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!