As several of you are aware, the entire goal of this blog is to chronicle the journey to having a net worth of $1,000,000 by my 40th birthday, which is February 12, 2029. That being the case, it is fitting to have an annual progress report to show how far we have come over the previous year. Well, today is my birthday! Because the blog is so new, this will serve as the inaugural edition!
Since we are starting from scratch, let’s establish where we currently stand financially. At time of writing, we are worth -$29,484. Mind you, this is after a weekend spent in Washington DC visiting friends, so our food and drink budget may be a little out of whack for February. At the same approximate time last year, our net worth was -$77,571. So, without implementing the financial principles that we have committed to recently, and while making tremendous financial mistakes, we managed to increase our net worth by +$48,087 over the past 12 months. Not bad, considering how unfocused and undisciplined we were.
Over the past couple of months, I have made our finances priority number one. I had the realization that I didn’t want money for the sake of having it, but for the freedom it grants. If you are not shackled to a job you hate because you need to be able to pay the bills, it makes searching for your passion possible. By achieving financial independence, my wife and I will be able to work when we want, and how we want. Don’t get me wrong, we both enjoy our current careers, but who knows what will happen in the future? Computers may replace us all at some point (half joking), so it only makes sense to get a jump on the competition and make a stake for ourselves in the future.
Making a Game Plan
As it stands today, we will have to change our net worth by +$85,790 on average every year to be millionaires by my 40th birthday. That is quite the feat, but I believe it is doable is 2 ways:
- Getting more serious (see: crazy) about budgeting and hoarding every penny we can muster.
- The beauty of compounding growth in investments.
When I look at our budgets in Mint, I am struck with a sense of shame. The amount of money that we spend on food and drink is shocking – so much that I am not comfortable sharing on the blog at this point. Once we get it under control, I will be more than willing to write about it, but as it stands now I don’t know that I could face the music. So, I am going to do something about it.
I have already implemented a plan to reduce our food and drink budget dramatically by eating out less and doing more bulk cooking. Our friends at Frugalwoods have a wonderful guide to living on a reasonable food budget, and although they are far beyond our current level of frugality, there are some valuable pieces of advice. My favorite was the idea of making a large batch of food on Sunday night and eating the food over the course of the week. Anyone who has worked a full-time job knows how challenging it is to cook every single weeknight, so why punish yourself? Cook ahead of time and nuke it after hard day’s work! In fact, I plan on buying several pounds worth of chicken next time we go to the grocery store and grilling them all up in one fell swoop – I will be sure to take pictures and write a blog post about it, for better or worse. Fingers crossed!
This is going to be the slowest growing portion of our net worth. Thankfully, both my wife and I have employer-matching retirement plans that we contribute to every paycheck. Mine is the Thrift Savings Plan, the federal government’s version of a 401k, and my wife’s is a traditional 401k. My contributions are matched up to 5%, and my wife’s are matched 1:2 up to 6%. With our current combined income of $165,147 annually, we are able to put away $15,685 toward retirement per year. This amount should increase as our respective salaries increase
We are both invested quite aggressively because we don’t plan on retiring any time soon, so we are more than willing to ride out the market fluctuations for an opportunity for long-term growth. Due to the rather bullish pace of the market over the past year, our investments returned +23.85%, which is FAR better than our anticipated 8%. A market downturn will certainly set us back in our overall net worth, but it will give us the opportunity to buy into equities at a low price, which should drive growth over the long-term. In fact, I would LOVE big market downturn right about now – it would give us a chance to invest now so we can reap the rewards in the future.
I know the growth of our investments will be a slow one, but natural beauty of compound growth should help us get over the million dollar hump towards the end our deadline of February 12, 2029. That is, unless we hit a major market downturn in 12 years, which would be unfortunate. Still, we would be young enough to ride it out, and hopefully we will have built other streams of income by then as well.
I am proud of the progress that we have made over the past year, but I am certain that we can do far better. By implementing some serious but realistic budgeting goals, I believe that we can beat last year’s net worth change by +$12,000. It’s going to take some serious sacrifice and commitment, but I believe that it can be done. Not because we are financial and self-discipline gurus (quite the opposite) but because of the help and support that the personal finance community has given us. Even though we are relatively new to this whole thing, the encouragement and cheering that we have received from other bloggers and on Twitter have been nothing short of phenomenal. I am personally inspired by the stories that are told in this community – it makes the dream of financial independence a distant, but achievable reality.
Have you achieved your financial goals since last year? What did you do well, and what could you do better? Let me know in the comments below!