No. of Recommendations: 20
Rule number 2 is that the topic should be focused around capital compounding for millionaires, and, whether you are in the situation now or not, the unique challenges that start to hit investors at this stage in their goals. There are very few places to discuss it, which is why this board was formed.
I have a hard time focusing on money for the sake of making money, tending to be motivated more by non-monetary goals, or at least by expressing monetary goals in an alternate way. For me, family is a much bigger motivator than my bank balance.
Courtesy of my parents' experience, I learned at an early age that retiring early was a goal to be pursued and not just stumbled into. They retired at 58 when they realized all of a sudden they had the funds to do so and jobs they just could no longer tolerate. I was 18 at the time, and in the middle of a tough recession, but by 19 I was already putting aside funds for retirement. It had impressed me how my parents became much nicer people without the job stressors and I figured I could retire even earlier if I set my mind to it at a young age.
One of the main ways I improved my lot was to move out of the high cost of living Boston, to a much cheaper Philadelphia. Was great to be able to eat as well as put money aside and pay for college, something which the low cost of living allowed. I minimized student loans by starting up a cleaning company while going to school full time, quickly having a full plate and turning away customers, not to mention tripling the hourly rate available to my limited education and experience. I also switched my major in college from French to a more marketable Chemistry with a concentration in Biology, not wanting to get stuck in what was low pay teacher career at the time. Pared back my client list to what I could handle on weekends and did an 15 month well paid internship with a specialty chemical company, buying my first home during that time. This experience was critical to verifying I enjoyed research and product development, along with showing my future employer that I was not a risky kid to hire, but could function as an adult, already understanding how to succeed in a professional environment. Having a job offer in my hip pocket from my co-op experience was a fabulous boost for self-confidence in the interview process, and I wound up getting a job that paid 30% more than what the co-op offered me. Money saved for retirement, on top of an emergency cushion in savings, got shoved into Vanguard mutual funds. Sweat equity was poured into the house which I stuffed with emotional buttons to make people desire THAT house.
With a better paying job, I bought a 250 year old fixer upper that had been vacant for 3 years and was looking daunting. I convinced those inheriting to give me a fixed rate interest only mortgage with a 5 year balloon payment, and started fixing up this once in a lifetime property bit by bit. In truth I was again stretched very thin, having rented out my first house rather than sell, and I took on a couple of roommates as the home improvements allowed. Did quite a bit of 'This Old House' type mentorship with some really great craftsmen, wracking up sweat equity. The rent paid kept the lights on and food in the fridge, but in truth I was stretched too thin. That house was my first and last emotional buy, with each subsequent real estate purchase being subject to a 10 year profit projection spreadsheet. I skated too close to the edge on that one, but lesson learned.
Met a great guy at work, who further proved how fabulous he was when he showed up to help me do drywall when I told him that was my only time available to 'hang out.' 2 years later we were married and put his townhome on the rental market. We were 30/34 when we got married, with a decent amount of assets to our names, something that let us start a family with little risk financially. Nothing makes accumulation of assets harder than a family in tow, and our later start in the family way certainly was critical to our ability to build a nest egg, as was our choice of careers and living in a low COL. We both put in too many hours to raise our own kids, deciding last minute to forget about the nanny applications and deciding I would become a stay at home mom. DH would bring home the bacon and I would use my New England thrift to stretch those dollars as far as they could go, joining TMF to learn how to improve my investment skills and retirement knowledge to make it possible to retire early and get the money needed to send the eventual 2 kids through college without loans. No doubt had we invested that money we would have another million in the bank, easily, but I felt that having to put myself through college limited my options to work, and we wanted more for our kids. We left my dream home when eldest was 18 months old, heading to an overseas posting that provided housing. Was quite the 8 year adventure, returning to the mainland with 2 kids instead of 1. Housing had doubled in price in the 8 years we were without a home of our own, so possibly not the best financial move, though Mechanical Investing was very good to us in that time frame.
TMF taught me about stocks and ETFs, IRAs and eventually Roths, how to invest for college, though we were fortunate that DH's income was high enough by then to pay it out of pocket and we left the kids' contribution to those college funds intact for seed money for the kids when they graduated. The kids started working early, documented and declared for taxes if 'self-employed,' and we funded their Roths to the extent allowed by law, giving them a head start on their retirement, making sure they knew that we considered those funds untouchable until retirement. We still fund their Roths annually, allowing them to focus on fully funding their 401Ks. College and retirement funds may well be the extent of their inheritance, but as long as we are on track for a well funded retirement, we feel this is a great way for them to inherit, particularly now that inheriting our IRAs is only tax deferred for 10 years.
DH did refuse to retire at 55 and I finally got him to do so at 58. It doesn't take much for us to be content, with many of our activities actually being free or free after minimal investment of equipment. Our needs and wants are fully provided for, and I am less interested in our getting richer than in our boys getting firmly established. Our next 'investment' will likely be to fund a home purchase for Youngest, giving him an interest only 5 year balloon fixed rate loan that he can refi down the road, as he gets more advanced in his career.
Our kids are in their 20's, no debt, and even the bleeding heart liberal who wants to save the world has a decent brokerage fund. If our RMDs are as high as calculations tell me to expect when we reach the age of RMDs, we will plan as a family how to take advantage of the up to $100,000 we can donate annually via qualified charitable deductions. It important to accumulate it, but it's equally important to spread the wealth once your needs are met.
Long, I know. Believe it or not, that's the condensed version.
FWIW,
IP
