2021 Financial Review
Breaking down annual income, expenses, wealth and all things personal
Oh 2021… the year we all thought that things would return to normal and COVID was temporary, well… not quite. Despite all the chaos of 2021, Mrs MoneyPlant and I continued to live our life as normally as could be expected, and 2021 shaped up to be quite a monstrous year!
Let’s start the breakdown reflecting on our most notable achievements:
- Moved out of rental and in with parents while looking to buy our first home
- Brought our first home!
- Moved into our granny flat and started renovations
- Built our first custom piece of furniture from plywood
- 3rd wedding anniversary holiday
- Learnt how to hit a golf ball at the driving range
- Made $13k in side hustles
- Both turned 30
- Reached 7 figures in net wealth (1mill)
- Founded MoneyPlant
- Built MoneyPlant.blog
- Created the $0 to $100k Community
- Mrs MoneyPlant resigned, and starts a new job in January 2022
- Didn’t get COVID!
How much did we grow our wealth by in 2021?
We started the year on $784,000 and ended on a whopping $1,085,000. Up 39% in 12 months. This is quite ridiculous by anyone’s standards and while I’m not complaining, I’m also not taking any credit. The market recovered after the first big COVID scare and while we did put some money in most of the gains were from the crazy market just going nuts. We remain extremely grateful for our position, and fortunate that our teenage selves sacrificed so much for us to be in the position we are in now.
Growing your net wealth takes time. At the start of the year we held Shares, Cash and our Super, and then in July we purchased our first home, (which is the dark blue portion). A very large chunk of our cash went straight towards our house deposit, with the remaining cash living in our offset account to reduce the interest on our mortgage.
Before we owned a home, cash wasn’t generating any interest (less then 2%) and we couldn’t invest it because we needed to be able to access it in the short term for when we did manage to get a house. Now our cash isn’t sitting idle which feels nice. It’s offsetting our mortgage interest which is 2.54%, and that’s post tax, so it’s similar to generating 4%, nearly double what it was before, yay!
“The best time to start saving and investing was yesterday, the second best is today”
Income & Expenses
Income plays such a huge part in building wealth. As I’ve written about before, you could be the most amazing saver, investing 90% of your income, but if you’re not earning much then 90% of a small pie is, well, still tiny.
One of the best things you can do in reaching financial independence is to continue to invest in yourself and keep trying to grow your income every year. This can be in your job through promotions and negotiations, through to leveraging your talents and earning some side cash.
This year we had a total of $237,500 come our way. The majority of that was through both of us working fulltime. We had some strong market distributions which contributed $30,000, $20,000 was added to our super by our employers and salary sacrificing, followed by side hustles (a lot of which was selling off unused items/furniture)
We paid a total of $49,900 in taxes this year, which I try not to think too much about haha (I wrote a post about where our taxes for the 2020 to 2021 FY went if you’re interested). Fortunately our largest expense was buying more shares, which really surprised me as I didn’t realise it was so much. We purchased $10k in January, and $36k in April before buying the house, and then $20k in November because our offset was getting abit too full 🙂
After Taxes and Shares, our next biggest expense was all the costs associated with buying a house. This ended up being around $29,000 in fees, stamp duty etc. Unfortunately we didn’t quality for any first home buyer grants because our house was valued at $781,000, which I thought was quite a good deal for Brisbane, but that’s ok. The rest comes under the Reno budget, and includes buying lots of tools from Bunnings and kitchen cabinetry from IKEA. I expect the Home and Reno budget to skyrocket in 2022 as this is when we’ll be switching from demo to construction, eeek!
Mortgage Repayments were the largest regular expense, followed by eating, retail, car and utilities.
Remember when I mentioned that growing your income is really important? Well that’s half of the puzzle, the other half is of course what you’re doing with the increased cashflow; introducing the savings rate!
Your savings rate is how much money you are saving/investing as a percentage of what hits your bank account. Historically, 10% has been a popular rate, and would be the first goal to aim for when starting out on your journey. Our average savings rate for this year was around 74% (excluding taxes etc). This means that we put aside $74 for every $100 that came into our account. We have found our income increasing year on year (thanks to dividends and pay rises), has help helped our savings rate increase as smart spending is at the core of our decision making. There is quite a beautiful balance between income and savings rate and I almost want to try and put it into an equation.. so it might be something like… Rate of Wealth Increase = Savings Rate X Income.
“If you want to grow your wealth faster: earn more. save more”
2021 was a year with the highest highs, and the lowest lows, and as you reflect financially… don’t forget to reflect emotionally, professionally and socially. It’s so important that we are constantly striving to find the delicate balance between living and enjoying life vs earning and getting ahead. I hope that your 2021 was a year of overcoming challenges, and that 2022 challenges you to grow in all aspects of your life.
Happy new year everyone, upwards and onwards! 🍷