Rich Frugal Life’s 4th Annual Year in Review – 2023

Welcome to the fourth annual “year in review” for the Rich Frugal Life blog! In this post, I’m sharing our 2023 financial results, with all the details of our expenses for the year, passive income, savings rate, changes in net worth and investments.

Since there’s a lot to cover here, I’m just going to jump right in. Enjoy!    

Why share our 2023 year in review?

For the same reasons I share our monthly financial updates here on the blog…

I’m nosey and find other people’s spending and investing habits to be quite fascinating. I also like the idea of normalizing the discussion around money. Some of you may feel the same. If so, this post is for you!

2023 Year in Review – Net Worth & Savings Rate Update

Net Worth

We calculate net worth by subtracting our total debt & other liabilities from our total assets. Total assets consists of cash, investments, home equity, and an immaterial amount of other assets.

Our net worth grew by 35% from December 2022 to December 2023!

After a dip in the market during 2022, it seems that our investments fully recovered and experienced additional growth this year. Mr. RFL’s job earnings also added quite a bit to our net worth this year, as his annual bonus was much higher than usual.

The graph below depicts our net worth growth since 2013, which is when we began tracking it as a couple.

For those of you in the early stages of your financial journey, notice how the line gets steeper in the later years (despite periodic downturns in the stock market). Getting started with investing can feel slow and frustrating, but the time it takes to get to each next milestone should continue to get shorter and shorter as you progress. Compound interest is your friend, so hang in there!

Not that long ago, our net worth was much lower, but the growth has accelerated over time. Our current net worth is more than triple the value from 2018, and several multiples of what it was at the beginning of our journey.

Debt

We ended December with $154,200 in debt, all of which relates to our mortgage.

We didn’t make any additional mortgage payments this year, because our high-yield savings account is currently paying way more than our fixed mortgage rate (4.3% vs. 2.5%). I don’t see this strategy changing any time soon. A return of 2.5% is very easy to beat these days. 

Annual Savings Rate

Our after-tax savings rate clocked in at 84.5% for the year, which is above the 79% we budgeted.

Although we spent a little more this year, our savings rate was boosted by Mr. RFL’s much larger than normal bonus received early in the year, a vesting of company stock, and cashing out of $21,000 worth of vested stock options.

My new part time job, which I quit over the summer, barely made a dent in this, clocking in at $8,000 of net income this year, after social security and taxes.   

2023 Year in Review – Annual Spending

Ok, full disclosure time! The table below shows our expenses for the entire year (excluding income taxes), along with some additional thoughts… or excuses.

*Does not include 2023 spending for home renovation of $2,931 from our renovation “sink” fund. It also excludes charity contributions we made during the year, which we don’t share publicly or treat as “expenses” (to encourage more giving). Most of our charitable contributions now come from the Donor Advised Fund we opened in 2022, which is excluded from our net worth.

Budget Review

Despite overages in a few categories, total spending for the year came in at $10,008 under our 2023 budget of $70,000.

Our 2023 spending was $4,191 more than the $55,801 we spent in 2022. We spent $6,300 more on travel this year than we did in 2022, which accounts for the entire difference.

The increase in spending was (mostly) intentional. We decided that our high savings rate and continued income supported spending more in certain value-spending categories, such as travel and restaurants for our “day dates.”   

Despite allowing ourselves the freedom to splurge, we continue to remain relatively close to our historical $50-60k spending range.

Budget misses

As a reminder, our budget serves as a tool that we primarily use to forecast cash flows and track our spending. When we set a budget, the numbers represent our spending estimates or goals. We are not strict with it and do not stress out over “misses.”  

This method of budgeting works for us given where we are on our financial journey. If you’re struggling to pay your bills, you may need to be stricter. However, if you aren’t, a budget is a great tool to help you achieve your goals and stay on track.

Our largest overages this year related to dining out and buying clothes.

We planned to spend more on restaurants this year with the continuation of our weekly day dates. However, we once again overshot our goal by quite a bit. It doesn’t bother me though, because we continue to avoid wasteful spending on convenience take-out and delivery. Instead, we make dining out a meaningful and delicious experience.

Clothing was another category where we drastically exceeded the budget this year. And by “we,” I mean me. After completing a 2-year clothing spending ban in 2022, I’ve decided to gradually replace all my clothes that don’t fit, aren’t flattering, or that don’t make me feel great. That doesn’t necessarily mean fancy or expensive clothes, which the exception of my growing Vuori jogger collection, but it does mean I feel better and more confident getting dressed in the morning than I did before. We’ll keep an eye on this one to make sure old habits don’t take hold again.

Budget wins

To offset the overages above and beat the overall budget by over $10,000, we came in under budget in several categories.

Our biggest savings came in Home Maintenance category, where we were $2,300 under budget. We added money to the budget last year so that we could buy back some time by hiring out certain maintenance services, such as a house cleaner. However, we ultimately only hired out a few small jobs. We also didn’t have any major repairs or unplanned maintenance costs during the year, which kept these costs low.

Another big savings was $2,200 in the Other category, which was intended for estimated attorney fees for estate planning, which we didn’t get done in 2023. I’m going to call this one a “fail” rather than a win. We’ll add these costs to our 2024 budget and finally get this one knocked out!

We also came in under budget by ~$1,900 in the Travel category, which is not too surprising since we nearly doubled the budget in 2023.

The final big savings category this year was Self Care, where we were almost $1,600 under budget. I budgeted for some anti-aging and spa type treatments that I ultimately decided against in 2023.

There were a few other categories where we came in $400 – $600 under budget. Some were under due to the cushion I typically build into our budget for unplanned expenses, that we ultimately didn’t need to spend. Others were just less spending or a change in our spending habits during the year.

Overall, I’m happy with where we landed for the year.

If you’re interested in more details of our spending or what we include in each of the categories above, check out our monthly financial updates.  

2023 Year in Review – Passive Income

While we don’t share exact W-2 salaries or related income (i.e. 401k match, deferred income, & wellness benefits), a growing portion of our annual income now comes from sources outside of the corporate office.

Here’s a summary of our Non-Employer Related Passive & Other Income for 2023:

Investment Income (Dividends & Interest)

This is the category I care the most about because investment income is truly passive. We’ll be able to use most of this money to fund our expenses in early retirement.

Our total investment income for 2023 was almost $30,000!!!

That is much more than I expected, and I’m thrilled to see this number grow each year.

Our 2023 investment income was 27% higher than the $23,111 we earned in 2022. It was also enough money to cover 49% of our current expenses!

Now, not all of this money will be immediately accessible to us in early retirement. Some of our investments sit in retirement accounts. Of the investment income earned, approximately 75% or $22,000 was derived from non-retirement accounts and would be available to cover our expenses in early retirement.

Thanks to the magic of compound interest, we’ll continue to reinvest these dividends and watch this number continue to grow until we need to start withdrawing from our portfolio.

Reselling

This income is primarily from Poshmark sales, which I decided to dial way back on this year.

Blog & Referral Income

I made very little actual money from the blog this year, which is not surprising given that I drastically reduced my frequency of blogging and continue to keep the site ad-free.

The bulk of my referrals this year came from my ButcherBox Review, which has become my most popular blog post of all time. I just wanted to share my experience and money saving hack, but I’ll gladly take all the free food I can get. Since I receive referral income as a discount off future purchases, it’s not technically income. Instead, it reduces our grocery expenses. I share it here for transparency, but we don’t treat it as income in our budget or when calculating our savings rate. I naively assumed that our grocery bill would be lower this year, but it was the same even with the free meat. Damn, inflation.  

I also earned a decent amount of referral income early in the year from Fundrise, a popular eREIT. While I can’t track sign ups perfectly, I believe that the majority of this income came from sharing my referral code on a website that is not my blog, so I’ve excluded most of it from blog income.

Note: The Fundrise link above is a referral link. If you decide to open a new account using this referral link, you’ll receive $50 worth in free shares, regardless of how much you choose to invest. For full transparency, I’ll also receive $50 in free shares.

2023 Year in Review – Investment Update

Our Financial Independence portfolio, which consists of cash and investments, excluding our daughter’s 529 Plan, grew by a whopping 53% during 2023!

Now before you get too excited, about half of that growth came from the additional investments we funneled into our portfolio during the year.

We added $215,000 in investments to our portfolio this year, which includes company matches but excludes any reinvested dividends (we currently reinvest all dividends). Mr. RFL’s surprisingly oversized bonus provided a lot of that extra capital. Unfortunately, his bonus for this year is looking pretty dismal, so we won’t be able to invest as much in 2024.

It didn’t hurt that the stock market also had a great year. Total stock market funds, which represent the largest portion of our portfolio, grew by approximately 25% in 2023! Not too shabby.

As our portfolio grows and we approach our “Fat FIRE” target, we’ve decided to shift our investment strategy somewhat going forward.

I’ll talk about the changes we’re making (and why), as well as share the current investment allocation and targets for our financial independence portfolio in my next blog post. Stay tuned…  

Hope you enjoyed Rich Frugal Life’s 2023 “Year in Review”! How’d your year go?

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Featured image by Greg Altmann from Pixabay

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