Today marks another milestone for me in this journey to financial freedom. This time the milestone is with my investments. I finally hit the six-figure mark in my investment portfolio. That is broken down below.
- TSP (401K) – $43,411
- Roth IRA – $33,960
- Taxable Account – $23,853
- Total – $101,225 barley made the mark!
Now I already hit the big six-figure goal for my net worth a few months back. This is because my net worth also would include my cash slush fund. It’s crazy how fast my wealth stash is growing even with the market staying somewhat stagnant this year. This little secret to my success might blow your mind! Are you ready to know? I’ll tell you in my new online course I just developed at the low cost of $19.99. Ready to subscribe yet? I’m just pulling your leg. Hopefully, no one took me seriously on that. The secret is my high savings rate.
You see I have a goal every month to hit at least a 50% savings rate. Meaning every $1 I make I try to save $0.50 cents of it. Now let me clear the air up for everyone out there. When I say “save” I mean that in two avenues so to speak. The first avenue is to park the money in my money market account also known as my slush fund. I do this when It starts to go below my threshold amount I like to see in it. The second avenue is I dump it into my taxable account at Vanguard. This is one of my money making machines so when I have extra cash I like to dump it here so that it works hard for me when I’m enjoying life. If I had one defining regret as I type this, it would be that I did not start or take these money machines more seriously in my twenties. I learned from that mistake and now in my thirties, I not only take them seriously I try to mentor others to do the same.
Now, what If you can’t save 50% of your income? That is ok and not everyone can hit this savings rate depending on income and life situations. Yet I would encourage you to start somewhere. Maybe that is starting at 10%. What I would do next is try to increase this savings rate by 1% every month for ten months. By the end of that year, you would now be hitting a 20% savings rate. That is twice as much as you started out at. Meaning you would be stacking up wealth at twice the speed. Let’s look at some numbers below to see this in a visual sense. For the purpose of this example, we will start off by saving $100 a month assuming the person makes $1,000 a month.
$100 (month) x 5 (years) = $7,039 with a average 8% return
$200 (month) x 5 (years) = $14,079 with a average 8% return
This is how powerful raising your savings rate can become. So just how high of a savings rate should you have? I can’t answer that question that is solely up to you. I will say you should save as much as you can while spending based on values. The reality is the majority of people spend first and think about saving if at all last. When in fact they could change their whole financial picture by saving first then spend and finally coming back to save if there is anything left.
So what’s my point in all this? Well to mark down on my journey when I hit this milestone for future references and also transparency in sharing my story. My hope is not for someone to clone my exact path. My hope is that people will take away pieces of my story and experiences and apply it to their situation.
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