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Operation Focus on Money 2020: Earning, spending and net worth


Here is the next instalment of operation ‘focus on money’ we at The Money Principle are conducting – this week, we inventory in detail our earning, spending, and net worth during 2020.

Some of you perhaps committed to doing this with me, and now is the time to share what you found about your earning, spending, and cash flow.

Doing this analysis followed the guidelines I outlined in a post published in December 2020 (trying to prepare myself and you, friend.) I already published our:

Debt inventory 2020 – this was easy because we only have a mortgage. If you are interested in how to inventory your debt, however, please follow the guidelines. Also, if you decide to get serious about paying off your debt, you may be interested in reading my new book ‘Never bet on red: how to pay off your debt fast and live debt free forever’: this book is very different from what you may find elsewhere because it guides you through a transformation of belief, knowledge, and actions necessary to achieve debt freedom.

Inventory of our investments and savings 2020 – it was a bumpy ride, but our investments (including gold) gained approximately 12% during the year. Because of the markets’ bumpiness, I continued my strategy of increasing liquidity and growing our savings – our savings are up 150% on the year. And it is always good to have easily accessible cash for opportunities.

Today, I’ll share our earning, spending, and net worth in 2020. This analysis took time to complete, but it is exact to within several pounds – yes, I’m a money nerd and have a whole year of data that had to be analysed.

(The analysis is easy when using The Money Principle Monthly Budget Planner.)

Here is what I found.

Earning in 2020

First, I must remind you that our earnings in 2020 were approximately 40% less than our income in previous years. That is because I decided to reduce my professorship to a 50% position, and my efforts on building an online business have not started paying off yet. And to be fair, 2020 was not a great year for online information businesses, and advertising revenue was down.

Here is our earning by source during 2020 as a proportion of the total.

focus on money 2020

Please note that there are two entries for salary – you remember that I have two professorships, right? Also, the ‘side hustle’ entry is mainly expert consultancy associated with my academic expertise.

Spending in 2020

Spending patterns in 2020 were generally different because of the Covid pandemic.

Our household was not an exception, and here is our spending by type and category.

Spending by type

At The Money Principle, we divide spending into three types: fixed spending or spending that you have to honour because it is subject to long term contracts; changeable expenditure, which you must honour but can regularly negotiate (e.g., insurance); and variable spending, which is the easiest to control part (e.g., food, services).

spending in 2020

This picture tells us that we have quite a bit of wiggle room in our budget – our fixed and changeable spending is less than 40% of our total expenditure. Yes, our variable spending is a relatively high proportion of the whole but can be changed (I’ll go into more detail with expenditure and you’ll see that there were some peculiarities last year).

Income by spending 2020

This picture is more exciting and shows that in 2020 we saved and invested close to 50% of our income.

(Yes, you may argue that there weren’t many temptations on which to spend in 2020, but I’d beg to disagree. Lack of temptation seldom stops a spendthrift.)

Spending by category

spending by category

Our spending by category in 2020 tells a story much different from previous years. In 2020:

  • As a proportion of total spending, our most considerable expense (18%) was on food and drink. You may think that being in lockdown will turn anyone to drink; think again. John and I are probably one of the few couples in the UK who average half a bottle of wine per month; yes, per month. It includes coffee, eating out, and luxury food items. Eating out, for obvious reasons, is a negligible part of that.
  • Transport was at less than 1% of our total spending in 2020 and shows as zero. Not surprising, given that most of the year, we lived in a lockdown with nowhere to go. Except for our jaunt in the Lake District in September, but this is not that far. In case you are curious, in 2020 we spent on petrol £162.
  • Our holiday spending was markedly down when compared to other years. The bulk of what we spent covered the annual fee we pay for membership in CLC – a holiday club that gives us (usually) access to numerous holiday destinations in the sun and snow. Not in 2020, although we stayed for a week in the Lake District using this facility. Saving on holidays in the sun (and snow) is something I don’t like doing – we Bulgarians believe that sun, sand, and sea are the three Ss crucial for our health.
  • Saving on clothes, shoes, and haircuts goes without saying. I’ve been living in my tracksuit bottoms and mouthy t-shorts, I admit. Lasting between haircuts was a challenge, and, on occasion, I was tempted to shave my head but resisted. Every day during 2020, I wore make-up – defiance comes in many forms.
  • Equipment is a proportionally high spending line. We bought a new TV (our old one was ten years old). Apart from that, I purchased a carpet washing machine which paid for itself within a month, and the carpets are clean everywhere. We also contributed to the rise in Apple share price – I have a 27-inch screen iMac (which I love), and our son has a MacBook (he is studying engineering and needed a decent computer). No regrets.

Finally, please remember that proportions (percent) are deceptive for comparison. If you decide to compare your spending with the spending of others, use absolute numbers.

Net worth in 2020

I had expected 2020 to be a bad year for our net worth – after all, the economy was entirely, or partially, closed for most of the year.

However, I found evidence that money has divorced the economy, just like the Gods left nature with the advent of Christianity.

Pleasingly, but perhaps not sustainable, our net worth has increased by a hefty 2% (as a proportional increase, this doesn’t sound much, but in absolute number, it is impressive. Since I’m not going to share number, you’ll have to trust me on this one.)

net worth and liquidity 2020

As I already mentioned, we stuck with our resolve to increase the liquidity of our wealth, but in 2020, we also preferred savings to investments in the stock market – understandable given the exceptional volatility of the markets and my limited capacity to accommodate stress.

Final thoughts

Operation ‘focus on money 2020’ is nearly complete, friend.

Here are the main messages I am taking forward from the inventory of our earning, spending, and net worth in 2020:

  • Increase our income again.
  • Shift my focus from increasing my salary to growing and scaling my business.
  • Restructure our investments (this needs much more thinking and consideration).
  • Watch more carefully ‘other’ spending and reduce it.

In my next and last post in this series, I’ll share my money intentions for 2021.

Have you completed your money audit? What did you find?

Please share this post if you found it helpful and interesting.

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