We are starting a regular series interviewing Money Vikings that either have achieved over a million dollar net worth or are Millionaire Vikings in the making. We will call them MMV’s!
Our first interview is with a couple in their late 30’s/early 40’s, Peter and Sasha (not using their real names for privacy reasons). They live in California in a close suburb of a large city (with an expensive cost of living). They have one 4 year old child. Peter works in the insurance industry and Sasha works in education. Peter makes approx. $90k annually and Sasha makes about $65k annually, for a combined household income of $155k. They also bring in an additional $300/month on a rental condo. They have been relatively successful in building a current net worth of around $500,000. Not bad, when the average net worth in the US at this age is $52,000 according to a CNN Money poll conducted in 2017. So we sat down with them to try and understand where they went right and what challenges may lie ahead. They are personal friends of The Money Vikings and agreed to sit down and answer our questions:
Money Vikings (MV’s): Thank you for sitting down with us today. You have a nice net worth for your age, do you still worry about money?
Peter (P): (Laughs), Uhhh, short answer yes. I think we are doing ok, but we live in a high cost of living area, have a young child, a car loan, mortgage, etc. So, we are probably on a good path, but we still feel we need to be careful.
Sasha (S): We feel very fortunate, especially when you read the news about people around the world. But, as Peter said, we are not in a place where we feel we can coast. We need to be focused on trimming costs if possible and being prepared for the unknowns.
MV’s: What is a listing of your assets and liabilities approximately by category?
Peter 401k: approx. $215k (contributes 8%, company matches 3%)
Sasha 401k: approx. $85k (contributes 5%, company match of 3%)
Vanguard Investment Acct: approx. $20k
Investment Condo: equity of $80k, cashflow positive of $300/month
Primary residence: equity of $100k
Car Loan, $10,000
Two mortgages, one on primary residence and one on rental condo.
Current net worth of approx. $500,000
MV’s: Tell us about your upbringing? Were you given any large amounts of money to begin investing?
We both come from solid middle class families and upbringings. Our parents were college educated professionals and paid for about half of our college education expenses. Therefore, we came out of college around the year 2000 with relatively manageable schools loans, about $15k each.
MV’s: How long have you been married? Did you always work well together in terms of finances?
P: We have been married for 8 years. I was initially impressed that Sasha did not have any debt. She did not have much in terms of investments, but she was also not in any debt. I had dated several girls before her that had a lot of debt and that was always a bit scary to me. I had been pretty good at saving and investing in my 401k and I had purchase a condo prior to meeting Sasha. At the time, I had about 90k in my 401k and low debt.
S: Peter was much more focused on investing than I was. I was good at staying within budget, low debt, etc., but Peter was thinking about stocks and investment properties early on. I have worked non stop since I was 15 and all through college, so I had a good idea of what it takes to make a living and pay one’s own way in life. I also had a grandparent that influenced me early in life and said be careful who you marry. (smile)
MV’s: You have a pretty solid net worth for a couple in their late 30’s, what tips would you provide others trying to build their net worth? In fact, you’re probably in the top 10%, so what has worked for you?
S: We hit the time right on our first home purchase, a small condo. We bought a modest place within our means, by no means our “dream home”. But the condo has increased in value and when we bought our primary house we were able to keep the condo and rent it out at a small profit each month. I think the key in the beginning was buying a modest starter home.
P: We are not perfect with money, we will splurge every once in a while, we go out to eat, we sometimes buy Starbucks. But, we get the big things right. We pay the credit card balance off each month so we are not paying crazy interest. We have continually contributed at least something to our 401k’s. We did borrow $20k from mine to cobble together a down payment for our house. I also had to lower my contribution to 5% at one point in order to manage the mortgage. So, again, we are not perfect, but we are consistent and get the big stuff in order. Also, I want to add that both our properties we purchased were fixer uppers in a way. Peter had bought the rental condo right before we met and it was very basic. Great locations, but they were not decked out with the latest styles and $40k kitchen upgrades, etc. In fact, with both places they were pretty much stuck in the late 70’s early 80’s. We were able over time to fix each one up and upgrade fixtures, bathrooms, flooring, windows, etc. over time, not all at once. But as long as the place is clean, maintained and functional, we do not care about the latest trends.
MV’s: What are your largest expenses?
S: Mortgage is high, day care/pre-school is high.
P: We spend a pretty good amount on going out to eat. We are just so darn busy and our days are filled with many obligations. A little bit more breathing room in the day would help here, but we do not see that happening anytime soon.
MV’s: Any final advice you would give to yourself 10 or 15 years ago:
P: Although we are doing pretty well, just save and invest more automatically. I do wish I had maxed out the 401k at work and just ignored it. I have bumped around to various levels based on trying to survive and pay for life.
S: No big regrets because we are all doing the best we can with the situation we are in. It would have been nice if high school or college had some kind of practical financial education. People do not learn anything, so it is either the school of hard knocks or folks never learn. People who have family who teach them early on about investing are very lucky. Peter was lucky in that way, his family did expose him to some of the fundamentals of investing at an early age.
So in summary, here are a few of the things Peter and Sasha are doing good at and here are a few of their challenges to work on and prepare for.
Clearly Peter and Sasha are on a solid path to financial independence and I would call them emerging wealthy/millionaires. If they keep up their habits and focus on solving some weak areas they will most likely build a solid net worth. In a growing city over time, the value of their investment property is also likely to go up. But traditionally real estate goes up at the rate of inflation and can be risky. Thankfully they are cash flow positive that makes it worth it for them.
Future Costs of education for a child
Cost to raise a child
Living in an expensive part of the country
They will want to ensure the rental condo is worth it. There is positive cash flow, but it is not that high, therefore if some major repair hit, they would probably lose most of that years’s profits.
This is not financial advice to anyone, for informational and entertainment purposes only.