2023 Review & Net Worth Update
14 Jan, 2024
Welcome to 2024!
For those new to my blog, an extra big WELCOME. I’ve been blogging and podcasting since 2016. Have a dig around my website if you have the time. The gist of The Happy Saver is me sharing helpful information about my family’s finances and helping you create a better financial position for yourself. I’m working toward my husband Jonny and I becoming ‘work optional’, meaning we have enough money invested to no longer need to earn an income. We started at zero and are well on our way towards that goal. I’m not a financial advisor; I can’t give financial advice, but the feedback I continue to receive tells me that the information I share absolutely helps other people.
It’s time for me (and you) to look back and determine if 2023 was a financial boom or a bust.
Before I launch into a new year, January 1st is always a time for me to close off the previous year and take stock of our income and expenses. I use that information to work out if we are gaining or losing financial ground, plus I use those historical figures to set some budgets for the coming year.
A lot of my planning is not rocket science.
If we spent X amount of money one year, we would likely spend a similar, or slightly more, next year:
Take grocery spending, for example:
2020 - $13,000
2021 - $13,300
2022 - $15,000
2023 - $15,500
2024 - It pains me to do it, but I’m budgeting about $16,000 this year to feed my whānau of three plus pets. Plus, I think we can make a few tweaks to (fingers crossed) to lower the overall spend.
I know you like to see our numbers, so I wanted to show how our net worth has increased despite the rising cost of living.
One thing I know for sure is that personal finance is an inexact science. It might seem black and white; if you make $1,000 and spend $200 on groceries, you have $800 left. Money is anything but clear-cut, and spending and earning patterns are constantly changing. What I spend money on, you don’t. What I value, you might not. I think my more laid-back budgeting attitude helps make it work so well, as Jonny and I consistently work towards our financial goals.
Here’s the gist of things for 2023.
I pulled this information from my budgeting app of choice (because it is the best), PocketSmith:
Gross Household Income for Jonny and I:
$96,000. While it seems like a black-and-white number, which I’m pleased with, it has grey areas. Our income is a mix of PAYE work from our part-time jobs, interest earned from money in the bank, dividends paid from our investments, and self-employed income, which we still need to pay tax on. If I were to guess, I’d say we cleared about $85,000 after tax.
Annual Expenses:
Although what we earned is slightly unknown due to tax, what we spent is abundantly clear cut:
$78,000. Yowzer.
My pinwheel in PocketSmith showing Earning and Spending for 2023.
Of these expenses, $25,000 were “nice to haves”, namely, holidays (plus we also prepaid for some travel which we will take in 2024), dining out, gift buying and “general entertainment” shopping that we could have easily gone without.
The remaining $53,000 were our fixed costs, things we couldn’t avoid such as electricity, food, petrol, rates, insurance, etc.
This leaves a difference of $18,000, give or take. All of this - and more - was reinvested.
Via PocketSmith, I have a record of every dollar earned and spent. I can tell you, for example, that we spent $15,500 on groceries, $1,700 on our pets, $2,300 on electricity and $1,900 on gifts and donations. Those numbers are true and correct. I use each of these figures to set budgets in PocketSmith for 2024. It’s easy and helpful to do.
Although I could do it in PocketSmith, out of habit, I manually update my own one-of-a-kind spreadsheet, and this is where I track our net worth each month and year. Income and expenses are crucial to know, but one of the biggest kicks I get is seeing how our investments are growing over time.
On the first of every new month, I noted how much money we have directly invested into our KiwiSavers and ETFs and the balance of each. Once per month, we contribute voluntarily to each of our KiwiSavers (including our daughter’s fund*). Plus, we have contributions from our employers and deductions from our wages. The government also chips in a small portion each year. We also contribute each month to our ETF funds (US 500 and NZ Top 50).
*In case you were wondering, no I don’t include her net worth with ours. I track hers separately (which I’m hoping she will be delighted about one day 😉 )
We actually invested a total of $26,000 in 2023, which is 27% of our gross income. I’m pretty happy with that percentage. Yeah, higher would be nice (I was aiming for 30%), but the holidays we spent the money on instead were also really nice! Investing is always a delicate balance of enjoying the now and creating a future you will also enjoy.
The figure I’m happiest with is that we ended 2023 with $458,000 invested in the share market via our KiwiSaver and ETF investments. This is $73,000 up on the Dec 31st 2022 $385,000 balance. This increase is even though back in May 2023, we sold off $12,000 as our take on applying The 4% Rule.
I’ve been tracking our investments for so many years now that I can see our consistent habit of investing every single month without fail is paying off. What began as a slow increase over time is now gaining momentum, and it’s purely down to having a larger balance. My friend Aussie Firebug recently blogged about his net worth growth, too; it’s worth a read.
As you know, we also own a house debt-free, and I set the value of it at the start of each year by simply using a home valuation app. I checked out a couple and found the average. In January 2023, our home was valued at $910,000. In January 2024, it is valued at $955,000. A $45,000 theoretical increase. If we did sell it, what might we get after all the costs of selling? No one knows. Unlike ETF investing, the housing market has so many more variables at play that it's impossible to get an accurate figure until a sale has settled. We plan to sell this home in the next 2-3 years, buy a cheaper home with cash and inject that freed-up money into our ETF investments.
I find comparing these two asset classes makes for an interesting conversation between Jonny and I. We love our home, and it’s perfect for our life right now, but as an asset that provides us an income that we can use in our daily lives, forget it; it's useless to us. An increase in value actually only incurs costs with higher rates and insurance. And it takes money out of our pocket with all its outgoings. In 2023, we paid $9,000 in rates, insurance and maintenance. On the other hand, money invested in ETFs provided us with hassle-free income in 2023. And the higher the amount we can have invested, the more income it can generate, which is why we are leaning so heavily towards ETFs and have zero desire to buy a rental property.
Another asset I track the value of is our cars. We have two. One is 2010, and the other is 2015. Both of their values are only going one way: down. On January 1st, I also researched the value of each, and they are worth $15,000 now. Which, if I’m honest with you, is about as much money as I want to be tied up in assets that go down in value. One day, this might change (we used to be car crazy), but for now, we want our money where it will grow, not corroded with each kilometre on the odometer.
Therefore, if I tally up our KiwiSavers, Exchange Traded Funds, house, cars and cash in the bank, our total net worth, as of Jan 1 2023, was $1,347,000. Exactly one year later, it was $1,470,000, a $123,000 increase. $73,000 came from the rise in the balance of our investments, and $45,000 from the estimated increase in our house value. The other $5,000 came down to some extra cash in our bank accounts.
Our net worth growth since 2015.
2023 was a boom year for us - a $123,000 increase in net worth. We’ll take it!
What's the point of sharing this?
Had I bought into the hype/vibe/general point of view of how terrible the New Zealand and world economies are, I would have sat frightened on the sidelines. Instead, we forged on with our plan to invest as much as we could every month into two ETF funds and our KiwiSaver. Over time, if you buy low-cost, passive, broad-based ETF funds, the theory is that the share market only goes up, dragging the value of your holdings with it. Having tracked our numbers since 2015, it holds true for us.
If we can achieve this on our income, what can you do?
Some may see us as rich beyond measure, and others will scoff that we could do much better. The point is that we track the progression of our net worth over time, and that you should too. Because of our ages (50 and 51) and stage of life, we are in the ‘wealth building phase’. To reach the goal we set ourselves (which is to retire ASAP), we must see our net worth, particularly the total value of our investments (not including our house), grow. In time, we can then pull income from our investments to replace the missing income from our jobs.
We must see our net worth growing and staying strong.
If you’ve followed me for a long time, as I know many of you have, our working situation has always been a little different. For the past sixteen years (since our daughter was born, basically), both Jonny and I have had stints of not working at all or only working part-time. This, of course, limits our income. In fact, 2023 was one of the highest-earning years we have had since going part-time! Had we chosen to work more, yes, of course, we could have invested more and been retired by now, but we love the balance that our life has. It’s perfect for the age and stage we are at.
I’ve just had the pleasure of interviewing Bradie for my podcast (this episode will be out soon). The fifth time she has chatted with me. I have watched Bradie and her husband Paul progress their lives by getting out of debt and rapidly growing their investments. They are now fully retired. Their seven-year sprint from debt to debt-free was amazing. Hearing their story lets me know Jonny and I are not there yet, but we are absolutely on the right path. All we need to do is keep going.
I implore you/encourage you/shake a stick at you to track your progress. Make every year financially better than the previous one. You do this by keeping a record of your incomings and outgoings for the month and tweaking your income and expenses, so you are saving money. This data builds up and tells a story of how your life is shaping up.
Like I said at the start, personal finance is grey, not black and white like you would think dealing with numbers would be. Most of my life is spent living it, not focussing on our numbers. I’m no accountant, but I’ve created an easy-to-manage system that lets us know if we are going forward or backward. And the good news is that, with one easy payment, you can buy that system HERE. NAH, I'm just kidding!
While there are some incredible tools to help you, there’s no one-size-fits-all model for managing your money. You just have to start wherever you are and update your systems as more information comes to light. But the most significant indicator of success is those who start, grow wealth. So, what are you waiting for? It's early January of a bright and shiny new year, so get out a pen and paper, a spreadsheet or PocketSmith and get cracking.
This previous blog post will help you do that: Easily Track Your Net Worth.
And you know what, even if you completely fail to update it in February, March, April, and the rest of the year, when January 2025 rolls around, which it inevitably will, you will have some data to compare year on year. Then, that will give you the kick in the pants you need to continue to pay attention.
Enjoy the process. And if you want to share how your year has been, let me know in the comments below.
