2014 has been a good year. The overall return of our portfolio is 15.34%, while S&P 500 index had a return of 12.39%. Our net worth (not counting real estate) has grown 58% in 2014 and our actual savings is 12% more than the savings target we set at the beginning of the year. Comparing to 2013, we significantly cut down spending on discretionary items by 27%. But kids’ fees have increased 7% from that of 2013. Our spending on basic needs is pretty comparable to that of 2013, though we exceeded our budget by 4%.
Our goal for 2015:
1. Save more. Save more really comes from two parts: Spend less and make more.
Spend less: Our saving rate in 2014 was about 37% of after-tax income and the goal for 2015 is 45%. Due to mortgage and private school tuition, our saving rate is not very high. However, owning a home and giving kids the best education we can afford (public schools are not good at where we live) take very high values in our utility function, so we consciously make these large payments and then selectively choose to think that these are good investments (at least for now). Having the younger one moving from an affiliated daycare to a private school in the coming fall will for sure further increase our kids expenses. To make that up, we need to cut down spending on discretionary items. We will also try to squeeze some room from basic needs expenditures by better planning.
Make more: My salary is pretty fixed with at most 1-2% increase yearly. But I can add additional money to our savings by finding alternative ways to pay for travel and getting maximum cash back from expenses that we need to pay anyway. Hubby’s income is pretty volatile and he is exploring some new ventures this year. So the real upward potential lies in the success of his new ventures.
2. Stick to the budget. As shown in the chart above, we exceeded our budget for both basic needs and kids’ expenses. With the planned increase in kids’ tuition this year, we seriously need to follow the budget strictly.