Year In Review 2021 Finance Edition

Year In Review 2021 Finance Edition

We are now two months into 2022 and 2021 is far behind us in the rear view mirror. It’s time to reflect on the past year. Yeah, I’m know we are well into February, but better late than never.

A lot has happened, so I’m going to break it up into a year in review with respect to finance and later I’ll talk about what’s going in my life elsewhere.

Overall, 2021 was a good year for us financially. When you break it down to its simplest components, personal finance really just boils down to growing your income, cutting expenses by not wasting money on unnecessary stuff or things that don’t make you happy, then investing the difference.

Here’s a glimpse of our finances in 2021, including some of our expenses and income.

 

Expenses

In every household, the top three expenses are are almost always housing, transportation, and food.

Housing

Despite inflation running hot, we are able to keep our housing expenses relatively low. Since we don’t rent, our housing costs are relatively fixed and not subject to rent increases.

We don’t own our house outright since it’s not fully paid off, but we “own” it with a fixed mortgage. And in 2021, I was able to refinance our mortgage to a 15 year loan fixed at 1.75%.

Our previous rate was 3.625%. In effect, refinancing our mortgage helped decrease the monthly payment, shorten the length of the loan, and reduce the total amount owed over the life of the loan by a significant amount. This was a huge win for us.

Transportation

We still don’t spend much on transportation either. Since our primary vehicle is a Tesla, we don’t have to pay for gas.

Due to inflation, gas prices have skyrocketed by 50%. In Southern California, it’s not uncommon to see prices as high as $5 a gallon for premium gas.

Obviously, I do not pay these exorbitant gas prices for my Tesla. I just plug it in to my home charging unit and electricity is essentially free because I have solar panels that over produce more energy than we need.

Food

Our food expenses are not as low as they were in the past (like when we were only spending $200 a month for groceries), but it is still relatively low.

One advantage of eating a whole food plant-based diet that is mostly locally sourced is that it is less expensive compared to a meat heavy diet. Meats really increased in price due to inflation.

Eating locally produced foods also reduce the impact of inflation in factors such as transportation costs.

In general, I haven’t seen a huge increase in our food expenses except when we go out to eat at restaurants, which isn’t very often since we eat a vast majority of our meals at home.

Other Discretionary Expenses

As usual, we were able to keep our other discretionary expenses relatively low.

Clothes

We still don’t buy a lot of clothes. Even my three year old daughter wears the same thing every day by choice.

She has about ten outfits to choose from, but she ends up wearing the same three princess outfits over and over. One of them is the mermaid dress my wife made for her from scratch (in the featured picture above).

I guess she’s a budding minimalist who knows what she likes.

Toys

Somehow, we are also able to avoid buying a lot of toys for her too.

It helps that a lot of her favorite activities include playing outside with friends, reading (or at least looking at) books, and painting works of art on scrap paper and cardboard boxes that would end up going in the recycle bin anyway.

Who needs electronics and plastic toys when you have nature, friends, books, and creative art to entertain you? 😀

Travel

Historically, our biggest household expense by far has been travel. 2020 was an anomaly for obvious reasons. But as travel restrictions eased, we started traveling again.

We traveled along the California coast and to the Pacific Northwest in May. In August we visited Chicago, Boston, and Maine. And in October we flew to Paris (in business class again!).

For how luxuriously we travel, we only spent a few thousand dollars in 2021. About 80% of these travel expenses were paid for using points and miles. I accumulated so many points in 2020 that it’s not even funny. I’m planning to use even more of these points in 2022!

 

Income

With respect to expenses, there’s only so much you can cut. Cutting expenses has a floor. But growing your income has no ceiling.

So let’s talk about income

Active Earned Income

Without a doubt, the vast majority of our household income comes from my working salary as an anesthesiologist and interventional pain physician. My salary is pretty close to the average for physicians in my specialty which affords us a very comfortable  lifestyle.

My wife is a state prosecutor who makes a decent income too, but it is a fraction of what I make.

Both of us earned raises this year, which is natural as we progress further in our careers.

Other Sources of Income

In addition to the increase in our active income, we were also able to grow other sources of income.

Administrative Duties ~ $18,000

On top of my clinical duties, I have take on some administrative duty as a wellness champion in my physician group.

These duties include helping to lead meetings, co-host in collegiality events, maintain a Facebook group page, host a podcast, among many other projects.

I earn a stipend of about $1500 a month for my work.

Real Estate Syndication Distributions ~ $6,500

Last year, I invested in a two real estate syndication deals.

I invested $50,000 in each deal. One has a preferred rate of return of 7% and the other has a preferred rate of return of 6%. These distributions are deposited to my checking account monthly. This is truly passive income “mailbox money”, which is pretty awesome.

Interest Income ~ $100

Between my wife and I, we do not keep much money in savings accounts.

On average, we keep about $20,000 or so in savings and it has been earning a meager 0.5% APY.

It’s not a lot, but it’s something.

Credit Card Points ~ $10,000

In 2021, I earned more than 1,200,000 credit card points across multiple credit cards.

The bulk of the points were earned from meeting huge sign up bonuses by opening new cards every quarter then using those new cards to pay my quarterly estimated taxes to meet the spending threshold to earn the bonuses.

Some of those points were earned by spending on our usual expenses. For example, I earn 4x on grocery purchases using my American Express Gold card and 5x on my Citi Prestige card for spending at restaurants.

Quite a few of my points were also earned by referring others. When I refer friends to sign up for credit cards or when readers of the blog click on my referral links I earn points as a referral bonus. It’s not a ton, but it adds up.

I haven’t been doing much manufactured spending by purchasing gift cars because they are getting harder and harder to liquidate nowadays. Therefore, MS isn’t a major source of my points earning anymore.

If redeemed for cash, the 1,200,000 credit card points that I earned would amount to about $10,000. This is because I can redeem each point for at least a penny each. I also have to subtract about $2,000 or so to account for credit card annual fees and the 1.87% convenience fee when using a credit card to pay taxes.

Online Income ~ $3,000

My blog doesn’t have a huge audience and therefore doesn’t generate that much income. However, it does make some money.

Last year, I made about $2,500 through affiliate marketing and selling online courses for affiliate partners. I also made $300 dollars writing guest posts for other blogs. Google Adsense paid about $200.

Making money as a blogger, YouTube vlogger, social medial influencer, or any other online entrepreneur can be difficult. You have to be able to  create quality content that is both valuable to other and authentic to yourself on a very consistent basis over a long period of time, then build a community based on your content and voice, then leverage that following to sell products and/or services. It’s a simple formula, but obviously it’s not easy.

Personally, I’m not willing to commit the time and effort to do it since I have other priorities in life (i.e. family) and I already make decent living from my work as a physician. But the experience of dipping my toes into the waters of online entrepreneurship is invaluable. I know that I can always make some money online if for some reason I couldn’t work as a physician anymore.

Options Trading ~ $6,000

While about 80-85% of my stock portfolio is in broadly diversified passive index funds, I do own several individual stocks. The two top individual stocks that I own are TSLA and AAPL but I own a dozen others.

I have a few hundred shares of these stocks and I used these shares as collateral to sell weekly covered calls. I’m relatively conservative, so I generally sell covered call options that are pretty far out of the money to minimize the risk of having to sell my shares if an option contract is exercised and my shares get called away.

In addition, I often sell cash secured put options every week to collect some extra income from the premiums. Again, I’m usually very conservative with this option strategy so I sell put options at strike prices that are far out of the money.

Sometimes I use other strategies like iron condors, bear call credit spreads, bull put credit spreads, and others just to make extra money by collecting the premium from these option contracts.

On average, I collect about $500 (usually more) a week.

Stock and Index Fund Dividends ~ $8,000

As I mentioned above, most of my stocks are in index funds. My largest positions are in Vanguard index funds VTSAX (total stock market), VIGAX (large growth), VLCAX (large cap), and VFIAX (S&P 500 index).  I also own individual stocks like AAPL, JPM, VZ, and others that pay some dividends.

Speaking of stocks, let’s take a look at my portfolio.

 

2021 Portfolio Performance

I use Personal Capital to track my investments and portfolio performance.

 

As you can see, my portfolio underperformed the S&P 500 and US Stocks. This is probably due to a variety of reasons. First of all, I started to increase my holdings in bonds and international stocks. Second, I used a portion of my self-directed retirement account to buy shares in ARKK, ARKG, and a few speculative tech stocks in the beginning of the year when they peaked. Hindsight is 20/20, but obviously that wasn’t a very smart move.

Asset Allocation

Even with me adding more to my bond and international stock position, I am still relatively underweight in those asset classes compared to what Personal Capital suggests should be my target allocation.

My alternatives include the two real estate syndication deals and a small portion of my portfolio is in cryptocurrencies (BTC and ETH only, no other alt-coins or NFTs).

The unclassified section includes Series-I bonds that I purchased at the end of 2021. I had to manually add these investments and for some reason, Personal Capital didn’t classify them as US Bonds. This section also includes index funds that Personal Capital has a hard time classifying, like Wealthfront’s “Risk Parity index”. I guess I’m too lazy to try to re-classify these assets into their proper category. Oh well.

 

Efficient Frontier

Nevertheless, Personal Capital does indicate that my current asset allocation is efficient. Yay!

 

Final Thoughts

Overall, 2021 was a good year for us financially. We were able to keep our expenses relatively low despite rising cost from inflation. And we were able to also grow our actively earned income as well as our other sources of income too.

I’m looking forward to 2022 and hoping it brings continued happiness, health, and prosperity.