2016: Our Financial Year in Review

I’ve never been one for making resolutions at the beginning of a new year but what I have always liked doing is reflecting back over the year and seeing how far we’ve come. For as long as we’ve had a household budget, me and Mr. LLC have always looked back over our yearly finances, not only to see where we ended up but to use this as a basis for setting the coming year’s budget.

Our year in review for 2016 then is nothing new but paradoxically also completely new. It’s the first time we’ve looked at our financial year in review with the goal of financial independence. We started this journey in March 2016, so we’ve got a decent amount of data already, showing us how we’re getting on.

So, how did we do?

Savings Rate

Savings rate = total savings divided by total income multiplied by 100
30% saved from our salaries
50% overall (excl. investment returns)
58% overall (incl. investment returns)

We really see room for improvement in the savings rate from our salaries and we’re working on getting that number closer to 40%. The main driver (as you’ll see in the expenses chart below) for the savings rate not being higher from our salaries is the ridiculous cost of our rent – our housing cost was 37.6% of our total expenses in 2016. Really looking forward to slashing that cost on our return to the UK!

We only really got our investing hats on properly in March/April when we moved all the money we had in ISAs into our brokerage account, so this is the first year we are realising more regular investment returns (we did have one investment prior to ploughing money into the brokerage account which I’ll be discussing in a future post).

Net Worth

Net Worth = Assets – Liabilities

We saw a 109% increase in net worth in 2016. Whilst that’s pretty incredible, there’s no way I can see us doubling our net worth year on year, so I’ll take that with a pinch of salt. 2016 was a unique year as it’s the year we committed to our plan and really doubled down efforts to get our savings plan in place. Come back next year to see a more moderate increase in net worth!

We started the graph from 2010 as that’s where our data begins (translation: the data we can still find!). I really love looking at this graph and can sum up the years as following;

2010: The end of 2010 saw us in a negative standing due to our liabilities (student loans) being more than our savings.
2011: We saw a rise in the first half of 2011 saving for our wedding & honeymoon, then a dip into the negative (we were -£1000 down after getting back from honeymoon) and then getting back on the straight and narrow.
2012: Began a major concerted savings effort to move house so our net worth steadily increased.
2013: Moved to the USA in the second half of the year & our savings rate slowed down to reflect this.
2014: Additional savings plateaued into non existence due to the move to the USA with our initial decision to put major saving on hold and to allocate more of our money towards travelling in the USA.
2015: Our household income took a healthy boost due to Mr. LLC’s promotion and me getting a well paid new job. Our spending was still very high though.
2016: Operation Lake District initiated (aka our journey to FIRE began) and our savings shot up.

Expenses

 

Some notes on the graph
– 2014-2016: Can you tell when we moved to the USA and started paying a ridiculous amount in rent?!
– The 2016 ‘food’ category looks like it took a huge leap. Things such as eating out were moved into this category whereas they were classed under ‘spending’ category.

Not Revealing the Numbers

You’ll notice as you’re reading this that I haven’t included actual figures anywhere in this post. One reason for starting this blog was for me personally to track our progress towards financial independence and including financial information in percentage form allows us one way to track that progress. Yes, I could easily convert that into the £ figures but I made two decisions when I started this blog;

1). We’d remain anonymous until we reach financial independence.
2). We wouldn’t share our actual numbers – yearly numbers or our FIRE number (aka investment assets and generally 25x your annual expenses).

And the two reasons for those decisions were;

1). We don’t want actual numbers published next to our real identities when we reach financial independence and put our names to the blog.
2). We don’t really see the need to reveal the actual numbers. I’m not sure how helpful it is, as our number doesn’t really mean anything to anyone other than us. I also think it can breed comparison and I’m a firm believer in comparison being the thief of joy. Not much good can come from comparing yourselves to others and it can all too easily lead to negative emotions, like feeling envious or frustrated/helpless about your own situation or maybe even superior as it turns out you’re doing better than someone else is on a similar journey. We’re all living different lives with different starting places and different end goals.

I’m happy with where we ended 2016 and it’s given us a real morale boost to keep up efforts! After living this life for 9 months, FIRE really feels attainable and so we’re happy to keeping travelling down this road.

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