2022 Review & Net Worth Update
29 Jan, 2023
I’m about to share my 2022 numbers with you. The primary reason is so that you have someone to benchmark against.
Because of my blog, I’m lucky that I’m regularly conversing with people interested in discussing personal finances. Those conversations also helped me learn what Jonny and I could improve. Chances are that very few of you have friends and family willing to share their experiences with money to help you learn. Therefore, I’m happy to share ours. Please don’t judge me and my financial position; it’s just information. Use it how you will.
Take some time to look back.
At the start of January, I took some time to sit down and use the information I’d gathered throughout 2022 to build a picture of how, financially speaking, 2022 went for our household.
My primary question is, did our net worth, the sum of everything we own, grow or shrink?
Then I looked a few years back, looking for the patterns. Over time, is our net worth on the rise?
I’m pleased to say the growth continues, which is no mean feat at the moment.
Then I take a retrospective view of 2022 and work out what we earned, invested and spent. Were there any financial surprises we could have better planned for? And then, I compare that to the previous years and gauge whether our wealth is growing or declining. This gives me a trend, and it’s this trend that I’ll hope to follow through the coming year.
I track our money using three essential tools:
Networth spreadsheet (homemade), which I began in 2015. On the last day of each month, I note our total income, the value of each investment, bank account, house and cars.
PocketSmith, where I monitor every dollar we spend and earn.
Sharesight, where I track the performance of our investments.
Net worth, including our home.
I calculate our net worth in two parts: including the house and vehicles and not including the house and vehicles.
In many ways, it is POINTLESS what our home is worth because the value of it is unusable unless I want to leverage against it, which I don’t. But it is an asset that we own outright, and if we sold it, we would come out with money.
With each passing year, I’m trying to increase the value of our share market investments and KiwiSaver to avoid having so much money tied up in a house. An ideal mix for me would be 20% house and 80% investments. It’s safe to say that we have some work to do here. We are currently sitting at about 50:50.
Our total net worth, including our investments (ETFs x 2 and KiwiSavers x 2), money in the bank, two cars and our paid-for home, ended the year at $1,376,000. Up $211,000 from 2021. A large reason for this was the increase in the value of our home. On the 1st of January each year, I pick a figure as to what our house is supposedly worth and use that for the entire year. On January 1st 2022, I increased the ‘guesstimated’ value of our home from $765,000 to $945,000, a $180,000 increase.
I have just started tracking 2023 on a clean spreadsheet and checked on the value of our home (www.homes.co.nz), and this year our home has apparently dropped $100,000 in value to $845,000, so I’ll set it at that amount for the coming year. Am I bothered the value has fallen? No. The day I actually come to sell our home will be the day I become interested.
Net worth, excluding our home.
If I leave the house and cars out of it for a moment, everything else added up to $411,000 at the end of 2022, 9% up from $375,000 the year before. Not bad. But numbers alone don’t tell a complete story. How did we grow 9% when the share market was down?
The answer is that we poured a lot of money into investments throughout 2022, meaning the total amount of money invested grew, even while our returns turned negative.
2022 was a record year for us. We invested the largest amount we ever have, $87,000. Yet, in dollar terms, the total value of our investments has only risen by $36,000 despite us pouring in $87,000. The share market had a rough year.
Am I concerned about that? No. This has been a perfect time to buy because everything is cheap. What’s that Warren Buffett quote? “Be fearful when others are greedy, be greedy when others are fearful”.
To use a closer-to-home analogy. As the price of houses in Aotearoa drops, the common consensus is that it's a great time to buy because you buy more cheaply, knowing that the price will rise over time. We flock to the housing market; we don’t flee from it. I feel the same about buying the NZ Top 50 and US 500; the price has dropped, so it’s a good time to buy.
Although it would have been ideal to buy when the market was at its lowest, no one has any idea when that would be, so we just kept up with our usual habit of investing on the 20th of each month. With one exception of an extra large share purchase.
Over time the share market goes up, and we have time to wait for it to do that:
Market Summary of the S&P 500 showing how over time the share market goes up. Source: Google Finance
So, although we invested and the price went down, it will come back again. We have no need for any of this money in the short term, so we are comfortable not only letting it ride but keep buying as normal, without fail, every month. Because the share market is down or on sale, each dollar we invest is buying units at a cheaper price. This is a PERFECT situation for the stage we are at, and I’m trying to buy as much as possible, as cheaply as I can, while it lasts.
Given enough time, the value of each of those cheaply bought units will grow.
Our biggest investing year yet.
In 2022 we invested $87,000, spread across both of our KiwiSavers (low fee, growth) and into two ETFs, the US 500 and NZ Top 50. This amount was so high due to the $68,000 insurance payout we received earlier in the year. We held a little back for a holiday we had planned but invested just over $60,000 of our payout. In addition, we invested $27,000 from our take-home pay.
Also our biggest income year for a very long time.
In total, we had what we consider to be a big income year in 2022. Including the insurance payout, together, Jonny and I earned about $150,000 (we won’t know for sure until tax time).
Although that insurance payout was an unexpected bonus, I included it as income because it was (tax-free) money coming into our home. Therefore, I very much include it in our income numbers. It happened, so we need to include it, which means it inflated our annual income. That’s fine; some years are stand-out years.
Despite that bump, our household income was on the rise anyway. This is due to me getting a small pay rise in my part-time job, Jonny having consistent work as a freelance graphic designer, and income from this very blog/podcast increasing too. 2023 is also promising, with Jonny giving up his freelance work and working for wages again. Both of us will be calling ourselves semi-retired, working PAYE jobs for just two days a week each, giving us more time to improve The Happy Saver and increase the income it generates. I intend to blog further about our fairly unique work situation at some point.
We earned more, but we spent more too.
Our outgoings for the year were higher than normal too. Blame it on inflation? Maybe a little of it (we spent $15,000 on groceries in 2022 and $13,000 in 2021). But we also spent $7,000 on house repairs and took an overseas holiday for the first time in years, accounting for another $10,000 of our total annual spend of $72,000. It won’t surprise you that I had anticipated this spending and saved up in advance.
We smashed our savings rate out of the park.
For those who follow F.I.R.E., our investing rate in 2022 was about 53%! If you want to understand why this is so important, this Mr. Money Mustache blog post is essential reading: The Shockingly Simple Math Behind Early Retirement. Our high percentage is largely thanks to that insurance payout. But the fact is that where we could have easily justified spending all of that money, we saw it as a huge opportunity to grow our investments. I’m so pleased we invested it instead.
Sinking Funds
Sinking funds were again our secret weapon in 2022 and will be the same in 2023. They stop life sneaking up on you and punching you in the face. I have separate bank accounts for several known upcoming expenses. If I have an expense coming up, I open a bank account, give it a name relevant to the expense, and set up an automatic weekly transfer into it. Some are for a fixed event; for example, we used to have one where we saved up $8,000 for braces for our daughter. When we saved up enough, she got her braces. Another was for a wedding we were planning to attend. The others grow over time, we dip into them when needed, and they then replenish themselves (as if by magic).
Our current sinking funds that we contribute to weekly:
Investing - $200 per week. On the 20th of each month, I invest whatever is in this account. I will often make an additional lump sum investment too.
Holiday - $100. I need to increase this because the cost of travel has increased significantly!
Winter Power Bill - $45. This helps prevent winter bill shock.
Health - $40. This covers anything to do with fixing our bodies.
Schooling - $30. For books, uniforms, trips etc.
Giving - $20. We donate money and time to people and causes throughout the year.
Car Insurance - $18. Saving towards a $900 annual bill due in March.
Car Maintenance - $10. I looked at what we spent on cars last year (WOF, rego, servicing, repairs), divided it by 52 weeks and came up with $10 a week.
Pets - $10. To cover vet bills etc.
Tax - The amount contributed varies depending on my self-employed monthly income.
Emergency Fund
We are currently sitting at $14,000. We dipped into it a few times in 2022 and immediately built it back up as funds allowed.
The Vibe
The final look I take is how our total net worth is tracking over time. I think it puts things into context. Despite ‘everything’ going on in the world and here in Aotearoa, because I’ve got a few good habits in place, our wealth continues to grow year upon year. We have built a good foundation that supports us through the tough times and lets us build it up through good times.
Despite ‘everything’ going on in the world and here in Aotearoa, our net worth continues to grow year upon year.
Teamwork. 2023, let’s be having you!
Managing our money in the way we do is good and all, but in all honestly, it is Jonny and I working together that is the secret sauce. When I reflect on the conversations I’ve had over the last 365 days, I am more sure than ever that if you can crack being on the same team as your spouse and that you share your money, the battle is won.
We are different people with different points of view and motivations, but our secret weapon is the ability to consider the other’s opinions concerning earning, spending and investing and see money as ‘our’ money, irrespective of who made what. And although we each spend differently (personal finance books for me, power tools for him), we do so with the other in mind.
Throughout the stable years, pre-pandemic, Jonny and I have kept a steady path of living below our means, saving for a rainy day and investing for the future. We have grown our wealth slowly and methodically, and I’m convinced that this is why the last couple of years have not overly impacted us. Our simple financial habits and our financial position have made us more resilient to shocks, and via my blog and podcast, I want to teach and encourage others to be in a similar position of feeling in control of their pūtea.
Together Jonny and I look forward to 2023.
