January 2023 Net Worth Update
In the Personal Finance FIRE (Financial Independence Retire Early) Community, there are five major net worth milestones: $100K, $300K, $500K, $750K and $1M. They are considered major milestones because they each represent different challenges. The personal growth that goes along with overcoming them to arrive at each milestone changes you, hopefully for the better.
It is the reason they say, “Don’t strive to be a millionaire for the money, strive to be a millionaire because of the person you will become on your way to getting there.” It is another way of saying: the journey is more important than the destination.
Today, I will discuss the things I’ve learned on my way to a $300K net worth.
The Grace to Get Here
The first thing I noticed on this Journey is that it’s a blessing if you can save. It means you have enough to meet your basic needs and there is something left over. It also means that employment and life, in general, have remained relatively stable. If you weren’t just handed $300K it means you had to go through $100K and $200K to get here and God or whomever your higher authority is allowed you the health, wisdom and grace to continue.
Confidence to Continue on Your Path
At $300K, you officially stop second-guessing yourself (at least you should). I no longer deliberate my investing decisions. The fool-proof portfolio ratios being touted on media platforms are no longer contemplated and the articles on “the next hot stock” have as much value to me as a YouTube conspiracy theory. I have rinsed and repeated my way to $300,000, so why would I do anything differently now? The process works.
The Confidence to Earn More Money
One of the four pillars of a strong financial foundation is income. Having an income is one thing. Learning to grow your income is another. You must believe in yourself and your ability to acquire and implement new skills. Growing your income above the average $65K that half of all Americans make will take a boldness and confidence that feels very uncomfortable at first. But it will eventually turn into your very own superpower and leave you confident in your ability to earn more money than you ever imagined.
Ahead of the Game
With more than half the population not having $400 for an emergency, I realized that I’m no longer 100 yards behind the starting line. I’m also far from where I started. When you finally get ahead financially, it affects every area of your life. One example is work. Work is no longer the soul-sucking chore that it once was. When I listen to the complaints of my coworkers, I know a lot of their anger and discontent are rooted in not having a financial alternative.
Getting ahead has meant that I no longer must be, where I don’t want to be. I have choices and I have the mental freedom to make good choices for myself. And just like your money, the good choices I’ve been making are compounding and creating even more choices and opportunities every single day.
The Law of Least Effort is With Me
Compounding is officially part of my equation now. At $300K, it’s not uncommon to see $7K-$10K net worth swings in one day. Of course, this can go in the other direction, too. But it’s more skin than I ever imagined having in the game when I first started. I now have months where my investment earnings are more than I’ve put in. And I realize that the next $100K won’t require nearly as much effort.
Unlike the first $100K and $200K that I saved and invested, which required 99% of my energy and input to achieve, getting to $400K will only require 85% to 90% of my input as the compounding effects of stock value, dividends and interest are growing more powerful. The hardest part of my journey is officially behind me.
Halfway to a Million
Since it will take less and less time to grow every consecutive $100K from here on out. It should take approximately, the same amount of time for me to reach $1 million, that it took for me to go from $0 to $300K. I learned $300,000, not $500,000, is the halfway mark to $1 million. If you stay the course, you are destined to be a millionaire in approximately the same amount of time (or less) that it took you to acquire your first $300K.
One Million is Still a Great Goal
While we can all agree and have heard people say a million is not what it used to be, most would rather have it than not. “I would rather live paycheck to paycheck than have a million dollars because a million dollars is not what it used to be,” said no one, ever.
We like to think millionaires are a dime a dozen today but that’s not true, especially for the Black and Hispanic populations. The truth is if you are Asian or a white man you have the greatest chance of becoming a millionaire in the United States. Here are some stats on a $1 million and your chances of becoming a millionaire based on race:
- Having $1 million puts you in the top 10% of wealth in the U.S.
- 8.8 % of U.S. adults are millionaires.
- People who are middle-aged, college-educated and Asian have the highest chance of becoming millionaires in the U.S.
- An estimated 21.5% of people who are white, middle-aged and college-educated are or will become millionaires.
- It’s estimated that only 6.8% of people who are Hispanic or Latino and are middle-aged and college-educated are or will become millionaires.
- Only 6.4% of people who are Black, college-educated, and middle-aged are estimated to be or to become millionaires.
The Psychological and Financial Benefits of $300K
If you have $300k and no debt outside of your mortgage, you essentially have walking papers. At this level, you also should have no regrets. All the hard work and sacrifices were worth it. With $300,000, you realize that even if you don’t save another dime, the standard 3%-4% withdrawal rate will allow you to take $750-$1,000 a month and not run out of money for 25-30 years.
With $300K, you’ve officially created your very own basic income. You have your very own social security and you don’t have to wait until you are 62 or 72 to reap your hard-earned reward. If bills run high or you just want a little more cash in the budget, you have as much as $12,000 a year (and growing) at your disposal if you continue to work, save and invest. If that’s not a psychological advantage, I don’t know what is.
Okay, time for the first net worth update of 2023:
The title of this blog tells you that I finally hit a $300K net worth, which doesn’t include any home equity. It’s just cash, stocks and bonds. While the market continues to be volatile, I continue to invest through the highs and lows. The majority of my investing is automatic but when the checking account has anything left over, I quickly invest it. I found myself buying $12.08 worth of VTSAX in January because every drop counts.
What number did I actually land on…
The $300K milestone is officially in the books and January was a great month for it to happen since it marks new beginnings. The clock has officially begun on the time it takes to reach $400K. In case you’re wondering, it took a year and seven months to go from $200K to $300K during one of the worst years for the stock market. If I had to guess, it won’t take nearly as long to reach $400K, but you never know what the stock market and the world are cooking up.
Here’s to a year of continued growth, progress and doing even more of the same things that brought me this far.
Remember, it is a fight to build wealth no matter where you are in the process. Everything around us conspires to take money out of our hands. But you must fight the good fight. Continue to save, invest, and grow your net worth even when it seems impossible. Save your pennies (copper) until they become dollars (cotton).
