I’m not gonna lie. I’m not at all mad 2020 is over! A year that felt like ten, but also sort of flew by, in retrospect. A year that made history, for sure.
I like to think that this year will also have made my history. It was truly the year that allowed me to take the reins of my financial life. And now that this unique year is behind us, it’s time to do a full review! I’ll be true to myself and I’ll present a lot of numbers. 🙂
My FIRE number
As you already know, I am aiming to reach financial independence by building a nest egg of $375,000 that would generate $15,000 in passive income, according to the 4% rule.
So where do I stand exactly with regards to my goal?
I had $125,500 in personal investments at the end of the year. To this, I add the estimated commuted value of my DB pension of $26,000. I can therefore say that my nest egg reached $151,500. Therefore, I’m at about 40% of my goal.
Another way to put things into perspective is to apply 4% to what I already have. Right now, my nest egg would provide me with an annual passive income of $6,060. I am $8,940 of passive income away from my goal.
If we take a closer look, we can also conclude that at $6,060 per year, it would currently pay my rent. In fact, that would give me $505 per month in passive income and my rent costs me $497.50 per month. 🙂
In comparison, I had $73,000 in personal investments and $14,000 in my DB pension plan, for a total of $87,000 as of December 31, 2019. That’s an increase of $64,500 (or 74%) in twelve months! I am extremely pleased with those results!
Now, I have to be realistic and adjust my target with inflation. So I’ll add 2% to my goal. That means $15,300 in annual expenses or a FIRE number of $382,500 in 2021 dollars. 🙂
Net Worth
You’re already quite familiar with this part, thanks to My Net Worth page, in addition to my December 2020 monthly review.
All the same, I am proud and happy to repeat that in 2020, I reached a net worth of $117,805.
By comparison, my net worth as of December 31, 2019, was $55,444. This is an increase of 112%.
What a year!
Returns
The year 2020 will certainly have been full of twists and turns in the stock markets. Let’s just take a look at the S&P 500 or the S&P/TSX 60 over the last twelve months. Since I only invest in index ETFs, this has had a direct (and positive) impact on my returns.
Indeed, Passiv allows me to see the (relatively minimal) impact that the stock market jolts have had on my portfolio over the last twelve months:
The top line represents the value of my portfolio while the bottom line represents my total contributions.
This clearly shows the importance of staying the course. Just keep saving and investing on a regular basis, regardless of the ups and downs.
For all of my personal investments, I have earned the following returns according to Questrade :
If only it could always be like this. 🙂
Switching Strategies
I have to say that I have had some strokes of luck during the year. At the time of the March 2020 drop, I had a sort of hybrid portfolio that combined the old Canadian Couch Potato portfolio model and Ray Dalio’s All Weather Portfolio. While I most certainly felt the drop, it wasn’t as bad as if I had been 100 % stocks.
On top of that, I had a lot of money coming in at the time, including a large tax refund, a bonus and refunds for a cancelled trip. I invested all of it at the right time and clearly benefited from that afterwards.
Also, I later decided to make some changes to my portfolio after hearing about the all-in-one ETFs. I changed most of my portfolio for XEQT. By doing so, I took advantage of another happy coincidence. Indeed, I sold a considerable amount of MNT (gold) while it was at its peak during the summer.
In the end, my portfolio will have increased by $20,544 in return alone. I still find it a little hard to believe that this amount accumulated on its own! I’m starting to see the benefits of making my money work for me, rather than working for it.
Dividends
Although my investment style is not focused on dividends, some of the ETFs I held, or still hold, do pay dividends. It’s no big deal, but I received $1,200 in dividends in 2020. By comparison, I received $1,056 in 2019. The difference is rather small, considering the difference in value of my portfolio over the last twelve months. This is mostly due to the changes in ETFs I’ve made in the past year.
One thing is certain: I’m not going to say no to money that’s deposited in my account. Also, all of it has been reinvested.
Expenses
Although every personal finance book in the world explains how important it is to track your expenses, I only started doing so this past August. So I don’t have the information for the whole year, but here is the detail from August to December regarding my expenses :
This amounts to a monthly average of $2,138, or an annualized total of $25,654.
Also, I would like to do the same exercise, but without accounting for my car loan repayments. Since this loan will not follow me into retirement, I wanted to get an idea of my current spending level without this cumbersome (and unrepresentative) expense.
- August: $1,090
- September: $1,761
- October: $1,042
- November: $1,599
- December: $1,396
That’s much better, isn’t it? This means an average monthly amount of $1,377, or an annualized total of $16,529.
Considering that I estimated $15,000 in annual retirement expenses (in 2020 dollars) and that my current expenses are not yet completely optimized (notably through geographic arbitrage), I find that I’m not that far off the mark. 🙂
Income
My final pay stub confirms I earned a gross amount of $78,050 in employment income. In comparison, I earned $63,288 in 2019. That’s a 24% increase! I did have 27 pays in 2020 instead of 26 and a nice raise. That helps. 🙂
Worth mentioning, although nothing major : I got $340 in Amazon gift cards through Swagbucks and $260 by doing jobs through Field Agent (mostly before the pandemic and during the summer). By the way, thanks to everyone who signed up for Swagbucks using my referral link!
Savings
I am more than happy with my savings rate in 2020, which is 50%!
As I explained here, I prefer to use a very simple formula:
(Amount saved / net income) * 100
Indeed, I saved a whopping $27,055 on a net employment income of $49,371, to which I also add my $5,000 tax refund, for a total of $54,371. I want to make it clear that this is my personal savings only. It does not include contributions to my DB pension plan, or any other form of forced savings.
I wasn’t tracking every cent at the time, but I estimate my savings rate in 2019 to have been around 27%, based on the same formula. At that time I was not yet aiming for FI, so I wasn’t saving as aggressively as I am now. It was still a good savings rate compared to the average person. With 50% in 2020, now we’re talking! 😉
Travel Hacking
I started looking into Travel Hacking this year after reading Quit Like a Millionaire, which praised its benefits in lowering travel expenses.
I started simply with the TD Aeroplan Visa Infinite back in March (for 30,000 Aeroplan bonus points). I later took the CIBC Visa Infinite Aeroplan in July (for 20,000 Aeroplan bonus points).
I studied more about travel hacking (thanks to Milesopedia), and in November, I applied for three more: American Express AIR MILES Platinum (for 3,000 bonus Air Miles), American Express Prestige Aeroplan (for 20,000 Aeroplan bonus points + a Buddy Pass) and BMO AIR MILES Mastercard (for 950 bonus Air Miles).
On top of all the sign-up bonuses, points are also earned based on expenses.
So, in just about 10 months, I managed to pile up the following points and miles for future trips :
- Aeroplan: 72,212
- Air Miles: 1,182
What I Can Buy With My Points
I still don’t have enough Air Miles to buy much of anything. Since I started collecting them pretty recently, I haven’t unlocked any sign-up bonuses yet.
On the other hand, I am starting to have an interesting number of Aeroplan points. You can take a look at this page for an idea of a flight’s cost in points. For example, I could currently pay for five short round-trip flights in North America (ex: Toronto, New York, Washington, DC) or three longer round-trip flights (ex: Mexico or California) with my points. I would only have to pay the taxes.
More specifically, my first travel destination post-COVID will be Hawaii (which I had to cancel this past April). Currently, a round trip (ex: YQB-KOA) with randomly picked dates would cost me 34,100 Aeroplan points and $189.66 in taxes. Once I get my Buddy Pass, I’ll even be able to bring someone with me (my sister, in this case) for the same number of points. Only the taxes would then be payable in double.
If I do the same search on Google Flights for the same random dates, I find that the cheapest tickets are $635.00 per person. By using my points, we’d be saving $445.34 per person!
Long story short, not taking advantage of Travel Hacking is leaving money on the table. 🙂
Blog
Finally, I wanted to mention that in only 3 months of blogging, I wrote (and translated) 14 articles. I must have something interesting to tell because I have had 3,741 visitors in 2020. My Facebook page is also now over 600 likes! Wow!
To be honest, I wasn’t expecting any real success. I just wanted to have a place where I could put my ideas in place and have some structure. Based on the positive feedback I get, I think people relate to me and I’m really thankful for that. It’s been a very rewarding experience to talk to some of you. I also love the complicity that comes naturally between FIRE bloggers.
All in all, it has been a very positive experience and I will do my best to continue bringing quality content. 🙂
Managing Your Personal Finances Like a Business
I know I may seem a little intense by doing such a detailed review, but I think you’re getting to know me a little bit. What can I say? I like numbers. It’s my Vulcan brain’s fault. By the way, I see that you like numbers too, judging by the traffic trend on the blog. 😉
Also, the fact that I put hard numbers on all this allows me to see my progression. That’s very encouraging.
I can’t help but think about Jean-Sébastien Pilotte’s (Jeune Retraité) book La retraite à 40 ans. The first chapter is called Devenir le PDG de sa vie (Becoming the CEO of Your Life). Here’s my rough translation of my favourite part:
The first step towards financial independence is the most decisive one to succeed. It is about having the will to take control of one’s finances. It’s time to go from being a janitor to becoming CEO. Take off your blue rubber gloves and put on your best tie. You are promoted! No one else applied for the job.
To begin your new position, you will need to understand and analyze your current financial situation. Where is your money going? What are your main expenses? What are your assets? So many questions that are essential to your financial health and, ultimately, to your quality of life. Like a CEO, you will have to peel the onion, layer by layer. And most of all, don’t cry! You will certainly have to get out of your comfort zone and make some unpleasant observations, but it’s time to get to the bottom of this.
I particularly liked this part. It’s really in synch with the way I see things. How can we hope to improve and move forward if we have no idea where we stand exactly?
Gratitude and Thanks
To say the least, 2020 has been a very special year. No matter how unpleasant the year has been, there is always a way to find something positive. I think this review shows that.
Financial review aside, I am also filled with gratitude for this blog and all that it brings me. In addition to discovering a certain talent for writing, my articles allow me to reach out to people and interact with them. I am so grateful for the opportunity to discuss with equally passionate people.
Thank you for reading my blog. Thank you for commenting (it’s sort of my pay!). I like to know what resonates with you in my writing. I love it when you share your own calculations or suggestions. Sincerely, don’t hesitate to contact me. I love discussing personal finances and FIRE.
I am ready to face whatever 2021 has in store for me. As you already know, I have already set goals for this year. Undoubtedly, I have a lot of work to do!
Perhaps the fact that it’s not easy is what makes it worthwhile.
– Odo (Star Trek Deep Space Nine)
Let’s stay the course. The best is yet to come.
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