Navigating Public Service, Pay Cuts, and Unexpected Challenges on the Path to Seven Figures
$1 Million Net Worth by 38 (details on income, spending and investments)
Exploring the Hidden Aspects of Wealth Building
This week we have the financial journey of an urban couple in the Midwest that highlights that the path to wealth isn't always a straight line. Their story is a powerful reminder that wealth is built through a combination of earning, saving, and investing, but also through resilience, adaptability, continuous learning, and making intentional choices that align with personal values and lifestyle goals, even when facing unexpected challenges.
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In their 30s:
$1,000,000 net worth - a couple from an urban area in the Midwest, ages 38 & 33, married for 8 years with two young children, aged 6 and 3. She (38) is a lawyer working for the state and he (33) is a data scientist. Their accumulated net worth is 92nd percentile for their age group. The composition of their net worth is 50% in retirement accounts, 29% in real estate (home and investment property), 7% in taxable brokerage, 7% in cash, 5% in 529s and 3% in an HSA.
Their combined annual income is ~$280,000, including salaries and his bonus. She is a lawyer working for the state in the mid-part of her career, and he is a data scientist in the earlier part of his career.
She describes her career path as non-linear, stemming from initial difficulty finding a traditional law job during the Great Recession, which led her into public service. She worked for 7.5 years at an underpaid but well-respected non-profit, gaining valuable experience and even turning down a significantly higher-paying private practice job because she valued work-life balance over a larger salary. She later moved to a state job in 2021 for higher earnings and paid maternity leave, as her family grew and her husband was still in grad school. Seeking flexibility, she briefly took a remote non-profit job that involved a pay cut but found it lacked the promised flexibility, prompting her to return to a different state agency after just a year. She currently works a 37.5-hour hybrid week with beneficial flex time and advises others not to fear a pay cut if it leads to a more interesting job, better career trajectory, or improved lifestyle fit, emphasizing that it's acceptable to change jobs again if the initial change isn't suitable.
His income trajectory was different. He was in grad school for 5 years, earning a stipend of around $30,000. Upon entering the industry, he started at $135,000 and his base salary is now $155,000, reaching the $175-180k range with an annual bonus.
Beyond their careers, they have one other source of income: a rental property that nets around $6000 – $7000 per year. The wife purchased this property as her primary residence when single and earning $48,000 using an inheritance for the down payment and living with roommates to subsidize costs.
Their annual spending is around $160,000. They review the "big picture" quarterly and discuss large expenses together, but they don't set allowances or limits on their spending. Despite a high spending level that the wife notes feels "outrageous" relative to her initial perception of saving being her greatest strength, they still maintain a high savings rate of approximately 42% of their gross income. This rate has been relatively stable around 40% over time, with a goal to reach 50%.
Their investment plan currently involves maxing out all retirement and HSA accounts, setting a goal for 529 accounts, and investing primarily in index funds. They plan to increase investing in taxable brokerage accounts and want to be able to access funds before the age 59.5 penalty. They are also planning to sell their rental property because being a landlord "has not been enjoyable".
A few positives that added to their net worth:
Inheritance: She inherited $65,000 of individual stock in 2017, cashing most of it out in 2022 for a down payment on their current home.
Student Loan Forgiveness: She had just under $50,000 in student loans forgiven under PSLF in 2023.
A few negatives or bumps they faced along the way:
The Great Recession made finding a job out of law school difficult.
Relatively low earnings for the wife's career due to pursuing public interest work.
The rental property has been a headache due to increasing HOA costs, difficult renters, and the eviction process.
Their primary residence had issues shortly after they moved in, including gas leaks, frozen pipes, and improper electrical work, though many were fixed under a 1-year builder warranty. A natural disaster caused significant damage not covered by the warranty or homeowner's insurance, leading to $50,000 in repair costs and difficulty getting future insurance coverage. Natural disasters remain a significant concern for the future.
Take-aways:
Career growth is often non-linear: It is acceptable to make career changes, even if they involve a pay cut, if they lead to a more interesting job, a better career trajectory, or a better lifestyle fit.
Consistent saving and investing are crucial: Automation being the key tip. They maintain a high savings rate and that prioritizes maxing out retirement and HSA accounts. Learning about finances can happen over time, as she highlights not understanding Roth IRAs or her 401k match mechanics for several years. Learning from experiences, like dealing with a rental property is also part of the wealth-building journey.
What is the meaning behind Ten Wilsons?
The $100,000 bill is the highest denomination ever issued by the U.S. Federal Government. Woodrow Wilson is the president on the $100,000 bill.
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