This year I expect to join the 7-figure net worth club at the age of 39. My net worth is that close. I can taste it.
When I get there, I won’t be the youngest person in the club. There are quite a few Silicon Valley CEOs 15 years younger than me who are worth 100 times more.
However, I currently work part-time. My wife is expecting to retire in 5 years as well.
Want to know how we did it? Read on.
My Million Dollar Plan
Planning is by far the most important thing. Throughout my 20’s, I maxed out my 401K and Roth IRAs. Even though I hadn’t met her yet, my wife did the same. Fifteen years ago, the combination added up to around $17,000 a year socked away for the future.
The maximums were raised and continued to put the most in there. We paid ourselves first and lived frugally to make it work. Two people saving $30,000 over 10 years becomes $500,000 when you factor in the gain of investing.
A great thing happens when you have $500,000 invested. If the market goes up 10% in a year, you make $50,000 doing nothing. Let me tell you, that is a great feeling!
Additionally, we bought three real estate properties. Before we met, we each bought a condo. Together we bought another condo. We refinanced them to 15-year mortgage which have had low rates for a few years now. We have 12 years left on all 3 mortgages.
We aren’t making money on the properties now. Instead the income from rent is buying us equity every month. We knock off roughly $30,000 in principle on the loans each year. When the mortgages are paid off they will generate monthly income to supplement our retirement. I expect them to bring in $40,000 a year after expenses.
We expect that the real estate market will continue to recover from the crash in 2009, which would give us good capital appreciation in case we decide to sell. I would prefer not to sell and keep them for their income stream.
When you combine the equity in our real estate, our retirement accounts, and our other assets, it isn’t hard to see how a million dollars is possible.
Behind these two major asset classes that contribute greatly to our near-million net worth were a lot of small financial decisions. It’s hard to put money into retirement accounts and real estate without making a good income. It’s also hard to make that money grow if you are spending on six-figure luxury cars.
I could go on about getting great value and buying at the right times. These are very important skills, but I don’t know how to teach them. If you couldn’t tell already, I’m a very analytical person. However, I do make mistakes. I bought my condo at the peak of the market. I like to think I learned from the mistake and when we looked for an investment property a couple of years ago, we bought it at near the bottom.
At the end of the day, I’m a firm believer that slow and steady wins the race. I don’t have the talent to dunk a basketball or throw a 98 mph fastball. My guitar skills are terrible. I’m never going to be a movie star as I’m the least photogenic person you’ve ever met.
For me, the best path to being a millionaire was saving and investing. That might be over-simplifying it a little bit, but that’s the simple key to success.
If any of this resonated with you, please click on over to my Ultimate Guide to Financial Freedom. It covers all these concepts in greater detail.