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 her responses follow in black.
OVERVIEW
Please tell us a bit about yourself.
I am 29 and engaged. My fiancé is 26 and we will be married in August.
We live in a pretty big, and rapidly growing, city in the West. No kids as of yet.
Since we have already combined finances, I will include our combined stats here.
We love to be outdoors and spend most of our time biking, climbing, mountaineering, rafting, kayaking, and skiing. Can you guess where we live?
What is your current net worth?
I bought a house last year – the real estate market in my city is absolutely crazy right now (I wish I could say I bought when it was low).
Many people think it is a bubble but I think it’s just supply and demand at work.
I will include my home equity in my net worth since I could rent it out for well over my monthly mortgage and turn a profit on it today if I needed to.
- Mortgage balance: $292,926
- House Value from Redfin: 580,696
- House Value from Zillow: 486,822
In my city, Redfin is much better updated and more accurate, but I think its valuation is high. Zillow’s estimate is $10k less than what I bought the house for so I absolute refuse to believe that and will land in the middle to estimate my home’s worth at $530,000, which I think is conservative.
Home Equity: $237,074
I own a small percentage of my parents’ real estate LLC.
LLC interest: $50,000
I invest my money according to Paul Merriman’s recommendations.
He lists his suggested portfolio make-up on his website and I follow the aggressive recommendations for Fidelity stocks as closely as I can. It’s certainly not a perfect allocation though as we have varying amounts to invest each month and have different options available in different accounts (e.g. my HSA has Vanguard options, I have a Deferred Annuity account from my Grandparents that I leave alone, my fiancé’s 401k has limited options).
We recently passed the $100k in investments mark and that was very exciting!
Investments: $109,514
Cash: $43,200
Total: $439,788
How did you accumulate your net worth?
I am incredibly fortunate in many ways. First, I had grandparents who were dedicated to paying for my college degree so they gave me a cash gift of several thousand dollars to be invested every Christmas and Birthday since I was born.
I attended a great in-state university and graduated with zero student debt. Their gifts, having grown via investing, covered my entire tuition and my parents paid the living expenses my summer job as a server didn’t cover.
I worked very hard in college because it was clear I was expected to. It was also clear that I would attend graduate school of some sort. After hating biology my freshman year of college, the obvious choice was law school (sorry Dad, he had doctor daughter dreams for a long time).
I got good grades and wrote an honors thesis, graduated summa cum laude, and was offered quite a few scholarships to good, but not great law schools. I also got into great law schools where I did not receive scholarships. Looking back I am so glad I made the choice to follow a full ride scholarship to a good private law school and again exit school debt free.
I’ve never been in any type of debt until I bought my house so I have had incredible freedom to pursue legal work that I want to instead of chasing a paycheck.
This meant clerking for a court of appeals judge and then a state Supreme Court justice for 3 years. That also meant only earning about $52k per year for those 3 years. Not exactly lawyer money, but still a lot of money for a single, childless person not living in San Fran or New York.
I saved half of my paycheck throughout my time clerking and maxed out my Roth and my HSA every year. I have the money in my HSA (over the cash balance required) in investments. The money in excess of funding my Roth and HSA I invest according to Paul Merriman’s investment recommendations in my individual account.
My dad instilled a love of personal finance in me and a few years ago I discovered the online PF blogosphere and absolutely love it! It has fueled the fire to save with a purpose. My dad always says to me, live like no one when you are young and you will live like no one when you are old.
But, my 4 years of savings on my small salary is only part of the story. My parents are incredibly generous and wanted to “front-load” my inheritance. They gave me my $200k down payment on my house as well as my interest in our family LLC. Obviously, this accounts for a huge portion of my net-worth.
My family’s generosity is the only reason I could go through 7 years of higher-education debt free and save 50% of my paycheck as well.
I am extremely grateful and want to, hopefully, show that being generous with your children doesn’t necessarily make them spoiled brats, but can give them incredible freedom and a leg up.
My fiancé came out of school with $30k in student debt and paid it off in 1 year while working construction and searching for an engineering position. Now that is impressive.
EARN
Tell us a bit about your career.
I am a lawyer and now work for my state in the Attorney General’s office doing tax law. I started this job 6 months ago.
I make $78,000/year which comes out to $5,045/month. My employer does not have a 401k program.
My fiancé is an engineer and he works in electronics controls. He makes $66,000/year including his bonus. His employer does have a 401k program and he contributes well above the amount needed to max that out.
Together our household income is $144k. Since combining finances we have been able to amp the investments up!
Do you have a side hustle?
I walk dogs on the wag app every now and again and will board a dog if convenient (and hypoallergenic)!
I also have a private 2x week walk that is reoccurring. I make minimum $40 a week with my reoccurring walk and $100 extra every now and again when I board.
I have a roommate who pays half of my mortgage and utilities. Game changer.
I also have a blog but it’s new and just for fun…for now.
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?
6
I have a law degree, I could clearly be earning more now and could have been earning double what I earned in the last 3 years while working for judges.
But, I have really enjoyed working for the state and doing public service. I definitely have not been maxing out my earning potential though.
What are your future plans regarding growing your income?
This is a question I have for readers. I am 29 and I love the outdoors and traveling. This is a big reason I have made the career choices I have. If you are working for a big law firm you are working a lot of hours (which is totally do-able) but you also pretty much always have to be on-call.
I spend my weekends out of cell service (and all my vacations) so this has been a tough pill to swallow – clearly since I haven’t done it.
Is it worth it to give up my lifestyle while I am young and want to be active to (probably) double my salary?
If I stay in my government job, which is fairly flexible, I will get some raises, but nothing drastic.
SAVE
What percent of your gross income do you save?
We are sitting at a 55% savings rate.
We could definitely do better. We live a super luxurious life by our standards (e.g. I just put artificial grass in my back yard – amazing) and could definitely cut more out- but we do invest $4k-$5k a month so I feel like we are doing pretty well.
How did you get to this level?
I have had to get my love of clothes under control — I am definitely still not perfect but have made great improvements.
We also try to keep our activity costs low. It’s great being outdoorsy because once you make the initial investment, your activities are mostly free after that (mountain biking excluded from that statement – bikes are more expensive to maintain than cars).
When we go somewhere to climb or bike, we sleep in the car or camp. We don’t go to concerts, we rarely eat out, we pack our lunches, I bike to work most of the year, we don’t go on fancy vacations, we don’t buy each other expensive gifts, we don’t go out to the bars often, we don’t buy things we can’t pay for in cash today. That type of lifestyle adds up to savings!
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 know we can spend less but if I compare myself to my peers, we are killing it.
I think the lack of debt just makes it so much easier to save. Eliminate all the fixed costs you can and saving comes naturally!
What are your future plans regarding saving your money?
I would like to cut our costs a little more.
Spend less on clothes and alcohol (my fiancé is a bit of a mixologist, in his mind) but overall I want to keep saving like we are and not get pulled into the mindset of thinking we deserve to have it all and have it all delivered.
INVEST
What are your main investments?
We are invested in a mix of index funds: typical 500 index, international index, small cap, large cap, value funds, emerging markets, international dividend, etc. Like I explained I try to follow Paul Merriman’s recommendations.
Since I am already heavy into real estate through my family’s LLC, I don’t invest in real estate funds.
My portfolio is heavy international.
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?
9
I follow the advice of people older and wiser than me and don’t try to outsmart them or the market. I think that’s pretty much all you can do.
What are your future plans regarding investing?
I don’t plan on changing my strategy. So far so good.
I would like to eventually buy a second home to move into and rent my current house. I think it has great rental property potential given how close it is to our city center. My dad has had great success in real estate so that route is appealing to me.
WRAP-UP
What money mistakes have you made that others can learn from?
You only need so many pairs of yoga pants. Read The Life Changing Magic of Tidying Up before it’s too late! This can apply to whatever it is you tend to accumulate. I want to continually simplify my life and my possessions. It’s amazing how much money being thoughtful about what you bring into your life can save you!
I think a big part of my saving success has been the understanding that I don’t deserve a fancy lifestyle just because I have an education.
My dad grew up in extreme poverty and everything he has today is because he worked very hard to get it. I know how lucky I am to stand on his shoulders and not have to fight my way up.
I think that a lot of my peers feel entitled to be wealthy and have whatever they want just because they have a college degree.
Are there any questions you have for ESI Money readers regarding any parts of your finances?
Am I wasting my degree by not pursuing a super high paying job while I am young?
Is lifestyle worth the sacrifice in savings? I certainly enjoyed my 7 day rafting trip last week but I would also enjoy retiring earlier. Sometimes I feel really behind in savings because I was in school for so long.
Great job on starting your life off. In no time, you can retire early and spend it all in the outdoors if you wish. Do you live in Colorado? I’m thinking of articial turf. Is it heavy on initial investment?
You guessed right! It was expensive to get a good job done on the turf- it was 7k for my backyard which is pretty small. But I am absolutely loving it! The time savings are incredible!
It looks like you have managed to strike a good work/life balance so far.
I don’t think you are ‘wasting your degree’ by not pursuing more financially rewarding careers. At the end of the day, getting a degree can be seen as a way to increase your chances of earning what you need to fund the lifestyle you want – which it looks you’ve achieved.
It may be worth continuing like this for a while (if bearable, of course) so that your savings can grow and/or your mortgage is paid off, before making the jump. Track your expenses, avoid financial mistakes, and you’ll be good to go very soon.
Thank you! That’s such a good way to look at it and is encouraging!
When I was your age my husband and I read “Your money or your life”. The premise is that people save a lot of money so that they can “live”. But why put off living if you have a good work/life balance? You’re young, you’ve done well with saving/investing. Do the math to see where you’ll be in 10/20/30 years. I wouldn’t change anything. You love the outdoors, you’re being paid well, and I’m assuming that over time your salary will increase as you get both COLA and general promotions. Enjoy your weekends!!
Thanks Julia! Sometimes I feel like I am behind from being in school for so long and not saving during those years and I need a high income to catch up. Thank you for the reassurance!
“Is it worth it to give up my lifestyle while I am young and want to be active to (probably) double my salary?”
No. It’s not worth it. If you are happy with your lifestyle and would be happy continuing it, you are well on your way to getting to financial independence and being able to maintain what you love.
Being a physician and basically having to sacrifice my 20s to medicine, I completely understand what you are getting at… But if you can enjoy now, earn enough, and save… Then just leave it that way.
The worst thing you can do is compare your salary to others. You seem content with life, and that is more than the vast majority of people can say no matter what their income is.
TPP
This is so encouraging thank you! I do worry about increased expenses when kids come into the equation but I guess I can cross that bridge when I come to it.
Annie, only you can decide if the trade-off is worth it. I personally decided in my late 20’s to sacrifice my life (and hair) in management consulting for a few years to get a head start before kids, etc. As we all know, investing early in the market have historically yielded great long-term rewards and I have personally benefited from investing lots of my early earnings in the market with no regrets.
I agree with all the other commenters so far. I would add that there are trade offs in life. That may seem obvious, but conscious decisions help guide our lives.
I decided to sacrifice some personal time / family time for a very high profile, high stress, high dollar career for about 20 years. It paid well, the sacrifices were obvious, and today I am comfortable and secure financially.
However, another choice would / could have been to live as you are living today. In retrospect, that would have also been a good choice too. Financially you seem very astute and on target as well.
I worked in hospitals most of my adult life. We never had a sick patient who said they wished they worked more. We had plenty of patients that wished they spent more time with family and friends, traveled more, enjoyed life more.
Looking back, I may have enjoyed more the path you are on today.
Either way, do what is right for you, and make a conscious choice!
Ron
Thanks Ron – you are right – remembering opportunity costs exist for every decision you make is so important. I also think part of my constant questioning of whether I am earning enough is part of my risk aversion. I may not be able to earn as much in the future so why am I not doing it now to cover for that future possibility? But I can also think of it the opposite way that I won’t always be able to do the active things I love so I should take advantage of my abilities now while I can. You’re perspective is really helpful in easing my mind!
Agree with the commment above by Julia. Your savings rate is great – and will likely only improve. If you go the heavy work hours jobs route, you’ll shave a few working years off in you 40s; less likely the point in life where you will enjoy and/or be able to take 7 day rafting trips. You and your fiance have a fantastic savings rate – I wouldn’t hesitate to stay the course with your current lifestyle choices!
Thanks Spencer! I hope our savings rate will improve every year!
My husband was in the same position as you. He could’ve doubled if not tripled his salary as an attorney in the private sector. He chose to stay working for the government for less money but more free time. It was the best decision he could’ve made. Instead of working 60 plus hours and commuting to the city, we are able to spend time outdoors and doing things we love together as a family. Tomorrow is never guaranteed, don’t put off doing what you love until retirement 🙂
Ahhhh thank you Kristen! That is the same position as me- very encouraging!
I’m not a millionaire, don’t intend to be one, but over my lifetime I have enjoyed the simple pleasures of family, friends, and travel. In my opinion you appear to be enjoying yourself, and continuing your monitoring of expenses and savings. Do what is best for you. Life is what it is, up and downs. Keep and open mind, and you will prosper in your own way.
I am going to print this off and put it on my bathroom mirror. Thank you.
Thanks for the interesting Scale report.
IMO, between you and your fiancee you have a very nice income. I’m in my early 50’s, and frankly, if my employer offered me $50K more a year, or 2 weeks more vacation where I could totally tune work out, I would pick the time off.
You seem to be earning enough, and living the lifestyle you enjoy while still saving a substantial amount. The trade off in stress might not be worth it.
Alternatively, if you can make $500K/year (as a corporate lawyer with your experience, this isn’t completely unreasonable), then you might be able to put enough away to completely walk away in your mid 40’s. Obviously nobody can make that decision for you.
To me, looking back, I would choose your current path, and enjoy more now…
Thanks Jason- it really is that stark of a difference. I could continue to make 80k or I could make 300-500k. It’s crazy. Your perspective is really helpful. I suppose I could always make the switch in the future if life demanded it.
You have a state job and there is no 401K? How is the pension? Is there a minimum age you have to reach to receive the pension? That can help you decide if you want a lower salary working for the AG office as opposed to earning more money in another legal sector
Kudos to your great start.
Ha- I was waiting for this question and I am embarrassed to answer it. After I answered all these questions I realized I left out my Defined Benefit Pension Plan thing I get through the state. The reason I forgot about it is that I don’t understand it, I don’t know how much I contribute, what the vesting process is, how many years I would have to work for the state to get paid out, etc. A negative in working for the state (at least in the jobs I have had) is that there isn’t in-house HR that deals with your retirement plans. Our are handled by PERA which is a separate entity and I don’t even know how to make and appointment with them. This is incredibly embarrassing and since I don’t understand it I have subconsciously chosen to ignore it and just not include it in my FI calculations.
I’d recommend making the appointment to get more info on your pension plan as you have the benefit of being young and the benefit of compound interest. Congratulations on all your successes so far!
Annie,
I hate to say this, but you are not alone on not understanding your retirement plan. Where I work, a lot of people do not know the pension we have and how it works. Is there someone in your office that seems to know about your pension plan? Think about it. There probably is someone there that could give you heads up on the pension.
Take some time to figure it out slowly. Just piece meal it. I saw from a previous comment that you are in Colorado. I did a quick search on the PERA site for Colorado and would you be surprised to know that you do have a 401K/457K in addition to your pension. Unless for some reason your agency doesn’t offer the 401K.
Lisa has a good point to start young and get the benefit of compound interest. Don’t be scared of it.
This is the kick in the pants I need- I will find someone who can help me in my office- thanks!!!
Ultimately there is a choice to be made but I believe there is no right or wrong answer. As with a lot of decisions in life only time will tell if it was the so called right one for you. You are the one that has to be comfortable with it and in my experience some people will agree with whatever decision you make and some will not.
I do not live in the US but around 10 years ago my wife and I decided to make a big lifestyle change when she was made redundant. I left my corporate role and we moved from a city to a small town for better work/life balance. Our income would have dropped by about a third to around the equivalent of household income of US$ 80k pa.before tax. Since then our net worth has risen by around 80 percent and we would qualify for the MI interviews you read here so you can do it without earning large incomes. Our largest annual expense after taxes is on holidays so we are not totally frugal.
Best of luck with whatever you decide.
That’s a great example thank you- have you found that living out of the city and in a small town has helped you cut costs?
Hi. I would say that costs are overall similar but spending differs by category. For example we need to use the car a lot more as I have to travel about 45 miles a day (round trip) to work so we spend more on gas. Gas is expensive in the country I live in as the government uses it as a source of revenue by taxing it heavily. In US$ terms it would be $6.10 per gallon.
My wife would say however that the move to a smaller town has saved her a lot in clothing. She worked for a corporate before we moved here and meant she had to dress more formally for work. Now she works in the office at a local vineyard so the dress code is much more casual so clothes she would have previously worn at weekends is acceptable for work
If you plan to start a family, you may want to have a job that will allow you to be have some flexibility. Juggling motherhood and work is not easy in any job, let alone a job that is very demanding. When I had my second child (and eventually a third) I realized daycare was so expensive it didn’t make sense for me to work during the first few years of my kids lives. Keep that in mind as you think about future jobs. Having a flexible job (and boss) when you are a parent is much more valuable than a high income, in my humble opinion!
Really good point Cecilia! Since I am currently the higher earner, we have talked about my husband staying home with the kids or going part time until they are in school. If that were the case I think my incentive to go for the higher paying job would increase to make up for his lack of income, but then I would miss out on time with them. So you are right, having a flexible job might be more valuable than a salary to me at that point too.
My husband is a partner at a big firm. I think because you earn a good salary and have great work/life balance, and you enjoy your work, you should stick with your current career path. This more balanced life will be even more valuable if you decide to have kids.
Your family’s generosity has enabled you to take this path. There is no reason to mess with it, unless you are truly unhappy.
Thanks Marie, sometimes I feel like I am being ungrateful for what I have been given if I take the “easier” road, but insight like yours is really helpful thank you!
Congrats to your parents for doing a great job and to you for following through and setting yourself up for success. I am also an attorney, and I think you’re making an assumption that private sector jobs require a significantly greater time sacrifice than your government job. While that may be true for the classic “big-law” job, I think you could easily earn more than your current salary at a private sector job and still maintain a positive work life balance. You just have to find the right firm.
That’s a good point, most of my friends who are at firms are struggling to maintain a work-life balance so that’s what I am comparing it to. But maybe I should think outside the box. Do you have any advice of what type of firms or jobs to look at? Thanks!
“Am I wasting my degree by not pursuing a super high paying job while I am young?”
No. You’re doing a job that utilizes your degree, although not the highest paid option possible.
You seem to be doing all the little and medium things that will put your financial house in order like packing lunches and having a roommate to balance the mortgage.
As someone who is 43 and physically active, I see my peers who did those overtime desk hours for 10-20 years and it catches up with you. If you were spending your free time doing pursuits like baking or playing poker (both fine hobbies) I might blink twice but physically active hobbies will pay off in improved health over time.
The only thing I’d keep in mind is that once you’re married to keep on with your side hustles like airbnb rather than a roommate to fill the gap and maybe to offer something on the activity front like blogging or walking tours.
Also in case kids do come on to your horizon to run your numbers for various scenarios as that may change your current ideas on early retirement.
Really good points thank you. We got married last month and are keeping a roommate- it makes such a big difference in our savings rate!
I hope that eventually blogging will lead to opportunities to make money, but for now I am focusing on creating valuable content that I enjoy writing.
Outstanding job, Annie! My suggestion is to maintain your work/life balance – you won’t regret it. I spent 12 years working for the state, then the rest of my career at a consulting firm. The difference in the level of stress was painful. Although I eventually added a side hustle that really made a long-term financial difference, I could’ve done the same thing if I had stayed in my state position. You are very well diversified and that is what really counts at this point.
I wouldn’t double your hours for just a 20% raise, but you indicate above that you could TRIPLE your income or more. That is quite another thing. Consider that you will have to work for 5 years in your current role to make a total of around $450k (assuming some raises). But if you moved to the corporate sector and started at $150k, assuming conservative 5% raises and no bonuses, you’ll make more like $830k over that same period. And you will still be young – not even 35! Trust me, you’ll still enjoy hiking and travel – and you’ll really enjoy being a millionaire and having true financial freedom at a still very young age.
The compound interest on that salary is incredible if you choose to keep working. Or you could quit to be a stay at home mom at 34 or 35, live off your husband’s income and let that extra half mil grow and compound like crazy for a few decades. You may never have to work again if you live frugally. Or you could start your own practice and set your own hours, or do pro bono work as you like, or go back to an easier government job. Or you might just find you thrive on the partner track. Who knows?
Keep in mind though that you have a lot more than just two choices: low paid government job or high stress corporate job with a giant paycheck are just the two extremes. I have friends who spent a few years at a big firm then transitioned to in house counsel roles at big companies – no partner track, but six figure salaries, good benefits and a normal work week. I have also been surprised how good the benefits are for women at larger law firms though, at least here in Dallas. Sure the hours can suck, but many firms offer crazy long maternity leaves, part time or work from home options, and all kinds of perks (free food, dry cleaning, childcare incentives, etc) to try to keep women engaged and reduce turnover. The culture does seem to be shifting.
As an aside, I think a lot of millennials (and I am one, barely, at 34) are sacrificing too much in favor of living for today and may live to regret it. Many of us may live for another 6 DECADES. A few years or even a decade or two of hard work to earn an incredible income and establish true financial security – using the degree you worked for in an industry you chose at a job that you are good at no less – can hardly be called a sacrifice.
Sorry but I just want to add that you obviously have excess capacity currently, since you’re involved in time consuming side gigs like dog walking and blogging. You may not be fully stimulated or engaged by your current work, or at minimum you have plenty of down time.
Financially speaking, you’d be a lot better off channelling those hours toward your career and maximizing your income there, whether networking or additional billable hours or even commuting if it came with a 100%+ raise. I realize that may not be as fun as blogging, but my point is that you have the time and energy, and putting it all into work at this stage of life (given you have that option with a high earning potential) will have a lot bigger payoff than scattershot side gigs. Plus giving up those extra hours at this stage of your life is when it will hurt the least. You don’t have kids, you are young with high energy, and skipping a few camping trips will not seem like a big deal in the scheme of your whole life.