And so, as it usually does every year, the Christmas fiesta has come to an end.
If anything, the unexpected lockdown here in London was a blessing in disguise. Yes, not being able to see friends and family was a bummer.
On the flip side, it sure helped with keeping food and alcohol intake at a minimum – all while freeing up enough time for sleeping, exercising, and catching up with the kids.
Talk about silver linings.
As a result, I’m entering 2021 with a lighter stomach, a clear head, and an even bigger spring in my step than usual.
No, we still aren’t out of the woods as far as the pandemic and the broader economy are concerned. But if you wait for an ideal time to build wealth, you’ll be waiting for a long time.
Thus, in what has now become an annual tradition, I sat down on Sunday afternoon to map out our family’s top money moves for the year ahead.
Here’s our family’s financial blueprint for the next 12 months.
2021 Money Moves: Real Estate
Continuing to grow our real estate portfolio will form the cornerstone of our wealth-building efforts over the next 12 months.
As a reminder, here’s why real estate is such a powerful tool for building wealth:
Other than the chart above, there are two reasons why I am so focused on property investing.
The first one is that we are currently underweight real estate in our portfolio. Hence, I would like to increase our allocation from 23% as of today to about 40-45%, broadly in line with our equity holdings.
The second one is that while I am a big believer in the magic money machine, I am also acutely cognizant that we can run into an extended period of stock market underperformance going forward.
This is especially true after the exceptional performance of the past 11+ years.
If I can find property investments that generate “base case” returns of 8-10% with upside potential, I’ll be happy to put a significant chunk of my money to work.
As far as specific 2021 goals go, I am aiming to buy two more properties:
- Another mixed-use residential-commercial building, similar to the one we bought at the height of Covid
- A detached, single-family home in the same metro area where my parents live. This would be both an investment as well as a hedge against rising property prices in case we ever decide to move back to our hometown
Given all the lockdowns that are being put back in place, I have a feeling that January – February may be an excellent time frame to find good bargains.
Hence, hence I’ve made all of the preparations leading up to Christmas. My real estate agent is on high alert.
In other words, watch this space.
2021 Money Moves: Stock Market
The beauty of stock market investing is that in the current world of index funds and online trading, it’s literally a matter of clicking a button on your screen.
As usual, tax considerations continue to drive our equity investment strategy.
In practice, that means that we will do the following four things in 2021:
(i) Max out our ISA limits of £20k for me and my wife.
(ii) Dial back our pension contributions.
While I love supercharging our returns through tax breaks and employer matching, I now need to manage the risk of exceeding the lifetime allowance.
More importantly, we’ve already got enough in our pensions to sustain us in our golden years. The focus is now on “working backward” and enabling retirement well before we hit our pension age.
(iii) Transfer our workplace pensions into our self-invested pension plans.
Back in 2019, I realized I am literally losing hundreds of thousands by sticking with my existing pension provider.
Since then, transferring the balance of our workplace pensions to a SIPP has become part of our annual financial routine.
Goodbye, expensive plans, and limited fund selection. Hello, low fees and well-diversified index trackers.
(iv) Cash out my vested share awards.
As I’ve admitted in this post, I am actually more of an active investor than I let on.
Thus, I’ve held on to my employer’s shares as they vested over the past 12 months – with more to come in the first quarter.
Given banking stock prices are finally rebounding, I will likely cash out the awards and use the proceeds to beef up our US equity holdings.
As you can see, there’s nothing groundbreaking here.
Once you’ve established a stock market investing strategy that works, it’s best to just leave it be.
Yes, you can tweak it on the margin to reduce fees and taxes. That being said, I probably won’t need more than a day to action all of the items above – and that’s just the way it should be.
The Biggest Money Move Of Them All
Real estate and stock market investing can be a lot of fun. That being said, we are not yet at a point where our investment income exceeds the income from my day job.
Thus, as boring as it may sound, my biggest focus area for 2021 by far is to continue doing well at work.
While 2020 was an intense year, I finished it with a ton of momentum and have a solid pipeline of deals into the next 12 months.
At a cost of significant time and intellectual investment, I’ve also expanded my coverage universe in a pretty meaningful way.
As a result, there’s much more ground to cover – and many more client relationships to nurture.
As in any client- and deal-driven industry, there is rarely a direct short–term correlation between effort and compensation.
Over the long-term, however, it’s all that matters. And if I am going to spend north of 70 hours a week working, I sure plan to make the most of it.
Sitting here in early January, it might seem that we have all the time in the world. That a year is a long time.
Perhaps. At the same time, there are only 52 weeks left to go – and the clock is ticking.
Might as well get started – and mapping out your own money moves is the perfect first step.
Good luck on your journey!