Spotlight on 2017 | A Year In Review
The last few years have been just one big transition for my wife and I. With so much in flux it made making any specific goals rather difficult. It's pretty difficult to forecast how much you could potentially save from your take home pay to use to pay down debt or invest, without knowing how much you're even going to make the next year.
I guess that's true for everyone, but we were stuck with the very real possibility of me returning back to work which is exactly what happened in February. We didn't make nearly as much progress on our goal of reducing debt as I would have liked, but that was primarily due to a lack of paying attention to things and getting into a groove. Unfortunately that was one long groove setting period.
With 2017 over and done with and 2018 well underway I figured what better way to ring in the new year than with a look at how 2017 went. Later this month I'll have an article outlining our goals/plans for 2018.
First up is my favorite, dividends. The reason I love dividends so much is that it's one of the most passive forms of income there is. It takes a little bit of time upfront to identify an excellent company and then the patience to purchase some shares when they are around fair value or less, whatever method you use to determine fair value. After that it's just sit back and watch the dividends roll in.
Across the 4 different accounts, well really more groupings than accounts, I received $6,691.80 in dividends during 2017. That's a huge total as far as I'm concerned although far from where I thought/expected we'd be at this point. *I'll cut us some slack though considering everything we've been through the last few years.
My dividends are heavily skewed toward my taxable FI Portfolio with over 85% of the dividends received in 2017 coming from there. My IRA funds, which are split between a Traditional and Roth IRA at Vanguard, provided 11% of the dividends received while my Roth IRA brokerage account generated the last 4%.
At first glance my FI Portfolio was an obvious laggard in the dividend growth department. Some of that was due to General Electric's (GE) dividend cut as well as some portfolio maintenance that I did in late 2015 and early 2016. For more details about the dividend growth for my FI Portfolio check out this article.
My Roth IRA and my IRA Funds both showed solid growth throughout the year with 11.2% and 8.7% growth, respectively. There's no complaints from me about either of those.
Overall I consider 2017 to be a success, not a roaring success, but a success, in terms of generating dividends.
I'm pretty disappointed with how 2017 went with writing and interacting with this great community. For some reason it was just really hard for me to ever get into a consistent schedule of writing. I know some of that has to do with my job and of course our daughter's constant activity doesn't allow me to do much whenever I'm home; however, those are just excuses. I would say that the biggest cause was just a lack of focus and creating the habit of writing consistently.
I did fairly well with writing during the first half of 2017; however, once the 2nd half of the year came my writing fell off a cliff. Things are starting to turn around though now that I'm in a semi-routine with work and I hope to keep things moving ahead.
Despite my lack of writing, especially during the 2nd half of the year, I'm fairly pleased with how this source of "passive" income turned out.
My online ventures were able to generate over $1,400 of revenue during 2017 and while that was a marked decline from 2016 there's no questioning the reason for the drop off. EBIT worked out to $1,409.21 for 2017 which isn't that bad considering the lack of writing. Much like dividend growth investing, it's the work that you did in years prior that really starts to bear fruits in the future.
Passive income is the name of the game here and will eventually lead us to financial independence. We're still a long ways away from achieving that, but here's how 2017 ended up. Passive income includes interest on cash, side hustle income and dividends from my FI Portfolio only. I only include the dividends from my taxable account because that would hopefully be our primary source of income; although in reality we'll hit the theoretical crossover point much sooner when we include our retirement accounts.
Passive income for 2017 came in at $7,140.53 which was solid, but a pretty disappointing decline of over $2,100 from 2016's total of $9,212.63. Essentially all of the decline was due to the aforementioned lack of writing so there's no one to blame but myself.
Even more disappointing is that I had a set an unofficial goal of reaching $10k of passive income for 2017 which was obviously a huge fail. Although if you include the income from my options trading, which I was planning on including, then I sailed past that with nearly $18k of profits alone from options trading. Check out this article if you're interested in a more detailed look at my foray into options trading.
Now here's where things didn't exactly go all that well. We did at least return back to being cash flow positive; however, I'm pretty disappointed with how much our expenses were. Frankly they were way too high. But the good news is there's plenty of room for improvement.
*Net savings does not include savings withheld from my paycheck (HSA, 401k, ESPP)
I can't complain too much about a 38% overall savings rate or 42% savings rate based on my work income. However, it honestly just doesn't feel like there was that much extra in our bank account. I have a feeling that was due to some lax record keeping on my part.
There were some unforeseen expenses such as having to get our air conditioner replaced, around Houston it's not realistic to not have a working A/C, which worked out to over $2.3k of extra expenses. Luckily it's at 0% interest, but unluckily we still have a lot more payments to make. Although this will probably be the first debt that we focus on and get paid off.
Travel expenses were also much higher than expected, although that's one thing I don't mind spending on. We took a relatively expensive trip to Nashville in the summer last year which didn't help things out and also paid for our flights for our big family trip, think 20+ people, to Grand Cayman for summer 2018. $2k out of our pocket, but it will be an experience we remember forever. I still remember the big family trip that we took back when I was probably around 9th grade. Absolutely fantastic!
Taking a more granular look at our expenses, which I won't bore you with, I see lots of room for improvement. First off, reducing our home owner and car insurance should be able to free up I'd guess at least $50 per month. Currently we're spending about $530 per month on which seems quite high for 2 cars and our house. That's one of my objectives for Q1 2018.
Food expenses were also way higher than I expected and a lot of that came down to laziness or just plain being tired so restaurant or convenient foods were much too common. We've started improving our food expenses thus far into January which is a good thing and hopefully it will be a good start toward building momentum to keep cooking for ourselves which has the two main benefits of being healthier as well as cheaper.
Aside from moving there isn't much that we can do to improve the baseline expenses, mortgage and property taxes, for our house. Those two combined to eat up just over $14.5k of our income for 2017 and were by far the largest total expenses. If interest rates remain low around the middle of 2018 we will look into potentially refinancing our mortgage to reduce our monthly outlay. It will only help a little bit, but every bit helps.
You won't see me complaining about a year when my net worth increased over $64k, especially when you couple that with the fact that we weren't exactly plowing money into savings during the year. Much of that increase was due to the markets climb throughout 2017.
Accordingly the two parts of the net worth equation, assets and liabilities, both showed positive changes throughout 2017.
Our assets showed a hefty $61,152.62 increase with our liabilities showing a $3,146.59 decrease.
Looking back at 2017 I wish we had made some more progress on reducing our debts, but that will be the main focus for the foreseeable future. At least our non-mortgage debt for sure. There's no reason, no matter how low the interest rate, to not try and get that paid down in order to free up cash flow each month.
Aside from focusing on paying down our our non-mortgage debts cutting expenses will be another focal point. Cutting expenses has a two-fold benefit of giving us more cash flow each month for debt reduction/savings and reducing the passive income that we need to generate in order to reach our crossover point.
Last year was a very successful year for our investments and our net worth and since I don't expect to be making meaningful contributions to our investments until sometime in 2Q the bull market might as well rage on until then.
By the end of the year did you outperform your expectations for your finances/investing during 2017? What was the biggest factor that led to you surpassing your goals? What about failing to meet some?