Personal Investments • $100k Net Worth at 25: A Teacher's Investment Journey

Since turning 20 in 2018, I've been aggressively investing and saving my income while living at home with my parents. Joining the Bogleheads community in 2020 further fueled my portfolio's growth, ultimately helping me reach a net worth of $100,000 as a single male teacher earning less than $50,000 annually.

Life circumstances play a big role. I've been fortunate to have my parents' support, allowing me to stay at home after college graduation. The current housing market's challenges, coupled with my income as a second-year teacher, prompted me to re-evaluate my situation and find creative ways to achieve my financial goals.

I'm excited to share that I've reached a net worth of $100,000 by the age of 25. I'm also very eager to share my investment journey, both successes and mistakes, since 2018. Hopefully, this will provide valuable insights for young individuals looking to enter the world of investing. Thank you to everyone who takes the time to read this.

FINANCIAL BREAKDOWN

Income: $41,600 (Second year teaching. Will be $44,000 beginning in August)
Side Hustle: Writing Articles Roughly $3,500 a Year
Coaching Supplemental: Roughly $5,500 after taxes (Rounded)

Total Income a Year: Roughly $50k

Emergency Funds: $12,000 + (HYSAs)

Debt: None

*I paid off $21,000 in student loans in an extremely short period of time. This was due to my coaching supplemental contract and taking a small portion out of my taxable brokerage account.

Tax Filing Status: Single

State of Residence: Ohio

Age: 25

Desired Asset Allocation: 100% Stocks/ 0% Bonds

Portfolio Size: $92,000 (Rounded)

Investments

Taxable: $13k (Rounded)
Fund: Schwab S&P 500 Index Fund - SWPPX - 0.03% Expense Ratio

Roth IRA: $56,000 (Rounded)
Fund: Schwab S&P 500 Index Fund - SWPPX - 0.03% Expense Ratio

State Teachers Retirement System of Ohio (STRS): $22,000 (Rounded)
Funds:
- STRS Large-Cap Core Choice - 75% Allocation (Expense Ratio is 0.30%)
- STRS Russell Midcap Index Choice - 20% Allocation (Expense Ratio is 0.07%)
- STRS MSCI World ex USA Index Choice - 10% Allocation (Expense Ratio is 0.10%)

14% is taken out of each paycheck automatically.
Company match? Yes. 11.09%. It is VESTED.

Note: I chose the Defined Contribution Plan. In 5 years I can change it back to the original plan but I will ask that question when it comes closer to that time. I think this Defined plan is good because I don't plan on teaching until the average retirement age. I plan on retiring earlier than the normal age or even switching my career within the next 15-20 years.

DEFINED CONTRIBUTION PLAN IS DEFINED AS:
- Investments selected by you
- Great Portability
- Greatest Investment Risk

IMPORANT NOTE: I have a 457b account. It has roughly $1,200 in it and I put $50 a paycheck in it. The fund is a large cap and it has a 0.03% expense ratio. In the coming years I plan on increasing this as someone in a previous thread mentioned how the Ohio457 is fantastic, especially if I want to retire earlier or move jobs.

What has went right on my journey so far:

- Great parents and staying at home has provided me with the ability to achieve my goals and to be where I am today.

- One of my family members inspired me to begin investing by showing me their portfolio when I was 16-years-old. This was something that went right as I have always been a fan of money throughout my childhood. If I was never shown this portfolio and taught that this could one day be me if I was smart with my money and invested it, I don't know where I would be right now.

- I learned about what a Roth IRA was during my senior year in high school. My English teacher taught the class about personal finance and I was absolutely hooked. (This was before many schools took on financial classes to teach students the basics and I am grateful he taught us about it). The YouTube videos he showed in class made me head home and want to learn more, which eventually led me down a path where I watched multiple finance videos a day.

- Coaching at some of the local schools near me has provided me with an opportunity to not only gain some extra income, but also gave me some food to take home to save on food costs. A lot of the schools where I have coached provide the student-athletes with food to take home after practice. The coaches were given the same opportunity and that has saved me a TON of money over the years.

- I had to fire a family friend who worked at Ameriprise Financial and move my investments to Schwab. It was extremely scary at first that I was about to manage my own investments, but after learning through reading and watching countless videos, this was something that went right.

- Paying off student loans early! Woohoo! This is something that I was stuck on for a long time and many Bogleheads commented on older posts just telling me to pay them off and how much better I will feel. I took my coaching supplemental along with a little bit of my taxable brokerage money and paid it off this year.

What has went wrong:

- When I first asked about how to begin investing, a family member told me about an individual they knew who can get me started. The individual was affiliated with Ameriprise Financial. At the time, I just took money from my paycheck working at a restaurant and put it into a Roth IRA account. This was something that went wrong in my early years as I lost valuable growth due to poor funds and expense ratios.

- Before I met the Bogleheads and the entire concept of low fees and index fund investing, I was essentially gambling in another market that was unregulated and still is (you know which one I am talking about). I eventually got out after losing a good deal of my money and never recovered from it. This was a massive mistake and something that ultimately made me a smarter investor since I lost roughly $20,000 at the time.
$20,000 of my hard earned money that was just wiped away... it really hurts a person when you know that it is not coming back. This is around the moment where I found Bogleheads and my life changed for the better.

- Buying individual stocks early on that never panned out. This was a mistake of mine and I am glad I found out about index funds.

Goals Coming Up:
- Save up for a down payment on a future home
- Earn masters degree
- Start a family

Kudos and congratulations on your progress since 2018.

Great to hear that your coaching and writing have enhanced your base salary income. Plenty of Bogleheads that are teachers, or are retired teachers who can relate to your early years and the starting salaries of teachers. Knowing the kind of hours the coaching adds to part of your teaching year, make sure to utilize those Summer vacations (and Spring Break, and Fall Break, and Holiday Break) to decompress, re-energize, and enjoy the built in mini-retirement each and every year that the time off provides. It's actually a large benefit that goes along with the profession. Our careers included that for the majority of the past 35+ years. So we front loaded our domestic and world travels at younger ages while we were vibrant, full of endless energy, and easily able to travel and do things we wouldn't be able to do so easily when older. End result of all of that is that it kept us energized and helped us be able to avoid burnout as we launched into every Autumn feeling refreshed.

In addition to your salary growing with additional years of service, what is the pay bump in Ohio within your district if you obtained your advanced degree? If you factor that in over a couple of decades or more of teaching, the delta between the bachelors vs. masters degree salaries for teachers should make it a good ROI.

Your decision and opportunity to live with your parents has been a big financial boon that allowed you to payoff your student loans in short order, and reach that first important milestone of $100K. Well done!

In the words of the late, great Charlie Munger: “It’s a b----, but you gotta do it. I don’t care what you have to do — if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
Related source: https://www.youtube.com/watch?v=CUbprlfUnB8

Consider your bunkcoin lessons tuition paid for learning the lesson. You've moved on, and we advise you to continue to move on and distance yourself from the losses. We all have a history of having paid a tuition for a lesson or two along the way over the prior decades.

Questions:
1. How do some of you balance your ability to spend and save/invest? I know for me I am so stuck in a save/ investing mindset that it is always hard for me to buy things without always contemplating about it.

As mentioned above, I would not be buying things outside of basic needs or beloved hobbies that bring you satisfaction, but looking at experiences such as domestic and international travel while you are young, mobile, and can travel on the cheap. The fun in saving for a trip, planning for a trip, and executing the adventure was always more enticing for us than purchasing material things. However, hobbies, sports, etc. that you love do require some equipment to be purchased (bicycle, golf clubs, skis, guitar, piano, etc.) if you do them often enough that renting equates to a higher expense. The balance of researching and purchasing at a good price that fits your needs should allow you to remove any guilt from being stuck in only the save/invest mindset. Having a percentage of your budget (say 30% of a typical 50/30/20 budget goes for wants) is a way to curtail that too much is not being spent on the wants of travel and things. The caution would be that you have some upcoming goals of starting a family, saving for a downpayment of a home, and earning an advanced degree. Although one's main expense (housing) is currently low for you, when setting your budget you might want to find a balance where you are setting aside for each of those, but still allowing enough to scratch your wants itch with some of your take home pay.

2. For those who started investing young, what are some of the biggest challenges you faced and how did you overcome them?

At your age, I was attacking my double digit interest rate student loan debt with a vengeance, and didn't start investing until that was totally paid off which meant my first investment in equities didn't come along until the ages of 27-28. So you are way ahead of the game my wife and I experienced. She was just finishing up her advanced degrees at that time, and was a few years older than myself. So again, kudos to you. Go back up to the Charlie Munger quote to see and understand how well off you already are at age 25 in terms of getting things going at your young age. Even if we inflation adjust Charlie's suggestion of the first $100k, you'll get to the inflation adjusted amount in the coming years - so keep at it!

One early investing challenge we had in our initial years was similar to yours. A family member referred us to one of the former versions of Ameriprise called IDS. All load funds with high expense ratios, and a financial advisor who received an AUM from us. I was investing in taxable on my own at Vanguard, and a few other mutual fund companies by mailing a check to each of them each and every month as it was all before online investing was a thing and the home PC was barely in its infancy at the time. It took us just a few short years to realize we could do it on our own at a lower cost, so another family member convinced us to pull the plug from IDS.

I guess staying with young being up until age 40, the biggest challenge we faced, in terms of saving and investing, came when we had children and subsequently moved to Europe in a VHCOL area. Between the raised expenses of a family of 4 compared to just the 2 of us in the household, not being able to contribute to a traditional IRA or any traditional retirement account due to living and working overseas, a VHCOL city/country, the cost of private schooling, and the combination of it all led to throttling back on the percentage we were saving for ourselves as we diverted some of that into college education accounts for our children as soon as they both were assigned SS#'s. That led to all taxable account investing for a good chunk of years via various mutual funds (most had much higher ER fees that today's options), individual stocks, and the tax drag that taxable account investing created. How we eventually dealt with it was to move back to the US to a VLCOL area, boosted our dual income household income, lived more below our means than we were in the prior 20 years thanks to lowered expenses, and were able to start socking away a much higher percentage of our incomes into employer workplace retirement plans (mandatory pension, 403b, 457b, Roth IRAs), as well as taxable account investing.

It's been on automatic pilot that way for the past 21 years.

3. I put $50 a paycheck into a 457b account through Ohio457.org. After I max out my Roth IRA each year, which I have already done, should I increase the $50 a paycheck into that 457 account as it has more benefits than a taxable brokerage?

At age 25, and with goals of a family, a house and what the expenses and costs of that entails over the coming decades, I wouldn't set a timeline for retirement, or stopping your teaching career with a pre-determined age just yet. The 457b has some nice attributes if you were retiring at a younger age, but becomes moot if you work until age 59 1/2. The taxable account will be more pertinent with paying for the downpayment on the home, advanced degree, kids, etc. The $1200 extra you could send to the 457b at this time would be nice if it doesn't take away from saving for the other goals, as well as addressing some of your wants for discretionary spend.

The journey is long. Don't forget to enjoy it along the way with a percentage of your income.

CyclingDuo

Statistics: Posted by CyclingDuo — Sun May 05, 2024 8:28 am — Replies 14 — Views 1383

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