The start of a new year is a good moment to reflect back and think about the previous one. You can do it taking several angles (e.g. personal achievements) but the relevant one here is related to personal finance.
Starting from the net income, it increased by 14%. This comes from having rented out the apartment for the full year in 2022 vs just a few months in 2021. My income from work declined slightly as in 2021 I benefitted from a relocation package for moving back to Amsterdam.
Recurring expenses are down 4% - this includes stuff like energy, insurance, internet. I corrected the totals to make it more like-for-like (or comparable) by removing the mortgage payments and Junior´s expenses. In 2021 I was paying off the mortgage with additional capital whenever I could; in 2022 I changed strategy given the high inflation and invested those amounts (they are still tied to the mortgage though, I cannot use them for other purposes). Junior´s expenses were negligible in 2021 but daycare in 2022 is becoming a major factor (and in 2023...).
I am surprised the energy cost goes down in 2022 vs 2021, but this is related to the fact that 2021 was the first year in Amsterdam and with a new energy provider that charged us a standard fare. This was far too high compared to our consumption and in 2022 they had to correct it by giving us back some money.
Insurance cost goes up by almost 40% but it is not fully comparable as we moved back to the Netherlands only in April 2021 and in Germany the cost was much lower.
Discretional expenses also down 16% -here I correct for house repairs, wedding cost and forniture. In 2021 we spent on forniture as we moved back and had to do some fixes in the apartment I rent out. Plus, we had some extra cost related to the wedding that happened this year (after we postponed it twice due to Corona).
Eating outside or ordering in received a big cut, more than 1,300 Euro less in 2022. Also owning and using the car was less expensive as in 2022 I did not need to do the big checkup for the maintenance, but it will come in 2023. On the other hand, travelling spiked up due to the winter holidays that last year we skipped.
Overall, I am happy about how I managed the balance between income and expenses last year. I managed to maximize the rent from the houses, while reducing the costs under my direct control.
An outlook for 2023.
2023 will be a wild ride as there are at least two big factors impacting it:
- Junior childcare cost has exploded, going up around 30% vs 2022. We will end up paying around 1,900 Euro each month for 4 days of childcare. As of 2024 the cost should come down, so this is a temporary spike - but it is nonetheless painful.
- I will receive a severance package from my old company around February / March and start a new job as of 1st March. Overall, the salary will be slightly less than what I used to make and the holiday allowance will be paid out all in one month rather than bit by bit each month. This means that I need to rely on less net income in a standard month.
Of course I expect other costs to go up as well - e.g. rent - so I am budgeting that in as well but these are the real macroscopic impacts that will limit in 2023 my capability to reliably invest every month.
Investing the severance package will mitigate this but it will mean moving away from the DCA (Dollar Cost Averaging) strategy I have followed so far. Also, I will use that to finally beef up the emergency fund once and for all.
If we exclude that and the investments tied up to the mortage repayment, I believe I can invest every month around 1,000 - 500 Euro for 2023. It is a far cry from the 2,700 Euro of 2022. For reference, even in 2019 and 2020 I could invest more on a regular base, however that is the current situation.
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