Today we continue the ESI Scale Interview series where people answer questions about their success at working the ESI Scale.
In short, the series focuses on what the interviewee is doing in the areas of earning, saving, and investing. They also get an opportunity to ask ESI Money readers for suggestions if they choose to do so.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
With that said, let’s get started.
My questions are in bold italics and his responses follow in black.
OVERVIEW
Please tell us a bit about yourself.
I’m 26 years old and my wife is 25 years old.
We’ve been married for just over 6 months and currently have no kids.
We live in a semi-rural area of the Southeast.
What is your current net worth?
Currently $226k
This breaks down as follows:
- Checking/Savings: $20k
- Brokerage with advisor: $3.6k
- Rollover IRA with advisor: $18k
- Roth IRA with advisor: $12k
- Current 401k: $2.5k
- Personal Vanguard account: $26.5k
- Wife’s 403(b): $8k
- Home Value: $205k (Worth more, conservative to account for commissions.)
- Recent inheritance: $92.5k (just happened this month)
- Recent sale of truck: $23k (just happened this month)
Mortgage debt: $185k
How did you accumulate your net worth?
Until this month, for the most part all of our net worth has come from earning and saving. I’ve gotten some market returns, but given my relatively short time in the market, it hasn’t had a huge effect on my net worth yet.
My wife and I were also both able to come out of school debt free, which is huge.
As you can see I’ve also recently had a couple windfalls. Through my current job I was able to buy a brand new truck. My personal truck was already a paper weight in the driveway, so I decided to go ahead and sell before it depreciated any more.
I’m also lucky to have a grandmother that wanted to put her grandchildren in the best position possible to succeed, so she left myself, brother, and cousin her house which we were able to sell for an inheritance.
EARN
Tell us a bit about your career.
I currently make $70k-$80k/year, and my wife makes $40k/year for a combined $110k-$120k.
I graduated from a prominent SEC school with a degree in finance in 2014.
I was a walk-on turned scholarship football player, so that’s where the bulk of my time and focus went. Given that, I took the first job offer I had with a large regional bank working in mortgage.
I’m happy I did, because of the exposure it gave me to personal finance as I dug into the financial lives of every client and saw how people lived their lives.
Unfortunately, this wasn’t the career for me. I grew up a southern kid and as a banker I was wearing a white collar to cover my red neck.
A friend I graduated with had the same feeling but had already jumped into the construction industry, and I was able to get a job with his company as a project manager. I started out with a $55k base, but got a raise earlier this year to $70k base. There are quarterly bonuses and a discretionary bonus every year that could add $10k to that.
I enjoy it, and the pay is relatively good, but I don’t know how long I’ll be able to do it. The travel is demanding and the job is stressful, 3-4 days a week flying all over the country and constantly dealing with people that are generally assholes. But I get to wear jeans and boots to work every day and get to see new places all the time which is cool.
We are also cash flowing grad school for my wife right now. As a teacher, to make more money you have to go back to school so we’re getting that out of the way. It’s not cheap, but our saving allows us to pay for it with no real issue.
Do you have a side hustle?
I don’t, but I need one. The demands of my current job make it tough, but it’s by no means impossible. I just haven’t figured it out yet.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
7
The biggest gripe I have with myself is not having multiple income streams.
The construction industry is volatile, and that worries me. Right now times are good, but what goes up must come down.
I also wish I would have tried to start some sportsman-based company while in college. Or at least looked for more ways to make money. The demanding schedule of SEC football didn’t allow for that though unfortunately.
What are your future plans regarding growing your income?
If I continue to perform in my current company my income is going to continue to rise annually.
My plan is to focus on some other streams as well, particularly real estate. My stint in mortgage introduced me to real estate investing and the dream is to have enough rental income to quit the day job. But I’m still a wannabe investor at this point. Like most people, I worry about how expensive everything is right now and don’t want to make the wrong move.
Once my wife finishes up grad school, her salary will also be bumped a good bit higher.
I have also toyed with the idea of starting my own blog. It would be something that tied in finances with my real love of hunting/fishing and the outdoors. I have a name and some topics, but that’s as far as it’s gone.
SAVE
What percent of your gross income do you save?
My wife and I save roughly 38-40% of gross right now. That’s not including what is automatically put in our 401(k)s.
We never touch my wife’s paycheck, and usually have some left over from mine.
How did you get to this level?
Paying attention to and tracking spending. I’m lucky to have a wife that is fiscally responsible, and we have a budget that we try to stick to.
We also don’t require much for entertainment. Most of our fun is had outside and entertaining our two German shorthaired pointers.
I grew up hunting and fishing and that is still where most of our time goes given the season.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
8
I feel good about where we are with saving. Some months are better than others, but we are good at avoiding frivolous spending.
What are your future plans regarding saving your money?
Continue to save at 50% or more. My raise was great and allowed us to save a good bit more, and lifestyle creep has been no issue.
Cash flowing my wife’s grad school is giving our savings a little bit of a hit, but it’s takes less than 2 months to recover each tuition payment so it’s not that big of a deal.
INVEST
What are your main investments?
My small brokerage account and IRA’s are held with my family’s financial advisor.
To be honest I pay little attention to them other than maxing the Roth the past couple years.
The traditional IRA is a rollover from my first job and I don’t have any real plans for it.
I try to put at least $1,000-$2000 a month into our Vanguard account. In that account I’m 70% VTI and 30% VEU. Given my investment horizon, most everything I read says to go all in on stocks and avoid bonds so that’s what I’m doing.
Like everybody, my returns have been great over the last couple years. I’ve only had 2 years of real contributions though, so most of the value is still principle saved.
The reason I don’t max out my 401k is because I don’t want to tie up the money for that long. I take the match, but that’s it. I want the flexibility to make moves in real estate and business in the near future and have no plans of waiting until 59 ½ to retire.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
7
I’m confident in my investment mindset and like to think I have a high risk tolerance. I know what kind of luck I have when I speculate, so I don’t waste time stock picking or making big bets.
What are your future plans regarding investing?
Real estate. I’m going to continue to max out my Roth IRA and regularly add to my Vanguard account, but I really want to acquire properties.
The dream for me is to have enough properties to support my family so I can hunt and fish for a living. I’ve just been gun shy to this point.
WRAP-UP
What money mistakes have you made that others can learn from?
I don’t think I’ve made any real money mistakes to this point. I was brought up in a fiscally responsible family and that has been passed on to myself as well as my wife.
I’m toying with making my first mistake though. I really want to buy a bay boat that I can use to fish on the lake and pull to the coast to inshore fish. It would be about $20k — talk me out of it.
Are there any questions you have for ESI Money readers regarding any parts of your finances?
Yes, especially the people out there with more life experience.
Given my age and position, what would you do? Particularly with the $115k I have parked in savings until I come up with a game plan.
I really want to use the money to catapult myself into my next chapter, but I need to figure what that is going to be and how I’m going to utilize it.
Nate says
Excellent job! Glad to see that I’m not the only redneck pursuing FI. Sounds like you’ve got your “ducks in a row”.
Chris @ Duke of Dollars says
How often would you use a boat if you bought one? I’ve found its much cheaper to rent out a jetski or boat for fishing whenever I go – saves WAY more money in the long run, plus I don’t have to maintain it.
If your looking to get started with investing with that big sum of mula you have, you can first max out your 401k at work each year. The taxes you save will make it worth it and you have savings to offset any life changes as you adapt to the new paycheck amounts. It isn’t as much as you think, because you save on taxes.
Secondly, check out investing with Vanguard – you don’t have to do all of it at once, take a bit each month and start dollar cost averaging it out. The market overall is pretty expensive right now, so putting a huge amount without dollar cost averaging it might hurt your gains, but if you start now you can take advantage of any dips in the future.
I’m not saying specifically wait for dips, or to try and time the market, I’m suggesting just using the large sum of money you have to take baby steps for getting it invested versus all of it at once. Dollar cost averaging is a popular strategy to average out against pricy stock markets while getting to take advantage of dips, all while not having to think about it much.
Since your young like I am, you can invest not only in the Vanguard total market fund or sp500 index fund – you can take advantage of the smaller / medium cap funds as well. These have more volatility and risk, but more room for growth since the companies have chances to grow. Percentage wise it is up to you :).
Lastly, you can take some of the mula and put it into REITs to diverse a bit into real estate (like you plan to), without having to be a landlord.
Hope that helps some – awesome job so far!!
Chadnudj says
Given that you have a relatively healthy amount leftover at the end of the month (you’re not touching your wife’s salary), I really think you should reconsider your reluctance to max out your 401ks.
Look — if you want to retire earlier than 59.5, there are plenty of ways (ROTH conversions/ladders, namely, but other options such as substantially equal periodic payment, or SEPP plan) to access money in a 401k before 59.5. And even if you retire at 45 or 50 or whenever, you’ll still NEED money from 59.5 until 90 or whenever you ultimately kick the bucket — having that money in a 401k (where your earnings are tax free) is an awesome help towards that goal. Plus, maxing out your 401k now when you’re very young will let compounding do its magic for longer, but also reduce your income taxes (assuming you use a traditional 401k, which you would). And you cannot make up for missed years maxing a 401k — you use it, or you lose it for that year.
I’d max out the 401ks, and then see where you are in terms of leftover money at the end of the month. You might even find that you still have a lot/enough leftover, and with future raises (like your wife’s raise when she finishes her degree) the leftover money will only increase.
stephanie says
agree, plus you lower your taxable income which would be helpful. I think not maxing this out is a missed opportunity.
Arrgo says
At your age I’d look to put in more or really, max out your 401k as much as possible. The compounding should do wonders for you down the road. At this point, I’d go 100% stocks and lean towards stock funds and put part (or a lot) into growth funds if available. Be sure to research first of coarse. You seem good on the spending front and I think that mindset will help you long term also. The hard thing to do is to not start spending a lot more money once you start making it. Its not wrong to treat yourself sometimes, just have some discipline and keep it under control.
Freedom 40 Plan says
Sounds like you’re doing awesome for your age – congrats! I’d agree with the other comments that maxing your 401ks (both) should probably be a big goal for you at this point. With your incomes and savings, that should not be too difficult. Hear what you’re saying about not wanting to tie that money up until 59 1/2, but the tax savings are pretty significant and there are always ways to get at the money if you really need it. I took a similar approach when I was your age and I regretted it.
It sounds like you have a lot of interest in Real Estate, and that can be a great way to build wealth, but I’d tread cautiously. You might wait until the next market downturn to snap up some amazing deals. Profits are made when you buy, not when you sell.
Tess says
I make my living as a RE Investor and I always tell people you make your money when you buy not when you sell. Nice to hear it here too.
BuddMann says
Great line…”a white collar to cover my red neck!”
Keep it up young man…stash away as much as possible in tax deferred accounts, get that graduate education knocked out debt free, keep an eye on tax avoidance down the road (that is going to bite me and my tax deferred accounts I am afraid), get insured against problems, and avoid debt and lifestyle creep…you are going to be just fine.
Ubique1 says
I am a 52-year-old ex-boat-owner. Take it from me: A boat is a hole, completely surrounded by water, into which you pour money. Don’t do it. Rather buy a kayak to fish from – not one of those $$$ custom fishing machines that so many kayak-fisherman (and women) get hung up on – just something simple and straightforward, that you can add a couple of rodholders to, and off you go (something like an Ocean Kayaks Scrambler, for example). It requires no gas, offers some exercise benefits, can be carried on the car/truck (no trailer needed); and if your wife wants to join you, buy a second – still a whole lot cheaper than a boat.
Lily | The Frugal Gene says
I like your mentality of investing in your wife’s education as a team. Some couples separate that as a ‘you do you’ thing and I always think it’s sort of a cold thing to do if theres no other reason besides independence =) best of luck to you both!!
P.S. I thought you meant SEC like the government / investment section. Is SEC another word for something football?
ESI says
LOL!!!
Yes, the SEC is the Southeastern Conference, believed by many to be the “best” college football conference in the nation:
https://en.wikipedia.org/wiki/Southeastern_Conference
MI 45 says
You’re doing a great job with the ESI scale so far! My suggestions would include additional contributions to your 401(k), and maybe some serious consideration for combining your interests.
For example, start a website that could include a hunting/fishing blog, as well as describing and advertising hunting and fishing guide services(?) That might justify buying the new boat. Long-term goals might include real estate acquisition for commercial hunting.
Mr. Middle Aged says
I’m impressed with your ability to save! I sure wish I had my act together financially at your age.
At your current savings rate (and low cost of living), you’re an ideal candidate to live the FI/RE lifestyle and realize your dream of retiring early possibly in your 40’s. If that appeals, avoid lifestyle creep, concentrate on paying off your mortgage, and make sure you retain a sufficient portion of your inheritance in a money market account to cover 3 to 6 months of living costs. Further, I agree with the other comments — make sure you maximize your 401k savings to cut down on current year taxes. If you retire early, you can take advantage of IRS rule 72(t) to access these funds without incurring penalties (see attached IRS hyperlink)….
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-substantially-equal-periodic-payments
SavvyFinancialLatina says
We’re 28, on our way to 29. We were you about 2-3 years ago. Create an Investment Statement Policy, it will help guide your jitters. I had a large sum of money in 2016 due to a change in jobs (not as big as your inheritance), but higher than $10K. I was reluctant to do anything with the money. I think it took me about a year to finally put it in the market. The market was higher.
Learned my lesson, created an ISP plan, and it’s really helped. Max out those retirement funds (401K, IRA, HSA). With your income is doable. Then, any leftover money automatically invest the money above a certain cash threshold.
I’m conservative and keep 6-12 months of expenses in cash.
Best of luck!
Jeff Summers says
You’ve obviously done a great job of keeping expenses in check and saving.
You asked what to do with $100k+.
I’m older but I’ve always had a goal to keep $100k liquid. I contribute to a SEP, life insurance and purchase real estate. Having the goal of $100k liquid not only gave me security but allowed me to take advantage of good real estate opportunities that came alone. Yes – most interest bearing accounts return very little today but being able to access that money and have a cash fall-back position was always philosophically important to me.
Good luck and keep up the good work.
Phillip says
My 2 cents … Grow your primary career earnings. Encourage your sponse to seek career and salary growth. Both of you have room to earn more before plateuing. Invest that extra income aggressively but not foolishly. You have lots of time to grow those investments. Then be patient and you will be a multiple millions before you know it.
Paul says
Well done – you are killing it – 3 points from me:
1. I agree with everyone else – max out the 401K – tax free growth is phenomenal – you are missing out
2. What is going to happen in the next few years – are you guys gonna want kids? Your travelling job will totally suck if it takes you away from the kids – start thinking about that and a Career Plan B. And oh yeah – kids cost a boatload of money….
3. Hell yeah – buy the bloody boat – treat yourselves – you deserve it !
( Mr ESI – please don’t throw me out of the FIRE community for this heresy)