At a Glance:
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People say it’s impossible to become a millionaire in 6-7 years without a high income.
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They’re wrong I’ve done it.
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The combination of a high savings rate and high investment returns can get you there too.
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When I first started investing in real estate in my mid-20s, I made some bad investments in rental properties. I never got a mentor I learned every lesson the hard way.
By my late 30s, I couldn’t afford to keep subsidizing those early investments with my income each month. I unloaded every property I owned and it wiped out my net worth entirely.
Every good investment I’d ever made got wiped out by the bad ones. I turned 38 with nothing to show for 16 years of working adulthood.
Today my net worth is around $1 million. Which doesn’t mean as much as it did 20 years ago, but it’s not nothing either.
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What happened in the last 6-7 years?
My wife and I have never had enormous incomes. Katie’s a school counselor (teacher salary) and SparkRental has always been a labor of love rather than a cash cow.
So how did we start over with nothing to join the Two-Comma Club within a few years?
The Winning Combination
The combination is simple, but not easy: save a high percentage of your income and invest it well.
Over the last 6-7 years, my wife and I have saved 40-65% of our household income each year. That’s extraordinary – which is why we’ve built wealth extraordinarily fast.
We’ve also averaged high returns on our investments, in the 12-17% range.
Here’s how we did each part of that combination.
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Real estate investments? Awesome.
Being a landlord? Less fun.
Learn how to earn 15%+ on passive real estate investments in our free video course.
High Savings Rate
The money you don’t spend your savings is the source of your future wealth.
In fact, I talk about this all the time as the “paradox of wealth”: the less money you spend on looking and feeling wealthy, the more real wealth you build. Real wealth exists in your investments, not in your car or clothes.
For a decade, my family and I lived overseas. We didn’t pay for housing, didn’t pay normal US income taxes (due to the foreign earned income exclusion), didn’t pay for our health insurance, and didn’t even have a car. And of course we paid less for everyday expenses like groceries, restaurants and childcare due to lower cost of living.
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Now that we’ve moved back to the States, we:
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Share one car (a used Hyundai Tucson)
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Negotiated affordable rent on a modest townhouse
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Opened an HSA in tandem with a high-deductible healthcare plan
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Minimize our tax bill through a combination of tax-sheltered accounts and tax-advantaged real estate investments
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Go out for meals and coffees less than we did abroad.
Do we have the same savings rate that we had overseas? No. But it’s still much, much higher than the average American’s.
High Investment Returns
About half our net worth is in stocks, and the stock market has admittedly had a great 6-7 years. But again, the only reason that’s helped us is because we’ve saved and invested so much money.
Because we participated. Half of life is showing up!
The other half of our net worth is in passive real estate investments. Most of those haven’t even delivered their full potential returns yet, since they haven’t sold to realize the profits.
Some investments are already paying high returns however. The Co-Investing Club has invested in notes that pay 10-15% interest, for example. All of those are paying in full.
As another example, last year we invested in a land fund that pays a 16% distribution yield. Every quarter, we collect 4% of our initial investment.
In fact, we liked that land fund so much we’re bringing it back to the Co-Investing Club to invest again. Join the Co-Investing Club to hop on that group call next week as we grill the operator together.
I invest as just one more member of the Co-Investing Club, month-in and month-out. This is how I invest to build wealth, and you’re welcome to join in.
Want to compare investment property loans?
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Ordinary Actions, Ordinary Results
Most Americans spend 85-100% of the money they earn each month, then wonder why it takes them so long to build wealth.
I don’t want an ordinary life or ordinary results. I want to build wealth, and fast.
Want to come chat with us about savings and investments? Like we do every Thursday, we’ll host an Open Office Hours Zoom call today at 3:30 EST. Show up to talk about anything that’s on your mind!
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