The ten years after our wedding had been quite successful for us both in our careers and financially. While we’ve made some mistakes, we made one key choice that has propelled our net worth to more than $900,000.
Where are we now, 10 years after getting married? Financially we are in a good place but we realized that we could be a lot further had we made some different choices along the way. Nonetheless, those choices didn’t kill us, and we probably wouldn’t change anything so no need to cry over those missed dollars.
The choice between paying off the student loans or investing in the stock market
Overall our debt has taken far too long to evaporate. While we could concentrate on the student loans and knock it out within a year, we’ve choosing not to do that because I’m paying less than one percent interest on the loan. This also explains why we’ve carried this loan around far longer than we should have. After the first year of our marriage, we decided to adjust the payment plan where I paid a lower amount for about seven years and then switched to a higher amount for the next 10 years. Most people say they will invest the difference or pay bills to get out of debt, and don’t end up doing that. But being a money conscious guy, I think not paying the full amount enabled me to put some extra cash towards our investment accounts. During the same period when we paid a lower amount on the student loan, we were able to max out our 401ks and IRAs starting in 2010. Additionally, during that same period of time, our income increased so when the payment amount changed, it did not impact our finances all that much.
How We Got There
During the past ten years, a lot has happened with our finances. We’ve owned and sold several homes, paid off most of our debts, and above all invested heavily.
Real Estate Deals
We sold our first marital home at a $10,000 lost, you may recall this is the home purchased with the military veterans benefit. Having learned our lesson on using the benefit, we decided to learn a different lesson by buying a condo using a 5/1 adjustable rate mortgage. Once again this was a hard lesson to learn as I saw the rate skyrocket after year seven. The best thing that came out of this deal is that the condo is being rented at this time and produces positive cashflow which has helped pay down the loan. We’ve since purchased another property as a rental and though it barely cash flows, it is appreciating nicely.
From the start of our marriage we started to invest at first 10, then 15 percent of our income into our 401ks and IRAs. While I had an IRA soon after I joined the military in 2005, my wife did not have one and we didn’t get her started until some time in 2006.
After four years of marriage, we were able to start maxing out our 401k and IRA contributions. I had the crazy idea that if we could max them out for ten years, then we would be in a position to not have to put any money into the accounts and let compound interestdo the rest. This was when I had set the goal of retiring at age 59½ with at least one million in our retirement account, which I projected would bring in a minimum of $40,000 per year, based on the four percent withdrawal rate. We’ve been able to max out our retirement accounts for nine of the ten years before switching course. Goals are important and sticking to them to realize them is also very important. But more important is the willingness to change paths based on new information or when the circumstances change. Learn more about why we picked a different path here. Overall, the biggest takeaway is that steady investments will eventually get you to where you want to go.
In 2009 we started a brokerage account as a way to save extra cash towards our dream home. This was based on bonehead advice from a financial advisor. Using that same train of thought, two years later we started putting money away towards my dream car, a BMW 530I at the time. The car story is a whole different blog post. Overtime, we contributed enough to have $12,000 in the car fund and over $90,000 in the home fund. Once again we changed course.
Over the last few years we went from still hoping to save for our dream home, which we hoped to purchase once retiring from the military, to just saving for at least 20% down payment on a home wherever we settle after the military. Indeed, we still have the goals of saving for our dream home, which we will purchase at an unknown time in the future and at an unknown location. Thus is the beauty and fault of not knowing what the future holds. The goal is to save at least $120,000 saved for the home so that I can have at least 20 percent as a down payment.
The brokerage account has essentially been repurposed for new goals and new dreams, though we hold on to eventually getting that dream car and homes, rather than a dream home.
Year 2006 to 2016 financial breakdown:
$230,000 Mr. 401k
$270,000 Mrs. 401k (people that tell you that matching contributions don’t really make a difference are absolutely wrong. Though her company stopped the match in 2009, following the financial crisis and has not reinstituted it, her company contributions between 2006 and 2009 have risen to a difference of $40,000 after ten years of growth.
$73,000 Mrs. IRA (her mutual funds have underperformed and she started out a year or so after I did. *The funds continue to underperform the next several years and in the midst of the 2020 financial crisis, I decided to move her account to Vanguard in 2020.
$90,000 Mr. IRA
$108,000 Brokerage account (dream home and what used to be car fund)
$270,000 Maryland rental (6% commission has been deducted)
$120,000 Georgia rental (6% commission has been deducted)
$20,000 Cash on hand
Total: 1,181,000 (total retirement amount: $663,000)
24,000 Charitable Foundation seed money (this is charitable giving and is not included in net worth) Click here to learn about the Foundation.
$35,000 529 Plans (I don’t include pension or money saved towards college expenses in a 529 plan as part of our overall assets)
$164,000 Maryland home Mortgage
$85,000 Georgia home Mortgage
$19,000 Mr. student loan (with .65 interest on the loan, (that is a correct amount, less than one percent) I have no desire to pay this off early, all extra cash goes toward the rental income with the highest interest rate)
NET WORTH: $913,000
This is a huge turnaround when considering that about 11 years ago when I graduated law school I was $80,000 in debt, and as a newly married couple we had a negative net worth of $34,000. To God be the glory. Learn how we managed to make this turnaround in 10 years.