2020 Financial Summary
Overall Net Worth
The market was up, so our net worth is also up – overall about a 20% increase for 2020. About 40% percent of the increase was from direct savings, and the other 60% was market growth. It always feels like the market is really propelling us forward (and it is!), but there is still a significant chunk of the growth happening due to our earnings and savings.
Our asset allocation changed a little bit throughout the year.
| Category | Start | Pre-refi | Post-refi | End |
| Cash | 7% | 8% | 4% | 4% |
| Investments | 67% | 68% | 70% | 71% |
| Home equity | 26% | 24% | 27% | 26% |
I’m glad we reduced our cash balance significantly, but not quite as glad that we put it into real estate – even though that helped us get a lower rate and lower payment. My goal is to have less than 20% of our net worth tied up in home equity. We’ll get there. I’m done with mortgage prepayments for some time, maybe forever. Our mortgage is now less than childcare (which isn’t saying a lot since childcare is $$$$), and the extra money is better invested.
Savings / debt repayment
We maxed out all tax advantaged retirement spaces, which includes two 403bs, two 457bs, two Roth IRAs, and some other (small) misc. non-voluntary savings through work. We also put a hefty sum from cash savings into our mortgage balance to qualify for a lower refinance rate (rates have since dropped even more!). We saved a little bit in a 529 for LO. This was mostly just gifts from relatives (total < $500), but I threw some money into it whenever the market was having a terrible day, or whenever life felt terrible. Our strategy for college savings is not primarily 529-focused. I hope to get to a mega-backdoor Roth IRA in the next couple of years for tax diversification and college savings. Maybe 2022? We heavily prioritize anything that gives us a tax break today over a tax break tomorrow, and we just haven’t had enough income for the mega-backdoor yet.
Spending
For spending, we “saved” on childcare for the 3-ish months daycare was closed, and also moved from infant care to toddler care. All in all, our childcare costs were $7k less in 2020 compared to 2019. We expect them to increase again in 2021, since we are voluntarily keeping LO home for now. I don’t expect the state will force our childcare to close again, and we have to pay unless they are closed, or we decide to withdraw.
Mortgage spending was down about $2.5k due to our refinance, but home maintenance spending was WAY up with a new roof. Despite saving in the childcare category and reducing our mortgage payment, our total spending was the highest ever due to the new roof.
Our grocery spending also went way up, increasing by ~$50/week. Most of this is pandemic related, but part of it is that LO now eats real food instead of breastmilk and small portions. For example, I rarely would buy berries for myself, but she has them all the time. On the pandemic side, ordering groceries online costs more, plus every order has an extra tip. I also count food boxes under grocery, and we’ve done some of those. They are pretty pricey for what you get. I can no longer shop in person at Costco in person (I used to get frozen chicken and other meat then). Finally, price just is not on the top of my list of concerns when meal planning (easy/quick, healthy, and tasty are the priorities).
Our pet spending was down because we had to rehome our dog early in the pandemic. I can’t go into details, but it was truly the only thing that we could do in the circumstances. It heart wrenching (and really still is), and one of the worst things we’ve gone through in our lives.
Donations were up! It still is a very small percentage of our take-home pay, but I’m glad that they are a regular and increasing part of our budget. This year they were mostly targeted on BLM / NAACP, combined with food security related donations. There are a lot of causes out there, but these feel the most pressing.
Everything else was pretty similar, or within $1000. Gas spending went down by half, but isn’t a large amount even in normal years.
Looking ahead
If the market stays flat, we would reach the “FI excluding home” number I set a few years ago by the end of 2021. This means that if we took our home equity and used it to buy a house outright in a lower cost area, and spent the yearly budget I set with a 4% withdrawal, we could retire. There are assumptions that imply it is an overly conservative number (ignoring social security and a tiny pension), and others that imply it is an overly risky number (health care, at market peak). I’m not planning on taking action on this milestone, so I haven’t calculated it any more detail. Also, our plan is not really to move to a lower cost area, and we probably should fund college for our LO. So, we are not really very close to FI, at least not for the lifestyle we have now and likely want to maintain. I estimate we have about another 5 years or so before we reach that, or less if the market performs well.
Stacking Pennies 
Our overall net worth was up too, and that had to be thanks to the market because our spending most certainly did not decrease this year. It can’t even be considered a net neutral for our lack of spending on childcare and travel because we turned right around and spent on educational materials, lots of home stuff to get through the changed circumstances, etc. I’m glad we spent the money on the home maintenance, we’re already really appreciating having that done but it was a huge chunk of money.
I’ve shifted away from the 529 approach as well now that we have a substantial foundation of savings in there from JB’s first few years. I’m primarily focused on debt reduction and increased investing. I figure if I do my job well enough, the kids can split the 529 evenly and I can cash flow whatever else is needed after that. Here’s hoping!
Thanks for the thorough breakdown! Childcare this year has truly been a series of challenging decisions. Glad you found something that works (or semi-works, anyway, given all the challenges) for you.