$1 MILLION – THINGS YOU NEED TO KNOW! (Interview #1)

This week I interview a young man, Jake, whose household Net-Worth is on a great trajectory. Jake and his wife Jen, in their early 30’s, have already built a Net-Worth, that is 30 times greater than the average American Household for a couple their age. THIRTY TIMES GREATER – bears repeating. So lets take a look at their strategy and accomplishments!

By the way, Jake is an avid basketball fan; although his preference for the best All-Time player is dead wrong! {Our constant battle!}

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INTERVIEW QUESTIONS AND RESPONSES

INTRODUCTIONS
How old are you and Jen? Also, how long have you been married?
RESPONSE: We are in our early 30’s and were married July 11, 2014. {I was impressed how quickly he told me the date.} We met in high school, and started dating in college. It was a long distance relationship, as we attended different colleges.

2. How old is your son Brady?
RESPONSE: Brady, is seven months old.

3. Do you intend to help Brady with the cost of college?
RESPONSE: We recently started a 529 Education Savings Plan and a regular savings account for Brady. We deposit several hundred each month. We estimate in 18 years we will need ~$350,000.

4. What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
RESPONSE: We purchased a home in 2015. I contribute 20% of my salary (pre tax) to a 401-K plan and Jen contributes a lower percentage. We also started contributing to a ROTH IRA. We have a savings account for cash assets. {Note: Outstanding contributions rates and usage of compound interest.}

5. What are your occupations?
RESPONSE: We are both licensed Physical Therapists. {An occupation that requires seven years of college education.} I manage a Physical Therapy Center and Jen works as a therapist and is the Clinic’s Education Coordinator.

6. What’s does your work-life balance look like?
RESPONSE: Jen has cut her hours to 34/week, following Brady’s birth. As a Clinic Manager, I average 50-55 hours per week. I do not work weekends and we both love spending quality time with Brady and our families.

7. Do you have a budget? If so, how do you implement it?
RESPONSE: We have not formally created a budget. We discuss major purchases prior to the purchase. We are both frugal people who do not spend a lot of money on “wants”. We spend our money on needs, such as mortgage, groceries, fuel for two cars, funding our retirement, Brady’s education and our savings accounts.

INVESTMENTS:
What is your investment philosophy/plan?
RESPONSE: I am not a financial expert, so I rely on professionals to advise on the investment portfolio. We are young, so we invest aggressively in stocks and mutual funds.

2. What has been your best investment?
RESPONSE: My best investment is my wife! {This is a smart man!!} We have seen ~$50,000 increase in equity in our home and good returns in the investment accounts.

3. What’s been your overall return in your investment accounts?
RESPONSE:
2017: ~25%; and
2016: ~ 17%

4. How often do you monitor/review your portfolio?
RESPONSE: I weekly review the performance. And annually review the portfolio with financial professionals, to determine if changes/rebalance are necessary.

5. You and Jen contribute to 401 accounts and a ROTH-IRA? Why did you decide to open a ROTH-IRA?
RESPONSE: The ROTH-IRA has significant future tax advantages. Unlike the 401-K, we contribute money after taxes. The tax savings occurs, when you finally begin to withdraw the money. The money in a ROTH-IRA is NEVER taxed, regardless of dividends, appreciation, etc. Example: If you contribute $100,000 into your ROTH account and through aggressive investing grow that account to $1 million+, you owe ZERO taxes when you eventually withdraw your money. The ROTH-IRA phases out when modified adjusted gross income, exceeds $196,000. We plan to continue making contributions.

NET-WORTH
1. By the end of this year, you will have zero dollars in bad debt. How did you achieve this so early?
RESPONSE: We avoid spending our money on wants. We buy used reliable cars. Pay off credit card each month. We are aggressively paying off student loans and will complete this by the end of 2018.

2. What are you currently doing to maintain/grow your net worth?
RESPONSE: Contributing to our 401-K plans, ROTH IRA; Brady’s 529 and savings accounts. I apply my annual merit increases to my 401-K account, contribution.

3. Do you have a target net worth you are trying to attain?
RESPONSE: Greater than $1 million

4. If you had to give advice to my readers about how to become wealthy, what would it be?
RESPONSE: Define what you mean as wealthy, so you have a goal/goals. Determine where you stand today financially and set targets. Spend your money on your needs and avoid wants. Contribute to investment accounts such as 401-K’s, IRAs, ROTH-IRA etc. If you have a passion to start your own business, develop a plan and calculate the risk. Then make a decision.

LEARNINGS
How did you learn about finances and at what age did it ‘click’? Was it from family, books, forced to learn as wealth grew, etc.?
RESPONSE: Minored in Business Management Administration. Subscribed to Morningstar and took several of their workshops/modules.

2. Who inspired you to excel in life? Who are your heroes?
RESPONSE: My Dad and former boss. They both have “grit” and determination. My Dad is an entrepreneur who started in the oil industry in Texas. Unfortunately when the oil prices fell significantly he had to shut down. He did not give up. He worked harder and has started new successful businesses.

Anything else you would like to add?
RESPONSE: Some people may read this and believe I am cheap. “I AM NOT A CHEAP ASS”. We live the American dream without relying on needless debt.

CONCLUSION

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I have known Jake for several years. He has impressed me with his interest and knowledge in investments. We often enjoy talking about the market, different stocks and other financial vehicles. And I learn by listening to his thoughts. I asked if I could interview him to show you a family on the path to financial security and wealth. Jake’s priorities are straightforward; it is his family. He avoids debt, pays his investments accounts first and is actively seeking more knowledge. He just wants to keep getting better. I am confident, Jake, Jen and Brady (and lets leave room for one/two more little ones) will not just achieve the American dream, but exceed it. And you, my readers can too!

In my next few blogs I will discuss some of the tools Jake has mentioned: The 401-K, 529 Education Savings Plan, IRA and ROTH-IRA.

THIS WEEK’S QUOTE
“Don’t wait until everything is just right. It will never be perfect. There will always be challenges, obstacles, and less-than-perfect conditions. So what? Get started now. With each step you take, you will grow stronger and stronger, more and more skilled, more and more self-confident, and more and more successful.” –Mark Victor Hanse

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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