Few minutes ago, I just updated our combined net worth for the last time this year (I do it monthly). I know we still have about ten days to go but I don’t anticipate any significant swing in either income or expense in the next little bit. Despite the market being down YTD (e.g., Nasdaq 100 is down more than 30% as of Dec 19), our net worth has increased a healthy amount even after adjusting for the cooled down real estate market (e.g., how much cash will I get back if I sell today after taxes and fees).
In last year’s financial plan, I started the post by sharing my money beliefs and financial planning process. This year, I will be updating my income sources and then dive right into recapping my 2022 financial goals. Then, I will share where my money is going in 2023.
My Income Sources
In no particular order, my income sources are:
- salary as a senior accountant
- dividends from stocks
- ad income & sales from jenthinks
- rental income from our investment property
The list is largely the same as last year’s with two notable differences: I was promoted to Senior Accountant after I got my designation and I started selling digital products this year. However, my salary remains my biggest source of income. Since both the stock and real estate markets underperformed this year, my salary and income from jenthinks were the major contributions to my net worth growth.
My 2022 Financial Recap
Overall, this was a good year for us financially. As I have mentioned in the introduction, our net worth went up despite the markets being down. We spent some pretty pennies on wants (e.g., renovation) but also managed to save for needs down the road (e.g., contributions to investment accounts). Our combined income went up so that helped with cash in-flow. The revenue stream from digital products made a difference as the ad income from jenthinks was minimal last year (i.e., covered all the expenses). I have several ideas for jenthinks for 2023 and hopefully it will keep growing.
Home Renovation / Furnishing
The two-week renovation took place in May. Eric and I went to Portland for a week to avoid the busiest and most disruptive week and worked from home for the remaining week. In hindsight, it would have been nicer and less stressful if I budgeted for a two-week trip (both financially and time-wise). Since we paid our deposits already, we paid our final bill not long after the project was done.
As I have mentioned last year, I started with a much smaller budget than what we ended up at. Overall, there were things I wish had gone differently but the majority of the process went as expected. The whole project was expensive as we paid for design fee on top of project management. However, knowing myself, I probably would have left the house empty for months if we didn’t hire a designer. It was almost like paying a premium to take money away from myself which might sound weird but it worked. I do love how my place turned out even though we didn’t get everything we wanted done this time. But we did get rid of the carpets in our bedrooms, a custom TV wall with my WFH desk, a dining area, lights, closet built-ins and most of the living room furniture. We skipped the sofa (but I do know exactly which one I want) and the balcony. We also didn’t furnish the windows but as you may know from my Instagram stories, Eric has been voluntold to make it happen for me.
In my post last year, I budgeted $12,500 for a 2-week Asia trip and an Edmonton trip. We ended up way under budget because instead of Asia, we went to Portland for a week (during the renovation), Edmonton twice for a total of a week and Vegas for just under a week.
The week-long Portland trip felt like a necessity and we ended up shopping more than expected (I guess no-tax didn’t hurt). For Edmonton, we managed to get pretty cheap flights both times so that really helped with the final cost. For Vegas, I did well on Blackjack so we brought home some money I was prepared to lose.
Eric and I didn’t end up picking our 3 companies each to have a bit of competition. It was mainly due to the market dropping like hot cakes and I decided to stick to what I have always done and invested in mostly ETFs. I know our portfolios are down YTD but since I am in it for the long term, it doesn’t really bother me. I don’t anticipate any large expense in the foreseeable future that would require a withdrawal from our TFSA or RRSP.
Second Investment Property
Not long after I wrote last year’s post, we signed the contract for a presale. It was slightly below our budget and was expected to complete in 2024. We just paid our last deposit in early December so we should be set until closing. I also secured financing a couple of months ago (stress-tested at just under 8% because the 3-year rate hold was around 6%) in case the market drops or rates keep going up.
The market has dropped since we signed the contract but because I was very familiar with the area, I knew the price I got was market at the time. That meant the price did not have a premium built-in (e.g., 10% higher than market in anticipation of growth) or adjusted for the real estate frenzy we were in a bit after. My assumption was confirmed when the developer raised their prices literally two weeks after I signed and sold out of their one-bedrooms not long after. However, I am not saying it will not drop below what I paid for in the next 12 to 24 months as the real estate markets have cooled down with the increased rates. Hence, I decided to secure financing now for the worst case scenario.
What I Decided Spending My Money On In 2023
I was asked this question the other day – how much do we save? Even though I have a very good idea where we are financially at all times, I did not have an answer to that. So, I looked at my 2023 cash flow forecast and calculated backward. By being very conservative with expected income and spending (i.e., assuming no raise/promotion, a small bonus and inflated spending), I expect we put away around 25% of take-home income in 2023. I do my cash flow budget conservatively to allow for unexpected spending even without a change in income. Since I have been doing this for years now, I am pretty sure we will end up saving quite a bit more than that. In addition, the equities we have in our properties increase as we pay them off (assuming market remains steady).
This means, saving 25% of take-home pay is the minimum I aim for. If we have trouble meeting that goal for any reason, I will take a close look at our discretionary spending and adjust accordingly. It might not always be possible to cut right away but I will try.
Therefore, if I am not being conservative by underestimating income and overestimating expense, my expectation is to put away at least 35% of our take-home pay.
The 2-week Asia trip that didn’t happen this year is happening in 2023. Instead of 2-week, it will be 6-week instead. I don’t know why I budgeted $12,500 for only 2 weeks last year but I am confident our extended Asia trip will stay within $15,000 to $17,500. I will be working remotely for most of it until Eric joins me later. Other than that, we are spending a week in San Diego for my friend’s summer wedding. I have been wanting to go to San Diego for a while so it will be a nice summer break. The flights and hotels are quite expensive so I am budgeting $4,500 to $5,000 for this trip.
Those two trips will take up most of my vacation next year (and budget) so I don’t anticipate going anywhere else. We might go to the island for a long weekend but that should be it.
Everyone is saying a recession is coming and I spent the better part of 2022 waiting for it. I already didn’t change my investment strategy this year and I don’t expect it to change next year. I will continue to keep a diversified portfolio with mostly ETFs and buy regularly.
If the market drops further, I will buy low. If the market recovers, no complain. The key is, I fully intend to continue contributing regularly to our investment accounts (for TFSA, we get $6,500 contribution room for 2023).
Eric finished Invisalign last month but my end date still isn’t in sight. If I get the okay next year, I will have to pay for the permanent retainer (~$600). I am also actively trying to book my Lasik appointment for early next year and when that happens, it will be about $3,000 out of pocket. I have been wearing daily contacts for years and hate wearing glasses with every cell of my body. Everyone has been telling me how Lasik changed their lives so I can’t wait.
I fully intend to get the sofa I want next year (if not on boxing day in a week if it goes on sale) because I have been going back and forth for months. Depending on how generous I feel, I might splurge on the sectional or buy the 3-seater instead. The difference is $1,200 which is not life-changing but definitely significant enough to make me consider seriously. Other than that, we might add a thing here and there but I don’t expect this to be a huge expense (definitely not as expensive as our renovation). I am putting this here only so that I will not back out on replacing my mismatched sofa again.
Eric’s Never-Ending Shopping List
Because I know Eric and my friends who are somehow supportive of his shopping habits will read this, I am adding this section here. I don’t know what he will want but I know he will want something every other month. I am not actually budgeting an amount because I refuse to truly acknowledge this but let’s just say this is first to go if I don’t get anything above… 😈