2015 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.  Though we missed the chance to publish our own Shareholder Letter the same day that Berkshire Hathaway did this year (that’s what we did for the2012, 2013, and 2014 editions), we figured we’d post it today since we’re leaving for Omaha to see the meeting in person with other cool folks like The 1500s, Even Steven, Income Surfer and A Fiery Millennial.  

If you’ll be in Omaha, drop us a line!  And if you won’t be in Omaha, you can still catch the meeting which will be livestreaming for the first time ever on Yahoo Finance on Saturday.  Definitely worth catching one way or another! 

Executive Summary

2015 was in many ways a “building” year.  Our net worth growth was the lowest that we’ve seen since starting our tracking in this space nearly four years ago.  The flat equities markets certainly weren’t a help there, but we also made several larger, long term capital expenditures (namely our giant remodel project, our new solar panels, and a new roof on our duplex) that should provide dividends (both of the monetary and happiness kind) for decades to come, though we haven’t recognized much (if any) monetary value from them so far.

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
  • End of 2015 Net Worth: $949.3K
    • YOY Net Worth Increase of $122.7K, +14.8%
    • 2015 Gross Income: $200.8 Employment / $18.5 Investment Properties
    • 2015 Spending: $70.7K Personal ($23.9K Remodel, $26.8K Everything Else) / $15.9 Investment Properties

Money

Real Estate:

We put an incredible amount of money into our properties this year via various capital improvements.

For Our Rental Duplex: Due to a switch in our insurance companies, we unexpectedly had to get a new roof put on a year earlier than we had originally planned.  This affected how much we were able to invest elsewhere this year, so our taxable brokerage account suffered by missing out on the $8,700 that we had to spend on this.

For Our Primary Residence: Early in the year, we put out a cash outlay of $30K to install solar panels that would provide electricity to power our kWh needs for decades to come.  The majority of this purchase was reimbursed via various rebates and tax incentives, but the net cost to us was still around $6K.

As noted above, we also put nearly $24K (and what felt like countless man-hours) into remodeling our primary residence which consisted of a gut renovation of our kitchen and dining room, in addition to purchasing flooring that will eventually extend throughout the entire house.  We have yet to modify the value of our house to account for these renovations as they are not yet complete, but when they are we expect to remove the discount factor we had previously applied to our sales comps analysis when valuing our home.  That will boost the book value of our home somewhat.  However, it should be noted that we don’t think of this spending as a financial investment, but rather one in increasing the usability of our small house , thereby increasing our happiness and satisfaction with it for years to come.

Stocks and Liquid Investments:  We maxed out our 401Ks, Mr PoP’s HSA,  and used the “backdoor” Roth funding procedure to max out our ability to deposit funds into our Roth IRAs.  However, due to all of the spending on various real estate projects above, we were able to put significantly less into our taxable brokerage account this year, just $34K.  However, combined with the $72.5K we put in during 2014, we are still on track to invest an average of $50K into our taxable brokerage account each year.  The S&P500 (our benchmark investment) was also down slightly for the year, so our balances didn’t get any boost from price appreciation.

Income:  Our cash income from our day jobs was up in 2015, but down on a gross basis (due to us having less non-cash compensation in 2015).  Rental income was the opposite situation – down (on a cash basis) due to paying for that new roof on the duplex.  However, we didn’t have any rental vacancies, and increased the rent in one unit when we had turnover going in to January 2016, so it’s still a solid money maker.

Spending:  Spending was pretty good.  While we went over our projected spending on the renovation, we were under enough on our “Everything Else” spending to come within 1% of our intended spend total, which is all the more impressive when we consider that includes nearly $6K in non-reimbursable spending on installing our solar panels.  More details here.

Happiness

Work related stress was lower this year than in years past, which was very good considering that home renovation stress was quite high at various points through the year.  Some of it was good stress as we celebrated wins at various points in the process.  But (especially for me), there was some bad stress dealing with unexpected delays and difficulties as we made our way through our biggest project yet.  As 2015 closed, the majority of the bad stress was happily in the rear-view mirror as the renovations really came together and the end began to be in sight.

Kittens

Kitty PoP: Kitty PoP had a bit of an expensive year as he figured out how to destroy the remaining non-pet screen in our lanai and (not-so-slowly) clawed his way through over $200 worth of screen.   Kitty PoP’s low of the year was probably similar to mine.  He was not a fan of the few months that we spent between having the old tile floors ripped up and laying the new tile down.  We think it was mostly the concrete dust that would get on him during that time that he disliked so much, but he is adapting very well to the new tile that Mr PoP has installed and seems quite happy again.

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

2015 Highlight Reel

  • Embraced my inner hippie and got solar panels installed when presented with an opportunity for a great ROI.

  •  Demolished and (mostly) rebuilt a kitchen, learning lots of new skills (framing, electricity, cabinet building, plank tiling…) along the way.

  • Mr PoP went camping for several nights in Yosemite while visiting a friend in the Bay Area.

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 2015?

 

5 comments to 2015 Shareholder Letter

  • Looks like a great year to me! And a busy one!

    We, well, spent all the money we made. But more positively:

    1. Funded our need for a second car with cash available.
    2. Bought a house.
    3. Started new job (me).
    4. Were raising two preschool-age children on a combined AGI of $66K.

    So while spending all our money is not a pattern I want to repeat annually, I’m going to be satisfied that we worked hard, learned a lot, and avoided all non-mortgage debt.
    Frugal Paragon recently posted..Let’s Talk About Feminine HygieneMy Profile

    • Your 2015 was definitely busy as well… Here’s to both of us getting a little bit more of a slow down in the latter half of 2016!

  • Olivia

    Was great to meet you two at Blatt’s yesterday! Thanks for explaining your story to the kids; sorry I did not get to say goodbye properly. Hope you had a great time at the zoo! (or wherever you finally decided on going) : )

    • Great to meet you too! It ended up being pretty cold yesterday, so we took your other recommendation and spent the afternoon hanging out in the Durham museum, which was really neat. We loved the Art Deco architecture and the exhibits were really interesting, too. =). Hope you guys had a safe drive home!

  • It was great to be able to meet you two! Thanks for all the great conversations!

    (Also well done on the financial progress!)
    Gwen recently posted..Savings: Year TwoMy Profile