2020 Year End Financial Review

2020 has been and gone – long live 2021! I love numbers and this year has seen a lot of new numbers for the gentleman’s family finances spreadsheet. Here are some of the highlights:

Here are a few numbers for the year. No graphs (sorry but no time).

  • Total Employment Income for Year = £92,000
  • Total Spending for Year = £49,000
  • Total Spending less Childcare = £35,000
  • Rough Savings Rate = 47%
  • Growth in Net Worth = £110,000
  • Growth in Net Worth = 10.8%
  • Annual Spending as a Percentage of Net Worth = 4.7% (3.4% less childcare)
  • Asset Growth for Year = 6.1% (Asset Growth – Spending)

A tiny bit of background is that I’ve been keeping a budget since 2001 and my initial projections were to become a millionaire (nominal) by 2021 (or 20 years). That was not through short parental life expectancy inheritance or lottery winning but through working, saving, being smart with money and using a bit of luck/wisdom along the way. Well, I did it this year with our family assets rising into the 7 figures and they’ve stayed their too. (This is a relatively conservative measure and I could have popped the champagne earlier but didn’t – and we’re beer drinkers anyway).

From the numbers above, 2020 wasn’t too bad at all. It was looking a lot worse earlier on in the year as our assets plummeted in March and April, I suspected our house would drop in value and my work started to dry-up. In fact, our work situation all worked out well. The Lady left one company with a redundancy package, joined another and left after 4 months for a better job that she’ll start in the new year. I’m working again and that’ll boost the coffers in due course.

Spending

I am loathe to spend money but I seem to do a lot of it. This year, our spending was curtailed by you know what and that was a big disappointment, especially for our Croatian holiday being cancelled. We did travel back to Ireland in August which was good and had a few breaks in Scotland but it made me realise that price is what you pay and memories are what you get when it comes to family spending. We also went skiing back at the start of the year – but that seems like a different time.

Elsewhere, our spending is stable and we’re moderately frugal. I expect that after being a stingy git for 20 years, you can live a life of moderate spendthrift. As Mr Micawber said:

Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

But annual income twenty pounds plus twenty pounds in dividends, annual expenditure twenty pounds ought and six + a ski trip or two, result happiness.

Wilkins Micaber

Changes in investment strategy?

I suppose that the biggest changes in 2020 were that I sold some VCTs (see guide here)that were maturing to bring down my exposure. That money was pumped into green investments and a lot went to cover day-to-day cashflow in part due to unreliable income but also high pension payments with pension assets up 47% over the year. So the old problem of having too much money in pensions persists but being pragmatic, it’s not a problem and our pre-pension funds are up £30,000 over the year (and we are one year closer to accessing the pensions).

Our ISAs, LISAs, pensions and SIPPs are well funded/full. I might consider saving for the kids in JISAs next year but I’m not so sure to be honest. I’ll reassess come April.

Property Wealth

Property wealth is a bit of an illusion. It’s an illusion that you can believe in though, as your monthly mortgage payment is part interest and part capital meaning that if you pay it each month you’re being forced into saving. Luckily I opted for the mortgage holiday in the middle of the year and pumped the £2000 or so saved into the markets which is probably now worth £2,500 – just another example of how having money gives you options. Anyway, we are back to paying off the mortgage now, but does make you wonder if it’s better to live in debt than to ever pay it off.

Dividend Income

I have been wrongly focused on trying to make our investment income/dividend rate exceed our outgoings and then declaring ourselves (truly) Financially Independent. That said, our haul is about £34,000 for the year (not including Pension dividends) – in large part helped by the super secret side-hustle. Of course, I could have put $8,000 or £5,200 in Tesla on January 1st and have made as much profit – 2020 is the year of hindsight isn’t it?

Which is better, high income or high net worth?

Looking at the numbers above, it seems that if you had to choose between a high income or high net worth it’s a bit of a toss-up. The great thing about assets is that they work harder than you do – or at least more productively. Work hard, save hard and have your money do the working for you is what I like about Financial Independence, put into words and practice by the (late?) great Retirement Investing Today. There’s a lot of chatter about Safe/Sustainable Withdrawal Rates (SWR) but it’s better if you can choose both. That being said, our spending is still high and even without kids and taking out home improvements, we are less than frugal. With two small kids we do have nursery costs but soon will come all sorts of other costs – the constant drip drip of “Daddy, I need money for …”

All that is for 2021+, we can cross that bridge when we come to it. For 2020, despite it looking a lot worse earlier on in the year, things are looking good now. Of course, the world is a whole lot worse as a result of everything but in terms of wealth, health and relationships – I think that we’re better off (despite everything that’s gone on).

Financially, it’s been a really, really good year but was looking depressing earlier on – except here’s the thing, I didn’t really get upset about the markets all crumbling. Maybe because I’m a pretty passive investor and I don’t look at stock prices all day and actively buy/sell the market, so I can turn a blind eye to the turmoil. Plus, I’m lucky that I know that ordinary investors have a bad knack of timing the market and I heeded advice from others to “DO NOT SELL” and went for a walk instead back in March. Thanks to all the other bloggers who’ve made 2020 a great year for quiet contemplation. Maybe it’s because I’ve been home more and have the time and interest. Great blogs include: Monevator, Simple Living in Somerset, Indeedably, Weenie’s Quietly Saving, Playing with Fire, More To That (cartoon’s and philosophy), a Fifer but still readable at Sassenach Saving, the encyclopaedic 7 Circles, Banker on Fire, Fire and Wide, my favourite The Escape Artist, The Humble(bragging) Penny, The Frugal Cottage and many many more besides.

How was your 2020? What about your 2021 look ahead?

Thanks, GFF

10 comments

  1. My most “exciting” moment was seeing my Stocks and Shares ISA finally breaking even again. Overall finances have been the least problematic part of the year. Home schooling and attempting / appearing to be productive at home was pretty painful. Total Net Worth has grown about the same as yours.

    My employer has curtailed the amount I can Salary Sacrifice into my pension but this shouldn’t be an issue as I’ll have use up my carry over allowance at the end of this financial year.

    The focus for next year will be continuing to fully fund my ISA and improve my investment choices. Hopefully we’ll get time ( and agreement from the domestic finance oversight committee) to get some house improvements done.

    I also need to decide what to do with my original house that’s on a Consent To Let deal ( expiring in July). Switching to a BTL deal will negatively impact the yield, seling up may also incur a CGT bill as I’ve not lived in it for 2 years.

    Hindsight is a wonderful thing isn’t it. Investing in AO, Ocado, Tesla and BitCoin ( at the right times ) would have been very beneficial. ( AO is up around 800% since March 23rd)

    Liked by 1 person

    • The markets have.been a bit funny with some winners and.many losers.
      As I pointed, all my.gains could have been won from just a small punt on Tesla and my own ISA only broke eve this month too due to some terrible picks over the years.
      Onwards and upwards I hope.

      I left out all the chat about home schooling and such and I can offer no advice on property – other than to consider that a£500 sinking fund is about right when you need to prediocally upgrade, restyle or stop the roof falling off.
      And remember that CGT is only paid on profits, so you can’t really complain.
      Happy New Year

      Like

  2. Our finances are in good nick so long as (i) state retirement pension rolls along in roughly its present form, and (ii) our defined benefit pensions don’t enter a mire, and (iii) one of us doesn’t enter “care” while the other is still alive.

    We’ve done the offspring proud so no financing should be necessary there, short of some horrible, unpredictable emergency. In fact that quarter has shyly suggested that it could help us financially.

    Train your children now. When you sing them the lullaby Ally Bally Bee make sure that you reach the verse:

    When you grow old, a man to be,
    you’ll work hard and you’ll sail the sea,
    an’ bring hame pennies for your faither and me,
    Tae buy mair Coultert’s Candy.

    Liked by 1 person

  3. Come to think of it, that lullaby contains a prediction of inflation. The child asks for a bawbee, equivalent to the English ha’penny, But the parent asks for pennies when the child has grown up and is earning. There you have the Coultert’s Candy inflation index.

    Happy New Year to you and yours.

    Liked by 1 person

  4. Cheers for the shout out and for keeping me pleasantly distracted this year with your numerous enjoyable posts, GFF.

    Great work on the finances and this with you not being in employment for periods.

    All the best for you and the family in 2021.

    Liked by 1 person

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