improved the figure by $8,600 from -$41,700 at the end of 2015 to -$33,100 at the end of 2016. I’ll explain exactly how I mean I achieved this goal later.

Spending

2016 was the most expensive year that I’ve had. I spent a whopping $68,000! For some of these categories, it represents solely my spending and for other categories, it represents my half of the joint spending. I may switch up how I report on this next year as I have two separate budgets for 2017: one for joint spending and one for personal spending.

2016 Spending.png

Surprisingly, if you take out the wedding and the living room remodel (my half was $8,000 combined for those two), then I was within 10% of my original budget. Or if you look at it another way, I spent exactly 50% of my budget for the year in the first half and then another 100% of my budget in the second half, resulting in spending about 150% of my original budget. I didn’t write a Q2 wrap up post because I thought it was so boring being exactly on point with 50% of my savings goals done and 50% of my budget spent. Who knew the second half of the year would turn so exciting…

I spent a pretty tidy sum amount on medical care this year (just under $3,000) and on rebuilding my closet ($7,000). My husband and I spent very little on travel compared to what we usually do ($4,400 for my portion and $8,500 total) this year to compensate for the living room remodel. Transportation was more expensive than usual due to my car commuting, which is thankfully behind me now. Our grocery spending was pretty reasonable for the cost of living in our area, coming in at an average of $450/month.

Some awesome things that this spending saw are:

  1. $16,000 (joint amount) Living room remodel including designer fee (totally worth it!) and painting. We went from worrying we might need more space and should move to loving our place again. We absolutely love our new couch, new furniture arrangement, and wall colors. I’m also really glad we paid a designer because it reduced the process of buying one item at a time and spending ages trying to figure out what it would go with. We’re almost done with the remodel – just waiting on one more piece of furniture to come and then we can hang the gallery wall which is full of travel and wedding photos. I still can’t believe we bought a $5,000 couch, though it is incredibly amazing to sit and lounge on.
  2. $500 Deposit on a reception venue to celebrate our marriage with our friends and family next year!
  3. A trip to Banff for an extended long weekend! Such a gorgeous place and absolutely on our list of places to return to with more time to wander. (That’s the featured photo on this post!)
  4. Our wedding, including our postnuptial agreement and my rings that we ended up splurging on after the wedding.
  5. Grad school tuition! I’m so thankful to not need to rely on the tuition reimbursement program through my former employer in order to keep pursuing my degree, despite the opportunity cost.
  6. $299+tax Bose QuietComfort 20 Acoustic Noise Cancelling Headphones – My husband has the over the ear ones and these are the in-ear ones. They are absolutely amazing for working in a crowded office!
  7. $3.99+tax Stylebook app
  8. $1,300 Improving my desktop computer set up and ergonomics at home
  9. $75+tax A wristlet wallet for my iPhone that is so useful. I had one for my previous phone and I procrastinated for a year with this phone before spending the money to buy a new one and I really shouldn’t have.
  10. $40+tax A new case for my iPhone 6S. I originally bought the silicone case that Apple makes. It does fine at keeping the phone free of scratches, but it was a huge pain to get in and out of my pocket/purse, so I finally replaced it and it was definitely the best money I spent that week.

Savings

2016 Savings.png

Despite having my lowest savings rate since graduating college, I still didn’t do too badly for savings this year. I maxed out my pre-tax and after-tax 401(k) accounts, saw the full employer 401(k) match, made the regular mortgage payments which unlocked a reasonable amount of equity, maxed out my Health Savings Account and got the full employer contribution, maxed out my Roth IRA, and put $1,100 into my general savings account. That all added up to about $55,000, before accounting for taking grad school tuition out of a savings account.

By The Numbers

2016 Net Worth Increase.pngDespite my highest year of spending yet and a relatively low year of income, I saw my second highest net worth increase since college, due mostly to adjusting the condo value up about 17%, which accounts for over half of my net worth increase.

My investments (~30% fixed income, 35% US stocks, 35% international stocks) were up about $16,700 for the year, which was a return of +6.72according to XIRR. My average return since I started investing in stocks back in early 2010 is +5.45%

Thanks to the timing of the layoff, my gross income only dropped 4% in 2016 from 2015. My gross income was 204% of my spending in 2016, so I did spend less than half of my gross income. Of the remaining half, about half went to savings and half went to taxes.

$ to FI vs net worth over time EOY 2016.png

In early 2016, I surpassed the halfway marker to financial independence – my net worth became higher than the remaining amount required to reach financial independence. Unfortunately the year got expensive quickly and I went further away from financial independence, but that trend reversed in the last few months of the year. Hopefully in 2017 the trend will improve again.

I surpassed six figures in my Roth IRA at some point in 2016, though it didn’t stick. I also surpassed one year’s base salary (at my pre-layoff salary) in my pre-tax 401(k). Unfortunately due to the increased spending, my investments are worth the same number of years as they were at the end of 2015, which means that my investments grew by the same rate as my spending (40%). Had my spending not increased, my investments would have gone from 4.20 years to 5.81 years.

4% SWR versus expenses over time EOY 2016.png

I came really close to the 4% SWR on my investments being four figures in 2016! I need my investments to grow by 5% more than where they were at the end of 2016 to hit that figure. It’s possible that I will hit it in 2017, depending on how things go. My portion of the fixed shared expenses is covered with this current figure! That doesn’t leave much in the way of discretionary spending yet, though it is still exciting progress!

Conclusion

I felt really guilty about how expensive the last few months of 2016 were, especially with my then lack of income. One (offline) friend commented that it sucked that life was expensive while I also had a drop in income. Doing this annual review though showed me that 2016 wasn’t all bad and that it’s important to look at the big picture. It showed me that I didn’t really see a drop in income and if you look at household income, we actually had an increase thanks to my husband being well appreciated at his job. If you just looked at my net worth growth, you would have no idea how expensive the year was. If you looked at just my spending without looking at my income, it would look pretty bad. When you consider that this is only my portion of the spending – I’m guessing more than either of our separate base salaries before taxes. Oops!

Here’s to a less spendy 2017!

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15 thoughts on “2016 In Review

  1. Banff is on my list of places to visit again, too. Actually we stayed in Canmore, but that area is incredible. We had some of the best hikes ever out there. And that water. So blue it’s ridiculous!

  2. I like your concluding paragraph. Too often it’s easy to get stuck in the mud of small financial details and get frustrated, when stepping back and gaining a little perspective is much more productive in the long term.

    Wishing you the best in 2017! =)

    • That’s exactly why I do annual reviews! I am actually no longer going to do monthly reviews even privately. I’ll do quick monthly checkins on spending in 2017 but will try to ignore net worth until December.

      I wish you the best in 2017 as well!

  3. I’m always surprised to look back at how steady progress adds up over a year. It never feels like that much in any given time.

    I totally want to pay a decorator, because we are terrible at it ourselves. Also, T has stronger opinions than I do on furnishings – but is also EXTREMELY picky and hates paying a lot. On the other hand, we just don’t care quite enough to invest the money, and being slow is cheaper. If we run into a situation where we really need to better utilize space, this seems to be a great thing to keep in mind. For now, I don’t think it fits into my priorities.

    Congratulations on a successful year!

    • Me too! I’ve actually been working to look at my investments less often and I think it’s going well.

      The designer we worked with had us each pick out designs we liked and then she found commonalities between those and gave us a plan of items. With a smaller space, it’s more key to have it working effectively for us and we are really glad we did it this way. I can understand not wanting to do it if you’re more willing to be patient, which is what we tried at first. Ours has an hourly rate too which could be a cheaper way to get some help – I’m sure you could find someone as helpful in your area.

      Congrats on a successful year as well! I’m glad you’re enjoying your mortgage pay down.

  4. I think you should look back on the year proudly, despite the higher spending and layoff. You achieved so much! Like you said, focus on the big picture and don’t let a few little roadblocks stop you from recognizing the excellent job you did! I’m excited to see how you’ll move forward in 2017. Good luck!

    • Thanks Gwen! I’m working through my comparisons to last year now and other than the living room (which we love!) and the wedding (which was great!), the spending doesn’t really look at that high. So hopefully those two pieces are one-time lifestyle inflations :)

      I’m excited to see how you move forward in 2017 as well!

  5. Funny how I recognized that picture. My wife dealt with a child custody case to determine where the case should be held, USA or Canada. Lake Louise vs Las Vegas, more specifically. We never heard of Lake Louise, so Googled it and walah, your picture of Banff shows up. Stunning to say the least, definitely put on our travel list.

  6. Does your 401k plan allow in-service after-tax Roth conversions? If so, that would be a huge advantage. It would enable you to convert those after-tax funds to Roth status. Only some employers offer it, though.

    • Yup! I did that just before my job was terminated this year. All of my after-tax 401(k) contributions are in my Roth IRA. It’s pretty sweet – I have six figures in my Roth IRA now!

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