Today, I’ll tell you my story.
7 Years Old to College Graduate ($0 to $60,000 in Debt)
As far back as I can remember, I was always a hustler and a saver. When I was 7, my parents paid me to do chores around the house. I earned $2/week picking up dog poop, mowing the lawn, trimming bushes and whatever else my dad didn’t want to do. If I broke down my time, I was probably making less than a quarter an hour. I never thought of it like that though. I enjoyed putting those two George Washingtons into my little cash register bank every week. Back then, $10 was a huge amount of money.
When I was a little older, I expanded my operations. If it snowed, I was the kid knocking on doors, ready to shovel your driveway for $2 ($5 if the snow was really heavy). I delivered newspapers. I mowed lawns. And I saved all of the money. This was in sharp contrast to my younger sisters who didn’t enjoy working, but sure liked to spend. I earned the name, “Mr. Cheapo,” from them for my frugal ways. They laughed, but it was a badge of honor.
At 14, I started at my first official job, working at a fast food restaurant. From that point on, I’ve always had a job. In college, I worked at a computer lab. During spring and summer breaks, I’d find work through temporary agencies.
I majored in biology and chemistry in college, but wound up working as a computer programmer. I also found myself with $60,000 in college loan debt. I was determined to work hard and quash those loans as fast at possible.
First, let’s back up a minute, though, to talk about my money education. Or lack of it.
My Money Education Begins (Better Late Than Never)
I had almost no financial education growing up. My parents weren’t good with money and, in school, I had one semester of consumer education. That class taught me that I should balance my checkbook and compare prices at the grocery store. It taught nothing about compound interest, mortgage amortization or anything to do with investing. However, my mind was receptive in the rare cases when valuable information presented itself.
One day, I was working in the back room of a pharmaceutical warehouse. On the radio, someone had turned on an AM show about investing. I’ll never forget what one of my 50+ year old co-workers said:
“If I only had this information when I was in my 20s, I’d be rich now.”
My ears perked up. He went on to say that saving when you’re young is critically important. Luckily, I was only 20 at the time. Around that same time, a girlfriend took me to an investing seminar. At one point, the guy speaking looked at me and said:
“Your advantage is your youth. Start now.”
The lessons sunk in. I hated being broke.
401ks and Flips, Oh My!
When I started at my first job post-college, along with paying off those loans, I signed up for the 401k immediately and began saving. I also bought my first home for $140,000. It was a starter house that wasn’t pretty, but had a great location. I made modest improvements like putting in tile and painting. With a strong real estate market at my back, I sold the home a couple years later and made $100,000 in profit. My wife and I looked at each other and said, “Hey, let’s do that again!”
We sought out ugly houses in great neighborhoods. If a house had pink toilets and green appliances, our eyes lit up with joy. We’d move in and, over the course of a couple years, make the home beautiful.
Even more beautiful was the money we made. The US tax code has a provision where you don’t have to pay capital gains on a home sale if you’ve lived and owned it for 2 of the past 5 years. We made healthy amounts of money, that way, which was either reinvested in other property or stocks.
The Great Recession Leads to Our Great Failure
In 2006, we purchased what we thought would be our ultimate flip. It was a lake home with sunset views of the Madison, Wisconsin skyline. The home set us back $535,000, but that was OK since we figured we’d sell it for a million when done. Queue the ominous music.
Almost immediately, we started work on the home. We paid carpenters to tear the roof off and build a second story. After they were done, I installed wood floors in the common areas, built the bathrooms, installed fixtures, gutted and rebuilt the kitchen, gutted and remodeled the first floor bathroom, and built a sprawling deck.
Our million dollar dreams may have come true except that the Great Recession happened. The value of luxury homes dropped through the floor. Some of the houses around us went into foreclosure. But we trudged on. We told ourselves that the values would recover. They did, but not quickly. In 2012, we sold the home for $200,000 more than we bought if for. However, we had put $200,000 into it and at least 1,000 hours of labor. It was a setback. Had we never purchased that home and just invested all of the money, we’d be hundreds of thousands of dollars ahead.
The whole time we were working on the house, I didn’t check my investments. I kept contributing to my 401k, but with the intense stock market drops and the intense remodeling spending, I just didn’t want to see my balance.
The Final Journey to $1 Million ($550,000 to $1,000,000)
I had a bad day at work in October 2013 and, for the first time in my life, considered retiring long before the age of 62. It was time to see where my finances were at and how much I needed to quit. I was pleasantly surprised to find that I had about $550,000 in investments. I also figured out that it would take me about 1,500 days to reach my goal of a $1,000,000 which would fund the rest of my existence.
Inspired by Mr. Money Mustache, I started writing about my journey. With strong market tailwinds, I become a millionaire for the first time on November 28th, 2014 at the age of 40. I was in downtown Chicago when I checked my Personal Capital account and saw the two commas. I was numb. Almost one year later, it hasn’t sunk in yet and probably never will. I’ll always feel like the poor kid I was growing up.
How I Built Our Net Worth to $1 Million
- Saving is absolutely my first priority: Maxing out contributions to tax advantaged accounts like the 401k comes first. I’d rather walk to the grocery store in a blizzard than not max it out. I’d rather eat beans and rice for a year than not max it out. I’d rather… well, you get the picture. Despite the fact that I’ve had some high-fee funds in past 401ks, those pre-tax accounts are now worth north of $600,000. Never let someone tell you that 401ks are a bad idea. Even with high fees, the tax advantages make them worthwhile.
- Don’t get smart: I admit to buying stocks, but I think that it’s a very dangerous idea. Remember that for every stock you buy, there is someone on the other end who thinks it’s just as good of an idea to sell. See Jim Collins’ excellent Stock Series.
- We live a modest life: My 1,900 square foot home fits our family of four just fine. My 2003 Honda Element has almost 150,000 miles on it and I expect to drive it for another 150,000. We live in a quiet, safe neighborhood and cook our own food.
- Work very hard when you’re young: Working at a job from 7-4 and then remodeling a home until 10pm for months on end is hard work. Before that, for at least half a year, I put in 80 hour weeks at my job. However, those long hours were an investment that paid off handsomely. That money we made from house flips was all saved and invested. Those 80 hour work weeks led to rapid promotions and pay raises. The thought of having at least half of my life free of work more than makes up for those late nights swinging hammers and writing code.
It Was Never About Money
My goal of a million dollars is a bit trite and superficial. However, if you dig a little deeper, you’ll see my true objective. The money will never be about buying a nice car or a big house. I’m content with everything I have right now. If I find myself with $5,000,000 or $10,000,000 some day, you’ll still see me under my Element, getting my hands dirty changing the oil. The money is just a facilitator.
It all comes down to living life on your own terms. If you have to work, some other person has control over you. Part of your life must be handed over to him or her. My best life is when I’m in full control. I want to be able to spend summer hours with my girls hiking or traveling. I want to build crazy things in my garage. I want to be able to exercise and read for hours every day.
It was never about money. It was always about freedom.
About the author: Mr. 1500 holds the 10th position on Rockstar’s Ultimate Net Worth Tracker, and is the founder of 1500 Days – a blog about his journey to financial independence/early retirement. The name comes from the amount of days he thought it would take to accumulate enough assets to quit his job, never having to work again.
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