Another year in the books. This is our 2020 Wrap-up. And what a year it was. Hold on tight because this one is a dozy.
The Stellar Financial Year that was 2020
So first let me give you a warning. Our financial year that was 2020 was stellar. I realize this is a privilege, although unlike the headlines that scream wealth inequality, this more has to do with my industry then my income position.
The company for which I work is involved with Covid testing and vaccine initiatives to some degree. Added to that my specialty is in the supply chain of pharmaceuticals, medical instruments, and testing equipment. In other words simply by the nature of luck of my career choices I, and my coworkers (regardless of pay level), are in high demand.
A Year is Not Only Measured by Finances
But that does not mean 2020 was a good year. People so often associate wealth with happiness. They tend to believe their high income neighbor, or when they become high income, that all problems will disappear. Sadly 2020 for our household proves this is not true.
Without complaining too much, the year that was 2020 cost us greatly in non financial ways. I lost 2 grandparents, put another relative in an assisted living facility that I am now managing’s financial life, had a child come down with Lyme disease (very scary before we figured it out), and wrestled with some of my own health problems.
None of this was covid related, but when considered on top of now trying to virtual school 2 kids while managing a third this year has taken a lot out of us. This is a big reason I cut back on blog posts earlier this year. Something had to give and this hobby was it.
Optimism, Pessimism, Realism
For those that might wonder, I am not an optimist or a pessimist. I am a realist. I realize I have no impact on the current Covid situation. But I also realize this too shall past (great video by the way if you click the link). So as far as my emotional state goes, just keep on keepin’ on. I hope all of our readers are similarly ok mentally in this tough time. My thoughts go out to all of you.
2020 Wrap-Up: The Finances
Anyway, enough about the downside of 2020. Let’s get on to the reason you are here, the financial porn.
A Decline In Income Predicted
If you recall from my 2020 goal setting post, I expected income to be down or flat in 2020. Our income in prior years was heavily based on RSUs. At one point nearly 50% of my pay was variable, either in the form of cash or those stock units. However, for 2020 my company was already signaling that the stock was heading towards a decline and that cash bonus’ would be reducing. Some of this was offset by a sizable base pay increase, but I still expected a significant decrease in my contribution to our household income.
At the time I postulated that our big chance to get flat on income for the year came from a expected slight uptick in my wife’s consulting income combined with any employer assistance from a potential foster care adoption.
My 2020 Income Predictions Were Wrong
Well, I ended up being mostly wrong on any of these guesses. We did not adopt from Foster Care in 2020. Our foster care odyssey largely remains in limbo due to Covid. Our little girl is still with us, but we are in not much different of a place then we were last year at this time. As always I can not publicly share any more about this situation.
My wife’s income meanwhile took off. If you recall she develops online computer based training. Well Covid and the work from home environment has caused online training to take off. Her income was up 30 percent year on year.
No 2020 Wrap-Up Would Be Complete without W2 Income Uncertainty
If you had asked me in March this would still not have been enough. At the beginning of Covid my employer announced cuts in cash bonuses. I also assumed their stock was destined to drop like a stone. Ie. I suspected my remaining variable pay to drop precipitously.
Well that didn’t happen either. Because of our field the company stock nearly doubled. My RSU value ended up only slightly less then last year. They also returned the cash bonus to normal levels about a week before they were given In December. All told my income was up 5% by itself. So essentially our income was up about 10% year on year.
Expenses Fell Through the Floor
Normal expenses also took a nose dive. All our vacation travel was canceled for this year, pushing all that money back into our budget. In addition I ignored my original plan to put credit card hacking on hold.
Our income from credit card churning was down year on year, but I still picked up about $3k in signup bonuses. Some of the cards we did this year were 2x Discover IT, Marriott Bonvoy Boundless, United Explorer Mileages Plus, and Fidelity Rewards (not a complete list).
I blame boredom on choosing to churn more this year. Other then a daily hike with the kids things were very slow outside of work during the summer. In addition to vacation travel disappearing, our kids activity expenses also hovered near 0 for most of the year.
Finally general expenses were also down. Once restaurants and bars opened here from the Covid lockdowns we made a point of getting take out fairly frequently (we still have not done a sit down meal). This still wasn’t enough to return us to our normal expense levels.
An Increasing Expense: Donations
But… we increased expenditures in two areas. The first was donations. In addition to meeting our normal 5% donation level, I added another $1k in donations to the Food Bank of Delaware and the local fire company. We want our community to survive this trying time and realize that requires increasing help. I hope many of you also choose to help more then normal.
The Second Major Expense, Buying a Travel Trailer
The second area of increased expense was the one off purchase of our travel trailer. That purchase has been complete, however the trailer is in storage with the manufacturer awaiting delivery once the snowy season clears. I’m glad we got our order in when we did. There is now nearly a year and a half wait to have a similar trailer built.
That change in demand started a few weeks after we placed our order, from a 3-4 month lead time prior. I am reminded that I said if you wait you are likely to get items like a travel trailer cheaper in 6-9 months. I still stand by that statement, albeit perhaps more like a year, even if I myself was not able to wait for that period to pass. Eventually this abnormal level of interest will subside and people who bought something they don’t need will unload their trailer for pennies on the dollar.
We decided not to wait because this will be a long term purchase. Before Covid we camped in a tent monthly. Sadly my back can no longer take sleeping on the ground. So this is just a more luxurious version of what we already do. Pictures of the trailer will be shared when it gets delivered.
2020 Wrap-Up: Saving the Same Amount as 2019
All in the reduction in some costs combined with the added income largely offset the travel trailer purchase and donations. Based on the numbers we saved essentially the same amount year on year.
The Stock Market this Year: Don’t Just Do Something, Stand There
Finally on the assets front things have been interesting. To get the first bit out of the way, so many people sold during the March stock market crash. We are not one of those people. Remember, no one knows anything about the future movement of the stock market. Action is the biggest hurdle to your potential success. Those people are I am sure kicking themselves after the recent run up in prices.
Benefiting From the Market Crash By Luck Alone
On a related note, I’ve been vocal over the years that I do not keep dry powder. Some people benefited from the crash with money that had on the sidelines, but we are not those people (pure luck if they timed it right, and don’t let them tell you otherwise). That being said we did benefit from the market crash.
The crash was relatively collocated with some of my lumpy income periods. For example, in April I received a large deposit back from a canceled vacation. In May I receive Employee Stock Purchase Plan funds. And in between my wife’s income kicked in. Between the three I can say that by staying the course with new investments we benefited from the decline in the stock market.
Net Worth is Not a Good Measuring Stick
How much? At last check our Net Worth was 60% higher then at the trough of the stock market collapse. That equates to many years of expenses, way more then we normally save. It just goes to remind me that Net Worth is not a good measurement of success or failure. Fundamentally this year and last were no different with respect to my actual actions. The net worth numbers don’t reflect that.
What About Our Real Estate Investing Goals?
We started the year with a goal to increase our real estate exposure. I will admit this has been a failure to date. I began to dig into options for syndicate investing in the southern US via some contacts of mine. But just as I was starting to get traction the issues with our relative and the Power of Attorney came into the picture.
Burn Out Appears
Theoretically I could have done both, learn how to be a POA and invest down south. But with all these things hitting at once I started to slide into burn out. So I just never got to investing in real estate this year. Instead our automatic investments continued to pour into the stock market. Our non automated investments largely pushed into a savings account, CDs or I-Bonds.
An Increase in “Safer” Investments
A note, we put more then normal into those “safer” investments. This was for 2 reasons. First to save for that inevitable real estate investment. And second to attempt to keep our asset allocation at 80 percent stocks based on our risk tolerance. The asset allocation has been an uphill battle due to the stock market. I will state that right now short term “safer” investments and more liquid options are returning more then their long term bond equivalents. So unlike previous years, I bought no new brokered CDs or Bonds.
The Year of I-Bonds
I bonds especially seem to be a good deal at the moment, albeit with volume limitations. Returns of 1.68% and sellable after a year for a sacrifice of 3 months of income. Add to that they adjust up with possible future inflation and they are my current favorite safer investment. Remember you are limited to 10K of Ibonds per person per year.
Our net safer investment return is well below our prior years 3 or 4% goals. But we are still somewhere in a blended 2%. So we are keeping pace with current levels of inflation with our fixed income. Not wonderful but good for little to no risk while we pursue real estate in the short term.
The monkey in the room of course being that real estate right now might be heading for heavy volatility. Our next post with 2021 goals will touch on what this means going forward.
2020 Wrap-Up: Blog Goals
Which brings us last but not least to blog goals. We celebrated 4 years of blogging this year. I also cut back on blog posts significantly, as referenced earlier. This cutback is a reduction from our beginning of the year 1x a week goal. But it also appears to be fairly sustainable. So while this is a fail from original goal, it is a success in that it has found a reasonable balance with our new more convoluted lifestyle.
I also planned for the site to remain revenue neutral. That continued in 2020, with income buying essentially another round of beers beyond expenses. I’ll take it.
How Was Your 2020?
Did anyone have an all around good 2020? I’d love to hear from you. If not, I’d still love to hear from you in the comments. Thanks to all of our readers. Onward and Upward into 2021.