Tuesday, 8 January 2013

2012 Full Year review

2012 turned out to be a great year for my finances, with my net worth increasing by around 41%

The biggest single driver was a good increase in employment income. Given my expenses did not materially change, my savings rate ((gross income - expenses) / gross income) for the year was 66%.  I found this number a bit surprising and whilst a high number is desirable, i'll give some thought as to whether i should add a target range to my financial objectives, rather than just making this as high as possible. I think there's a danger that the combination of my natural frugality (if that's a word!) and a greater focus on personal finances may unnecessarily constrain lifestyle choices.  I may consider options such as treats/rewards for reaching financial targets, or accruing some money each month that can be spent more freely. Whilst this is the first year i've really been monitoring income & expenses in sufficient detail to calculate this, i don't think my savings rate will have been much higher than 50% in the past.

Apart from employment income, all of my asset classes saw gains in 2012.

My property was occupied all year, apart from a few days between a change in tenants. A few minor maintenance issues arose, but the associated costs were low.  The rental yield for the year after factoring in all associated income & expenses was a little over 4%.  I also periodically compare similar local property valuations and update the asset value using the most conservative end of the scale. On this basis, the value also increased by around 6% in the year (although looking back i think the opening value was a bit low).

I've discussed my pension performance in an earlier post, but just to refresh with the year end position, the unit values increased by around 14% in 2012, following a strong end to the year. The number of units held also increased through the year with ongoing contributions.

My new investment portfolio (started in October) also performed well as markets rallied into the end of the year.  It was up roughly 4% (about 2% in Nov & 2% in Dec) when comparing income & capital gains against purchase costs.  Within the portfolio, all the ETFs were well up, in particular the UK & Eurozone high dividend ETFs which were the most recent two additions to the portfolio. My holdings of gold partly (but not materially) offset some of these gains, ending the year around 3.5% below its average purchase price.  My approach of buy, hold & accumulate still stands, although following the recent market strength i may grow the portfolio at a steadier pace (ie dollar cost averaging in) rather than piling in as quickly as i did in the past couple of months.

My asset allocation has started to change, with the investment portfolio going from zero to 6% of total assets. When combined with my pension funds (fairly stable at 15% of total assets), i estimate my overall equities exposure to be around 18% of total assets.  My combined invested assets (investment portfolio, rental property & pensions) came to 71%, leaving 29% in cash & near cash.  This is short of my medium term goal of an 80/20 ratio but is moving in the right direction.

I'll post some specific 2013 goals once i've given it some more thought.

I'd also like to take this opportunity to wish you all a happy & prosperous 2013!


  1. Congratulations on a great year.

    If you want to spend a bit more (66% savings rate is remarkable), you could set aside a given sum each month to be spent on "luxuries". If you want something, "save" for it using the allowance you give yourself. I've been doing it for several years and I do find myself thinking about and buying a few things that I would otherwise not buy because they are "too expensive".


  2. Hi, thanks for the suggestion. I suppose even if you put the money aside, you still don't have to spend it. It probably just makes it easier to spend.

    One thing i've noticed in several recent months is that my actual spending has been coming in below my forecast or planned spending. I might start logging this surplus and accumulating it as a spending pot for luxuries.

    Many thanks