My First Milestone

When you live below your means you learn to appreciate all of the smaller things in life that you never notice when going full board into hyper-consumption. I love quiet evenings at home chatting with my wife, getting a great work out in, Sundays at church and monthly book club. Sure a couple of weeks ago we splurged and went to a concert with Collin Hay headlining, but what I remember most vividly and happily was thinking back to the night, hearing incredibly awesome music, and looking over at my wife smiling, and enjoying the experience with her, together. Quality time together, it’s something that’s engulfed my life Post-Ramsey and I’m pretty damn proud of it.

So when something huge happens that’s outside of the quality time category, it kind of smacks me in the face. What I’m referring to is the first of four accomplishments on my path to have a net worth of $1 million dollars. Because I’m a nerd and crunch numbers (it’s what we do I’m sorry) I semi-actively follow my net worth number during the course of a quarter leading up to the quarter end. And in my most recent tally, we’ve hit milestone one of four: Our net worth is OVER a quarter of a million dollars!

Man, that felt great to type and feels even better to say and know. We are living like no one else, and while our mascot is a tortoise and not a hare, it feels amazing to see our progress and know that we are heading in our shared direction. We buy groceries at Wal-Mart and Aldi, we buy our clothes at Salvation Army, we prioritize retirement and being debt free and we give 10% of our net income every month to various charities and causes (my thinking is, if God wants my “tithe” to go up, he’ll lower my taxes). Seeing this is like my stamp of approval saying, “It’s working.”

To help mark these occasions along the way I’ve been generating questions that my “old self” would like to ask current self as the four milestones are crossed. It may sound crazy, but for me it’s like a way to talk to myself and see if there have been any changes in who I am and who I am becoming, and whether these changes are good or bad. So without further adieu, here’s my first Q&A in my march to $1 million.

What does it feel like to achieve your first milestone?

It feels absolutely amazing and incredible. For me it’s the living proof that living below my means, staying away from debt and that the old school investing style of buy and hold in sound investments, all work together in building wealth. It hasn’t been easy, but man it’s been worth it. My wife and I have lived on a zero based budget before every month begins and for three years have told our money where to go rather than wonder where it went. Apart from my quarterly reviews here I rarely take the aerial view to see, in a larger picture, exactly what the fruits of our labor are.

I think we have secured something greater than just protection against immediate loss of income. In the day to day I’ve discovered that you don’t have to spend money or go on huge trips to love and enjoy your life. And that information alone is the best weapon to have when you’re a frugal fury fighter. We’ve also found that quality time spent together is a priority in our marriage. This value is reflected in our short, medium and long term goals.

We’re going to continue hitting and hustling so that when we pay cash for our house we can take a 3 month sabbatical travelling the world together to celebrate. And when we start our family, we can have the option for one of us to be a stay at home parent or both take part-time jobs so that we can spend as much time together as possible! And as these milestones come and go, there will certainly be cause to celebrate, because it means we are seeing concrete results that our dreams are becoming reality.

Do you still feel like you have a long way to go?

I do but since this journey began I’ve developed a magical thing called patience. I think when I hit the fourth and final milestone, I’ll look back on this 1^st one, as the most important phase in the journey to $1 million. This is the foundation we’re not only laying for our finances, but in how we live our lives and what is important to us.

When we hit the pinnacle point, when our investments make more money in one year than we make for us, I can’t imagine our cost of living exceeding more than $40,000 a year. The splurges we make would be on missions trips to Africa and cross country road trips here in the U.S. Material possessions really don’t mean anything to me anymore, especially compared to my Pre-Ramsey life. The foundation I’m talking about has led me to build patience and embrace, love and enjoy the small things in day to day life that I spent the first two decades of my life missing. So yes, I do feel like I have a long way to go before I reach $1 million dollars in net worth. But it doesn’t make me sad, in fact it makes me feel the exact opposite of dejected. It makes me excited to see what else I will learn, who I will meet and what kind of experiences I will get to share with my beautiful wife along the way. Deep down I kind of hope it takes a while, I wouldn’t want life to pass before me in the blink of an eye J

How long did it take you to get to this point?

Well I was first introduced to and began implementing the “Dave Ramsey” principles in January of 2009. So I guess the official tally puts me at 3 years, 2 months and 22 days, if you want to be precise.

What are your average annualized investment returns?

We’ve had a nice run up in the market this quarter leading into my personal landmark day. I’ll get more into it when I post my quarterly review, but at this point in time my portfolio as a whole has average annualized returns at 9.31%. And considering that at my super fund annual checkup in early in February these guys stood at around 7%, and we’re only in March of a presidential election year, I’m grinning happily for the remainder of the year!

Which Rocky Balboa do you see yourself as?

For me this is quite the loaded question. The answer delves into how I measure success and how the progress of success has impacted me. But since past me asked this I guess I am obliged to answer it. If I had to pick one Rocky Balboa that I currently see myself as, it would be the Rocky from Rocky I the night before Super Fight I with Apollo Creed.

Rocky trained like he never had before and was a fully functioning fighting machine operating on all cylinders. The clincher on why I feel this Rocky best represents me at this current point, is that the night before the fight with Apollo, he knew that he could go toe to toe with Creed and stand his ground. I believe that if Rocky didn’t think he had the guts to stand toe to toe with the champion of the world, he never would have stepped foot into the Philadelphia Spectrum to fight.

By comparison over the last 3 years I’ve fine tuned my frugality to a point that it is second nature and almost a thing of art. There’s lots of noise from the world around me, saying to finance everything out of my ears, that I’m really the 99%, that the little man just can’t get ahead and that upward social mobility is lost in America. I don’t believe one God damn word of it. Building wealth is possible, we can move up the ladder, old school techniques of handling money works and one day I will reach my fourth and final milestone. My style (like Rocky’s) is sure as hell not flashy or stylish. In fact in some regards (especially those “educated” in finance) my style is raw and not sophisticated. But guess what, it works! And I am going to continue using these techniques and strategies to pursue all of my hopes and dreams and make them happen.

How did you manage growth in equities given the backdrop of the recessions in 2008 and 2011?

Three simple words: Buy and Hold. I did my research according to Dave Ramsey. Any money invested in the stock market I plan to leave alone for at least five years. I spread my investments across four types of mutual funds: Growth, Aggressive Growth, International, Growth & Income. I only invest in mutual funds that have been around for at least 10 years, have average annualized returns of at least 12% since inception and have a fund manager that has been with the firm for at least 5 years. That’s it, plain and simple. Some are way up, and some are way down. But as a group they give me excellent diversification and peace of mind to always beat taxes and inflation. My best fund currently is returning 52.32% since I bought the thing! My worst, -14.04%. But collectively I’m currently flirting with 10% return on my money invested and couldn’t be happier with my choices.

What were your key components in growing your net worth in this amount of time?

The first thing that jumps to mind is the budget. I could not have drastically cut my expenses nor lived below my means if it weren’t for a zero based budget that my wife and I agree upon before the start of every month, oh yea, and we ACTUALLY FOLLOW IT! When I started the budgeting process it was eye opening and scary to see how much I was bleeding myself broke every month. Now it’s exciting and inspiring to see our plans come to life and not to have money worries.

I also stopped caring what other people thought. Yes I have friends from high school and college buying houses and who never left college. Yes I have friends driving nice cars and living in well to do neighborhoods. The difference maker is when I stopped comparing myself to other people. I know what I want out of life, I know what I value and I’m going to do everything within my power to build my dreams and make them reality. At the onset of living frugally I thought my wife and I would be perceived as weird to everyone we came into contact with and that we’d be living a lonely, twosome existence until we had children. What has amazed me is that the friends I have in my life currently, are the best I’ve ever had in my life. We meet for monthly book club, we see each other weekly at church, we discuss our expectations for starting families, we work together, and we celebrate each other’s joys and successes, and we are there for each other when life punches us in the gut. I like to think that the amazing group of friends that I find myself surrounded by is the direct result of being weird J

What is your combined household income?

Well, I won’t lay out exact numbers because I have been informed that a few of our work colleagues read this (thank you btw, I assume you enjoy reading the musings of a madman, and Lord knows I’m not going to tell you to stop) so I’ll just say that for the 2012 tax year, according to the IRS, we are somewhere around the middle of the 25% tax bracket. You can do the legwork and estimate if you so choose, but that’s a pretty good ball park figure by my book.

So there you have it! My first Q&A for my first milestone. Everyday has been a blessing and I can’t wait to see what comes in the pipeline next.