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I’m always looking forward to the beginning of a new year but 2021 deserves special recognition. This past year was filled with lots of challenges but we remain grateful and optimistic for a brighter future. Don’t get me wrong, we are definitely not out of the woods but I would like to believe that the worst has passed.

The holiday season just came to an end and, as usual, it feels like the right time to go back and evaluate our performance in 2020.

Both my wife and I set personal and professional goals at the beginning of the year but who would have predicted the series of events that later on took place.

But before we get into the numbers let me share some of our highlights in 2020.

• Celebrated my 40th birthday without knowing it’d be the largest gathering of the year.
• Worked from home for the last 9 months of the year.
• Lost a very good friend to COVID-19.
• Remote learning for our oldest became a reality.
• Travel hacking took a pause with the cancellation of all our flights.
• In-state tourism with several road trips to the mountains.
• Knee surgery #2 followed by physical therapy.
• Bought rental property #3.
• Still trying to overcome sciatic nerve pain and lower back discomfort.

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As a family we’re stronger than ever. Our boys are healthy and my wife is doing great.

In Colorado, the storm has not settled but we are a little more comfortable sending our youngest to daycare and our oldest back to school. They need it and so do we 🙂 .

I was told we would be back in the office sometime in June so for now, we have to take advantage of the benefits of working from home. Having the time to enjoy lunch with my family and take mini-breaks with the kids is priceless.

Health continues to be a priority and I will get better. I know what I need to do so it is game on.

On To The Numbers

There are many metrics one can use to evaluate performance but no one beats savings rate. The math is simple but the challenge is pulling all the data together and having the will to run the numbers.

If you’ve read any of my previous posts, you know I’m a big fan of personal capital. Similar to 2019 and years prior, I recently downloaded all the activity in 2020 as a .csv file, adjusted a few categories, and then estimated our savings rate.

The equation to estimate savings rate is straightforward. You grab your Take Home Pay subtract your Expenses, divide the result by your Take Home Pay and multiply the result by 100.

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The plot below shows our savings rate sitting at 46% for 2020.

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Now let’s look at the main sources of income and expense categories that contributed to our annual savings rate and monthly cash flow for the year.

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Paying Yourself First

We truly believe in paying yourself first. The concept is pretty simple.

The goal is to make sure that enough income is first saved or invested before monthly expenses or discretionary purchases are made. The key is automation.

We set up a system that funnels our income to all tax-deferred accounts including 401(k), HSA, IRAs, and 529s. In addition, we use automation to save and invest in our brokerage account(s). Whatever is left on our checking account is spent guilt-free.

This year was no different.

We paid ourselves first by maximizing the majority of our tax-deferred vehicles but this time we didn’t pull the trigger on the mega backdoor Roth.

Even though we have the option to contribute to an after-tax 401(k), our employer has very strict regulations about in-service withdrawals. If done incorrectly it could trigger an annual suspension from getting the company match.

We haven’t given up but as you can imagine, the move could be pretty risky.

The table below summarizes tax-deferred contributions in 2020.

Account Type	Amount
Pre-Tax 401(k)	$19,450
Health Savings Account (HSA)	$7,100
IRAs (2019/2020)	$24,000
529 (1)	$2,600
529 (2)	$2,600
Total	$55,750

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What About our Net Worth?

Savings rate is one of our favorite key performance indicators; however, you can’t forget about net worth. The graph below is a snapshot of the net worth tracker in personal capital. Plugging the numbers shows an increase of 35% between 1/1/220 and 12/31/2020!!

The graph below is also from personal capital. It includes all of our accounts and essentially shows we mimicked the market.

Our financial plan has been set up in such a way that it allows us to navigate market volatility without a sweat. This year was a real testament to our discipline and we are happy with the results.

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Final Thoughts

I don’t know how to describe 2020.

A lot of words come to mind: sadness, exhausting, chaotic, surreal, unimaginable, heartbreaking, nightmare, lack of social interaction …… relentless, perseverance, resilience, priorities, transformation 🙂

If you’d told me that …

• my 40th birthday would be the event of the year (at least for us),
• we would become teachers,
• I’d be working from home for 9 months and,
• the market would drop 30% to then recover and gain 16% …

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I would have said … what the hell are you smoking?

Before I wrap up, let me leave you with the following:

• Please don’t let your guard down.
• Take care of yourself and protect your loved ones.
• If you don’t have a financial plan in place what the hell are you waiting for?
• If you have one, stick to it.
• Above all remain optimistic and hopeful for a better and brighter future.

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Until next time … JJ