We made it! My goal for 2022 was to do less work and have more fun. 2020 and 2021 were difficult years thanks to the pandemic so I needed a break.
Overall, I give 2022 a B+. The year was great from a family and health standpoint. But the year was piss poor from a financial standpoint due to the bear market.
As I start this post, I can't remember what happened in the first half of 2022. You might not either, which is why I recommend you do a year in review as well. Time for me to scroll through my picture library and jog this old brain.
2022 Financial Samurai Year In Review
I'm going to break down my year in review into five categories: Health, Wealth, Family, Financial Samurai, and X-Factor.
Health In 2022: Improvement
After experiencing shortness of breath issues in 2021, I'm pleased to say the problem is now 95% gone. My pulmonologist told me asthma can often flare up again in adults over 40. When I was growing up in Taipei, Taiwan, I was hospitalized for asthma at least twice. The pollution in Taipei back in the 80s was terrible.
I also think the shortness of breath I experienced was due to increased anxiety and stress. Despite a bull market in 2021, I was constantly worried about my kids and wife. It often felt like I was not doing enough, despite being a full-time dad, managing our finances, and writing on Financial Samurai.
What's interesting is my shortness of breath issue cleared up in 2022, in spite of a bear market. This means I've got an appropriate asset allocation based on my risk tolerance. It may also support the view that I'm satisfied with the money we have.
In 2022 I also experienced an improvement in sleep. I regularly slept six hours straight and took 30-45-minute naps after lunch. Back in 2020, I remember waking up after only four hours mostly due to worry. We had a newborn in the house and it felt like I had to always be up to defend our castle.
Finally, I lost five pounds, whoo hoo! I'm firmly in the 167 – 168 lbs range at 5'10”. I'd love to get back down to 160 lbs, but that's likely not going to happen given I don't care that much. I still fit into all of my clothes from 15 years ago.
The main reason for losing weight was eating moderately and playing more pickleball. I can only play tennis two times a week because of shoulder pain. But I found on my off days, I can play pickleball for two hours a session with no problem.
I finally got COVID after participating in my first group event indoors since 2020. I went to a preschool dad’s night out in May with 20 other dads. We had a blast drinking old whiskey and sharing stories.
The only positive of getting COVID was finally knowing what it felt like. Given I experienced a V-shaped recovery after two days of sweats, I feel less anxious about getting the virus again.
Finally, due to playing too many softball games and tennis matches, I damaged both shoulders and suffered from golfer’s elbow most of the year. Due to my sports addiction, I didn’t properly give my body days off to heal.
Wealth In 2022: Running In Molasses
My biggest financial mistake in 2022 was underestimating how aggressive the Fed would be.
Overall, my net worth increased by maybe 1%, well below my target annual net worth increase of 10%. The gains came from online revenue and passive income savings. The decline came from the stock market.
At the end of 2021, I cut my stock allocation down from 35% to 30% of my net worth (reduced in my tax-advantaged accounts). Since 2012, my ideal stock allocation has been between 25% – 30% of my net worth.
In my opinion, the ideal financial scenario in retirement is conservative returns and steady income. After all, if you're truly happy with what you have, there's no need to take excess risk.
Unfortunately, a 30% stock allocation still dragged down my net worth by ~6%, which is more money than I had lost during the 2008 global financial crisis. I'm uncomfortable losing more than 10% of my net worth in any year, hence I invest accordingly.
Real estate accounted for about 50% of my net worth at the beginning of the year. In my Personal Capital app, I undervalue my physical real estate by about 10% and have kept their values flat all year. Therefore, my physical real estate neither helped nor hurt my net worth. The same thing happened in 2021, despite a big run up in real estate prices.
However, my private real estate funds did well in 2022. I had one large exit of over $122,000. Price growth was strong in 1H 2022, then began to fade as the Fed aggressively raised rates. Rent growth remained strong in the heartland, supporting NAVs, especially in credit funds.
I wish I had more of my real estate assets in Sunbelt rental properties. Alas, I don't like to change asset allocation by selling, only through new cash flow.
Below is the latest Fundrise performance chart that shows significant outperformance. The reasons for outperformance were mostly due to portfolios with mostly residential properties and lower leverage. Although 4Q numbers are showing NAVs down 5-7% on average.
With the collapse in many tech and growth names, my Kleiner Perkins 18 venture capital fund is likely not doing as well. But I won't know the latest performance update until sometime in 1Q 2023.
I do know the KP18 fund has Rippling, which is a huge win. The Kleiner Perkins 20 fund I invested in just started in 2022. Hopefully, it will find a lot of diamonds at depressed valuations. Sadly, I missed out on the Figma acquisition, which is part of the KP17 fund.
My venture debt funds continue to return capital. I'm estimating the returns net of fees for 2022 was about 12%. In a rising interest rate environment, venture debt can ask for higher rates.
I enjoy investing in private funds that have 5-10-year payouts. It's nice to not be distracted by daily price movements so I can focus on more important things.
Strong Passive Income Growth In 2022
Thanks to rising interest rates I've managed to boost my passive income by about 10% to ~$380,000. The main source of gains are from:
- Treasury bonds yielding 4.2% – 4.7%
- A $12,000 net annual boost in Lake Tahoe vacation property income
- A $15,600 net increase in my larger rental home income
As the pandemic died down, holiday travel boomed in 2022. Further, my wife and I paid off our Lake Tahoe vacation property this year. There was only about $50,000 of mortgage left at the beginning of the year. It was our highest mortgage rate at 4.25%, which now sounds reasonable.
In June 2022, I found new tenants for my larger Golden Gate Heights rental home. As a result, I was able to boost the rent from $6,700 to $8,000. The tenants are a family of three with no pets. So far, they've been great compared to the previous family who stayed for 18 months.
Finished My Rental Property Remodel Nightmare
Now I remember what I was busy doing during the first half of the year.
A lot of my time was spent dealing with my unreliable contractor who took two years to finish a remodel instead of one year as proposed. I would have been more annoyed, but I had rented out the top two floors of the larger Golden Gate Heights rental house while I waited.
The contractor finally finished building a new bedroom, living room, laundry room, full bathroom, and closet downstairs in June. Before the remodel, there was a funky-shaped room and an old half bathroom on a one-foot raised platform for the pipes.
We ultimately gained about 350 square feet of additional living space and remodeled 650 square feet of total living space with permits. In addition, we also retrofitted the ground floor by installing plywood to brace the walls. It also felt good to put up a retaining wall toward the middle of the house.
The total cost for the ground floor remodel was about $135,000, or $15,000 more than planned. Remodeling always costs more and takes longer than expected. However, at $1,000/sqft, I added about $350,000 – $500,000 of value to the house. The existing 300 square feet of space was uninhabitable.
I also ended up building a nice deck off the dining room in June. The dining room window had been fogged out for years and the wood frame was rotten. We ended up installing a French door and creating a 78-square-foot deck. The cost came out to about $29,000, which was $4,000 more than expected. We were unfortunately buying lumber when prices were at all-time highs.
To make money in real estate, focus on expansion. Although the remodeling was painful, it was worth it. Being able to create value when the stock market is falling apart is one reason why I prefer real estate over stocks.
Other Real Estate Activities
- Fixed a longtime window leak and painted the entire exterior of my small Golden Gate Heights rental house on January 25, 2022.
- Fixed HVAC, leaking shower, and kitchen faucet in the Pacific Heights condo throughout the year.
- Fixed a cracked kitchen sink pipe in the large Golden Gate Heights rental house in November.
- Removed planter boxes per city request and added new mulch in October at the small GGH rental.
Family in 2022: An Amazing Year!
Despite the pain of losing money in stocks, I had the best year yet for my family. My mom and dad finally visited us for eight days over Thanksgiving from November 22 to December 1. They had not seen their grandkids for three years prior.
It was wonderful to see my mom smile as we talked about life, raising kids, and Taiwan. There were no arguments, probably because they had a place of their own to stay close by.
I had a great time playing pickleball with my father, who needs to be more physically active. He's now making an effort to go hit on his own in Honolulu. Most importantly, my parents enjoyed their visit and didn't get sick! They came when both kids and I caught slight colds.
My mother-in-law also came to visit on December 19 until December 25. She, too, had not seen her grandchildren for three years. She flew in on time and was also able to fly out on time, despite the bomb cyclone that canceled over 14,000 flights the week of her departure. Phew!
Proud Father Moments
There were two moments I am extremely proud of in 2022. The first was attending my son's preschool graduation ceremony. He really developed socially during this time. The second moment happened on November 13, 2022. After seven bike-riding sessions where I'd hold onto my son's shoulders or neck to keep his balance, my boy finally figured out how to ride a bike!
The joy in his voice when he said “I can do it!” and the smile on his face when he finally learned how to ride were priceless. In retrospect, the hardest part for me was letting go. Here's a one-second audio clip capturing his enthusiasm as soon as he realized he was biking on his own.
The Downer Of Being A SAHD
The biggest bummer for 2022 was often getting the cold shoulder from my daughter. It happened ~70% of the time. The same thing happened with my son between the ages of 2-3.25. Because my wife is always home, there is a natural preference for her, no matter how cheerful and nice I am.
Therefore, if you are a man with a stay-at-home spouse, between years 1.5-3 of a child's life may not be an ideal time to be a stay-at-home dad. Evolution seems to want at least one spouse to go out there to hunt for food. Of course, the gender roles can be reversed as well.
That said, I found many happy moments in my photo and video log with my daughter throughout the year. I'm showing a negative bias because she's been frequently sick during the fourth quarter. And when she's sick, she wants her mommy the most.
- Enjoyed a wonderful Sonoma vacation on Feb 22, 2022, and discovered the joy of Train Town.
- Wife's sister and son came to visit March 18, 2022 from North Carolina.
- My uncle, aunty, and two cousins visited us from Hawaii on May 26, 2022. Let my cousin and her boyfriend stay at my empty rental for several days.
- Took my son to his first basketball game on July 26, 2022, at Kezar stadium. San Francisco Pro Am tournament.
- My sister and her boyfriend came to visit on August 4, 2022. We went to see the Redwoods.
- Went to Lake Tahoe on August 8, 2022, and had a nice time hiking, eating, and playing in the pool. Oh yeah, I took my wife on a jet ski date on August 10. So much fun!
- Went back to Lake Tahoe on October 6, 2022, for four days to pick up my bashed car while it was in valet care! It was nice to make lemonade of the situation as we probably wouldn't have gone up again. Luckily, the car was ready for pickup during a school break.
- Super fun Halloween Noe Valley neighborhood walk with both kids and several families.
Financial Samurai In 2022: Consistent Production
After 13 years, my writing cadence has become second nature. It's easy to write about finance because that's what I studied in college and business school. I also worked in investment banking for 13 years.
Starting in 2017, I decided to focus more on the process and not on the results. I cannot control Google's algorithm, which media publication decides to feature my work, or which articles you decide to share.
I noticed the more I focused on the results, the less happy I became. Therefore, I primarily focused on writing about things that are interesting or important. I'm not sure how some bloggers manage to mainly pump out SEO-optimized affiliate articles. That would suck my soul dry.
The one thing I do know is that my newsletter subscriber count grew from about 46,000 to about 55,000 in 2022. I know the count because it automatically pops up every time I write a newsletter. Feel free to subscribe for free here. I recap the most interesting events of the week and offer some nuances to my posts.
I also ended up recording 43 podcast episodes in 2022, surpassing my goal of 30. After getting sick in October and November, I couldn't play as much tennis and pickleball. So I decided to use that exercise time to record more podcasts. I try to keep them between 10-20 minutes and to the point.
Online revenue was down about 15% from a record-high in 2021. I could sign a lot more business partnerships but I'd rather focus mainly on the business partnerships I use. My online income goal for 2022 was to lose less than 25%.
Making money online is nice. However, I see it as a nice byproduct of doing what I love. It already baffles me that I can earn money from the internet.
Just like how I recorded 43 podcast episodes with no advertisers, I would still write over 100 posts a year if they made no money. There are just so many interesting things to talk about every day. If it's not new retirement rules, it's figuring out how two Stanford professors can afford a $16 million vacation property in the Bahamas.
It is nice to know, however, that if I need to make more money online I can. I'm just at a stage where I'm more interested in optimizing time with my family and happiness. I feel I have the ideal balance online today.
X-Factor In 2022: Published A Book
Publishing Buy This, Not That: How To Spend Your Way To Wealth And Freedom was beyond hard. I began writing the book after lockdowns began in 2020. It was my defiant way of making lemonade after a horrible situation.
When BTNT came out on July 19, 2022, it became an instant Wall Street Journal bestseller. Based on conversations I had with publishers and agents, less than 0.2% of nonfiction books make a national bestseller list a year. Thank you for your support! And thanks to my wife for doing so many hours of last-minute editing.
When they found the book, they jumped up in the air and shouted, “Hooray for daddy!” This moment ranked right up there with getting a college acceptance letter or receiving my first job offer in finance. The years of hard work paid off.
Taking on a big project can feel daunting. It will push you to your limits so you can see exactly how far you can go. But if you get through it, you will feel extremely proud of your effort. You may also feel a trough of sorrow after it's all done.
My goal is to keep writing books until my kids leave the house. This way, I can show them my work ethic with a tangible product. When I was growing up, I wasn't exactly sure what my parents did at the American Embassy. But with a physical book, it's easy.
By doing something academic, maybe my kids will also become more academic themselves. Leading by example is more impactful than just telling.
Other Random X-Factor Wins:
- Won the men's 4.5, 40+ City Championship, went 8-3
- Won the men's 4.5, 18+ City Championship, went 11-2
- Came in second place for the men's 9.5 City Championship, went 4-1
- Finally started playing pickleball in October and met new friends
- Read 14 books
- Did several live TV interviews
No Financial Progress Still Lead To More Happiness
Progress is my one-word definition of happiness. However, despite no financial progress in 2022, I felt happier than I did in 2021.
Seeing progress in my kids and progress in my new endeavors was rewarding. Therefore, not all is ruined if you're not always making money.
Yes, there were days when I was bummed about losing big bucks in the stock market. I channeled my frustration into looking on the bright side as the Fed goes overboard.
Without the potential of always making more money, we get to focus on everything else that matters in life. For this, I'm grateful for the bear market. Here are my 2023 goals.
How was your 2022? What were some of your big wins? What were some of your losses? Did you discover any surprises after doing your year in review?
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