Path to a Million: 2017 Q3

8

Another quarter, another net worth update. This time is no different. My laser focus on keeping a tight budget has ensured continuous success with my net worth slowly but surely climbing through a combination of debt reduction and asset appreciation. I’m adding more to liquid savings, increasing retirement contributions in addition to accelerating my debt payments.

The importance of both sides of my balance sheet moving in the right direction at the same time is that it’s an indicator of the fact that I am finding ways to increase my household income. Whether it is a special project, a real estate transaction, a consult or even a travel stipend, our income has not remained stagnant. Often times, you may find yourself only able to move one side of your balance sheet. You can pay debt faster or you can save more but not both. That’s often a sign that there isn’t more income coming in and it takes one set back to undo all your hard work. Incremental changes matter but never miss an opportunity to accelerate your goals.

In any event, I am up nearly $22k for this quarter, a pace which could put me well over the 1/2 million mark this time next year and it motivates me even more. Updating this spreadsheet is borderline therapeutic. It is the balm that soothes any sting I may feel from not buying a new purse, packing a lunch or passing on that watch I’ve been coveting. It reminds me that there’s a greater purpose: seeing that ‘Student Loan’ line item say $0.

 

NW

Advertisements

Path to a Million: 2017 Q1

8

This is my first update since the initial posts (announcing the start of the series and the pilot post). Things are going well, maybe better than I expected because a great thing happened: tax season! *eyeroll* (take some time to read this post about why it’s not a windfall you should rejoice in).

However, in my case I can rejoice just a little. Part of my big refund had less to do with my lax W4 allowances, but because we had some credits for energy efficient updates, primarily in the form of solar panels and we were able to use the cost of depreciation to offset our rental income.

Tax season came through for some serious debt reduction which had a snowball effect on our net worth. It will reduce our liability (once I get around to actually making the large payment) and free up cash that was normally going to satisfying my monthly student loan payments, to put towards investments/savings. This really does show the positive effects and importance of eliminating debt. Of course, we continued to pay down all our other obligations as well, but using our refund to all but eliminating student loans will make the most significant impact.

 

NW

 

Last quarter, I recorded my net worth at $369,922. This time, it’s $389,213, up $19,291. This represents an average increase of just under $6,500 every month. Although most of that is achieved by reducing debt, it’s a start, and a very good one. Debt plays significant role in our financial struggles and if we can consistently decrease our debts over time rather than add to them, we have the right attitudes and the necessary tools to build wealth, because the idea is that, once the debt is gone, we can use the same disciplined approach towards investing to gain even more speed towards financial independence.

*See Pilot post for more info on loans.

Path to a Million: 2016 Q4 – Results

8

In this post I talk about why I wanted to make my net worth public. Here are the actual numbers and below I’ll discuss what they all represent. Since this is the first time I am posting this, I will give some background information below. Going forward, I will only be posting the statement of net worth and referring to this post for the details.

 

q4-nw

On the asset side

Liquid assets represent cash and investments that can be easily accessed in the event of an emergency.

Personal property includes things that have been appraised but aren’t real property and aren’t easily accessible. That includes jewelry, furniture, etc.

Real estate is pretty self-explanatory.

 

On the Liability side

Both the HELOC and the Consumer loans seem like “too good to be true” deals, however they are state and federal subsidized loans for energy efficient improvements on our primary residence. The HELOC is for the solar panels and the consumer loan is for energy efficient central AC.

The student loans are what they are. But if you want to know how determined I am to pay them off, I graduated with over $45,000 in 2015, and I’ve paid down over $10,000 in principal payments this year alone. So I don’t anticipate it will be weighing around my neck much longer.

2 of the 3 mortgage loans are on rental properties which are cash flowing well and do not require us to pay anything out of pocket.

I do not have, nor have I ever had credit card debt.

Net Worth

Pretty self-explanatory as well. It’s the difference between what I have and what I owe. While most of my NW is tied up in real estate, a significant portion of the real estate is income generating. By no means am I living in a $1 MM house. My goal is to increase my net worth by $75,000 by this time next year. While a good portion of that gain will be through eliminating my student loans, I think there will be several other income generating, savings and investment opportunities in the new year. Paying off the student loans alone will make a significant difference. Those $300 that are currently being eaten away by the loans, can be funneled to other projects and create a snow ball effect both in savings and in investments.

Nothing happens by luck. It takes faith, hard work and discipline. I am making a plan preparing for a prosperous 2017. I look forward to checking in for the first quarter.

 

Path to a Million: 2016 Q4

This is the first installment in my “Path to a Million” series. I will use these posts to track my family’s net worth over time to record the progress we try to make in reducing expenses, eliminating debt, increasing our income and saving as much as possible to retire early and in style.

I have chosen a quarterly format which will give me enough time between updates to make leaps, recover from setbacks and fine tune anything that might not work as well as I would have wanted to. But it’s frequent enough to make it consistent, keep it interesting and prevent me from being complacent. I will also schedule it for the last Monday of the quarter, making it a “Monday Motivation” post both for myself and for those who might stumble upon it.

With that said, I am a bit apprehensive about posting this. For starters, it feels a little like financial exhibitionism. Telling people how  much you are worth in detail is like being naked, in part because of the stigma we attach to money. We tend to tie our self-worth to our net worth, in part due to a capitalist society built on poverty exploitation that has turned us into money-worshiping cult followers. In fact, even rich people have been known to inflate how rich they are, with some resulting to threats of litigation when the overinflation of their wealth is brought into question. (I don’t want to get sued so I won’t say his name, but you know who he is…)

But I’ve decided that I have nothing to be ashamed of. If anything, my story is one of inspiration. What do I have to lose by telling it? Either a bunch of people are going to see the details and be inspired or no one will even see it. I can’t lose and scenario 2 is more likely to happen anyway.

I am a 31-year old first generation American woman of color who started out with $5,000 almost 10 years ago in May of 2007 when I finished my bachelors. That $5,000 was composed of $1,000 I had saved after working part time all 4 years of college, $1,000 my dad gave me as a graduation present and $3,000 I got in monetary gifts from various guests at a surprise party my cousin threw for me. My first experience at “investing” was putting that  $5k in a long-term CD at Bank of America  where I was getting 5% at the time. That CD, my clothes and a 2000 Honda Accord was all I had in my name. No inheritance, no stocks, no homes. While I know I’m more fortunate than many others, I still have to point out that this was as close to starting from scratch as you could get. But I’m on a path to a million and I want to take you with me one quarter at a time. Your first insight is how  things have changed 9.5 years later.

Without further ado…

 

October Budget Buster

img_4486

What a disastrous month it has been for my budget. I’m usually not so doom and gloom, but my goodness! Our finances need a break.

Despite some non-recurring, high expenses in September, we finished the month really strongly in the black and earning $2,500 more than we spent. We had an out of state wedding which meant lodging, eating out, gas, tolls, a gift, hair & make-up, on top of getting a new dress. Therefore, despite going over budget, I consider September to be a success because we had some serious expenses to contend with. But the glow did not last long as October came in swinging, taking names, kicking ass and stealing my lunch money.

October is both my and my mom’s birthday month (we are 2 days apart). However, gifts and 2 birthday steak dinners in 1 week aren’t enough to set us back. We are fortunate enough to have multiple sources of income. However, this particular month of October 2016, also happens to be when my husband’s younger brother was getting married. And that’s right: out of state. Since it’s his brother, my husband was also a groomsman, meaning that we had to spring for a tux despite the perfectly well-tailored and expensive suits he has hanging in his closet. I remember when I got the call from the groom saying: “we are on our way to pick up the tuxes and the store manager said he hasn’t paid yet. He’s not picking up his phone.” Sure, here’s my credit card number.

Then there was the hotel. 2 days.

The gift.

We had to eat and put gas in the car.

Do you have anxiety yet? Well, it gets worse.

We go home after the wedding to find out skylight shades in the great room broke. It was just hanging there, swinging. My husband is very bright and pretty handy, but given that the ceiling is 10+ feet tall, I wasn’t going to risk an injury to save some money, so we called a company. The quote? $2,000.

I just checked my budget app and not only did we run over budget, we spent $600 more this month than we made.

I’m ready for this month to be over. There’s way too much month left at the end of my money.

(Jokes aside, this shows the importance of having a solid cushion, both month to month from an income perspective, and a savings point of view. If a month like this happened to anyone living paycheck to paycheck, it could have been a catalyst for getting into debt or the final straw that breaks the debt camel’s back. At least one would hope that people on the brink of financial disaster would be less frivolous with their money, carpooling to the wedding and crashing with acquaintances rather than paying for a hotel. But they didn’t get that way by being mindful of money so maybe my statement still stands. In any case, for me this is a frustrating stumble that will make me even more motivated to tighten up for the 2 months left in the year. But it is by no means going to unravel my year since this situation is the exception for us rather than the norm. I look forward to making a positive year-end update!)

Net Worth Tracking

I stumbled upon a article of someone discussing when they first realized that they crossed the million dollar mark. He listed his net worth which shows both an impressive and simple path to achieving the lofty goal: increase your income, reduce your expenses, save and invest the difference as much as you can.

Some people will say that a million today isn’t what it used to be because of inflation. High cost of living has eroded the purchasing power of the cool $1,000,000. In some ways I agree but it’s a pretty dim view of the world. You can’t retire early with a million in savings but I can’t imagine that anyone who’s worth a million is hurting too bad. And no matter what, saying you’re a millionaire will always ring much better than saying you’re a thousandaire. So I’ve decided to do some net worth tracking so I can record my own path to a cool million. I’ve settled on doing a quarterly update, and since we are in October, the first one will be scheduled for December. If you’ve been wondering if my methods are working for me, or simply want to know the money behind the blog, be sure to tune in!

It takes Luck to be Successful

Don’t mind me; I’m just practicing my click-bait titles…

It is often said that if hard work was the only way to success, day laborers, farmers, etc. would all be millionaires. Hard work is a key to success. No one (except maybe lottery winners) has ever achieved anything in life by sitting around the house doing nothing. Whether it’s Harriet Tubman freeing slaves, Mark Zuckerberg founding Facebook or Obama becoming president, you won’t hear about high achievers sitting on the couch with a lot of free time on their hands.

On the other hand, we shouldn’t be insinuating that anyone who didn’t find great professional or financial success failed to do so because they lacked discipline. Many of those people lacked opportunity, money and some were lazy and poor planners, but some lacked good fortune.

I say luck because many of my peers who came from similar backgrounds as myself are doing very well while others, who didn’t work any less hard are doing terribly or did so terribly that even after being back on their feet are playing catch up.

I want to tell the tales of 3 of my peers, all of whom graduated college within a year of  each other and a year of the Great Recession, eliminating the disparity that graduating during prosperous times would create.

All 3 are women of color, giving them the same likelihood of facing sex and race discrimination in academia and the workforce.

All 3 were traditional students with parental support (albeit to various degrees), no teen pregnancies, criminal past, etc.

While they remain anecdotes, I wanted to provide that small glimpse of their backgrounds to demonstrate that some of the major things that tend to create inequalities were not factors or were the same for all women.

I’ll start with the one that graduated in 2007. That was pre-recession but her lack of meaningful experience limited her opportunity to find full-time employment in time before Sallie Mae came calling. She was a little stubborn about getting internships in her field because they paid less than the temp-jobs she got that were completely unrelated to her major. She eventually found a job a year later after she began managing her salary expectations a little better. She built her savings and got her own apartment. She was no longer living on whatever allowance her parents could spare but she wasn’t living a life of prosperity either. For example, she couldn’t afford a car in any state (new or used) because the added cost of fuel and insurance was too much for her tight budget to bear. Some days she didn’t run the heat to keep utility costs manageable.

A year later, Peer #2 graduates. All is well.  At least for a few months until the market crashes and Lehman goes out of business on a humid august day. It’s pandemonium and lay offs start rolling in. She got to keep her job but it was only a matter of time before she too was offered a severance  package. She takes it, finds a job in retail and applies to graduate school, but she falls behind on her bills. Shortly there after, she lands another, better paying job which offers to pay for her to finish her degree. She says goodbye to retail for good as she graduates, gets promoted and gets married. Her now-husband who also has a good paying job brings in solid additional income that allows them to move to a really nice part of town and she keeps thriving. 8 years after undergrad, she has a happy family life, has a successful career and is financially stable.

Peer #3 is also a 2008 graduate. She’s an outgoing creative woman with a heart of gold. She’s generous to a fault. She’s active and participates in any and all activities that could enrich her undergraduate experience. She had lofty aspirations so she travels internationally and tries to get internships at various prominent organizations. Unfortunately her field of study is narrow and doors are closing fast. Her field is in demand but only for the most seasoned workers. There’s no desire to invest scarce resources into building inexperienced people. She bounces from paid internship to paid internship until things get so bad that she ends up working at the mall, focusing on just making a living since building her resume has done little for her career prospects. As a result of her basic costs (which are relatively low given that she still lives at home), she is unable to make her student loan payments which go into default and double in size after capitalized interest and late fees. 8 years after graduation, she is still making minimum wage and owes more on her student loans than she borrowed.

Next time you see someone struggling, don’t assume that they’ve done everything wrong. It could very well be that the necessary opportunities for success didn’t present themselves.