Financial Independence We did it! $1M net worth on the last day of 2019. |
- We did it! $1M net worth on the last day of 2019.
- Daily FI discussion thread - December 31, 2019
- How minimizing four large expenses accounts for 66% of my networth at age 26
| We did it! $1M net worth on the last day of 2019. Posted: 31 Dec 2019 07:05 AM PST I just needed to tell someone, not to brag, but because I am so proud of this milestone and want to share with those who would appreciate the path to this point, and the path forward. I am 37, married with 3 kids ages 5 and under. Started in 2007 with a masters degree and my wife (girlfriend at the time) a bachelors degree, with a combined net worth of NEGATIVE $100K in student loan debt averaging around 4.5% interest (not terrible by today's standards, I know). Cashed savings bonds for the security deposit to rent our first place together in a HCOL area. We were ever so slightly off the beaten path and found a 1 bedroom place below market rent, which was the first key in our path to savings. We were both fortunate to find jobs right before the 08 recession, starting salaries of $75K and $40K. We both contributed enough to our 401Ks to take advantage of company matches, somewhere around 5%. Overtime, I slowly boosted my contributions until I felt I could afford the maximum annual contribution limit. After we had our first kid, my wife resigned from her job because 85-90% of her take home was going towards full time daycare in our HCOL area. She caped out around $70K. I changed jobs 3 times in the last 12 years, getting around a 20% boost in salary with each switch. I have been making $150K/year for the last 3 years. About 5 years ago we bought our first house. We made a "sacrifice" by moving even further off the beaten path into a less desirable part of town. But, we were able to purchase a 2 family property for the price of a single family in the happening spot. We bought with 3.5% cash on an FHA loan and paid PMI through the nose for 3 years. But our "sacrifice" turned out to be an incredible investment as the property values in our area appreciated to the point where we reached 20% equity and were able to refinance into a conventional loan after 3 years, at a slightly higher interest rate but still historically low. This decision also helped us back into the financial independence mindset. We were renting our second unit for more than half of the monthly mortgage, and we were paying less to own than we were paying to rent. This put our savings into hyperdrive. We have been consistently around a 50% savings rate for the last 5 years. Maxed out 401K and IRA every year, kept about $20K cash on hand, and invested the rest in self-directed brokerage accounts with an 80-20 stock-bond split, low cost ETF portfolio. 2 years ago, because our part of town was now desirable, we realized we could get enough rent for our unit to cover the cost of the mortgage and then some. So we purchased a second property in a still affordable area with the potential to be the next hot spot. 5% down this time, still FHA. Also a 2 family property. Rent for our 3 units now covered the mortgages on both properties plus about $500/month cashflow after expenses. Property appreciation in the area looks like we may be able to refinance out of the FHA (and PMI) soon, which will save us a few $100 more per month. Currently, we have around $50K cash, $450K investments, and $500K in home equity between the two properties. We definitely don't feel like "millionaires" and it's only a number, but it does signify a milestone in our path to FI. I think our true FI number is closer to $3M, but our goal is not really to stop working but to take the pressure off of having to work for income. Anyway, we're getting closer and it's fun that we hit this mark on the last day of 2019. Sorry for the wall of text btw! Edit: paragraphs! Edit2: we moved into the second property - it was not a flat out investment property purchase. Edit 3: 85-90% of wife's take home is inaccurate. It was about 1 of her paychecks going entirely to daycare with one kid and we knew we wanted to have more. So to both of us, it felt like she was just working to pay for daycare which made no sense for us to continue. We were fortunate that we could afford for her to be a stay at home mom. [link] [comments]  |
| Daily FI discussion thread - December 31, 2019 Posted: 31 Dec 2019 12:08 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| How minimizing four large expenses accounts for 66% of my networth at age 26 Posted: 31 Dec 2019 12:59 PM PST I am a 26 year old with a networth of $125,000. In 2011 I started public university, with instate tuition. In 2015 I graduated and moved to a larger city for work. I have worked full time since graduating, and at least part time since the age of sixteen. Despite my savings, I often feel like I'm not particularly frugal. Since graduating, I have saved almost half my income, but my income has also been relatively low (between $36000-$44000; except for this year). I realized that while I do enjoy going out to eat, investing in hobbies, and taking long weekend trips, I have minimized four large expenses. The savings on these four expenses have been tremendous. |Expense Category| |Projected Expense|Actual Expense|Amount Saved| :--|:--|:--|:--|:--| |Transportation| |$20000|$3000|$17000| |University| |$32000|$5000|$27000| |Housing| |$70000|$$45700|$24300| |Wedding| |$20000|$5000|$15000| The savings in these four categories have resulted in a total of $83,300. That is 66% of my networth! I have further explanation of these four categories below: Transportation: I have never owned a car. When I turned 16, I wanted one bad. My parents said I would have to work and save my own money, so I started a job at my local movie theater. By the time I saved up $4000, I realized I realllly didn't want to spend all of that on a car when I was getting along fine the way things were. I have never wanted a car since. For my current transportation, I walk, bike, and share a car with my partner of five years. I've made it a priority to design a live where my own car is not needed, but my partner has also sacrificed his own time and assets (his car and gas). I do pay some gas and car expenses to him, hence the $3000. The $20000 is assuming two used cars (an initial one valued at $4000 and a more expensive one later) and increased gas and insurance. University: Tuition at my University was $8000 a year. My first year of University, I received no scholarship money. In the three years following, I received about $35000 in need and merit based scholarships. I received these by 1) Filing my FAFSA early (scholarships were awarded first come, first serve) and applying to scholarships through my University. Since I didn't receive a scholarship my first year, I did take out a $5000 loan, which I repaid my senior year using my excess scholarship money and savings from my part time job. As a senior, I was also accepted into several private schools with scholarships, but the tuition was still expensive at $20000 a year. That would have been $80000 total! Going to a public University is a significant factor in my current net worth. Housing: I lived in the dorms my first year of college, which was quite expensive at $10000 for nine months. Living off campus was much cheaper, year round instead of nine months (which allowed me to work more), and an option at my university, so I did that for my remaining three years. If I had lived on campus for all four years ($40000) and spent about a third of my salary during my working years ($625/month for $30000) my total housing costs would have been $70000. Instead, I lived with roommates for four years and then split a modest one bedroom apartment with my partner, and paid below the recommended one third of your salary. My average rent costs have been $425 over the last seven years-despite changing cities, jobs, and incomes, I've always paid pretty close to this amount. Wedding: My partner and I got engaged earlier this year and are planning a wedding. The average cost of a wedding in my state is $20000, but we plan to spend no more than $5000, perhaps even less. One of the most shocking takeaways from this exercise is how many of these decisions were set into place by the age of 18. University, transportation, and housing were all decisions I made at age 18 and continued to have significant effects on me to this day. For example, if I had bought a car at age sixteen, would I have ever been interested in a car free life? If I decided to rent a studio apartment during college, how would I have decreased my standard of living (and rent cost) when I got a professional job? [link] [comments]  |
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