I hesitated on writing this post for some time because I really don’t like the blog posts and social media pages that share net worth and come off as boastful about how much money some people have accumulated. However after considering it, I decided to share my journey to show readers that despite failures and big losses, with the right habits and determination, just about any able bodied, capable person can turn themself into a millionaire in the US.

Milestone

Every so often, I sit down and calculate my net worth. For people that want to take control of their financial lives, it’s something I highly recommend doing. Your net worth is just as important, if not more important, than how much you make. Net worth is calculated by adding up the value of all your assets: funds in bank accounts, retirement accounts, the value of any property you own, cars, jewelry etc. You then subtract from this figure any liabilities you have: the current value of a mortgage, student loans, car loans, credit card debt etc. The resulting figure is your net worth.

With the end of 2020 and the run up in share prices as well as the surprise spike in the home market, I thought I would calculate my net worth to see where I sit currently. This was mainly to refinance my real estate and to update the figures which I had calculated in the previous year for my divorce. To my surprise my net worth now came in at over $1 million.

A little over half of this $1 million is in retirement accounts which are invested in the stock market: traditional and Roth IRA accounts, a 401(k) account, a pension from an old job and a health savings account. This money will not likely be touched until retirement so there is decades of growth left for these. The rest consists primarily of real estate assets, my brokerage account and a 529 college savings account for my son. See below for the line item breakdown.

Net Worth Breakdown:

• 51% – Retirement Accounts and Pensions
• 6% – Primary Home Real Estate
• 33% – Investment Real Estate
• 6% – 529 Savings for College
• 3% – Cash, Brokerage Accounts and Other savings
• 1% – Other, a car valued around $5,000, some art

$1 million was an important mental milestone for me and has been a long term goal. Of course, this amount of money is not what it used to be. Few people would retire today if $1 million was suddenly deposited into their bank account. The figure is more linked to pop culture of an older age such as the roaring 20’s when $1 million was equivalent to about $26 million in today’s dollars. But it also represents an important mental crossover point moving towards what’s really important: not having to depend on anyone or any company to take care of your family or make a living. That in itself represents not necessarily early retirement for me personally, but the chance to take risks in my career, start another business or feel free to devote more time to this blog or other passions I have. It also represents a point where the allocation of my investments and the outlook for the market starts to become just as, if not more important for the growth of my savings than income.

The median household income in the US was about $68,000 in 2019. $1 million of invested assets means if the market grows at a relatively slow rate of 7% then your investment of $1 million has grown by the annual income of the median household. In other words, this is the figure that can produce significant potential income with smaller growth rates.

When you have very little and are just starting to save, $1 million seems a far off distant goal. You would need to either earn a ton of money or find an investment that gets you the equivalent of a hole in one: a return of many multiples of your original investment. This doesn’t happen for most people. For most people, the seeds of being a future millionaire are planted through skill acquisition, discipline, risk taking and some good luck.

Fail Up

That this happened despite all the setbacks that I experienced, is a testament to the fact that anyone with the right habits can also reach $1 million. It may take you less time or it may take you a bit more depending on your income, but it can be achieved.

I would have likely reached this point a few years ago if it wasn’t for the risks that I took: some financial, some business and some general life risks. Many of them didn’t pay off and I lost big time.

After I graduated college, moved to New York City and got my first job, I saved aggressively by getting an apartment far outside Manhattan and rarely eating out. My goals started out small: save enough to put money into a Roth IRA and to have 6 months of savings in case I lost my job (which happened). Luckily I was able to quickly find a new job and I continued aggressively saving, knowing that the money I made young was valuable in investing terms.

I started later than some college grads at 25 given that I did a dual degree then went straight to grad school. However I knew then, even at 25 that, assuming a 10% growth rate, every dollar I saved and invested in the market was worth $45 dollars when I retire at 65. This helped motivate me to save an invest even small amounts. It was a mental trick I used when I was tempted to spend a night out or splurge on something for myself. $20 then was giving up $900 in retirement, that’s a lot of money.

I didn’t max out my retirement contributions in those early years which was my first mistake. I look back and really wish I did now. I did contribute up to the full match my company offered though, and contributed to a Roth IRA when my income qualified, these made big differences down the road.

I purchased a home in 2010 by doing the opposite of what many do, I bought the absolute cheapest home I could find. It was income restricted and very far from work, but I was willing to make the sacrifice to take a chance: saving for a business. I even received half my down payment back from the government due to a crisis era program to promote home purchases from the Obama administration.

Within a few years, I had saved so much from living in that cheaper apartment I was able to purchase an investment property and start a business with a friend of mine. I brought in investors and within a few years we expanded the business and purchased a second home. This proved to be too much of a stretch for my partner who was running the day to day. 4 years after starting the business, I was laid off from my job. I flew out to California to shore up the business. I will avoid the details of that episode but I ended up having to throw in the towel on the business and sell the second property.

I used the proceeds fro. The sale to pay back investors I had brought in over the years. These people were close friends and associates who trusted me with their money. My relationship with them was more important than paying myself, so I ate a personal loss on the business to pay back my friends. I also gave the remaining business to my former partner for the same reason, it wasn’t about the money. Relationships were more important. This failure cost me hundreds of thousands.

The other risk I took was a personal risk in getting married. I had seen friends and colleagues get divorced and had said for years that will never be me. For many years I proclaimed I would never marry and would die single. However I thought I had found someone that accepted me for who I was so I softened up, got married and had a child. My spouse didn’t have much but I didn’t care. Being happy and with someone that accepted the simple lifestyle I lived was more important. So I spent on a wedding, a ring and a very expensive rental that could fit our growing family. Sadly, this didn’t work out either. Within 2 years of being married, tensions became too much for my spouse and she wanted to end it. Separation proved contentious in our interactions both personally and financially and I realized we needed defined terms to interact with each other, so I asked for a divorce.

The fallout also hurt financially. I paid a large settlement to have the terms accepted and had to pay full child support as per of my joint custody agreement. This was as expensive if not more so than the loss of my business and the two occurred back to back from one another.

Yet throughout all of this, no matter how difficult things got, certain things did not change. Other than when I was unemployed for 8 months, my retirement savings were automatically deducted from my check and invested in the market, I paid my bills on time and I put money towards my son’s college. I never tapped any of these funds, except when part of my retirement savings were paid out for divorce. These were the habits that helped me bounce back from huge losses.

Luck

I will be the first to admit that I also experienced a great deal of luck. I happened to find stable and eventually lucrative, employment during and in the aftermath of the financial crisis. The real estate market improved after my purchases. The pandemic greatly increased the value of my property in California. I diversified my retirement investments in 2019 to include small cap and international growth funds, some of which returned over 100% in 2020. This wasn’t skill, it was just the luck of my timing. The bulk of my retirement portfolio remains in a boring old target date retirement fund from Vanguard, diversified across equities and bonds in both the US and internationally.

I also was lucky enough to not have student loan debt to contend with. I received a scholarship for graduate school and my state school undergrad education was funded by my parents who are also diligent savers.

It’s only the consistent habits of saving, investing and taking measured risks with my savings that distinguish me from anyone else. These habits didn’t always help me when things went wrong, but they enabled me to be in a position to take advantage of opportunities when they presented themselves: when the housing market crashed, when the pandemic hit or when I lost my job. Opportunities will come in life, the question is will we be prepared to take advantage of them when they do come? Being prepared wasn’t luck, it was consistency and dedication. Being prepared was about controlling what was within my own power no matter what was going on around me.

Learning

Finally, it was what I learned from the failures which also paid me going forward. I can’t put a price tag on these but they paid in different ways. My failed business taught me how to read people, consider their motivation, strengths, weaknesses and how to get the best out of them. This will lay the groundwork for future leadership. The failure of my marriage showed me my own emotional shortcomings and how I could work on them as well as spot personal issues others may have which I would want to avoid. My divorce in particular also showed me a resiliency I didn’t know I had which made me much less fearful about the future and confident I could confront any crisis head on. I would even dare to say these lessons were worth what I paid for them monetarily.

The lesson for those of you reading this hasn’t changed since I started writing this blog: forget what the masses do. Save, invest and take measured risks to achieve your own personal satisfaction be that $1 million, hitting those career milestones or having your own business. When you block out the noise and ask yourself what you really want, it may be very different from the life people envision for you.

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