Road to $1M

[feelan]

Hit 500k in 2011, after being an idiot for a while and getting a late start on saving, then taking a bath in 08. Hit 1M this year at 37, a few years ago the goal was to hit that at 40, so I have revised that number up now. Hopefully I hit the end goal several years early as well.

 

[FIREd]

Obviously, you are not an index investor, or rather definitely not a S&P500 index investor.

I do not know of any index that has your performance other than a biotech index.

Well no, I am not a zealous index investor, that's true. And in fact, quite a bit of our net worth has been tied to the biotech sector for over a decade, in the form of employer's company stock. But this graph is not a performance chart. It simply represents the evolution of our taxable and tax-deferred account balances, including contributions. I excluded things like company stock and inheritances from this graph because they create too much distortion. So the relative over-performance of our biotech stock is not even factored here. This is what we built by saving a large portion our paychecks over 13 years and by investing the excess funds in a broadly diversified portfolio. We kept our expenses fairly steady over the years while our income increased steadily. So we saved more and more each year and, with the magic of compounding, we observed this acceleration.

 

[NW-Bound]

Well, I was just thinking that if my portfolio could grow like that, I would be sitting in 1st class section for travel for the rest of my life. It is about the only thing that I would do differently with money. Oh, and I might get an expensive Audi, just to see for once what it was all about. My son bought an S4, so I should get an A8 to see what more they have to offer.

100% in biotech then. Onward we go! No guts no glory.

 

[MikeWillRetire]

I am amazed by so many reaching 500K at such early ages. I have to tip my hat to you. It's got me thinking what did I do wrong. It took me into my fifties to reach that. But I've always been a fearful investor and that is something that I regret.

I was thinking the same thing. We didn't hit 500k until this year, age 51, and that 500k is the sum of my 401k and my wife's! I blame daycare costs and private elementary school tuition. Now that my kids are in public high school, we're catching up!

 

[Enjoy the Ride]

Thanks all for the responses. Seems the next 500k might be a little earlier than my original prediction. I'm planning to use this money when I'm 60 so these milestones really doesn't matter now but still it'll be good to see the 1M mark.

 

[gomo]

In our taxable brokerage account we hit 500k for the first time Oct 2010. Seen 1M for the first time Aug 2012. I was quite pleased with that progress.

 

[jesaco]

Started investing in 1996 and reached 500K mark in early 2008..hit the 1M mark early this year (2013) ...currently at 1.1M (as of Oct 30,2013). never sold a share during the internet bubble and the housing crisis. Rode the wave and it has been a good ride the last few years..if this continues, I'll retire at 60 instead of 62. I'm 58 yrs old this year...

Note that as my salary grew, so is the amount invested..

 

[FinanceDude]

I am not sure when I hit 500K it was young. But I do remember the first year the gain on my investment topped my salary. It was 1991 the S&P was up 26% and the NASDAQ and my portfolio were up even more. It wasn't my favorite year at work,and realize that it was ok to devote more time to my investments rather than working super hard a work trying to get the extra 2% raise.

Intel stock options certainly help.........

 

[NW-Bound]

Hey, stock options are supposedly an incentive for employees to work harder, not the other way around.

 

[Fermion]

When we started megacorp they gave us 20,000 stock options and showed us a chart that said we would be multi-millionaires in a few years. Didn't work out that way.

 

[Gumby]

It took me 8 years of work to get from zero to about 100k, and then 3 years to get back down to zero. At that point, I was 34 years old. So you're substantially ahead of where I was at your age.

Take heart. You'll eventually get where you want to be.

 

[MDJO]

Picked up speed in later years due to inheritance, better job with bonuses, paid off house and cars, and reduced expenses. Started at nothing in 1980, now $2.2M including paid off home of $300K.

 

[truenorth418]

When I was 36 years old and getting pushed out of my 2nd company in 5 years, I decided I had to insulate myself against the uncertainties of modern corporate America. Someone suggested I read Millionaire Next Door. I devoured that book, and from that point on I committed myself to saving $1,000,000 in investable assets by the time I turned 45.

I was fortunate to land another job that paid pretty well, and I created a spreadsheet budget projecting my income and all of my spending across more than a dozen categories for every year over the next ten years. I budgeted to the month to the dollar. That was almost 14 years ago and I have been updating that spreadsheet ever since.

With my head down I committed myself to my new company, which was not easy because my job required 70 hour weeks and a ton of BS, and that, combined with my extreme spending discipline, led to my crossing the $1 million threshold at age 43.

My next goal was to achieve overall financial independence. Using the same methods, i reached critical mass at age 47. It was at about that same time that my company gave me my walking papers, so I decided to just go ahead and retire. That was 2 years ago and, thanks to a nice run up in the market and continued LBYM lifestyle, I am in a better financial position than ever.

$1 million does not buy what it once did, but setting that specific $1 million goal and making a specific, actionable plan years ago was pivotal in my achieving FIRE.

 

[LoneAspen]

Hey, stock options are supposedly an incentive for employees to work harder, not the other way around.

Only for the first four years, when most peoples' initial grants stop vesting. After that, the Golden Handcuffs usually fall off, and even if the company is successful, out the door they go. At least, that's my plan.

 

[47]

Just curious.. When you all talk about NW do you typically include equity in your primary residence, or is it just invested amount? Equity could be a squishy thing if LTV is high like 80 or 90%, but when the house is almost paid up or even more than half paid up, can you still ignore it completely?

 

[truenorth418]

Just curious.. When you all talk about NW do you typically include equity in your primary residence, or is it just invested amount? Equity could be a squishy thing if LTV is high like 80 or 90%, but when the house is almost paid up or even more than half paid up, can you still ignore it completely?

No, I consider my home separately. Once I owned my home free and clear I became focused completely on investable assets.

 

[NW-Bound]

Just curious.. When you all talk about NW do you typically include equity in your primary residence, or is it just invested amount? Equity could be a squishy thing if LTV is high like 80 or 90%, but when the house is almost paid up or even more than half paid up, can you still ignore it completely?

You are obviously a newcomer.

The debate of whether to include RE in one's portfolio has been revived every so often here. Another one is whether it is better to carry mortgage or not, as one can often invest at a higher return rate than the mortgage rate.

Regarding real estate, usually people still working on reaching FI like to include it. But when one has reached early retirement, the home tends to be looked at as an ongoing expense that must be funded out of one's portfolio return. I myself do not include my homes in my NW. Their upkeeping does show up in my Quicken screen though.

 

[Fermion]

If you don't own a home then I assume you include the future rent payments as an unfunded liability and subtract that lump sum from your net worth? This is the only way I could justify not including a home's net value as an asset in net worth calculations.

 

[NW-Bound]

Or I would have to include rent in my withdrawal rate from the investments, which means the portfolio would have to be higher to accommodate the rent without home ownership.

These are just different ways of looking at it. The way I look at my homes, I do not plan on selling them, but I need to get the cash flow for sustainment. So, I tend to get more focused on the expenses for upkeep, and do not look at the home values that often.

 

[nash031]

Just curious.. When you all talk about NW do you typically include equity in your primary residence, or is it just invested amount? Equity could be a squishy thing if LTV is high like 80 or 90%, but when the house is almost paid up or even more than half paid up, can you still ignore it completely?

Nope. When I talk NW, I talk just "liquid" assets - something I could spend within a week. I like the term "augmented NW" when I include home equity. You need a place to live, thus the equity in your home is meaningless until you can do something (other than borrow against it) with it. That's just me.

That doesn't mean you can't count your home as an "investment", since when I sell this place I expect to have made a few 100K on it. The problem is, if I never sell the house, that equity is effectively meaningless. Owning my home when I retire would just reduce my expenses, not add to my net worth.

 

[Meadbh]

For the Nth time....



Investopedia explains 'Tangible Net Worth'
In terms of a consumer, tangible net worth is the sum of all your tangible assets (cash, home, cars, etc) less any liabilities you may have.





People are entitled to use any measure they wish in planning their financial lives. Excluding one's home means that one is using not Net Worth but Investment Portfolio. It's a perfectly reasonable variable to use based on the assumption that one's home will not be sold. But the fact is that a home (minus any mortgage owing) is a financial asset and by any country's GAAP (generally accepted accounting principles) MUST be included in the definition of Net Worth.

Whenever this topic comes up on the forum, there is a variety of interpretations of the term "Net Worth". No valid comparisons can be made unless there is agreement on the definition of the term.

 

[tinlizzy]

I don't include the value of my home in my NW but I did subtract the balance of my mortgage (when I still had one - never really had other debt) from my NW.

I view it as psychological investing. I tell people (in real life) who are still accumulating for retirement that if having a larger net worth trips their trigger and inspires them to continue saving then they should include the home equity. For myself, the opposite was true. I needed a lower NW to inspire me to continue investing.

 

[Jager]

I consider my paid-off home part of my net worth. But net worth is very different from the portfolio that must provide my future cash flow, and from which withdrawal rates, etc. are calculated from. That portfolio includes only very liquid investment assets.

On the spreadsheet in which I track net worth I also break assets down into 'liquid,' moderately liquid' (things like automobiles), and 'illiquid' (things like real estate) categories.

Net worth is really little more than an interesting curiosity. Portfolio number is the thing that really matters.

 

[2B]

Gee, I missed out on all the fun. After I no longer had my "important" job with Megacorp, I pulled together all of my finances after lurking at this forum for a few months. Up until then I had always been debt free except the mortgage and maxed out my company thrift plans. Other than that I just went with the flow, worked 60 hrs/wk and raised three kids with DW. My earliest "formal" accounting had my NW (without house) over $1MM. That prompted my realization that even though I had been put at the curb by Megacorp I was FI and could have actually retired then.

HI concerns and the final years of my kids college prompted me to continue gainful employment. I finally realized my 90% asset allocation put an unnecessary risk or as William Bernstein wrote in one book, "When you've won the game it is time to stop playing." I went to 60% equities in August 2007. That helped dampen the hit but it still hurt. Fortunately, it has all come back and more. In 2010 I went down to 40% equities.

So, why am I still coming in here?

 

[travelover]

I include my home's value in my net worth when I'm bragging, but for retirement planing, I exclude it.