To explain our current situation, it important to understand where we came from. We started off with nothing. We received no financial support from our parents. My wife and I both graduated from college in 2002 with student loans. I graduated with my Doctorate in pharmacy degree, and she with a bachelors in Biology. She then went on to pursue her education by attaining her medical degree and went on to complete the coursework in 2006. She then spent the next 3 years in a residency program where she did not earn much money. During this time, I had made a conscious decision to take a pay cut from typical pharmacy practice by working as a pharmaceutical sales representative in 2002. I did this with a goal and the knowledge that effort and hard work may propel my career up the ladder in the industry and that the income potential is far greater than pharmacy practice.
We have made several large purchases over the years. Before we were married, I bought my first house in 2003 and still own it as a rental. We got married in 2005 and spent a significant amount of money on the rings and wedding. I went back to school in 2005 for my MBA and paid a portion of it out of my pocket. We bought another home in 2006 and sold it for a loss in 2009. We bought our second rental in 2007. Lastly, we bought our current home in 2009. We also bought a small Lexus sedan in 2006 and an Acura SUV in 2008.
Keep in mind that many of these purchases were never beyond our means. Our income slowly increased since we got married in 2005. I took on a new higher paying job in 2005. I took a promotion in 2008. Then, my wife became a full fledged physician in 2009.
Over the years, we have maxed out on all retirement accounts (401k, Roth, Traditional, and SEP). We also have been lucky enough to ride the wave of the stock market after the market crashed in 2008. We currently have 2 Million in assets and $950k in liabilities ($800k in mortgages) which brings our current net worth to over $1 million.
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Hi there,
Congrats on your journey. Mine was quite similar, hit the first 1M at age 34 (the age we got married), 2nd at age 37 and working on the 3rd- should be on track to hit it by age 40.
-Mike
Mike, thanks for visiting the site. First million is certainly the hardest. I’m hoping I can reach my 2nd a lot quicker.
The first million really is the hardest. How much of the $1 million is liquid though?
About 200k is liquid and 500k is in retirement which can be used (with a penalty) if i’m ever in a pinch. You make a good point, though. You only have access to your liquid accounts, but tracking net worth is a good barometer on how your investments are doing over time.
Congrats on your journey, it is a great story and I am looking forward to this blog growing and reading your upcoming posts.
Thanks for the encouraging words! Come back soon!
What’s your mortgage interest rate? $2 million in assets and $950k in liabilities ($800k in mortgages) doesn’t jive with good choices to me, unless your mortgage interest rate is say around 2%.
Mortgage on my primary home is 3.5%. Our mortgage represents a small percentage of our total monthly income.
Other mortgages are slighly higher (rental properties), but the rental income covers them.
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The mortgages (residence and rental properties) should be paid off. This is because of (1) by comparison, the risk of stocks; (2) the need to diversify to minimize risk; (3) that you have the money to pay off the mortgages; (4) the wasted money that mortgage interest is, even considering the deduction; and (5) the little-to-no risk of paying off a mortgage.
That the mortgage represents a small percentage of your total monthly income is utterly irrelevant. You’re throwing away tens of thousands of dollars on interest here.
Why don’t you put in the actual amounts (term in particular) and get a better handle on how much you will pay in interest over the life of your mortgages, then share with all? Factor in tax savings as well. You will be surprised. Or just google on the subject.
A person who does not go through this calculation does indeed tend to be the stereotypical 1-percenter with hundred dollar bills to burn.
Elle, your level or risk tolerance is obviously a lot less than mine. Currently, the interest rate on my mortgage is 3.5%, but we’re in the top tax bracket (35%) so the real interest rate (after taking the tax deduction into considertion) is 2.275% ((1-35%)*3.5% = 2.275%). I’m 34 years old, so my risk tolerance is high in terms of how aggressively I invest in the market. Had I paid down my mortgage, I would’ve missed out on huge gains over the past 3 years in the market.
With rentals, if I paid off the mortgage, I lose the deduction and will have to pay taxes on the rental income. Additionally, with Obamacare, there is a 3.8% additional tax on rental income that I would have to incur. At this point, it doesn’t make sense to pay off the rentals either.
If you’re interested in the amount, I have a 417k mortgage at 3.5% on my primary home…
Do you think you’d have $1M in networth if you were still single? More, or less?
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Probably not…wife makes a significant income. However, most of our gains was because of the 2009-2011 market rally as well.
I greatly admire what you’ve been able to accomplish thus far. My net worth is quite a ways below yours and as a fellow 35 year old male who is married with two kids, I know I’ve got work to do (roll up my sleeves and get at it).
It really seems to me that to get a handle on wealth, as you say, the first step is to track it all and then start allocating and getting to work. I’m working on the first million – about 25% of the way there in terms of net worth. Thanks for sharing your inspiring tale!
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