Photo via Sean Hacker Teper | Words by Me
Note: This total does not include my house or car. The house is shared with my girlfriend and my car is depreciating faster than Hilary Clinton’s credibility. So excluding those, the $100K figure is strictly in liquid assets.
I did it! Back in Dec 2010, I set a goal to save $100K in Net Worth in 4 years. I missed it by a year, but hey I was still able to hit my monetary goal at age 31. Pretty stoked about that since most of my 5-year plan was a hit or miss crap shoot. Here’s how I was able to do it while still buying a house and traveling from Ireland to St Lucia and all over the country.
A No-Stress Low-Maintenance Stock Portfolio
I’m not a gambler, but investing in the stock market is basically educated gambling. Well, you at least have better odds. There is still a real world risk involved which is really scary. I don’t have the time to research and track the markets, so I let a fund manager take care of it for me. The majority of my wealth is kept in mutual funds and index funds. Index funds aren’t as immune to crashes as a mutual fund, but over time they have shown to be just as resilient and profitable. I also have individual stocks in other companies like Tesla and Southwest Airlines. Southwest only because their stock ticker name is LUV.
Automation and Organization
Every paycheck I receive automatically deducts money into my job’s pension plan and into another separate Roth IRA account I setup with a different bank (don’t bank on us millennials receiving social security checks anytime soon!). Additionally, another savings account that I designated as my emergency fund, automatically deducts money every week from my main bank account. I never see any of this money at the end of the month. And when it’s money I can’t see, it’s money I can’t use to spend on things I didn’t really need anyway. When I check into those accounts every few months, I find a reasonable surplus built up and from there I can decide where I can devote the extra funds. Depending on the need at the time, it could’ve been used for a down payment for a house or car, investing in new mutual funds, paying off our mortgage quicker, or getting that engagement ring.
Being the hopeless pedantic I am, I use money management websites religiously to organize and track where my money is coming from and where it’s going to. I use Mint, Personal Capital, Credit Karma, and Google Docs. Mint for my everyday purchases and budgeting. Personal Capital for my investment accounts. Credit Karma to monitor my credit and identity theft prevention, and a Google Docs sheet to remind me when to pay my bills, how much each time, and what the burn rate for each account is.
My philosophy in buying things (majority of the time) is, “Unless it’s an emergency or your livelihood depends on it, you really don’t need it”. Or at least not right away. There is a luxury tax put on most items coming from simple supply and demand. Does your smartphone need to be faster than your computer at home? Probably not. Will all those powerpoints guaranteeing a 20% increase in performance for item “X” help you in the end? Prolly not. When item “X” has quadrupled performance AND saved me time efficiently, now you have my attention. I’ve had my smartphone for 4 years now (the one before that, 5 years). No real problems with it, it just keeps restarting during random phone calls. Also, the memory card gets unmounted every time I so much as breathe on it. So I think I’ve waited long enough for an upgrade.
I’ve never felt pressed to constantly buy the latest and greatest. New cameras same thing. I don’t buy the latest and greatest DSLR camera right away. I waited until it was discontinued by a newer version or until my skill level became good enough to justify the purchase. I only buy what I need at the time, and even then I only buy either heavily discounted, refurbished, or certified. My car is over 12 years old, with 150,000 miles, and is more reliable than a Kenyan running in a marathon. Nothing wrong has ever happened with it and I don’t see any reason to replace it even though it’s trade-in value isss dipping a lot. If I do have a weakness, it’s videogames. I had to set a budget on Mint in order to keep my constitutional in check. I was really good last year, this year not so much. Damn you Playstation VR.
Point is, I don’t feel a constant pressure to spend money to upgrade just because I can. I control when I deem something needs to be replaced, where, and how much. There will always be a new shiny thing to want. Always remember this country’s prevalent axioms – America will never run out of food – never run out of product – and never run out of ways to try and sell you something.
Or in the eternal words of George Bluth Sr., “There’s always money in the banana stand.”
Credit Card Hacking
This is free money and free travel. The best credit cards I use are the Chase Sapphire Preferred, Chase Freedom, American Express Gold Card, and the Barclay Arrival Plus+. They reward me with cashback or frequent flyer miles for basically spending money on stuff I normally buy monthly, like groceries, gas, cellphone bills, cat litter, coffee and Target stuff. They also have introductory bonus payouts just for using the card. I’ve had 3 Sapphire cards equating to $1,500 in free cash just for using their card within the first 3 months. $1,500 for free. EFF-ARR-EEE-EEE.
The nice thing about the Chase cards are how liquid the points are. I can use them for anything because they’re as good as cash. If I’m planning an airline trip, they have an excellent exchange ratio of points to frequent flyer miles. They’re the best cards hands down. But within the 24 month period in which I cannot reapply for another Sapphire card I alternate those years with either the American Express or Barclay card. That way every year, I’m still accumulating points which are transferable to services I actually use. When I took a week-long trip to the Caribbean last summer, all my airfare and hotel accommodations (except the St. Lucia hotel) were paid for with credit card points.
That being said, credit cards are tricky as long as you respect how to use them. I didn’t go all crazy and max them out every time I got a new one. I was responsible and reasonable towards how much I needed to spend compared to how much I actually make. Given major sources of debt (car, student loans, kids) are out of the way, I still carry debt. It’s about $2,000-$4,000 every month. But whatever I spend in a given month I pay it off immediately. That way I don’t incur interest charges or overages, and it keeps my spending in check. I only utilize 2%-3% of my credit potential at any given time and I’m 100% on time with payments to keep my score up. If financing is available I always take advantage of it, so I can have my current money put in work now rather than have it’s value diminished later due to inflation. Love those Amazon, Best Buy, and Paypal finance cards. It’s a complex balancing act, but it’s worth the extra effort in the long run.
I only spend for one version of something. I rarely have backup uses or redundancies for physical items in the house. One item has to be really good at doing one thing and do it often. If it can’t meet that requirement, then I will either rent or borrow it from someone, or sidestep it altogether. The more things you have in your house, the more expensive it is to maintain all that goes with it. Redundant things eventually get donated or sold on eBay.
Giving Things Up and the Efficient Dollar
I had to sacrifice things along the way. I try to reassess every year what I really want or need (house, wedding, etc.) compared to where I’m at that year. I gave up cable/tv never wanting to looking back. No landline. No texting plan. I search for DIY options for things I couldn’t give up. I was gifted a dope french press so I don’t have to go to Starbucks. I bought an oil pan and lifts instead of going to a mechanic for an oil change. More blankets for winter instead of running the heater on all the time. This all adds up.
I also try and keep things for as long as possible. That means maintaining what I currently have judiciously. I’ve maintained expensive items like bikes, cameras, cars, computers, lawn mowers, equipment, etc. waaay past their shelf lives; cleaning them up and keeping them running right – not ragged. If there’s no salvage value after, then I typically avoid repurchasing big ticket items like those if I can.
In the end though, do those things really matter to me? Not really, they’re just things. Except, my hoverboard. That thing is a riot.
I Save More Than I Spend. Mass In. Mass Out.
This all might sound like work, but it’s really not. I just take a few steps to organize and setup my accounts. Then I either give up something and do nothing. And finally, I save more than I spend. That’s all this really is. Most of this essay is just descriptive ways of saying this over and over again. Once everything is automated and I have a fund manager run the show I just sit back. The only thing I worry about is focusing on doing my job well and keeping my health. That’s it.
Also, don’t confuse Net Worth with wealth. True wealth is measured on an individual basis. It’s nice to have money, don’t get me wrong. But to me, being wealthy is not stressing over car issues, a mortgage, or crushing loan debt. It’s having plenty of time to spend with friends and family instead of being stuck at work. Having the freedom to take a day off whenever and enjoy whatever I want for the day. That’s how I truly measure wealth. In freedoms.