Financial voyeurs of the world, rejoice! I dug out all our old tax returns, pay stubs, and my net worth spreadsheet to pull together the story of our ten year journey from nearly zero net worth to millionaire status (and early retirement).
This post answers a lot of questions like: How much did we earn? Did we have six figure incomes all of our careers? Did we work for a start up and make a million when our employer went IPO? Did we get lucky picking stocks?
SEE ALSO: I just became a millionaire at age 35, and it’s a huge letdown
Year 1
Our story starts in 2004, a period in ancient times before the launch of Youtube. This is the year I graduated from law school and started what would be my job for the next seven years (in engineering, not law). My starting salary at a small engineering consulting firm was $48,000.
The salary negotiation was bizarre. The president of the company asked me what I would like to make. I asked for $42,000 (since I had a job already lined up elsewhere for $36,000). He countered with “does $48,000 work for you?”. I spent about two seconds trying to figure what the trick was before suppressing a smile and responding with “yes, that will be acceptable.” The vice-president’s dumbfounded sideways glance at the president sticks with me even today.
Mrs. RoG was still in law school at the time. Like me, she never worked as an attorney. In 2004, we owned a rental condo that was previously our primary residence in a nearby city where I attended law school. We had just purchased our new primary residence — a house in Raleigh.
We had some investments slowly accumulated during college and graduate school plus a fledgling 401k from a couple years of Mrs. RoG’s employment between undergrad and grad school (at a salary of $24,000 to $34,000). I guess we were the weird ones that graduated college with a positive net worth (in spite of six figure college loans).
By the end of 2004, we maxed out our IRAs, I contributed what my company allowed to a 401k, and we added to our taxable accounts. In total we added about$15,000 to our investment portfolio in 2004, bringing the portfolio balance to $64,000. We didn’t start Year 1 with zero dollars, but it makes sense to start when I graduated college since that is when our earnings picked up dramatically.
If you’re really interested in my career before my first post-college job, check out “From Paper Boy to Engineering Manager to Early Retiree.”
Year 2
2005 was a year of big changes for us. Our first child was born in the spring right before Mrs. RoG finished law school. After graduating and spending most of the year caring for our daughter, Mrs. RoG decided to get a job. Her starting salary of $38,000 per year was pretty average for her field, and she was eligible to receive overtime pay. The company offered really good benefits like nearly free family health insurance that would save us a lot of money over the next decade.
Mrs. RoG only worked six weeks in 2005 and pulled in $5,000. I received a small raise to $49,000.
During the year, we sold our rental condo and put the proceeds into our investment portfolio. We also completed a cash out refinance on our primary residence that generated a lot of cash because we purchased the house from the City at a discount of $30,000 from fair market value. These real estate moves helped us add $101,000 to our investment portfolio during the year even though we only earned $54,000 from working.
Our portfolio ended the year at $183,000 with $18,000 in gains for the year. At some point during this year I realized we would be able to save a significant part of our incomes every year and it was a mathematical fact that we would have enough to retire comfortably one day. I thought our “magic number” needed to retire was well over $2 million and it would take at least 20 years to hit that number.
I also discovered the Early-Retirement.org forums this year, which helped crystallize in my mind the concept of early retirement as a thing that people aim for in an intentional manner, instead of something that randomly happens as a result of saving massive piles of money.
Year 3
In 2006, we had another kid. Mrs. RoG’s swanky job offered three months of paid maternity leave plus the option to take two more months of unpaid leave. Since we weren’t even spending my whole paycheck at the time, Mrs. RoG was able to take off five months. In spite of not getting paid for two months, she still made $40,000 during the year due to overtime and bonus.
I rode the boom time wave at my job, snagging two raises to bring my salary to$55,000.
We kept maxing out our 401ks and IRAs throughout the year and picked up company matches in the process. Including the 401k matches, we contributed $75,000 to our investments during Year 3.
The portfolio ended the year at $295,000 which includes $37,000 in investment gains during the year.
See the rest of the story at Business Insider
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