Charting New Horizons: 2023 Cashflow in Review
Taking cashflow visuals to the next level using Sankey charts.
2023 In Review
As the clock struck midnight on January 1st, 2023, I, like many of you, looked off into the not-so-distant future with wonder, embracing what would become of my next lap around the sun. Coming back to Canada from the life-changing adventures of a foreign exchange program in the heart of Marseille, France, I felt primed for exploration and hungry to embrace the influx of new experiences that lie ahead.
Yet, this New Year seemed slightly off. Things were different this time, as I was on track to reach one of my most significant milestones to date - graduation and the commencement of my career. Though I was excited to turn the page, the beginning of the rest of my life (and of repaying my hefty $40,000 student debt) was a bit daunting. In 4 months from the ball drop, I was expecting to get a start on something, and I had no idea what that would be. I anticipated a more mundane and perhaps rudimentary year ahead, but I couldn’t have been more wrong.
As the year unfolded, I found myself in places unknown. I swapped my elegant grad cap for a tireless and honourable construction ball cap and relished the creation of tangible, luxury PVC decks. I proudly avoided launching my career from inside a local banking branch, opting for a role that demanded physicality, taught technical hands-on skills, and enabled me to plunge into the multi-faceted high-end construction business.
Perhaps, like me, you've discovered that exploration isn’t exclusive to exotic destinations or foreign cities - it's present in our everyday lives. I realized that exploring isn't an act of voyage, but a mindset that must be applied daily to reach never-ending growth and understanding. Exploration turns every day into an opportunity to achieve greatness. It broadens the physical and mental bounds of discovery.
When reflecting on 2023, I see a year that redefined exploration. Though the only ‘coastal’ waters I saw in 2023 were in my hometown on Lake Ontario, I felt I had set sail on Day 1 of a journey, bound for the open ocean of opportunity ahead. I spent years preparing for this journey, seeking the tales of those who have charted these waters before me, learning the skills necessary for survival and progression, and getting some novice experience deploying my most utile resources - time and money.
Speaking of money.
It’s fun to fantasize and reminisce, but the most effective and accurate reflection embodies a balance of mental recollection and statistical proof. Though I don’t have a timesheet breaking down everything I did in 2023 (could you imagine?), my financial records serve as one portal through which I reflect on my journey.
Follow along as I explore my 2023 story in numbers.
2023 In Numbers
Instead of the classic expense breakdown, I though I’d give you a different perspective of how cash flows though our bank accounts. In Part 2, we’ll bring back the classic expense breakdown.
What you’re looking at is a Sankey Diagram, and they’re perfect for cash flow analysis. On the left, the grey nodes represent all the cash inflows that are my gross income (in green). From there, my gross income branches off to the different components of the personal finance identity, where the red nodes reflect cash outflows and the green nodes reflect the cash that stayed in my hands.
Fan of the Sankey? I’d love your input! Drop me a like, or leave a comment.
Lucky for me, the diagram does most of the explaining. Today, we’ll explore where the cash flowed and why.
Gross Income, Withdrawals, and Everything Else
All my incoming cash went in one of two places - either withheld (by my employer or myself) or in my bank account. Right off the bat, I do not see 24% of my income. Instead, it is either withdrawn by my employer to pay income tax (see Taxes node) or by myself to Pay Myself First (see Investments node). That’s right, I take PYF so seriously that I don’t even bring it under my control - it's lumped with taxes.
Notice the investment (PYF) value of $4,380 - It’s almost exactly 10% of my gross income of $43,727. To nail the goal of 10% PYF, I first had to make the goal, then execute by treating my PYF investments like a (personally inflicted) tax. If that’s not proof of the effectiveness of prioritization, I don’t know what is.
Disposable Income and Non-Discretionaries
Whatever didn’t get withdrawn from my Gross Income is considered Net Income, and branches off into Disposable Income or Non-Discretionary Expenses. As the name suggests, non-discretionary expenses are all cash outflows that I had no discretion over. They are the base level of expenses I am obliged to incur to survive and live my lifestyle. Of these expenses, a majority went toward rent, groceries, transportation, and other "necessities". An almost negligible amount (only $913) went toward Interest.
I say necessities lightly because most non-discretionaries are still up to one’s discretion. You can lower your non-discretionaries by buying cheaper groceries, paying the lowest rent possible, and prioritizing a life that doesn’t demand a vehicle. My point is that though these expenses are "necessary", the ballpark in which this value lands is up to your initial lifestyle decisions and the financial demands and commitments that come with it.
"$40,000 in debt AND you paid less than $1,000 in interest? Yeah, right."
I know I was shocked, too. I felt like I paid more, but most of the paid interest to my student line of credit. Most of my debt is government-provided through OSAP, which I didn’t become obligated to repay until November 2023, the end of the 6-month post-graduation grace period. I expect 2024 to set personal records for this category, further pressuring my debt repayment plan.
Save or Spend?
The cash that didn’t get chalked down as a ‘necessity’ ended up as a discretionary expense or in a savings account.
I set aside the savings of $2,370 solely for January’s trip to Uruguay, and $7,105 went toward a whole wack of different expenses.
Oh, didn’t catch the Uruguay post?
Dollars to Pesos: 5 Weeks in Uruguay
The Boeing 787-8 hit the tarmac of Montevideo’s Carrasco International Airport with seemingly effortless precision. After a three-day layover in Miami, Fernanda and I finally made it to our sunny, culture-rich destination. This landing was a first for me, not only because I had never been south of the equator but because I had
Some notable ones were recreation ($2,900) and drinking ($2,500). Other categories included Christmas and presents, flights to Uruguay, and eating out. It’s not pretty, and it adds up quickly!
But discretionary expenses aren’t $7,105… they're $13,877! What gives?
Debt Financing and Repayment
You may have noticed that, with all this talk of going into debt, there isn’t a debt node on the income side of this visual. I could have done that, but the most digestible way to include net debt in the visual was to have the independent Debt Financing node, which funnels cash directly into the discretionary expenses line. This value means that after considering all debt financing and repayment, my overall (net) borrowed amount was $6,772.
In practice, this $6,772 wasn't spent directly and exclusively on discretionary expenses - most of it paid for my tuition directly through my school account. My cash flow breakdown isn’t so much of a dollar-for-dollar system but rather a jumbled series of cash inflows and outflows. I allocated the (net) debt financing balance toward discretionary expenses because, since these expenses were up to my discretion, they could have been avoided, meaning the need for debt financing could have been eliminated.
In Part 2, we will consider the debt financing and repayment landscape in more detail. When we zoom in on specific phases of 2023, we see that I transitioned from a period of high borrowing to one of consistent debt repayment.
2024 In Progress
Considering the first few months of 2024, I am sure my cashflows will tell a different story than 2023. Here are my highly anticipated key differences.
Anticipated differences for 2024
Absolutely 0 debt financing: I’m taking a PYF approach to paying off all my interest-bearing debt.
Wildly volatile income: Entrepreneurial ambitions make anticipating yearly income challenging.
Shifting of discretionary and non-discretionary expenses: Both should be lower, giving me flexibility for other priorities.
In the waning hours of 2023, a familiar feeling came over me - the dawn of the New Year had me pondering what was in store for 2024. Expectations can only take me so far - I need to contribute ample time toward building the year that I want, and this process includes the planning and execution that most aligns with progress. Beyond building budgets and being mindful of my spending, I need to consider my priorities and how I should spend my time. A year from now I’ll have fond memories of the days of the present, but what about the data? Beyond the subjective reflection of the past, reliable data is essential for holistic understanding and feedback.
After casting off into the ocean of my future, the year of sailing took me to where the harbour meets the open sea. The land is still in view, but the wind in my sails propels me with merciless consideration of the safety and security of my origin. With each passing day, the trees behind me stand slightly smaller than the day before. I am on life’s voyage, exploring endlessly and guided only by my understanding of the world around me.
Thanks for reading! 👋
As always, drop me a like (especially since you made it this far!). Your support is forever appreciated.
Best.
Evan Clementino