How this 32-year-old couple saved $1 million

We, Mr. and Mrs. Saverdink, are a pretty nondescript couple on the outside. We both have engineering degrees and have spent the past 10 years working standard Monday – Friday jobs. We own a moderately sized 3-bedroom house in a residential area. No kids, just two little cats. No fancy cars. We travel a few times a year (to some pretty awesome destinations!) and prefer to spend our free time hanging out with friends and exploring the great outdoors.

In 2016, we reached a major milestone. Our net worth hit $1 million dollars when we were only 32 years old. We’ve never benefited from a financial windfall and do not hold exceptionally high paying jobs. Slowly, but surely, we amassed almost a million dollars across our retirement, savings and investment accounts over our first 10 years as working professionals. Combined with $100k in equity in our house, we tip-toed over the millionaire net worth threshold and our savings have continued to grow.

What got us pointed in the right direction? Below are some of the major contributing factors that launched us on our journey towards financial independence and early retirement.

1) We graduated college without any debt and landed in well-paying, in-demand careers

Mr. Saverdink and I met at a private university while pursuing our undergraduate studies. Tuition, room and board was over $30,000 per year in the early 2000s (I hear it’s more than double that now, ouch!). Through a combination of scholarships, paid internships, and family contributions, we were both able to graduate from our bachelor’s degree programs without any debt. This was a HUGE advantage when it came to getting ahead financially as young adults.

Unfortunately, student loans are a fact of life for many millennials and impact their ability to save for retirement. We were both incredibly fortunate to start our professional lives with a net worth of $0, instead of massively in debt like many of our peers.

Our parents were supportive of our (expensive) college choice because they knew we would receive an excellent education and that we would be able to secure good jobs upon graduation. Graduates of STEM (Science, Technology, Engineering, Math) degrees are in high demand and are often offered very competitive starting salaries.

Food for Thought: If you are going to take on debt for college, take the time to do a cost-benefit analysis to see if it’s worth the time and energy required to earn the degree. Are scholarships available? Paid internships? Will you be able to secure a job upon graduation? Will that job pay enough to justify the amount spent on your education? For high income, in-demand careers, a moderate amount of student debt is absolutely justifiable, but make sure you are going into debt with your eyes wide open.

2) Upon entering the workforce, we immediately prioritized 401k retirement savings

I made $65k per year at my first job and immediately elected to withdraw 24% of my paycheck into my 401k to hit the maximum yearly contribution limits. Combined with a 6% company match, I stashed away almost $20k in my 401k that first year.

$65k/year is a TON of money to a broke college student (a situation I was very familiar with!). As a recent college graduate, I was pretty naive when it came to financial well-being, but I did know one thing – I was used to living on a lot less. By immediately withdrawing 20+ percent of my paycheck, I never missed the money and I never got used to living on a higher monthly income.

Mr. Saverdink followed a similar path at his first job and started with a 10% 401k withdrawal that slowly ramped up to the full yearly contribution limit. He joined the workforce two years after I did (due to pursuing his master’s degree first) and worked for a much smaller company that did not offer a 401k match. It’s very interesting to see what a difference those two years and variations in contributions and company matching made when looking at the current value of our retirement savings. Spoiler: I have about $125k more in my 401k. Saving early makes a big difference.

Estimated Wealth Contributor: $40k – $50k per year

3) We prioritized retirement savings again and contributed to Roth IRAs

Yup, broken record. After maxing out our 401ks, we prioritized stashing away money in our respective Roth IRA retirement accounts. We set up automatic monthly withdrawals from our saving accounts and funded Roth IRAs throughout the year. It was simply another line item in our budget and received as much priority as paying our other necessary expenses.

Estimated Wealth Contributor: $10k – $11k per year

4) We’ve maintained a lifestyle well below our means

One of the biggest traps young professionals fall into is the “Well, I can afford it now that I’m earning all this money…” mindset.  I watched as many of my peers opted for brand new cars, expensive houses, new electronic gadgets and high-end furniture because they could “afford it” on their newly earned paychecks. Yes, technically they could afford it, but it left very little extra for savings. Lifestyle inflation can really derail efforts to increase long-term wealth and financial well-being.

Our first two years living together were easy – Mr. Saverdink was in graduate school and we continued living a college student’s lifestyle. Cheap rent, used cars, hand-me-down furniture, camping trips for “vacations” — life was simple and we loved it. I remember moving into our first apartment together and we didn’t have a kitchen table or living room furniture that first week, so we ate our dinner sitting on the bed (which I’m pretty sure was just a hand-me-down mattress and boxspring on the floor). Ah, memories.

After Mr. Saverdink entered the workforce and we achieved DINK status, we splurged a bit more – a brand new vehicle (and the accompanying car loan…), international vacations over the years, eating out a bit more often, but overall, we kept expenses low in comparison to our income. In our mid-20s, we bought a house that we could afford on one $75k/year salary and put 20% down to avoid PMI. Our most expensive vehicle cost $26k brand new. A fancy dinner out totaled ~$60 and was a rarity. We did all our own home maintenance and repairs.

Now in our 30s, our incomes have continued to rise, but our lifestyle, with the exception of our travels, has stayed pretty even keeled. Sure, we splurge on more expensive items here and there, but we cook dinner at home almost every night, bring lunch to work every day and drive 8-year-old vehicles. We’ve kept our expenses in check, despite the fact that we now have more disposable income than ever.

Estimated Wealth Contributor: $15k+ per year

5) We increased our income by working hard at our day jobs

Earning a paycheck is a necessity (at least for some number of years!) and even though we’re looking to exit the corporate world as soon as possible, we’ve still worked hard to be top performers at our jobs and earn the commensurate salaries. There are a lot of internal and external factors that come into play where salaries are concerned. Engineering pays well. We have a huge advantage on that front, but career growth is very much influenced by an individual’s ability and dedication.

At our first jobs, both of our companies were struggling and downsizing, which didn’t leave a lot of opportunities to increase our incomes (remember that nice recession from 2008-2010?). During the first 5 years of our careers, we only increased our incomes, on average, by 2-3% a year, but we were both lucky to stay gainfully employed during the economic downturn. Since then, we’ve each moved on to healthier corporations, taken on challenging roles and achieved high-performance ratings. As a result, in recent years, we’ve each earned promotions and significant year-after-year pay raises. Over the past 4 years, our household income rose over 50% and that was a huge contributor in reaching the millionaire mark.

Estimated Wealth Contributor: $40k+ per year (and hopefully more to come!)

6) We took advantage of “free” money that our employers offered

Tuition Reimbursement: When I switched companies, my new employer placed a strong emphasis on earning a master’s degree. Utilizing the company’s tuition reimbursement program, I took evening classes over a three-year period and earned a master’s degree from a local well-known private university. Value: Over $40,000. Out of pocket expenses? $0. Plus, the additional education helped me earn a promotion on an earlier timeline. It was a lot of work balancing a full-time job and a graduate class at the same time, but it paid off in multiple ways.

ESPP: Two of our employers have offered an Employee Stock Purchase Plan (ESPP), which allowed us to designate a percentage of our income to be set aside for the purchase of the company’s stock at a discount. Money was withheld via automatic payroll deductions and depending on the purchasing period, it was a minimum of a 15% discount on the stock.

Pension Matches: My current employer used to offer an amazing “pension” plan. I contributed 2% of my salary and the company matched 8%. This was an optional benefit and it boggled my mind when I learned of coworkers who chose not to take advantage of it. Sadly, they discontinued the program a few years ago. I have about $35,000 waiting for me at retirement though 🙂

Estimated Wealth Contributor: $10k+ per year

7) We started investing in non-retirement accounts

This may come as a shock, but we didn’t start investing outside of our retirement accounts until 2013 (aside from ESPP stocks). In our late 20s, we came to realize that even with maxing out our retirement accounts, we still had some extra cash left at the end of the month. It was a bit intimidating hopping into the stock market, but we opened up a Vanguard Investment Account and have been purchasing index funds for a few years now. Over the past 4 years, we’ve earned over $30,000 in investment returns (~$8,000 of which are dividends and “real” money). We’re just getting started on managing our investments better and expect to see much better returns going forward.

Estimated Wealth Contributor: $10k+ per year

 

The Saverdink Millionaire Summary and Steps Forward

By late 2016, when we achieved millionaire status at age 32, our wealth breakdown was as follows:

  • Retirement Savings: $575k (401k and Roth IRA accounts)
  • Investments: $250k (Mix of ESPP and Vanguard Funds)
  • Savings/Cash: $75k
  • Home Equity: $100k

A number of factors played into building our wealth over the past ten years. We were exceedingly fortunate to graduate college debt free and enter high-income careers. Those two factors alone set a very solid financial foundation that allowed us to save a significant portion of our income early on. Retirement savings currently form the bulk of our wealth (almost 60%) and while we will continue to contribute the yearly maximums, our future focus is on optimizing our non-retirement investments and maximizing returns. With our recent increases in household income, we are able to contribute more of our savings in that direction and that presents our greatest opportunity to fast-track financial independence.

We’re still keeping an eye on lifestyle inflation because the less you spend, the more you can save, but we’re still going to enjoy life as much as we can (and yes, we still need to work for a few more years…). I hope you’ll join us on our journey to financial independence!

-The Saverdinks

11 comments

  1. Nice work! I’m older than you–GenX, not Millenial–and I graduated college in 2000 with $35k in debt and I didn’t start real work until 8 years out of college, as I was getting a PhD and making peanuts. Paid off my loan a year or so ago and the husband’s graduate loans this year. Not having that debt was a huge kick-start for you to really get the ball rolling early!

  2. Awesome job guys! What are you mostly investing in – low cost index funds?
    Any consideration in using extra capital for a self directed IRA to do some real estate investing? Or invest in a franchise?
    Or just looking for super passive gains through stocks?

    Only being in the workforce 4 years now, we live a similar lifestyle. Live frugally but awesomely 🙂 + 2 kiddos. Our net worth is only in the quarter million mark though. Although we will have about a million in assetts once we close on our triplex towards the end of the month.

    Anyway great stuff, keep it up!

    1. Hi Sunny! Yes, we primarily invest in low-cost index funds. We’re actually in the process of revamping all of our investments right now and just started working with a financial planner ton consolidate investments and come up with a more cohesive financial plan. No interest in real-estate at this time.

      250k in 4 years with two kids is amazing work! Can’t wait to see where you are a few years from now!

  3. Congratulations on your success Saverdinks! That formula is not all that complicated but somehow eludes the majority of Americans (including myself up until recently). You two are going to be set for a long time! Best of luck with your next chapter in Financial Independence!

  4. Kudos. Must feel great to be saving. $1 million is a nice marker and I suppose for some (Mr Money Mustache) would be enough to retire if your costs were considerably low. I calculated at $1.6 I could retire but seeing as most of my cash is in retirement accounts, it is not that helpful. I would need to save the cash in after tax investments so I can draw down without a penalty if I choose to retire early.

  5. Nice work! My husband and I are fellow DINKs, though we are a few years older than you and our net work is about a quarter of yours 🙂

    I spent 10 years pursuing my PhD (and two degrees before that) and my husband opened his own small business right after completing his BS. While I managed to graduate debt free (scholarships, fellowships, and part-time employment), my husband still has a small amount of student loans.

    As a result, we didn’t start saving towards retirement until our 30s, but it’s been fun to watch our savings increase (slowly at first and now a little faster). We used to measure our retirement savings in terms of the months we could live if we were to retire right then (“we can now live for 3.5 months!). Fortunately about four years into our savings adventure we are able to think seriously about life after full-time employment. And this is without big pay increases. In fact, my employer allows me to work reduced base hours and still receive nearly full benefits. Therefore, I’ve been enjoying part-time work (32-35 hours/week) for over a year. Though my husband recently started a new job so his earning potential should improve quite significantly.

    Thanks for sharing your story!

  6. Great work w/ the early savings. I wish I had that mindset early on (and the cashflow). Employers need to do more to get this information out there. (Or maybe schools, government, somebody to teach basic financial literacy!)

    Hope to catch you in a few short years!

    1. I wish students in high school learned the essentials of personal finance and that colleges/employers offered more advanced topics. There are SO many different aspects – from basic budgeting to lifestyle choices to investing to retirement savings to the math behind saving early vs later – it takes years to grasp many of the concepts. Some of us are fortunate enough to have parents who can guide us, but many do not. It makes a huge difference in quality of life and financial stability.

  7. Awesome job! We’re close to hitting the $1M mark…probably in the next year or two but we’re a lot older than you guys (I’m 38 and hubby is 40). I started off with a much lower starting salary…only $40k and so wasn’t able to start saving as much in my 401k. Plus I definitely had a bit of the lifestyle creep and didn’t really start saving seriously until fairly recently.

    What’s your retirement goal? Ours is probably $1.6M which would be enough to pay off the house and have $1M in liquid funds.

    1. You’re still doing great! Our goal right now is $3M to allow for lots of travel during retirement. We’re also both engineers and a bit conservative by nature… 🙂

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