2016 Annual Review

2016 was an excellent year for my finances and exceeded expectations. These are a few of the key points:

Net worth
Net worth increased by 24%, compared to 16% plan and 18% in the prior year. This was driven by a combination of (a) higher than expected income, (b) strong equities performance supporting the investment portfolio and pension valuations, and (c) the impact of a large movement in foreign exchange rates post brexit increasing the value of my hkd assets in gbp terms.

Savings rate
Savings rate (net income after all expenses divided by gross income) was a very high 65%. This was in line with plan, but within this number both income and expenses were higher than expected, but in this constant proportion. My savings rate has been in the 60-70% range for five years in a row (since detailed records commenced), and although expenses have been increasing during this period, it has always been proportionate to increases in income.  Whilst this is clearly a high savings percentage, it does not feel like i've been particularly frugal and expenses reached a record high this year.

Income
Income reached a record high, driven largely by higher than expected employment income, of which a growing portion is variable and may not all recur.  Aside from employment income, the passive income from my assets (property, cash savings and dividends on investments) continued to rise as my net worth and assets increased. Throughout the year i also crystallised some foreign exchange gains and realised some gains on the disposal of non core parts of my investment portfolio, taking the opportunity to simplify my range of ETFs as many markets hit long term highs.

Expenses
Expenses also reached a record high.  Roughly half of the increase was unavoidable - home rental and taxation related,  the other half was more discretionary.  In particular travel costs were a lot higher than previous years with around 7 separate trips enjoyed during the year.  Property investment costs and bills were also higher than expected, including some costs associated with acquiring a new rental property towards the end of the year. General living expenses were also slightly over plan but with nothing significant driving the increase.

Overall there are far more positives than negatives here, along with a few one off factors i don't expect to recur consistently in the years to come.  I will dig into expenses a little further to see if there are opportunities to reduce, or at least stabilise some of the increases,  but overall i don't see much cause for concern. Income is less predictable so i can only hope for the best and keep maximising the parts i can control.

A 2017 plan will follow shortly.