Flight Attendant, Electrical Engineer, and a Teacher: Surprising Financial Journeys

Unmasking Financial Realities: Behind the Numbers

May 25, 2024

Exploring the Hidden Aspects of Wealth

Our goal is to provide complete transparency and show you real numbers from real people. Discussing money is often considered taboo in our society, and it's surrounded by numerous misconceptions about visible wealth.

Many of the net worth updates this week are in the top 10% or 20% in their age group. However, not all of them have high incomes, but most of them have the highest percentage of their wealth in their retirement accounts or other non-visible assets like brokerage accounts. Several are retired or close to early retirement. You will see that they've consistently saved and invested, lived within their means, and benefited from the power of compounding typically over decades.

These real-life examples mirror the takeaways from "The Millionaire Next Door". It shows us that most wealth isn't visible and is often within retirement or brokerage accounts.

We're sharing these stories to inspire you to create the life you want! Each one offers practical takeaways that can help you towards your own financial goals - be it managing debt, saving for retirement, or cutting down expenses.

Enjoy the long weekend and see you next week!

In their 20s:

$58,000 net worth - A 25 year old long-haul cabin crew worker based in Melbourne, earning $60,000 annually. She has an accumulated net worth that is 58th percentile for her age group. Her net worth composition consists of $21K or 36% in retirement accounts and $37K or 64% in cash (checking and savings accounts). She shared insights into her lifestyle, revealing how her job impacts her sleep patterns, eating habits, and social life. While she enjoys the travel opportunities, the irregular sleep schedule and physical demands of the job are significant challenges. She also highlighted the cost of living in Melbourne and how she manages expenses, such as using public transport and sharing a house. The interviewee expressed concerns about inflation and the rising cost of living, sentiments rooted in her upbringing in a financially insecure household. "I knew I wanted to make my own money and start saving from a young age for financial security, which I didn't experience in my childhood growing up."

TAKE-AWAY: This shows that despite previous financial challenges, aim to start saving from a young age for financial security. It's also valuable to live within your means, by using public transport or sharing an apartment/home to manage expenses (‘house hacking’). The first $100K of net worth is the hardest!

$100,000 net worth - A 22-year-old child of hard-working immigrant parents. He has an accumulated net worth that is 83rd percentile for his age group. His net worth composition consists of $60K or 60% in retirement accounts (Roth IRA, 401k, and HSA), $32K or 32% in cash (checking and savings), and $4K or 4% in taxable investment accounts. He utilized TikTok and other personal research to learn about financial planning. He pursued a degree in Electrical Engineering from a state school, funded by FAFSA and scholarships, which resulted in no education debt. "I saw a TikTok about IRAs and went down a rabbit-hole and have been lurking for the past few years."

TAKE-AWAY: This story shows the importance of self-education in personal finance (TikTok, books, or this newsletter!). Also, this story highlights the value of pursuing education opportunities that do not lead to substantial debt.

$215,143 net worth - A 27-year-old senior compliance analyst in the investment management industry, earns a yearly salary of $108K, along with a 10% bonus and 15% company 401(k) contribution. She has no debt and an accumulated net worth that is 84th percentile for her age group. Her net worth composition consists of $142K (66%) in retirement accounts (Roth IRA, 401k, and HSA), $55K (25%) in taxable brokerage accounts, and $18K (8%) in checking and regular savings. She lives in a one-bedroom apartment in Chicago and owns a horse. She indulges in activities such as barre studio classes, dining out with friends, and even spoils herself sometimes with a decaf pistachio latte on a workday. Additionally, Linda is not averse to treating herself to new clothes or beauty products when she feels the need.

TAKE-AWAY: The importance of first saving and investing early (2/3 of her net worth is in retirement accounts). Also, having the balance to invest in your future and still enjoy some things today while she is single and living in Chicago.

In their 30s:

$649,500 net worth - A 34-year-old that grew up in poverty has seen significant income increases annually since 2018 (total compensation was $220K last year). He has an accumulated net worth that is 92nd percentile for his age group. His net worth composition consists of $478K or 74% in retirement accounts, $123K or 19% in home equity, $40K or 6% in vested RSUs and <1% in taxable brokerage account. His long-term goal is to become a rock guide, a pursuit that will require further financial planning due to the high costs of certification and low pay. "I have about $1k extra per month that I'm trying to figure out where to put it to use. I could either pay off my mortgage early, or put this into a brokerage account."

TAKE-AWAY: By saving and investing early in life, one can build a solid financial safety net, offering the flexibility to shift career paths (become a rock guide) or to consider early retirement.

$704,000 net worth - A 31-year-old woman who works in marketing with a total compensation of $160K. She has an accumulated net worth that is 93rd percentile for her age group. Her net worth grew by $300K in one year, showcasing the power of compound interest. Her net worth composition consists of $274K or 39% in retirement accounts (401k, Roth IRA), $332K or 47% in a taxable brokerage account, $70K or 10% in vested RSUs, and $21K or 3% in cash. She aims to reach $1 million by 36 and plans a celebratory trip to Italy.

TAKE-AWAY: Markets don’t go up every year but a $300K increase in net worth can only happen if you have saving and investing a portion of your income. Also, set financial goals and reward yourself along the way!

$1,000,000 net worth - A couple, in their mid-late 30s, are in engineering with combined earnings of $250K annually. They have an accumulated net worth that is 92nd percentile for their age group. They achieved $1M in 9.5 years, starting from being nearly broke. Their net worth composition consists of $316K in retirement accounts, $665K in a taxable brokerage, and $82K in cash, offset by $63K in debt. They currently do not own any real estate. The journey to this milestone was described as the "boring middle", but they celebrated the achievement with a sushi lunch.

TAKE-AWAY: The key lesson here is that it’s never too late to start your financial journey. Even though the couple was nearly broke at the age of 30, they managed to build a million-dollar net worth in less than a decade.

$3,600,000 net worth - A 38-year-old who FI/RE'd (financial independence/retire early) at the start of 2022 with $3.4M faced market downturns, reducing net worth to $2.6M but rebounding to $3.6M by May 2024. He has an accumulated net worth that is 98th percentile for his age group. He is following a 3% safe withdrawal rate (SWR). Key learnings include turning off dividend reinvestments, planning post-retirement activities, considering side consulting for tax benefits, and paying estimated taxes. Future plans involve buying land and converting 401k to Roth IRA. Emphasizes the importance of having a purpose after retiring and remaining adaptable to market changes.

TAKE-AWAY: One lesson here is staying the course in down markets. Also, the importance of adaptability if your retire early and remaining flexible to change certain decisions.

In their 40s:

$2,700,000 net worth - A couple, aged 46 and 44, reached their FI/RE target of $2.7M after 10 years, while living in Boston and working in finance and technology. They have an accumulated net worth that is 94th percentile for their age group. Their net worth composition consists of $1.5M or 55% in retirement accounts, $900K or 33% in taxable brokerage, $270K or 10% in CDs, and $35K or 1.2% in cash. Their annual retirement cost is estimated at $90K with a 3.33% SWR. They plan to retire fully after tying up loose ends, then travel nomadically for 5 years, followed by stints in various U.S. cities. They credit the FI/RE community for their success.

TAKE-AWAY: Another important lesson from this interview is the need for a solid post-retirement plan. They not only planned for financial independence, but also for their lifestyle after retirement, including traveling nomadically for five years and living in various U.S. cities. It shows the importance of envisioning and planning for life after work, not just the financial aspect.

In their 50s:

$2,050,000 net worth - A former teacher, age 55, managed to amass a net worth of $900K in his 403B retirement account over a period of 26 years. He started investing 10% of his salary, which he gradually increased to 40%, without having a significant understanding of investing. The growth was facilitated by consistent contributions, fund selection based on past performance, and the boost in returns over the recent years. He has an accumulated net worth that is 86th percentile for his age group. Despite leaving teaching and not contributing further, the account continued to grow. His net worth composition consists of $900K or 44% in retirement accounts, $450K or 22% in other investment accounts, and $700K or 34% equity in their home.

TAKE-AWAY: Key takeaways include the importance of starting early, consistent investing, and leveraging time in the market rather than timing the market.

$1,700,000 net worth - A couple, aged 50 and 44, live in a low cost of living area. They have an accumulated net worth that is 92nd percentile for their age group. Their net worth composition consists of $600K or 35% in retirement accounts, $450K or 26% in paid-off home, $400K or 24% in taxable brokerage accounts, $230K in RSUs and in $20k in HYSA accounts. They have no significant debts and earn around $850k annually from tech and government jobs. They plan to grow their assets to $3.1M by 2026 and eventually buy a second home while maintaining their current residence.

TAKE-AWAY: It’s a significant financial advantage to live in a low cost of living area and have a high income. Both of these allow for a larger portion of income to be directed towards savings and investments, thereby accelerating wealth accumulation.

$1,750,000 net worth - A couple, aged 54 and 52, never had high incomes. He never earned more than $90K/year and his wife never earned more than $60K/year. They have an accumulated net worth that is 86th percentile for their age group. They've lived in the same paid-off home since 1995 and invested mainly through their 401k. Their net worth composition consists of $1.4 million or 80% in retirement accounts ($1.2M in 401K and $200K in pension), $100K or 6% in cash and $250K in other real estate. Their monthly expenses are about $6,500, including two annual vacations. They're currently deciding when to retire or switch to a job that brings them more satisfaction.

TAKE-AWAY: This shows that high-income isn't a prerequisite for building substantial wealth. By living in a less expensive house and consistently investing in their 401k over time, even with moderate incomes, you can save a significant amount. This highlights the power and importance of time and compounding when saving for retirement.