Year in Review 2023: Finances, Fun and Fireworks

personal Insights and Reflections

We have a year end tradition that’s a bit boring when compared to fireworks and festivities. But its super insightful and valuable! I needed to tap into my prior persona of being a Big 4 management consultant. Yes, I am willing to admit I am a former PwC Director despite their well known corporate atrocities such as exploiting confidential government briefings to sell more business and going to extensive lengths to hide it.

It was an important stepping stone on my journey to figure what kind of work gave me purpose (consulting for PwC did not), and the kind of people I wanted to work with (there we no mentors or people to look up to, just people focused on becoming partner at all costs). But my years at PwC gave me insight into what was important to me, and I honed some amazing PowerPoint slide skills in the meantime. So at the end of the year, I churned out a glorious slide deck like I am still getting paid over $250,000 plus bonus to do so.

Throughout the year, I am the Mom CFO, and the member of our household who fills out our Wealth Planner every month, I was surprised at how many additional interesting insights I gleamed from the year end analysis. Seems while managing day to day, sometimes the bigger picture isn’t evident.

Personal Finance Outcomes

Here’s the executive summary:

Our net worth grew by 50%.
Our most over-budget category (vacations) grew by 2x this year (and we’re ok with that!)
We became financially independent and no longer need to work unless we want to
Now, we just need to avoid “lifestyle inflation”!

One of the major findings was that for every dollar we contributed to our assets, our net worth grew by just 65 cents. This is, of course, because a portion of our assets were decimated in the worst bear market since 2008, and our real estate assets helped offset, but could not fully compensate. It was not an encouraging environment for saving, so my strategy was to not look at my portfolio balance, for fear I’d freak out and sell off stocks. Instead, we stayed the course —and this year, we were rewarded.

In 2023—a year in which the S&P 500 has returned an astonishing 24%—and real estate appreciation varied from 5-10% across our rental portfolio – our overall assets grew by half. 60% of the asset growth was thanks to our contributions, and the other 40% was purely the market going up.

Seeing back-to-back years with wildly different outcomes is a reminder of HOW IMPORTANT IT IS TO STAY THE COURSE when investing. Don’t give into the desire to sell out of the market when it dips like in 2022 to “reduce your losses”. All that ends up happening is you sell low and end up “buying high” when the market rebounds like it did in 2023. Read up on the human phenomena referred to as behavioral economics or more interesting animal spirits. You’ll see you’re not alone in this desire. Just don’t give in!

Sticking to your investment plan—

regardless of whether you’re seeing gains or losses in the markets pays off.

Now, let’s talk about the part of of financial plan that I actually had control over, like our spending. Here, we spent much more than we had budgeted, doubling our holiday expenses. April was the only month in 2023 we didn’t go on a family vacations.

And we have zero regrets. Vacations are a key pillar of our Live Richly philosophy. To us, time spent traveling and exploring new places and cultures as a family is the number one thing that brings us happiness. In late 2024, we will be embarking on a journey to move our entire life nearly 8,000 miles away to the Southern Hemisphere. So we are seeing as much of the world up North in the meantime.

Travel: NYC to see Phantom of Opera before final curtain call, Australia to find a new family home on the Sunshine Coast for our next chapter, London and Paris with my 11 year old to show her the magic of Europe, Glacier to hike along turquoise iceberg lakes, Hollywood to walk in the steps of acting legends given our daughter’s love of acting and dreams to be on stage.
My genealogy trip and course. I have a deep love of history and genealogy, having traced our family history back over 300 years. I was able to travel to the “mother ship” and spend a week at the Family Search Archives in Salt Lake City and learn researching tips from the pros. As a life long learner,, I was thrilled to have this opportunity to expand my knowledge (and having a week all to myself and leaving my “Mom” name tag at home.
Going to see Bruce Springsteen – something I have done too many times to count – but taking my daughter along for her first concert. Over the years I have paid some very hefty prices for this experience, and never once regretted it. Could be interesting one year to dedicate a slide just to my Bruce purchases over my lifetime, no doubt the results would be eye-opening. The concert has been postponed until early 2024 so I look forward to the return on my investment.

…and, I’m sure, many other things I can’t remember right now. The point is, we remain committed to Living Richly!

Despite all the above, the majority of our spending plans actually went…well, according to plan. We were under budget on household expenses, and only slightly over on daily living expenses, which is quite good given the inflation rate at the time. Where we were under budget, we made up for it by overspending on things like our daughter’s theatre and singing classes. But again, this is what gives her purpose and joy, so that’s where we like to spend and its entirely guilt-free!

We are celebrating our first New Year’s at home, with friends, having just come back from a California Roadtrip. We’ll share with them our favorite New Year’s tradition of ringing in 2024 watching the recorded Sydney Australia fireworks – the best in the world!

Now let’s dive into what was driving much of that appreciation in our assets in 2023.

The Market in Review 2023: Rallies, Rates & Reflections

What a difference a year makes.

RALLY TIME!

Stocks and bonds have soared after the Federal Reserve signaled rate hikes are over and cuts are coming, as inflation cools. The benchmark S&P 500 index closed at its highest level of the year on Dec 1st. And 10-year Treasury yields closed back below 4% for the first time since July. For those that don’t know – the S&P 500 is an index that tracks the 500 largest companies on the US stock exchange.

The market is signaling a paradigm shift

Today’s environment is very different from the one we started the year in. Amid what felt like a tremendous amount of uncertainty, a record number of CEOs said they expected a U.S. recession.

Economically, 2023 was a much better year in the markets than what was predicted. There was a lot of doom and gloom and naysayers in the first half the year, but the market did well, considering a full blown recession was predicted.

RATE CHANGES!!

Today, inflation has since more than halved, all while growth has remained resilient. That strong pace stands to fade, but the recession many of us fretted over never happened. We’re not quite out of the woods on that front, but Inflation will likely settle as the Fed’s own forecasts show a path toward its 2% inflation target.

Bonds are more competitive: This also means that now looks like the time to consider locking in still-elevated bond yields.
Stocks will likely march to new highs: A soft landing – marked by moderate inflation, solid growth and easier policy – could mean a sweet spot for stocks.

REFLECTIONS

If you listened to world-class investors like Warren Buffet, and let your investments ride, this strategy would have done well for you!

All things considered, it wasn’t a bad year. But a lot of people left a lot of money on the table, when they listened to the doom and gloom and pulled their money out and put it into low interest savings accounts instead of investing it.

So here are a few principles for 2024, Stocks and bonds are more volatile than cash, but they increase your chances of growing wealth in the long term: Resist the urge hoard your long term retirement funds away in a bank account. Over the last 100+ years, stock have returned on average 4-5% more than cash and bonds about 2% more. Over time, these increases are significant! Don’t get caught worrying about the short term volatility and narrative in the markets…if your money is invested for the long term, these short term fluctuations don’t matter. Keep it simple. Keep it consistent.

Although past stock market performance doesn’t guarantee positive returns in the future, keeping your money in a checking or savings account paying less than inflation rates does guarantee a loss!

Returns are not within your control, but your fees, expenses and contributions are – focus on those, not on returns:

Your best chance at building significant wealth is by:

being CONSISTENT and investing every – single – month.
keeping your investing fees low. Over your lifetime, the difference between paying 0.5% in fees compared to 1.% is HUNDREDS OF THOUSANDS OF DOLLARS when you are ready to retire. This is the cost my friends to not learning the basics of investing.

Make 2024 the year you become an informed investor and master of your wealth! This will set you on the journey to financial freedom in the coming years.

Cheers to a new year filled with Life, Love, Adventure and Happiness. Bring on 2024!