ESI Scale Interview 40

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 am 26 and my wife is 24, and we live in Northern, VA (about 20 minutes outside of Washington D.C.).

We first met when we were lifeguards at our local community pool when we were teenagers!

We began dating when I was around 20, and she was 18. Funny thing is we were both each other’s “rebounds” from previous long-term relationships haha.

We recently got married (June 2018) in Mexico, where a small amount of close friends/family came with us. I guess we turned out to be more than just rebounds!

We also have 1 dog named Loki, and he is half pit, half lab. He is our life, and we go almost everywhere with him.

What is your current net worth?

Our total net worth is roughly $102,000. It is broken down as followed:

Investments

• 401k (mine): $48,000
• Roth IRA (mine): $18,000
• Roth IRA (wife): $12,000
• Brokerage Account (joint): $8,400

Cash

• Checking Account: $2,000
• Emergency Fund: $10,000
• House Down Payment Fund: $4,800 (Using Ally Bank’s 1.8% online savings account)

I do want to make one thing perfectly clear. Although I identified our investment accounts with “mine” and “wife”, these accounts are OUR money. I only identified the accounts by name to give complete transparency of whose name are on the accounts.

My wife and I operate as one unit when it comes to our money, so that has helped us get to the point we are at. All the money that comes into our lives is OUR money, and we have been on the same page with this since day 1.

I feel that a lot of couples struggle with money, especially married couples, because they keep their finances separate, and act as individuals with their money. It is very hard to accumulate wealth with a spouse/partner if you never get on the same page with each other, and refuse to put “all the cards on the table.” Once you do that, the accountability factor sets in and you begin to treat your money with a long-term view, instead of wanting to continuously satisfy short-term wants.

How did you accumulate your net worth?

We definitely are not the “from rags to riches” story that the majority love to read about, and love to identify with.

We didn’t come from struggling on the streets or wondering where our next meal would be coming from.

Although my wife grew up a lot rougher than I did, but more on that later…

We grew up in one of the wealthiest counties (Fairfax County, VA) in the entire country, so with that, there is only so much one can “struggle” in the grand scheme of things.

Before you can truly understand our financial path, I have to admit that we were blessed in ways that most are not. I received an inheritance that paid for my entire undergraduate degree, and allowed me to have ZERO student loan debt upon graduating. That is a benefit that can’t be taken lightly.

If you give a frugal person like myself zero student loan debt upon graduating, then you allow that person to be in a great financial position to save a lot of their salary at a very young age, where they can start the compound interest snow ball.

My inheritance was in the amount of $40,000 from my late aunt, who lost her battle with breast cancer the summer before I went to college. Nobody knew she had this money, and she gave the same amount to each of her other 12 nieces and nephews, and gave roughly $55,000 to her 4 siblings.

Although the inheritance allowed me to graduate debt-free, I would give that $40,000 back in an INSTANT if it meant I could have her back. She truly was a saint, and she is part of my inspiration of building wealth, so that I can give back like she did.

She didn’t work in a profession that was extremely profitable, she simply followed the ESI Scale, and saved/invested throughout her entire life.

My wife and I plan to one day leave a similar inheritance for our family members, as well as setting up potential future scholarships for other kids, so that they can afford to have the same path we did.

Now to my wife…

As a result from falling off a balcony as a child (she was around 2), my wife received four settlement checks from the ages of 18 – 21. She received each check on her birthday, and the checks were $14,000 each ($56,000 total).

She also received one final check when she turned 24, which was worth $25,000. All of these checks were designed by her parents to finance her college, and get her started off with a head start in the real world.

That was how they were designed…

Out of respect to my wife and her family, I won’t go into all the details of her past, but she had to grow up into an adult faster than most.

Her parents went through an ugly divorce when my wife was young that involved substance abuse and mental / minor physical abuse. The fighting began when my wife was around 10 years old, and when her parents finally divorced, my wife was 13.

Just because her parents were divorced, that didn’t mean that everything was all better. If you come from a broken household, you will understand that the psychological ramifications continue long after the divorce.

*In these last few years (present time) my wife and her father have begun to build their relationship again, after a long time of contention and not speaking.

My wife has a younger brother, and she had to step up into a parent role with him at the age of 13, which didn’t allow her to have the traditional childhood that one needs. This involved working immediately when she was allowed to (15/16 years old), and helping the household in providing the groceries and paying bills.

When my wife finally turned 18, and began to receive her settlement checks, essentially all of the money went towards paying off family debt (which was a result of the divorce), and helping provide for their household.

My wife is the type of selfless person where money has never been a primary motivator in her life, and she has always been one to give everything she has before she receives anything.

She also moved out of her house immediately when she was 18, and then lived on her own from there on out. A lot of the settlement money went towards helping her live on her own, pay bills, and continue to help her family when they needed it. She also went to community college, and the settlement money allowed her to graduate with her Associates degree debt-free.

With her $25,000 check, I essentially wasted it all by convincing her to do a 6-month coding boot camp with me. This cost us $18,000, and neither of us will be using coding going forward. It just never clicked with us, and neither of us enjoyed it like we thought we might. We quickly realized why so many IT professionals get burned out so quickly…

So the remaining $7,000 of the settlement, we used to fill our emergency fund.

With all that being said, my wife and I definitely received financial benefits that most never will, and we did greatly benefit from them. But like I said, I would take the student loan debt in an instant if it meant I could have my aunt back, and the majority of my wife’s money got spent on helping her family.

As a matter of fact, if we never received any of the financial inheritances/settlements, we would still be 100% debt-free today. By my calculations, our net worth would be around closer to $40,000 today if we had to take student loans, instead of our current $102,000 net worth.

We used Dave Ramsey’s debt snowball method to pay off my car (more on that later) early, and we would have applied the exact same principles to the student debt. I actually most likely wouldn’t have bought a car if we had student loan debt, so that would push our net worth even higher than that estimated $40,000 number, but I could go on and on with “what if’s.”

I guess what I am trying to portray is that we aren’t the rich spoiled kids who received inheritances/trusts, to where they are set for life and never have to work for their own money again. We used the money to assist our family’s debt (wife) and pay off school (both of us).

Just because you start off ahead of the game with zero student loan debt, doesn’t guarantee you a life of financial independence. You still need to go out in the world and work your a** off to get to financial independence. The amount of money that allows you to achieve financial independence doesn’t magically appear out of nowhere.

The rest of the interview will discuss how we then began to accumulate all of the money we have now.

Tell us a bit about your career.

I started my career making $35,000 out of college, supporting the Navy as a contractor doing basic administrative work.

I was a Criminal Justice major, and this was the only job that gave me an offer, so I jumped on it!

4 years later, I now make $70,000 as a Business Analyst. Being able to double my income in 4 years is definitely an accomplishment I am proud of.

I attribute this to switching companies and “raising my hand when nobody else would.” What I mean by this is that I was never afraid to take on tasks that others were too afraid to take, especially tasks that involved speaking directly with clients.

In all honesty, the ability to communicate effectively in front of audiences is the sole reason I have been able to progress so quickly in my career. I have never been afraid to speak to clients, nor my peers, and my managers have always taken note of that.

My managers now put me as the lead on projects that involve working directly with government clients, and it has me in line for another raise/promotion this November.

Funny story is recently I was asked to give an internal “Professional Communication” presentation to my colleagues on our project. Here I was as a 26 year old speaking to Consultants, Senior Consultants, Managers, and Directors, and showing them how to effectively communicate in the professional work environment.

It was strange to get this request at first, being one of the youngest workers on the project, but I was definitely humbled that they thought so highly of my communication abilities.

*I actually kicked off that presentation with a 3-minute clip of Game 1 of the 2018 NBA Finals, where JR Smith had the last second blunder in regulation time, and highlighted LeBron’s poor body communication towards JR Smith immediately after.

I tell all of my younger colleagues now that if they truly want to progress far in a company, start getting comfortable speaking in front of audiences. I have found that the majority of managers are not the smartest people in the room, but they are the most effective at communicating a message to an audience.

If speaking in front of others scares you right now, then I really suggest you begin practicing this skillset! I have seen numerous intelligent individuals stagnate in roles because they simply are too afraid to speak to audiences, and they essentially eliminate themselves from lead/manager roles.

Communication / Public Speaking is an underrated skill, and if you can get comfortable and effective at it, it can propel you far financially.

My wife has worked in administrative / HR roles from ages 15 – 22. She also was a nanny for the past 2 years, and she has essentially earned roughly $30 – $35,000 for the past 4 years.

She recently joined my company in an administrative role and is now earning $45,000. She absolutely loves the work she does, and I know she will only continue to grow and obtain leadership roles in the immediate future.

I have never quite understood why our society looks down upon administrative roles in the workplace. They do a job that the majority of us couldn’t/wouldn’t do, and always (normally) have a smile on their face. My wife is an ace at this type of role, and I love that she loves what she does.

So together we went from making a combined $75,000 four years ago, to now $115,000. Definitely great progress in our eyes!

Do you have a side hustle?

My wife does occasional babysitting on the weekends, but other than that, we have no side hustles that bring in money.

The money she receives from babysitting goes directly into our House Down Payment Fund.

I have the blog that I run, but I still am not 100% sure the direction I want to take with it. Would I love to monetize it? Sure, but that wasn’t my motivation to make the blog.

What I wanted the blog to be was a tool for others to use to help improve their financial intelligence/situation. I get all the satisfaction I need when I get messages from readers like:

• “YOOOOO, I just paid my car off!”
• “Can you help me set up my Roth IRA?”
• “I just maxed out my Roth IRA for 2017 & 2018!”
• “I am now an investor in VTSMX/VTSAX!”
• “I just opened my son’s 529 account!”

All of these were messages I have received from readers, and they have brought me more satisfaction than any amount of money that has entered my life. I truly get more satisfaction when others succeed with money, then when my wife and I hit our money goals. You may think I am full of s***, but it’s true.

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?

10

I am highly satisfied with how we have grown our income in our young professional life.

Being able to go from $75,000 to $115,000 combined incomes in 4 years is something we are happy about, and blessed about.

Neither of our parents were college graduates, and neither parents made over six-figures. So for my wife and me to be able to do this at the ages of 26 and 24 is something we don’t take lightly.

I will always say though that our parents gave us valuable lessons that are worth way more than money. Without the valuable life lessons we learned from our parents, we would have NEVER been able to succeed with money. The majority of the credit goes to them, and teaching us how to work hard and be humble at early ages.

But no doubt about it, we worked our butts off to get to the positions we are in together. Money doesn’t mistakenly fall into workers’ pockets. They have to go out and earn it consistently, and constantly prove their worth if they wish to continue to increase their income.

What are your future plans regarding growing your income?

We will continue to “raise our hands when nobody else will.”

We are fortunate that we both work for a company (same company) that truly values its employees, and they will go out of their way to help if they see you take initiative.

We will continue to take initiative, prove our value, and continue to seek roles that will allow us to lead projects. By doing this, the money will naturally flow into our paychecks, and we won’t have to go seeking it.

Essentially the goal is to become more valuable than everyone else, so that the company is then at your mercy. Not saying we’re ruthless money tyrants, but I think you know what I am getting at.

SAVE

What percent of your gross income do you save?

Currently we save roughly 82% of our income. More on this in the next question.

How did you get to this level?

We recently moved back in with my parents, so that we could speed up our process to save up for a house down payment.

Living in the Northern, VA area, home prices are astronomical. It isn’t crazy to see newly built townhomes go for $650k, and newly built single family homes go for $900k (some approaching $1,000,000).

We have been living with my parents for about 5 months. Before we were living with my parents, we were renting a 2 bedroom apartment for about $1,800/month. We lived in this apartment for 2.5 years. This is where we truly learned how to budget, and learned how to become debt-free (more on this later).

Even when we were renting, we were saving roughly 50% of our income. We were only able to do this by becoming debt-free (paying off my car, but like I said, more on this later) and house hacking. We had one of my friends move in to our other bedroom, and charged $600/month in rent. That $600 went directly towards savings.

Our savings rate of 82% now is a direct result of our goal to pay for a home down south (Charlotte) in FULL.

We have plans to retire early, and one of the quickest ways to do that is to rid yourself of mortgage/rents payments.

I know moving back in with you parents is a sensitive subject for some, but I HIGHLY suggest you consider it if you’re struggling with debt and/or trying to get ahead financially.

Yes, some of your friends may make fun of you, but you need to not care at all what they think. They aren’t paying your bills, and they certainly aren’t going to help fund your retirement. You have your own goals/dreams, so if you have a great relationship with your parents and they are willing to assist you in the short-term, drop the ego and take advantage of it.

I will give three pieces of advice on if you’re seriously considering moving back in with your parents:

1. Pay your parents SOMETHING. Whether it’s for groceries or rent, they are providing you a benefit that is not afforded to others, so show them some financial courtesy!
2. Have a written plan of how long you intend to stay there, when you plan to move out, and assure that you show your parents your plan. This is to make sure everyone is on the same page, and your family can hold you accountable.
3. YOU BETTER SAVE AT LEAST 50% OF YOUR INCOME IF YOU DO THIS. There is seriously no excuse for you to not be pocketing at least half of your income while living with your parents. If you can’t do this, then you are simply over-consuming and need to give yourself a financial reality check. You better not increase your trips to the bar scene, take more vacations, or buy fancier things. This is a short-term plan, and you are doing it for a long-term goal. Always remember that!

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?

10

I have always been extremely frugal.

I have always been an athlete, and continue to run/workout to this day. Not only are these activities cheap (running is free), but they tire you out to where you don’t have the energy to go spend money.

I have also never needed anything fancy in my life. I have always consumed my life with sports, and the majority of that has always come with small price tags. I still use some of the same pair of running shorts/shirts that I had in high school/college. I use the majority of my sports clothes until they legit fall off my body. Same with shoes, I wear them out until my feet finally break through them. I am never going to be an NFL combine athlete, so no need to attempt to dress like them.

Plus, I already have a wife so no need to impress anybody else anymore. 😉

My wife is also very frugal, and like I said, she is of the giving mindset where before she receives anything, she assures she has given to others first.

When you combine two frugal mentalities together, you are able to save a lot of your income naturally.

What are your future plans regarding saving your money?

We will continue to save over 80% of our income while living with my parents, in our effort to save for our house plan down south. We will do this by consistently working, saving, and investing our income. As our incomes grow over the years, we will simply take those pay raises/bonuses and immediately save/invest them.

I have always banked my pay raises/bonuses, and never really allowed myself to succumb to lifestyle inflation. I was able to live comfortably off my original $35,000 salary when I was fresh out of college, so that was proof that I never needed anything more.

Even though I make $70,000 now, I still see roughly the same amount on my paychecks from when I made $35,000, because I have simply invested my raises.

Just because you get more money, doesn’t mean you have to spend it. As a matter of fact, if you increase you’re spending as your income increases, which almost guarantees you will have to work for the remainder of your life.

I read a quote recently that briefly touches on this subject:

“All of human unhappiness comes from one single thing: not knowing how to remain at rest in a room.” – Blaise Pascal

My interpretation of this, in terms of money, is that most people think they need to constantly consume and brag about their new cars, houses, vacations, etc. Most people don’t know how to be happy with what they already have, so they need to constantly purchase external toys/experiences that they believe will elevate themselves.

All too often they find that none of their new purchases made them any happier, and they are still not happy with themselves.

Until you discover what truly makes YOU happy/comfortable, you will never know how to “remain at rest in a room.” I have learned that if you are secure with yourself, then the money part comes easy. You no longer need to impress others, and instead you can then bank all your money and become truly wealthy.

The short answer again to the original question – We plan on banking our raises/bonuses as they come.

INVEST

What are your main investments?

I will break down each investment as best I can:

401k

• Current Value: $48,000
• Investment: Vanguard Institutional Index Fund (S&P 500 Index Fund)
• I have been maxing out my 401k for the past 2 years

*My wife will be enrolling in her 401k next month, and will invest the same way I do. She will be contributing roughly $200/paycheck

2 Roth IRA’s

• Combined Value: $30,000
• Investment: Vanguard Total Stock Market Index Fund
• I have maxed out my IRA for the past 3 years, and my wife the past 2

Brokerage Account

• Current Value: $8,400
• Investment: Vanguard Total Stock Market Index Fund
• We recently opened this account this year, and have been steadily increasing our monthly contributions. We are currently allocating $1,000/month into this account, with the intention of growing this to be an account we tap before our retirement accounts

Share Purchase Plan

• Current Value: $500
• Company Growth: 18% annual return over past 15 years
• I didn’t place this in our net worth because of its small amount. We also just began to contribute to this plan, and we will sell our shares either quarterly/annually, and put the proceeds into our house fund. Our company matches our contributions 100% up to 3%

If you are unaware of the performance of the U.S. stock market’s returns over the past 9 years, well I will just say it has been extremely profitable for its investors.

YTD, we are currently up 10%. Our return over the past 3 years (the time we began to invest our money) has been roughly 15%.

Index Funds truly make this whole investing game easy, and completely winnable for the Average Joe.

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

Finally, not a 10…

When I first started investing (speculating), I was dabbling in and out of individual stocks. This is much the same as everyone else who learns about money by themselves, until they discover it’s a loser’s game in the long run.

I lost more money than I earned, and ever since John C. Bogle converted me to be a passive index investor, I have been earning money ever since.

The best part about it?

I don’t have to do any type of financial analysis on individual companies, and waste my precious time trying to beat a market that can’t be beaten by the majority of people (trust me, it isn’t you, so don’t try).

All I seek is the “average” returns that the market is blessed enough to give me. So far, so good.

What are your future plans regarding investing?

We will continue to max out my 401k, and both of our Roth IRA’s. We would one day like to max out her 401k, but that depends on her salary increases, and how our children will affect the budget when they enter the picture.

We will also continue to aggressively flood money into our brokerage account, so we can build up an account that we can tap before our retirement accounts. My rough idea/plan with that account is to have a sizeable amount in it by the time we are in our early 40’s, to where we can jump on a big opportunity if one arises.

As I previously said, we are 100% index investors. We only have 2 investments:

1. Vanguard S&P 500 Index Fund (401k’s)
2. Vanguard Total Stock Market Index Fund (IRA’s & Brokerage Account)

I seriously can’t stress enough how easy index investing is. Everyone with a single brain cell in their head can do it. I urge you to begin reading into them if you haven’t already, and don’t be the person who realizes it later in life when it’s too late.

The only hard effort in index investing is simply putting money into the account. In all seriousness, that’s about as hard as it will ever get.

The onus is on YOU to actually save your money, say NO to short-term wants (which are not NEEDS), and put your money in these investment accounts. The index funds will do the rest and will build you a financial empire that future generations will also benefit off of.

WRAP-UP

What money mistakes have you made that others can learn from?

Do you remember when I talked about we had to learn how to become debt-free while renting? Or when I said I had to pay off a car?

Well this is the place where you learn about my dumbest money mistake…

So there you had it. A college grad with a job, no student loan debt, and had an apartment with his girlfriend. Literally the perfect situation! Except I had to act like every other dumb college grad who just began to receive more money than they ever received in their lives.

I BOUGHT A BRAND NEW CAR!!!!!!!

Yup, I had the opportunity to live debt free immediately after college. Instead of that, I signed up for a 5 year $20,000 auto loan, so that I could have my 2015 Kia Optima. I guess because I am such a basketball fan that all of the Blake Griffin/LeBron commercials finally got me…

Although this was the dumbest money mistake I ever made, it was the greatest financial blessing I ever received. I truly believe this was God’s way of teaching me about debt, budgeting, and how to handle money.

If it weren’t for that auto loan, I would never have picked up a book on money. I would have never opened Dave Ramsey’s The Total Money Makeover, and discovered that ramifications of living with debt.

This debt forced me to go out and learn how to handle money, and it helped me pay off the car early and then re-allocate my money towards my investments. We used Dave Ramsey’s debt snowball method to pay the car off early, and this is exactly how we did it:

1. I stopped contributing to my 401k, and used all that money I was normally contributing to the 401k, and then allocated it all towards the car loan.
2. We combined our money and created one joint bank account, so we were throwing two salaries at the debt.
3. We used some of our emergency fund money at the time to throw at the auto loan.
4. We built a smaller emergency fund ($5,000), and then through all of the remaining money we had left over at the end of the months, and through it all towards the car loan.
5. We used my wife’s babysitting money and through that at the car loan.

We essentially attacked the $20,000 auto loan with reckless abandon with two salaries, and eventually paid the car off in two years instead of five.

My advice to college grads (or anyone actually) who is thinking about buying a brand new car:

1. Just go used. That new car smell wears off pretty quickly. My new car smell wore off the second I got my first bill from KIA. A good used car will do the job just fine, and at the fraction of the price.
2. If you can’t buy it in cash, seriously consider not buying it. Cars are one of the biggest money pits out there, and you will lose a lot of opportunities to build wealth if your money is stuck paying car payments.
3. Nobody is jealous of you in the car, they simply want the car. So if you are getting a car to impress others, you are essentially signing up to be a broke person the rest of your life.

Are there any questions you have for ESI Money readers regarding any parts of your finances?

I get a lot of feedback on me and wife’s goals of paying for a home in full down south (Charlotte) before 30. Is this something we should temper a bit, and make the move sooner and do a 15 year fixed rate mortgage?

No other questions, but feel free to give me any money tips/advice you think may help us!