2014 Shareholder Letter

Warren Buffet’s #1 fan!

One of the ways that Mr. PoP has enjoyed learning about business and investing over the years is by reading (and re-reading!) Warren Buffet’s annual Shareholder Letters written to the shareholders of Berkshire Hathaway. In honor of the release of Buffett’s 2014 letter (which is due out tomorrow, 2/28), here is our own PoP 2014 Shareholder Letter. Click through for the 2012 and 2013 editions.

Executive Summary

2014 was another solid year for us financially. Our net worth growth was lower than it was in 2013, but we’re not that surprised by that since we didn’t have 30%+ market gains in 2014 to effortlessly boost our portfolio in the same way. Instead, more of our gains this year were from our income, which was a bit higher in 2014, and by not missing our spending targets by too much. So in that way, we feel better about our 2014 gains than we do about the 2013 ones.

Here’s what the past few years have looked like:

  • End of 2011 Net Worth: $256.7K
  • End of 2012 Net Worth: $417.3K
  • End of 2013 Net Worth: $624.4K
  • End of 2014 Net Worth: $826.6K
    • YOY Net Worth Increase of $202.2K, +32.4%
    • 2014 Gross Income: $206.1 Employment / $18.5 Investment Properties
    • 2014 Spending: $50.5 Personal / $8.0 Investment Properties

Money

Real Estate: We booked a solid increase in the market value of our duplex early in 2014, but that was the most eventful part of our real estate portfolio in 2014. Our rental duplex was happily uneventful for the year, with long term renters on one side (they’ve been there for over 2.5 years now) and renters that look like they are likely to stay for a while on the other side now, too. References from current and former tenants remains the single best way that we have found to get high quality tenants.

We haven’t booked any increase in value (still at $80K on our balance sheet) on our canal lot as there haven’t been any lot sales in that neighborhood lately. Another lot in the neighborhood is currently listed in MLS at the laughably high value of $350K, so if that one sells, perhaps we will change our tune. In the mean time, big, beautiful houses are continuing to sprout up in that neighborhood, filling in empty lots and decreasing supply. So we still have hopes that we will flip that piece of land in the next 5 or so years. (It’d actually be nice if we flip it after we don’t have wage income due for tax purposes.)

Stocks and Liquid Investments: 2014 was the year that we opened our taxable brokerage account and we managed to stash away $72K into it over the course of the year. Market gains of over 10% weighted across our various funds also contributed to the highest balances we’ve ever seen in these accounts at the end of the year.  Mr Market surely won’t be this good to us every year, but we’ll take it.

Income: Our income in 2014 was up (which no doubt was a primary contributor in stashing away more in that taxable brokerage!), mostly from our day jobs. Our duplex income was also up in 2014 due to having a year with full occupancy and without any large expenses. While we wish they were all this way, we know that’s not going to be the case and our projections on our rental income into the future are not based on the rosy picture 2014 presents.

Australia Fun Fact: Koalas look like real-life Popples!

Australia Fun Fact: Koalas look like real-life Popples!

 

Spending: Our spending was right on target. After netting out a rebate check for overpayment into our mortgage escrow account in early 2015, we came in at $12 over our targeted spending of $50K, which felt pretty good for having adventures like going to Australia, attending our first ever Berkshire Hathaway Shareholder Meeting, buying a vintage Mercedes, and getting Mr PoP SCUBA certified!  (None of which were particularly cheap endeavors…)

Happiness

General Emotional State: Overall, pretty darned good. After five years of marriage, we’re happier with each other than ever and felt secure enough in everything to start what will be our biggest project yet, our kitchen remodel.

Stress Level: We both (and Mr PoP, especially) had quite a bit of work stress at different points throughout the year. But by the end of the year Mr PoP had secured a new position that should keep his work related stress at a much lower steady state in the future.  I continue to manage my stress through daily exercise like running and bike commuting.

Kittens

Kitty PoP: Continues to be an amazing cat. In 2014 he learned that the best way to get Mrs PoP to dish out his kibble at dinner time is to crawl onto her chest while she sits on the couch, lay down, and purr. He also settled in quite happily to using his fancy-pants Litter Robot and seems utterly at peace with the world. His vet did shave his chin during his yearly check-up, which treated his cat acne and also provided the PoPs with some laughs at how ridiculous he looked with a shaved chin.

Discussions on an Additional Acquisition Kitten: Off the table. One Kitty PoP is more than enough right now.

2014 Highlight Reel

  • Sold the Jeep for more than we thought it was worth and officially became a 1 car household.
  • Stashed $72K away in our newly created brokerage account, in addition to maxing out our 401Ks, Roth IRAs, and Mr PoP’s HSA.
  • Best money spent was probably on Sunny, though that might also be the worst money spent. Time will tell.
  • Got a head start on our kitchen renovation which is technically our 2015 project.
  • And at the end of the year, Mr PoP scored a promotion into a new gig with his same employer.  A nice way to end the year.  =)

If you like the idea of writing a shareholder letter, start your own tradition! To you get you started here is a link to Buffett’s letters, along with a link to the annual letter from Bill Gates.

 

Anyone else out there devour Buffet’s Shareholder Letter every year the way Mr. PoP does? How would your shareholder letter read for FY 2014?

 

PS – Happy Friday!  The solar contractors are supposed to get started on our solar panel installation today!  Yay!

 

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