I’m Getting Rich, How About You?

by Derek

I started focusing on my financial position a little over 2 years ago, and I realized that I was in trouble. My wife and I were newlyweds and there was more money going out than what was coming in, plus we had $18,000 worth of school loans to pay back. Rather than wallow in my sorrows, I decided that we were going to increase our income, pay off our debts, and live the way we had always dreamed.

Paying Off The Debt

To increase our income, my wife was able to find work (rather than go into more debt at school), and I started learning how to make some online money in addition to my full-time job at the office. With an extra $1,500 coming in each month, we were able to pay off all of our debts in just over a year.

Buying a House

After paying off all of our debts, it was pretty easy to save up a down-payment for a house. We found a lovely foreclosure that needed some work, but at the cost of only $78,000 we figured that we could make some improvements and still come in at a cost that was less than the actual value of the property. While we are still in the “improvement stage”, we are nearing completion and our house is already worth more than $100k for sure.

Paying Down the Mortgage

It is pretty normal to pay for a house over the course of 30 years these days. Well, my wife and I are far from normal. In order to save $75,000+ on interest payments, we’ve decided to pay off our house in less than 4 years. After all, not much has changed financially in the last couple of years, so instead of making those $1,500 payments toward our debts (which are gone now), we’re putting an extra $1,200 toward our mortgage (and having $300 worth of extra fun)!

After the Mortgage is Gone

Once we get rid of that pesky mortgage, think about how quickly we could increase our savings/investments? If we consistently put $2,000 (our mortgage payment of $711 plus our extra $1,200 + a little extra) a month into some retirement funds for the next 40 years, guess how much our fund would be worth when we’re 70 years old? Drumroll…….. $11,521,743.46!!! If that’s not considered rich, I don’t know what is.

You Can Do It Too!

The crazy thing is that my wife and I are not really that special. We just started by living frugally, increasing our income, and devoting every extra penny toward our debts (and then later our house). Anybody can do this! What’s stopping you? If you need a little kick-start, email me at derek [at] lifeandmyfinances [dot] com. I would absolutely love to help you get started down your “get rich trail”!

Are you heading down the road toward a better financial future? How are you doing it?

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YFS April 25, 2012 at 6:03 am

I’m doing it a bit of a different way.

1. I purchased a home that only uses up 15% of our net income
2. Max pre-tax retirement plans
3. Max Traditional IRA’s to roll to a roth IRA
4. Purchase rental properties
5. Keep fixed expenses to minimum
6. Increase other income streams

That’s my plan..

Derek April 25, 2012 at 10:06 am

If you can max pre-tax retirement plans AND max an IRA account, PLUS purchase rental properties, you must have quite the income. I choose to invest in our 401(k) program, but since I plan to retire early, I don’t want to tie up too much money there, so I put it toward the mortgage and will soon buy some rental properties. I love your plan though. Keep it up!

Money Beagle April 25, 2012 at 7:54 am

We’re doing all the same things and it definitely helps though it can be frustratingly slow progress at times. Still, it’s posts like these that inspire to stay the course!

Derek April 25, 2012 at 10:07 am

I’m glad it could inspire you Money Beagle! It does kind of get boring after a while doesn’t it? I like to see how my net worth changes each month. That keeps me motivated. 🙂

krantcents April 25, 2012 at 8:17 am

It looks as though you made some small changes that paid off big. Getting out of debt and staying there provide choices. With mortgage rates so low, I probably would invest more in growth. It is just a choice!

Derek April 25, 2012 at 10:09 am

Those changes certainly did pay off big! I can’t wait to see what great things are in store for the future!

Newlyweds ona Budget (@NewlywedsBudget) April 25, 2012 at 11:12 am

no offense, but if everyone got access to an extra $1500 a month, I’m sure they would be able to do all of that too. I’m not saying paying off debt is supposed to be easy, but let’s be realistic–not everyone has the access to make an extra $1500 a month.
It’s like “look how easy it is to pay off debt! We only had to make an extra $1500 a month, duh!”

Derek April 26, 2012 at 3:18 am

Ha, yes, I do understand this, but we didn’t always have an extra $1,500 per month either. In fact, we used to make less than what we needed to survive, so believe me, I know what that’s like. In order to get ourselves into a position to earn more, my wife continually looked for a better paying job and so did I! In addition to this, we both started our own businesses on the side, which earns us an additional $30,000 a year or so. And since we did it, I think that anyone can do it!

Frugal Portland April 25, 2012 at 2:58 pm

I’m paying off the debt for sure, not sure if I’m 100% sold on buying a house. But I’m building wealth simply by one day no longer owing anybody anything!

Derek April 26, 2012 at 3:20 am

Buying a house certainly isn’t for everyone. It does come with additional taxes and maintenance expenses, so it can sometimes be advantageous to find a cheap rental instead! Keep paying down that debt and start investing for the future and you’ll be sitting pretty.

ShortRoadTo April 25, 2012 at 7:30 pm

The power of compounding is awesome. People lose sight of the that. I agree $1500 per month is a lot. But even $150 per month turns into over $1 million in this scenario.

Derek April 26, 2012 at 3:21 am

Very true SRT! Thanks for the comment!

The Retired Landlord April 25, 2012 at 7:57 pm

That increase in the value of your home has done a lot for your networth, I’m sure! Keep up the great work! I hope to get rich along the same ways someday.

Derek April 26, 2012 at 3:22 am

Thanks TRL! It has really boosted our net worth quite a lot! I figure that once our house is officially renovated and complete, it will be worth about $115,000, and we only paid $78,000 for it!

Jai Catalano April 26, 2012 at 7:34 am

I said to myself wtf. I haven’t gotten a blog post from Derek in a few days and here I am reading this post thinking to myself I thought Mary Kay was in her 50’s. Anyway I had a blonde moment.

Yes I am getting richer. My income has increased and my financial portfolio finally has some life. My house won’t be paid off until 2037 but I either plan to sell it or start making a profit on it again. I blame all of my success on you and Yakezie and all these damn blogs that keep making me look into myself and be responsible and financially independent.

And I love you all for doing so.

Derek April 26, 2012 at 8:37 am

Lol. I’m glad we’re having an impact on your life Jai, even if it’s a little forced. As long as you appreciate it and are happy with your future finances, then I’m happy for you!

SB @ One Cent At A Time April 27, 2012 at 5:30 am

I think I am getting poorer. 🙁

Derek April 27, 2012 at 4:32 pm

Well, if you owned a house before the downturn, that’s understandable. But at this point, you should start to see a rise in your net worth again, right?

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