Flashback to four years to 2013. I had just graduated college with five figures of student loans and about $5,000 of credit card debt. Thankfully, the credit had zero interest for 12 months; I had just signed up for it on a whim on a spring break trip.
The job market was still rough at that time. I had applied to approximately 90 jobs before being hired. That said, I was fairly optimistic about the future since I landed a great entry level analyst job soon after graduating.
Flash forward to the present. I am very blessed and fortunate to have the life I am living. I have a great job, own three properties that provide dependable income and am working towards financial independence. Today, my net worth is more than $500k. Yup, over a half a mil.
I am going to tell you how I got there but first I’ll share a bit about my background.
I grew up lower middle class and middle class. At times, I even got free breakfast and lunch at school because of our family’s income.
I have never received an inheritance or any windfalls. I do not have a trust fund.
My parents had me at a very young age then went their separate ways.
I struggled with dyslexia.
I did not graduate high school on time.
I failed out of college… TWICE – but eventually graduated.
I graduated with five figures of student debt like most of my peers (and still have loans).
I acknowledge there are privileges in my life that some less fortunate than me did not enjoy; I had a loving family, attended relatively safe public schools and never worried about a roof over my head as a child. My success is a result of hard work, being frugal, avoiding lifestyle inflation and a bit of luck (thank you bull market).
Year 1: The Accumulation State
Fresh out of college, the ‘real world’ was waiting for me. Honestly, this is a scary time in life. It is sink or swim and time to start ‘adulting’. Bills come in, credit scores matter, and attending class is no longer your biggest worry.
Instead, you are working Monday through Friday (including the occasional weekend). Unfortunately, you cannot play hooky to go on a bike ride with friends in the middle of the week anymore.
Life becomes a juggling act. Balancing work, family, and friends is not easy; its a skill many never master. I certainly have not.
I faced a learning curve in my first year in the real world. In college, I studied finance and economics, so I knew it was important to start saving and investing as early as possible. The idea of going broke or further into debt scared the living hell out of me. I had big aspirations of living the ‘baller lifestyle’ and did not know about #FIRE yet.
I squirreled away as much of my paychecks as possible while contributing to 10% to my 401k. Unfortunately, my employer did NOT match 401k until you had a year of tenure.
Growing up, I always had two or three part-time jobs. While I was making a decent penny for a 23-year-old (I would prefer not to share specifics; I’ve gotta keep some details private!), I wanted an extra source of income.
Experts talk about diversification all the time. Usually, it pertains to investing. However, I needed to diversify my income; I felt at risk for having one income stream.
Think about it. It’s binary if your only income comes from your employer. You either have your paycheck or you do not. If you were let go next week, how long could you survive without that income?
So, I continued side hustling. I was ‘swim practice taxi’ for a high school kid and drove him to swim practice every morning. This required waking up at 3:40 am to pick the kid up by 4:00 am so that he could make his 4:30 am practice. While the kid swam, I would either get a jump start on my work or exercise for an hour and a half. It was easy to be productive during this time since there are no distractions at such an early hour. Then I would drive him home and head to the office.
I also worked the occasional odd job for extra income. I lived at home for approximately 8 months and learned to live off my side hustle income.
This allowed me to save most of my salary, build up an emergency fund and max out my Roth IRA. My emergency fund was about $8,000.
Thanks to my savings mindset, I was able to come up with a 3.5% down payment (around $11,000) for my first property, which I bought less than a year after graduating. It is a 3 bedroom/2 bathroom duplex (I own half the duplex) in a working-class neighborhood – nothing fancy.
The monthly payment was more than I was comfortable with (thanks PMI) BUT that was ok. Why?
Because I decided to house hack and rent out the extra rooms. The rent I collected covered a bulk of the mortgage and kept my cost of living low. Renting anywhere would have been more expensive.
Bonus – I also received tax benefits associated with owning a home and my renters were paying down most of my debt every month.
I ended year 1 with a net worth of $33,313.11
Year 2: The Growth Stage
This year started off with a bang as I was the proud homeowner. My side hustle ended, though, since the kid could drive himself to practice.
Just when you think everything is going well, life can throw you a curve ball (or two). I had two major medical accidents a month apart. I was lucky to have good health insurance from my employer, but this experience stressed the concept of having an emergency fund and did set me back a bit financially.
This financial setback combined with no longer having a side hustle motivated me to find ways to increase my earning potential. Thankfully, my cost of living was low since I was house hacking.
I was killing it at work and decided to ask for a raise. My boss agreed, but this promise went unfilled for a few months.
One day a recruiter from a competitor’s firm left me a voicemail. I decided to return the recruiter’s call. Next thing you know I was on my second round of interviews and the new firm paid for my travel to New York City for a final interview. A job offer followed shortly after the trip to the Big Apple.
The new job was a promotion and the compensation was something my previous employer did not match. So, I left my old job on good terms and never looked back.
Around the same time, I started a Master’s program. Taking classes at night and on weekends filled up my schedule. Long-term this would be beneficial, or so I thought. I mean, Americans are trained to think higher education is good right? Looking back, for me, grad school ended up being a complete waste of time and money.
Near the middle of year 2, I stumbled upon a few FIRE (financial independence; retire early) blogs. I was immediately fascinated with the idea, concept, and lifestyle many bloggers wrote about.
Biking to work and preparing most of my meals at home became common practice. This allowed me to increase my savings rate significantly. Parking in the city is about $20/day and eating out is not cheap.
Dreams of a flexible life filled with travel, time outdoors and avoiding an office constantly crossed my mind. The idea of working on projects for primarily enjoyment and not monetary gain excited me.
I began to take as many steps as possible to set myself up for financial independence. Past aspirations of a “baller lifestyle” with fancy cars and country club memberships faded into distant memory.
Towards the end of year two, I was able to refinance my house and get rid of PMI payments. Refinancing lowered my monthly mortgage payment about $400. This helped me budget, save, and invest as I was generally living on less than $1,000 a month. However, I would occasionally let loose to enjoy a night out with friends or travel.
I ended year 2 with a net worth of $112,061.49 – a $78,848.38 increase over year 1. About half the increase was from savings/investing. The other half was from the reduction in my mortgage debt and property value increasing (confirmed by appraisal and Redfin).
Also see: 6 Steps to Saving a 6-figure Net Worth
Year 3 – The Snowball and Risk Taking State
Year three was marked by wanting to grow and get to financial independence as quickly as possible. Two actions allowed me to take years off my timeline to achieving financial independence.
First, I started another side hustle. (Oh boy here he goes again…) I worked part-time (sometimes felt like full-time) as a property manager for a few dozen rentals in the city.
The position required me to be the main point of contact for all the tenants. Additionally, I was responsible for scheduling repairs (some I did on my own), marketing vacant units, collecting rents and overseeing the turnover process of tenants moving in and out.
This was a great learning experience as I wanted to own more rental properties. The gentleman I worked for had over 15 years of experience in being a landlord/property manager in Washington, D.C.
Our nation’s capital has very tenant friendly laws and landlords have few rights. This can be challenging to navigate around if you do not know what you are doing. I highly recommend understanding your local landlord/tenant laws if you plan to own rental properties. Some places are tenant-friendly while others places are more landlord-friendly.
Second, I bought my second investment property, The Fixer-Upper. This was the worst house on a decent street in a neighborhood surrounded by gentrification. This is the ultimate trifecta for anyone looking to find a good deal and create value.
This home was purchased with an FHA 203k loan which required only 3.5% for the down payment. The loan also gave me extra funds to fix up the place. To be clear, this was a complete gut renovation. The property had been neglected and unimproved since the 70s.
The renovation process was stressful but rewarding. My bank account almost hit zero a few times as the renovation budget was more than the loan would cover. However, it was definitely worth it in the long run.
I continued my love of house hacking by living in the property. However, unlike my previous house, I lived here for free. Actually – I got paid to live here because my tenants (roommates) covered all of my expenses and then some.
Not only did I keep my cost of living low, I completely eliminated my housing expense.
This was huge! Absolutely HUGE for my budgeting. Most people’s biggest expense is housing and I no longer had to worry about paying rent or a mortgage.
At this point, my only living expenses were transportation, food, and entertainment. As you can imagine, this did wonders for my savings rate and ability to invest.
My spending has increased modestly and I no longer live on less than $1,000/month. I am still thrifty and do not spend lavishly, but enjoy a few more meals out or drinks with friends.
Heck, I still occasionally go for a Zero Day Challenge like my buddy over at Zero Day Finance. Highly recommend checking his blog out if you are looking to learn more about saving and budgeting.
During years 1 and 2 I passed on many weekend trips and lavish trips abroad. In year 3, I decided to enjoy life a bit more. After all, it is all about balance. I went skiing for 5 days out west and went backpacking in Europe for 17 days. Gotta live life while you still can as long as you are still planning for tomorrow.
I ended year 3 with a net worth of $261,038.14 – a $148,976.65 increase over year 2. Much of this increase came from the value created in my second investment property and continuing to pay down mortgage debt (with other people’s money). Though approximately 35% came from saving/investing; compound interest or the ‘snowball effect’ is an amazing tool.
Year 4- ball out or burnout?
Year 4 was a year full of decisions. The job I once enjoyed became unbearable. My boss turned into a micromanager and fostered a hostile work environment; my whole team agreed.
To further complicate matters, our firm had willingly stopped doing new business for almost a year. Going to work every day to twiddle my thumbs and deal with a buffoon of a boss did not sit well with me. I had two feet out the door and never looked back.
A small, local firm reach out to me and through a recruiter. The position did not entice me but I knew the work environment could not get any worse. The company was committed to growth, which I liked. Given my experience working with some of the world’s most sophisticated clients at my previous job, I knew contributing to the new firm’s growth would manageable. The smaller firm demanded fewer hours and provided better compensation as well.
During my discussions with HR, I was able to negotiate a meaningful 40% pay increase and a modest signing bonus. I also negotiated a start date that allowed me a full month off in between jobs.
The mountains are my zen place and I spent a week in the Rockies climbing and camping during my month of ‘down time’.
“The mountains are calling and I must go” – John Muir
The other three weeks were spent tending to the responsibilities of my side hustle and getting my life in order from all the things I neglected during my 80+ hour work weeks.
My side hustle became more of a burden as we doubled the number of properties under management during my tenure. This now felt more like a full-time job. As I announced earlier this month, I will be stepping away from my side hustle. The money and experience were great, but I value my free time and do not need the additional income.
Year 4 was also great for my savings and investing. I still did not have any living expenses and continued to invest regularly. This was the first year that I maxed out my 401k. I also bought investment property #3.
The decisions made in year 4 will allow me more downtime and help avoid burn out. I could have kept going 100 miles an hour to afford a baller lifestyle, but the at the expense of being burned out, I do not see the value.
I value my free time and flexibility. I want to escape the rat race and get off the corporate hamster wheel. The dreams of financial independence are more vivid every day.
I am not ready to walk away from my day job but the sacrifices I made in the past 4 years have provided a great foundation for financial independence. I plan to enjoy my life more and work less while continuing to save for financial independence. If everything goes to plan, I look forward to announcing my FIRE date before the age of 30.
I ended year 4 with a net worth over $500,000.00 – a $238,961.86+ increase from year 3. The increase was about 40% from saving and investing and about 60% from reducing mortgage debt and property values increasing.
I have overcome adversity and defied the odds, and have two pieces of advice for you: Do not let society put you in a box. The only place you will find success before (hard) work is in the dictionary.
Have you ever sacrificed short-term pain for long-term gain? What instances in your life have you put in the extra time to get ahead in life? Did you know when it was enough? Or did you burn out? Perhaps you are still going 100 miles an hour?