Welcome to my year end review for 2022! In this post, I review all my family’s earnings, expenses and savings (literally everything!) over the past year.
This post was only made possible by keeping a meticulous record of all of our cash flows in 2022. And wow, what an abnormal and interesting year 2022 has been. Let’s dive right into the numbers, shall we?
Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!
Cash Flows in 2022
Ok–so here’s the master Sankey diagram I’ve made for 2022. In it, you can see a breakdown of all of our cash flows, including our income, expenses and savings.
Record High and Unusual Income
The first thing you may notice is our abnormally high income compared to last year.
For some context, last year we earned a combined $127k after tax and deductions, while this year we earned $142k (an increase of 12%!). This increase primarily came from a raise I received last year which helped offset the rise in inflation.
But the main increase in income came from our one-time “windfall” we received in the spring of 2022. I revealed some details about this back in my March and April net worth updates.
Also, because we received that money at a convenient time, we were able to contribute a lot of it to our RRSPs before the deadline. This helped us receive a 5 figure tax refund in 2022. This tax refund, along with the windfall, is recorded in that orange “Tax Refund/Other” line.
In 2023, I do not expect to receive any unusual income. However, I do plan on us receiving another 5-figure tax refund, but that will depend a lot on how much we can contribute to our RRSPs before the end of RRSP season.
Most Expensive Year Ever?
In 2022 we spent more than ever (well, except when we purchased our home). Let’s compare our main spending categories with our numbers from 2021:
- Home: -1.5%
- Food: +21%
- Transportation: -70%
Surprisingly, we spent basically the same amount on our home in 2022. That’s because we were so slow to get it furnished after moving in and are still buying things to this day! This was our second year in a row spending $7,000 on home items.
All other home-related expenses were also similar, with home maintenance being cheaper than in 2022. I attribute that to me being lazy: I put off some of the small but necessary repairs needed around the house.
Food increased 21%, but I am happy to see this did not come from our grocery budget but from eating out. Because COVID has wanned, we spent a lot more time eating out with family and friends, and this is reflected in the increase for 2022.
Transportation had the most significant decrease, and I attribute this to paying off my car in late 2021. That meant that for all of 2022 I had zero car payments which saved me over $2,300. Besides that, our transportation habits mostly stayed the same in 2022.
It’s clear that the main reason for our increased spending in 2022 came from the “Travel” category. In 2021 we spent only $1,000 on travel, while in 2022 we spent $9,000. This is an increase I plan to build on in 2023 as I continue looking for opportunities to “live in the now“.
As you may know, 2022 could have been a better year for us investors. Generally speaking, markets were down. A globally diversified basket of stocks like VEQT (Vanguard All-Equity ETF Portfolio) was down just over 10%, while the tech-heavy QQQ was down nearly 30%.
My wife’s and I’s portfolios fared a little better in some cases and worse in others. Here’s how our investment accounts did in 2022:
As you can see, most of our accounts were down in 2022. My wife’s accounts were among the best performers. That’s because of her slight dividend focus in her TFSA, where XDIV and XDG make up a sizable portion of that account. She also benefited from the timing of her RRSP investments–she purchased in late February when the market had already started to decline.
My TFSA and RRSP accounts were worse off, mainly because I have less of a dividend focus and a bit more allocated to the U.S. than she does.
The worst performer by far was my margin account that I opened in late 2021, losing 18.9% on the year when you account for margin interest and leverage. Keep in mind this whole account is financed with debt, with the majority coming from my Tangerine line of credit.
The same goes for my “SM Account” (aka my Smith Maneuver account). But luckily, I made most purchases in that account after the stock market had already begun falling. So the end-of-year return was basically zero.
One bright spot in 2022 was our dividend growth. Compared to 2021, we grew dividends by 136% last year. In total, we received $5,603 in dividends in 2022. If you subtract the $617 we received from leveraged investments, we still cleared an impressive $4,986 in dividends.
Now, if only we could grow dividends by another 136% next year.
Net Worth Summary
Last year I shared that we ended 2021 with a net worth of $453,100, which was an increase of $103,500 compared to 2020.
In 2022, our increase was much larger because of the abnormal income I’ve already discussed, but also because of our home appreciating dramatically compared to when we purchased it. Of that increase, we conservatively included only a portion of it ($129k of a potential $330k) in our net worth in anticipation of the market cooling in the coming years.
And so, although our liquid investments didn’t perform well in 2022, our net worth still grew substantially. In total, our net worth grew from $453,100 to $720,820. That’s an increase of $267,720 (or 59%) in just one year.
It’s easy to understand where this increase came from: $134k in savings, $129k in home appreciation, a further $15k in home principal paydown and another roughly $8k in pension contributions. This was partially offset by around $20k in investment losses in 2022.
Taking a high-level view, we ended 2022 with the following assets:
As you can see, our largest asset continues to be our home. But because of our extra income and leveraged investing, we were able to grow our liquid investments by $200,700 in 2022.
However, that’s just one side of the equation. Our liabilities also rose in 2022.
The largest increase in our liabilities came from our leveraged investing accounts. We grew our investment debt by $61,000 in 2022 from using the large HELOC we received to invest in VEQT.
With rates increasing the way they have, it’s not a great time to be increasing our liabilities. I’ll write about this in more depth in a future article. For now, I’m happy to see that we made some incredible gains in net worth in 2022. I can only hope to do half as well in 2023–that’s for sure.
Looking Ahead to 2023
Overall I am happy with how 2022 went for us. We received a windfall that helped us contribute much more to our registered accounts than we did in 2021. And we were able to grow our income enough to keep pace with inflation.
With everything that happened in 2022, we’re also getting very close to achieving a one million dollar combined net worth–a long-term goal I’ve had my eye on for quite some time, but didn’t think would be possible so soon.
But not everything went perfectly. And with that in mind, let’s identify where some adjustments can be made.
Planning our Expenses for 2023
Looking at totals for the year can make it hard to understand the full picture. So to that end, I broke down our income and expenses into averages and came up with a Sankey for what our average month looked like.
This is especially helpful because so many of our expenses are once per year (like property tax and car insurance), and so it can be useful to assign a monthly cost to those expenses.
Looking at our average month, what stands out the most to me is our savings: $4,762 per month on $11,852 of regular employment income. That gives us a savings rate of 40.2%, which matches our 40% savings rate in 2021–something I didn’t anticipate but am thankful for.
Looking at this monthly diagram also makes it a bit easier for me to see what we should reduce spending on.
Dining out, for one thing, seems high at $334 per month. When we were renting, $200 in dining out would be an expensive month for us. But for 2022, we averaged over 60% more than that every month! Time to cut back on our eating out habit in 2023.
Another area I would like to cut is our “home items” budget. I know we still have a few things to buy for our home, but $600 a month on home items seems outrageous to me–just a few years ago I was paying only slightly more than that in rent each month.
One line item I’d like to increase is donations. In 2022, we only made a single $300 donation to the Canadian Red Cross. I discussed this a bit on Reddit, and although I dislike getting junk mail from charities, I’d definitely like to increase this number in 2023.
And finally, I want to increase how much we spent on home maintenance in 2023. I have a few “shovel-ready” maintenance projects I want done in 2023. I just need to connect with the appropriate tradesperson and fork over the cash. I hope to spend at least double what I spent in 2022 on home maintenance next year.
Saving and Investing in 2023
2022 was our best year yet when it came to saving and contributing to our investment accounts. I don’t think we’ll be able to top it in 2023, but I am motivated to maximize my RRSP which is my main New Year’s resolution for 2023.
I also hope we can manage to save 40% of our employment income again. This isn’t something I had planned to do for 2022, but it would be nice to continue the trend and make it 3 years running.
On the dividend front, I know it will be hard to replicate the dividend growth we saw this year. But I do hope we can continue to make steady progress and achieve at least $1,000 in additional dividends from our registered accounts in 2022.
Thanks for Reading!
Thank you if you made it this far. Please drop a comment below with any comments or critiques you may have over my 2022 numbers. I am also curious how you did in 2022, and if you met or exceeded your saving and investment goals!
By the way, I recently wrote a few articles that you may be interested in. This includes my post on real estate and financial literacy and my post reviewing my 2022 New Year’s resolutions. Consider giving those a read if you think they’ll help you on your financial journey!
Wow – great saving rate and overall net worth increase in 2022 AL.
I can’t believe how low your monthly water, sewer, and garbage bill is.
I look forward to hearing your plan for your margin account in 2023 now that rates are so high. Does it still make sense?
Hey Maria. Thanks a lot for your comment. Yea, 2022 was certainly a great year for us. Our largest net worth increase to date.
On the topic of water/utilites: maybe we just use a lot less water than most people? We’re just a family of two so that may have something to do with it. I have no clue what the average family uses in my area. What’s water/sewer/garbage costs do you see in your neck of the woods?
Re: your question on leveraged investing, I do have a post I’m working on right now focused on that subject! I can already say that it definitely makes less sense than it did before, when rates were low or forecast to be low.
Such a massive increase yo your net worth! wow Similar to you, we are also invested in VEQT for our Smith Manoeuvre account. Will.this be the firat year for you to start getting some tax returns for your SM account? I am curious whether you do your own taxes or get help from an accountant now that you have an SM account. I am glad 2023 is off to a great start for stock markets. Happy investing!
Yes, it will be the first year getting some tax returns from my SM. Although, last years tax season I had already been investing with my Tangerine LOC + margin which gave me a small extra return.
I’ve been doing my own taxes so far and am trying my best not to screw anything up (ha!). Unless you’re very meticulous, it seems like a good idea to use an accountant when trying to do the Smith Maneuver or any type of leveraged investing.
Thank you for your comment and best of luck on your progress in 2023!
Comments are closed.