Wednesday, January 04, 2017

2016 Annual Accounts

This is our annual account - the sum of each of the monthly accounts I've posted - in Australian Dollars. First a reminder about how these accounts are laid out: Current account is all non-retirement account and housing account income and spending. Then the other two are fairly self-explanatory. But housing spending only includes mortgage interest. Property taxes etc. are included in the current account. There is not a lot of logic to this except the "transfer to housing" is measured using the transfer from our checking account to our mortgage account...

We earned $158k after tax in salary, business related refunds, medical payment refunds, tax refunds etc. We earned (pre-tax including unrealised capital gains) $58k on non-retirement account investments. Total current after tax income was $216k. We spent $77k, $71k of that was "core spending". (I always regard business expenses that are refunded as non-core, but also some one-off things).

$9k of the investment income was tax credits. These increased our after tax "other income" but are also counted as part of the pre-tax investment income. So, they have to deducted to get things to add up to the change in net worth. Finally, we transferred $45k in mortgage payments to the housing account.* The change in current net worth, was therefore $85k. Looking at just saving from non-investment income, we saved $36k.

The retirement account is a bit simpler. We made $45k in after tax contributions and the value rose by an estimated additional $54k in pre tax returns. $6k was the estimated tax on that and so the increase in net worth was $93k. Taxes are just estimated because all we get to see is the after tax returns. I do this exercise to make retirement and non-retirement returns comparable.

Finally, the housing account. We spent $20k on mortgage interest. We would have paid $25k in mortgage interest if we didn't have an offset account. I estimate our house is worth $21k more than I did last year based on recent sales in our neighbourhood. After counting the transfer of $45k into the housing account housing equity increased $40k of which $19k was due to paying off principal on our mortgage.

In total net worth increased by $217k, $100k of which was saving from non-investment sources.

Comparing 2016's accounts with the very exceptional 2015 accounts, we saved 56% more and net worth increased by 34% more. Salary and other current income was down as we would expect in a year that Moominmama didn't work (she went back to work yesterday). Of course, she got a lot of maternity and other payments and so current income was only down by 15%. Invesment income was up 18%. Expenditure was down 41% and even core expenditure was down by 18%.

* $5k of this is actually interest we saved by having money in our offset account. I count this as investment earnings and so to balance the books I need to count this as spending on the housing account and need to record a transfer between the current and housing accounts.

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