The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Next in the series is FMF reader BG. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I am a 27 year old male from the South Central US. My wife of 3.5 years is 26 years old. We both graduated from a state school about an hour's drive from the city in which we now reside. We both grow up in the same hometown which is in the opposite corner of the state that we still live in. We met in high school and dated for about 6 years (all through college) prior to getting married. I graduated college one year ahead of my wife, and we got married about a month after she graduated from college.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
Presently, my wife and I both work full time jobs. I am a commercial lending officer for a locally owned bank and my wife is a team supervisor for the local housing authority (section 8 housing). Our average monthly take home pay is about $7,000 per month. This does not include bonus income, which can vary from a few thousand to tens of thousands of dollars per year (bonus income is from my job).
Take home pay is after we contribute 10% of my gross pay (my employer matches 3%, so total for my 401k is 13%) and my wife contributes 6% of her gross pay (with an 8% match, 14% total). We also contribute a full $10k per year to ROTH IRA's.
Monthly living expenses are about $4,500 per month (not including ROTH contributions or cash savings/investments). Total monthly budget looks like this:
$7,000 - take home pay
- $1,300 - mortgage payment (PITI)
- $300 - utilities
- $400 - food/groceries
- $85 - cell phones
- $115 - cable
- $500 - auto expenses (fuel/maintenance)
- $580 - auto loan payments (most funds used for investments)
- $250 - giving
- $40 - gym membership for me
- $500 - golf club membership (includes golf & dining)
- $400 discretionary spending
- $832 - ROTH IRA Contributions
- $1,700 cash savings/various investments
A few notes on my monthly expenses:
- I am a golf nut and pay a premium to belong to a very nice local club. As a banker, this is a tool I use frequently to help grow my career by entertaining clients.
- We have to 2 auto loans of which most of the funds were used for various investment opportunities. The rates on each of these are 3.49%. You can see below that we could fully pay these off if we wanted to, but decide not to since investments earn much more than 3.49%.
Our household net worth is approximately $210,000. This includes the following (this is all net of debts):
- $60,000 in cash
- $50,000 real estate partnerships equity
- $50,000 retirement assets
- $30,000 stock/options in the bank I work for
- $20,000 - other private investments, home equity, vehicle equity, etc.
What are the current financial issues you're facing (saving, paying off debt, etc.)?
The main financial goals that we have right now are growing our overall investment portfolio, focusing more on investments outside of retirement assets. We put a good chunk of money into retirement accounts each month, but I don't think too much about these accounts. I do spend a good deal of time each month focusing on our other investments, which are focused in real estate investments and a few other private company investments (insurance company, etc.).
Working as a banker, I have the opportunity to see all different types of businesses and work with the most wealthy and successful business people in my city. This allows me insight on and access to investments that many people would not.
I own 7 rental properties (some personally and some with a partner). These are all condos so they are fairly easy to manage, and me and my partner handle all management ourselves.
I also just recently had the opportunity to buy a chunk of stock in the bank I work for. I've worked here for about 1.5 years and have moved up quickly, which is beginning to open up solid equity opportunities (both in buying shares and getting options).
I am not too concerned about paying off debts at this point, as they are all at low rates. Debts consist of the following:
- $190,000 home mortgage @ 4.50%
- $30,000 in auto loans @ 3.49% (all but about $10k used for investing purposes)
- credit card balances usually are around $1,000 and are paid in full monthly
What are your plans for the future. (retire early, build your career, etc.)?
My wife and I plan to have children in the next 2-3 years at which point we plan for her to become a stay at home mom. She is not as career focused as I am, and we both believe it will be worth the sacrifice for her to be able to stay home. Her take home pay represents about $2,000 of our total $7,000 monthly income. I believe that my income growth from my job over the next 3 years combined with growth in investment income should come pretty close to covering this gap by the time my wife quite her job. Thankfully, we spend much less than we currently earn so this should be easily doable.
My goal is to be "retired" from having an 8-5 job by the time I am 45 years old. I plan to focus very heavily on investing over the next 15-20 years. My investments to this point have been heavily focused on real estate. My goal for 2012 is to make a sizable direct investment into the oil and gas industry by either acquiring some royalties or some working interests in various wells. I am heavily involved in lending to the oil and gas industry and have developed a good working knowledge of the industry. My mother is also employed in a small oil and gas firm and will help to provide me access to some investment opportunities.
I've been heavily focused on my non-retirement investments for about 2 years now, and I've built an income stream of about $600 per month (net of associated debt service - not included in take home pay described above). I realistically believe I can build this to about $15,000 per month by the time I am 45 years old. I typically amortize any debt on investments very rapidly, so once debts are paid off, my income stream will increase quite a bit. Still, I'll have to acquire a lot more assets in order to eventually reach my investment income goals.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
My general philosophy on personal finances is generally one of being aggressive (focus more on offense than defense). I work very hard to grow my income and to create new income streams. I also don't shy away from debt when it provides me the ability to own an asset that will increase my wealth and income over time.
Keeping spending under control is important, however, to me its not fun to spend your whole life preventing yourself from spending money on things you want to spend money on (see country club membership above). Money is only a tool that can be used to acquire things, or to invest to earn more money.
I'm not shy about wanting big things out of life, but I also try to be smart about creating a plan and working extremely hard to execute in order to reach my goals.
My main piece of financial advice (more like "life advice") - don't let anyone tell you that you can't do something you want to do, or have something that you want to have. People achieve big things every day, and the people that achieve big things are the ones that believe in themselves. Some people think having money or nice things is evil, which is fine. But I don't believe that, and I am not afraid to strive hard for success.