$1,000,000 in Lifetime Earnings

Last night, I was going over some expenses to determine what is a “nice to have” and what is a “need to have.” Doing this on a fairly regular basis has become cathartic in the same way that clearing your desk is. It’s minimalism applied to expenses, which serves to remove distractions and get down to the essential.

Of course, none of the monthly expenses I have are actually essential, but I mean necessary to continue saving at rate less than dismal.

Staring at the spreadsheet of expenses, I started to wonder a few things:

  • How much money I’ve made in my entire career.
  • How much money has gone to stuff I no longer use or never used more than a few times.
  • How much money I could have saved had I not spent it on those things.

So, immediately, I searched for my salary history and found that it was missing the past few jobs. Being that I’m getting paid a lot more, it made sense that the most recent work years would amount to the biggest spike in income. After looking up the various amounts and filling them in, I was astounded to find out that I’ve crossed the million dollar mark in lifetime earnings.

Two comma club .. sort of.

For some of you, this may not mean much. And for others, it might seem unreal. I was in the latter group. If you’ve read about my story, you’ll know that I grew up in a house where we didn’t want for things, but we weren’t exactly rolling in dough. The thought of reaching a million dollars was so far off. As I’ve mentioned before, my brother and I marveled at $1,000 when we held it in our hands. I honestly never thought I’d reach a million bucks before I was either old or dead, and yet, here it is.

Next came the easy part. To figure out how much money I’ve spent on stuff I no longer use or never used more than a few times, I could go into some crazy detail or I could just subtract my net worth to figure that number out. Conveniently, I started tracking that number not too long ago, so it wasn’t too difficult to find.

$1,000,000 – $422,000 = $578,000

Granted, a big part of that $422,000 is equity on my mortgage. I could easily include that, but it’s not something I earned through income, so let’s strip it away.

$422,000 – $256,000 = $166,000

Adding in the depreciation of both vehicles, I would bump that up to $175,000. So our new number is something like this:

$1,000,000 – $175,000 = $825,000

Credit: Ingram Pinn (I think)
Credit: Ingram Pinn (I think)

There, that’s more like it. I’ve been working since I was 17, so that means for the last 15 years of work, I only have 17.5% to show for it. In other words, I have let nearly 83% of my income slip like sand through my fingers. True, a lot of that has gone to things like rent, utilities, school — for myself and for the kids –, fuel, vacations but also to eating out (A LOT), asset depreciation and general frivolousness with my income. So it’s not like I’d be a millionaire right now had I just buckled down a bit, but my point is that I’d be a lot closer. I figure that if I’d had a modest average savings rate of 15% for that entire time, it would have come out to an extra $100,000 during that time.

Ultimately, it comes down to this: for all the time I’ve traded in for money, what do I have to show for it?

Yes, I understand that I’m effectively complaining about having so little when I obviously have a lot. But it doesn’t hurt to stop and look back for some perspective. I don’t want to hold my former self accountable too much, because I was ignorant. Things could have gone much worse for a person ignorant of finance. Not that I’m Buffett at this point or anything, but I’ve come a long way.

In fact, this post is more about the next million than about the previous one. The real question at the heart of this post is: now that I know, how much of that next million will I use to become financially independent?

And where past meets present, I now understand that even that 15% is hard to maintain when the future starts looking a little difficult. It’s hard to take income volatility into account when you’re making these numbers up. And 15% isn’t even a good savings rate. I’d rather be saving at 40-50%, or more.

But when it’s not in the cards, it’s not in the cards.

Even if I only save 15% of the next million, that will still be another $150,000 tacked onto my net worth. And while I won’t be financially independent by that point given my current spending habits, I will be that much closer to early retirement.

And, as I’ve maintained, I will continue to push through that earnings gap to make up the difference. Be it through my main source of income or some side hustle, I’m determined to stay focused on that one goal.


Wealthometer – How This Monkey Measures Up

So I was checking on my Twitter feed and noticed this post from @BudgetsAreSexy (J. Money):

Naturally, I had to go and check this ‘Wealthometer’ out. So I did. And here are the results:


And to my surprise, I actually over-estimated where I fall in my wealth comparison. I wagered I was in the 75th percentile where I actually fall into the 70th percentile.

On the other hand, not too bummed. I definitely consider myself well on the side of fortunate.

After playing with the numbers a bit as I often do, I could magically be on the upside of the 80th percentile if my mortgage were paid off. No big deal, right?

Enough about me. How do you measure up?

Early Retirement – Playing With Numbers

Ever find yourself playing with numbers when you should be sleeping?

Running the Numbers

I sure do.

I was looking at my Ally account and happened to click on the “More Details” button/link which then showed me what my daily accrued interest looks like. I mean, it’s a simple calculation they’re using, but for some reason I find it exciting anyway.

Daily Accrued Interest = (Available Balance X 0.0099) / 365

For me, that works out to $1.22 per day. And soon, that will be $1.36/day!

Yeah, not exactly Bill Gates numbers here. In terms of money earned per second, it’s .000014 cents per second or in terms of minutes, it’s .00085 cents per minute.

So that made me wonder what it would take to reach different retirement numbers at 0.99%. Easy enough, just take the amount you want to earn per year and divide it by the APY you’re getting.

Playing With Numbers

$60,000 / 0.0099 = $6,060,606.06 (Yikes)

In order to earn $5,000 per month with a high interest savings account from Ally, you would need over $6 million in the bank. What a waste!

Now let’s say we find an amazing CD with a 3% interest rate. Then what does it take?

$60,000 / 0.03 = $2,000,000.00

Now we’re getting somewhere. That number is still really high but not impossible to reach. However, I’m not a Rockefeller. I’m going to need a higher interest rate. What happens if I invest in index funds that average just 5%?

$60,000 / 0.05  = $1,200,000.00

Okay, now we’re really talking. That’s just $1.2 million. Not only would I get to join the double comma (dos comas) club, but at just 5% I’d have enough money to live comfortably on in most places in the world.

Of course, it’s not outside the realm of possibility to beat 5%. For example, over the past 10 years, VTSAX has averaged around 8%. Plugging that number in should get us some interesting results.

$60,000 / 0.08 = $750,000.00

No double comma club there, but now I’m at least financially independent. And this assumes no diversification, which would obviously bring the average interest rate down but we’re playing with numbers here. (The total bond market index fund — VBFMX — has earned around 4.5% over the past 10 years). Assuming a weighted average for those two for an 80 / 20 portfolio, it would only bring the total interest rate down to 7.3.

( 80 X 8 + 20 X 4.5 ) / ( 80 + 20 ) = 7.3

$60,000 / 0.073 = $821,917.80

Not as clean a number, but perhaps leaning towards realistic. What if I want a little more money to play with? Say $100k.

$100,000 / 0.073 = $1,369,863.01 (or roughly $1.4 million)

So How Much Should I Save?

Assuming I want to reach this number before I turn 65, and assuming I’m starting from $0 at a salary of $100,000 saving just 20%, 30% or 40%, how long would it take me to get there?

20% annual savings ($20,000) invested at an average of 7.3% APY would take 25 years to get to $1.4 million. Retirement age? 57.

30% annual savings ($30,000) invested at an average of 7.3% APY would take 20.5 years to get to $1.4 million. Retirement age? 52.

40% annual savings ($40,000) invested at an average of 7.3% APY would take 17.5 years to get to $1.4 million. Retirement age? 49.5.

While we’re at it, let’s try the same thing while aiming for the lower number of $60,000.

20% annual savings ($20,000) invested at an average of 7.3% APY would take 19 years to get to $822k. Retirement age? 51.

30% annual savings ($30,000) invested at an average of 7.3% APY would take 15 years to get to $822k. Retirement age? 47.

40% annual savings ($40,000) invested at an average of 7.3% APY would take 12.5 years to get to $822k. Retirement age? 44.5.

Sure, I could have used one of the many calculators online for this stuff. Mr. Money Mustache has an excellent one! But sometimes it’s good just to figure the math out for yourself and go through some of the scenarios.

Another thing is that all of these scenarios suppose that I’m living purely off of interest from index funds. It says nothing about dividend payouts from individual stocks or investment property income. Both are avenues I intend on pursuing just to bring that year number down to just 10 years, which is the goal I’ve given myself on my about page. Oh, and also — I’m not starting from $0. I’m starting from about $100,000. If I decide to sell my house, I’ll be in even better shape.

This year has been an excellent year for savings … so far. As you know if you’ve been reading, a rough patch is coming. But that doesn’t mean I can’t maximize before then!

I should probably sleep now.

Until tomorrow!

Disclaimer: Any errors in math are totally not my fault because it’s nearly 2AM where I live and will be corrected once someone inevitably points them out, at which point I will recoil in horror and existential dread because I will be so much further from my goal; meanwhile, I will sleep in blissful ignorance.