Life Update: December 2020
I'm a bit late to create this life update but I'm still getting it done!
Good old December, the last month of the year and probably one of the busiest for us. As everyone knows, it's Christmas time and we gathered the last remaining gifts leading up to December 25th. Preparing for Christmas gifts began back in September for us and it helped tremendously.
Some of our family decided to ship a few presents all the way from Australia (which takes forever and costs a small fortune mind you) and the majority of them showed up before Christmas time. With just about every package my mother sends over, she packs a few little treats for the kids that aren't easily available over this side of the pond. The kids love it and we really appreciate it too.
A few gifts that were sent over from Aus arrived about a week or so after the 25th but that's ok, the kids had plenty of stuff to consume themselves in on the big day. Opening the other gifts a week later is like a mini-Christmas all over again. Winning!
Before we dive into talking about Christmas activities and celebrations there are a few other worthy events to mention. First, the kids "graduated" from the first phase of their ice skating lessons around the middle of the month. They even received ribbons and a scorecard explaining what they had achieved over the past two months of weekly skating lessons.
Both Callum and Addi went from barely being able to stand up on the ice to skating around (albeit not too fast), skating backwards and performing some fully sick jumps and tricks! We are proud of how much they've learned in such a short time. They're much more confident on the ice now too.
We also got stuck into baking some cookies and getting all festive with the home decor. I've said it before, I'm not the most festive person (Allanah has called me the Grinch of the household once or twice before) but I like listening to the terrible Christmas playlists and re-watching the same Christmas movies each year. I'm just waiting for the kids to be old enough for Die Hard to be included in the Christmas movie collection, much to Allanah's disgust.
The kids donned their apron's and chef's hats and got into character - Italian by the looks of the pictures - and whipped up some killer gingerbread cookies. We have a Thermomix so that makes whisking and mixing a breeze when making recipes like these, but we made the kids do it by hand by mixing in a bowl. Hey, they have to learn the hard way, right?
Just kidding, they only had to mix the dry ingredients in a bowl. They switched the the Thermi for the remainder of the recipe. Callum and Addison fight to see who gets to look into the top of it to see it mixing. Oh the little things that kids fight about, eh.
The picture below is the finished product after we decorated the little gingerbread ourselves. Not the best decorated cookies you've ever seen but we never said we were masters at this craft. We had about 40 in total so we packaged them up into nice little containers and gifted a few of them to friends for Christmas Day eating. Allanah also threw together chocolate coconut balls (rum balls without the rum basically) to throw in as well, after I took my share out of course!
Fast forward to Christmas Day and oh my lord weren't there some presents to be opened! We are fortunate enough to have kids that are kind enough to sleep in to 7am on Christmas Day. No 5am start for us, you beauty!
Santa had filled up the kids stockings full of candy and their Santa sacks full of other goodies. The reindeer ate their snacks that were left out for them the night before and Santa drank the beer that was left for him. I sure hope that not all kids leave beer out for the jolly big guy otherwise it would be one hell of a sleigh ride.
Since we live on the other side of the planet from our family we take photos and short videos of the kids opening their presents so we can still share the experience even though they're not with us in person. The two big presents this year were a Nintendo Switch for Callum and a Barbie Dream House for Addison. They were super excited when they tore into the wrapping and revealed what was inside.
We like to follow a bit of routine for the order of activities on Christmas Day. Some people like to open up all the presents at once before even having breakfast or seeing the sunrise. Nothing against that method but we prefer to have the kids open their Santa stockings and Santa sacks first, take a moment to recognize what they got, open a few presents from family members, then take a break for breakfast.
After breakfast the kids usually open their "big" presents from us and any other gifts that may have been tucked up behind the tree that we missed. Our aim of spreading it out like this is to give the kids time to truly appreciate each gift they receive, rather than just tearing into one after another and forgetting what they've just opened. Anyone else follow this kind of gift opening method for Christmas?
With present opening and breakfast out of the way, we had our two friends - Gabby & Aric - join us for the rest of Christmas Day. Mimosa's and snacks were on the menu first up followed by a huge feast for Christmas dinner. It was a good day had by all.
Just 5 days later it was Callum's 10th birthday. The big boy is now in the double digits! Crazy to think that he was only 6 when we moved to Canada. Even more crazy is that Addison has spent more of her life in Canada than she has in Australia. Time flies as they say.
We decided to have a small party for Callum with two of his friends on the 23rd of December because we entered yet another Covid lockdown for two weeks which began on December 26. We had an Xbox themed party as per master Callum's request and the kids consumed their weight in candy and cake. Callum got to open a few gifts from his friends but we waited until his actual birthday on the 30th to open the gifts from us.
For Cal's actual birthday on the 30th Allanah even whipped up an epic Smarties themed cake, with a little bit of help from yours truly. I just follow her directions and do as I'm told. That method seems to produce the most reliable results. We kept the cake a surprise and Callum was super impressed when he saw it. Don't mind the creep of a cat photobombing in the background!
Addi helped Allanah pick out a few gifts from Walmart to go with the Switch he received for Christmas. She got him a Pokemon themed travel case and a new Switch game to play. Cal got to open all the gifts that the family had sent over for him as well. We had a very happy 10 year old.
We set out with a goal at the start of the year to save 50% of our combined net income. That was a far cry more than the zero amounts we've previously saved. In fact, most years we finish with more debt. But not this year my friends! 2020 may have been a wild rollercoaster ride for the majority of the world, but for our finances it was a great year. It truly proved to us what we are capable of and set the standard for the years to come.
If I calculate our savings rate using our planned income rather than our actual income, we hit 50%. That is how I built the savings tracker you see in the picture above. Instead what you should do is calculate your savings rate using your actual income. This is what we will do going forward. The formula would look like this:
Savings Rate % = ( Amount Saved ($) / Actual Income ($) ) x 100 to get it to a percentage
EXAMPLE: ( $78,430 / $176,972 ) x 100 = 44%
Pretty specific example don't you think? The example above is what our actual savings rate was for 2020 when using our actual income instead of our planned income. So using the first method we reached our goal, but using the correct method we fell slightly short.
There are a few things I can think of that we could've improved on and got us closer to the 50% target:
Allanah got a pay rise around the middle of the year. We didn't increase our savings target proportional to the pay increase
Even though we achieved our savings target most months, our expenses were higher than we originally planned at the start of the year
I increased my RRSP contribution to 18% of my gross income (which is a good thing!) which in turn lowers my net income. I wouldn't change what I did here, but it is a factor for why we didn't save more of our NET income
When setting the savings goal and annual budget way back in January 2020 I obviously couldn't predict all of the expenses we'd face throughout the year. While I could plug in things like mortgage payments and other fixed expenses, it was unreasonable for me to think I would be 100% accurate with everything else
While we could have achieved more savings by sacrificing certain expenses at times, we enjoyed meeting our savings target and felt ok to splurge a little bit. I truly believe it's about balance and being able to still enjoy your life while progressing towards your financial goals. I also believe it's important to include "fun money" into your budget. This is for you to do anything you want with it, care free. I'll admit I struggle at times to do this, but I still believe it's a must in everyone's spending plan.
NET WORTH SNAPSHOT
I've spoken about this numerous times throughout several blog posts and I'll say it again. Net worth is a powerful financial metric that everyone should track. It case you missed it, check out my article Get to Know Your Net Worth I wrote a few months back for all the details on this metric.
If you think of your financial situation as a book, your savings rate would be a chapter and your net worth would be the whole damn book. This is simply because it tallies up everything you own (cash, investments, property, vehicles, etc.) and subtracts everything you owe (student loans, personal loans, car loans, credit card debt, mortgages, etc.) and leaves you with a dollar amount at the end. Ideally you want to always see this number go up over time.
As you can see, I only really started tracking our net worth in March, 2020. I back-calculated what our net worth was in November 2019, which is pretty close to the starting point of our financial journey. I did this so I could know our starting point. Since then, we've seen nearly $136k increase to our net worth.
The main drivers of this 57% increase in our net worth are:
Paying back approximately $55k of debt - no more family debts, credit card debts or car lease payments!
RSSP retirement account grew from $50k to $83k - mainly due to increased contributions
After paying back our debts we had still managed to save around $50k by the end of December
Normally I wouldn't recommend someone have such a large cash position in excess of a reasonable emergency fund (of 3-6 months of expenses). However if you are saving for something in the next few years, like a car or a house deposit, holding cash makes the most sense. Just be sure to keep it in a High Yield Savings Account (HYSA) earning you at least a small amount of interest.
Given that our car is a lease (looking back, terrible financial decision, but it is what it is) and we want to buy our next car in cash, we will need to save enough to be able to pay for this without a loan. We will not buy a brand new car, instead we'll purchase a reliable used car around 3 years old. In doing this, we will be getting a reliable car that should have no major maintenance issues and has already taken a large depreciation hit.
So we're thinking we'll need around $20k - $30k saved to pay for a car that we would be comfortable with. Our lease runs up in November, 2020 so we'll hold onto a fair bit of cash until we purchase another car.
Our plan is to start investing outside of the standard retirement accounts in 2021. RRSP is the equivalent to Superannuation in Australia and so far that's the only avenue we've been investing through. In 2021 we plan to max out our contribution room for both the RRSP and TFSA (Tax Free Savings Account) and also open a taxable account with a brokerage such as Vanguard. I will talk about this investing strategy and journey in more detail in future posts, but for now that's a quick overview of what we're planning.
It's safe to say we're pretty happy with how we finished the year and what's in store for 2021. If anyone would like a free budget template, net worth tracker or some other cool tools, head over to our Resources sections under Tools and download whatever interests you (link here). Chat to you all again at the end of January!
Blake - FIRE with a Family