A couple would have $1.2 million if they simply maxed out their 401K/IRA the last 10 years!

If you and your partner had maxed out your 401k and IRA accounts every year for the last 10 years, you would have over $1.2 million in your 401K/IRA accounts right now!

See the chart below. To the left shows the maximum amount you are allowed to invest into a 401k/IRA account for that year. To the right shows how much that amount would be worth on 1/1/2022.


Your account would have $607,691.

As a couple you would have $1,215,382!*

* This assumes you and your partner invest everything into a S and P 500 index fund into your 401K and IRA.

You can use portfolio visualizer to backtest this. www.portfoliovisualizer.com

If you have a company match, your total amount in your 401K/IRA would be even higher!

Imagine how much money you will have in another 10-20 years!

How I became a multimillionaire

Currently I have a net worth of over $4 million. How did I do it? I didn’t win the lottery, I didn’t sell a startup, I don’t have a trust fund, and I didn’t marry into wealth. I simply did two things.

  • I saved a high percentage of my income every year.

  • I invested that savings every year and let compound interest run like magic!

“The harsh truth is that the most important driver in the growth of your assets is how much you save, and saving requires discipline.”

Burton Malkiel from “A Random Walk Down Wall Street”

If you want to retire by 65, financials advisors recommend you save 10-15% of your income each year and invest it into a 401K.

I thought to myself, “I’m not going to wait until I’m 65! I want financial independence as soon as possible!”

If you want to reach financial independence within 10 years, you need to save about 70%-85% of your income each year and invest it. That’s exactly what I did.

From 2013- 2019, I was making about $300,000 a year on average. I only spent about $30,000 each year for my living expenses.

This allowed me to invest about $200,000 each year! (I wish I could have invested even more money but I had to pay about $70,000 in taxes each year.)

You might be thinking, “How can you live on just $30,000 a year?”

I’ll show you how I only spent $30,000 each year and still had a great life living in an expensive city like Boston. The details are right here.

How did I invest my money each year?

I’ll show you how I invested my money right here.

Investing

Some people feel the best way to invest is to buy stocks.

Some people feel the best way to invest is to buy real estate.

I didn’t know which one was better, so I bought both.

Every year I spent about $200,000 buying stocks and real estate. (This was during my peak earning years from 2013-2019)

I will go over my stock investments first, and then I’ll go over my real estate investments.

My Stock Investments, Year by Year

2012-2017

Jack Bogle, the founder of Vanguard, and Warren Buffet said the best way to invest is to simply buy a total market index fund. That’s it. They said you don’t need to buy anything else!

So I followed their advice. Every year I spent about $100,000 buying Vanguard’s Total Market Index Fund (VTSAX).

From 2012-2017 I spent a total of $655,750 buying Vanguard’s Total Market Index Fund (VTSAX).

What if you have the urge to buy individual stocks?

Most financial experts and academics said you shouldn’t buy individual stocks because it’s highly unlikely the stocks you buy will do better than Vanguard’s Total Market Index Fund.

Burton Malkiel, author of “Random Walk on Wall Street,” suggests if you really have the urge to buy individual stocks, only spend 5% of your total portfolio on individual stocks.

I followed Malkiel’s advice and only spent 5% of my portfolio buying individual stocks. I spent about 5% of my portfolio buying Berkshire Hathaway Stock (BRK-B). It’s the only stock I ever bought in my whole life.

Here is a recap.

I only bought two things from 2012-2017, Vanguard’s Total Market Index Fund (VTSAX) and Berkshire stock (BRK-B).

(2012-2017) – I spent a total of $36,520 buying Berkshire B Stock (BRK-B)

(2012-2017)– I spent a total of $655,750 buying Vanguard’s Total Market Index Fund (VTSAX).

From 2012-2017 my portfolio was 100% equities. I didn’t own bonds, individual stocks, REITS, or anything else.

2018

In 2018, I realized I was getting very close to my retirement number! I decided I needed to take less risk and diversify more.

Most financial experts recommend you don’t put all your money into just the US market. They suggest you should buy an international index fund for more diversification.

So in 2018, I started to buy Vanguard’s Total International Index Fund.

(2018)– I spent a total of $155,000 buying VTIAX (Vanguard’s Total International Index Fund).

(2018)– I spent a total of $147,500 on VTSAX (Vanguard’s Total Market Index Fund)

(2018)– My portfolio consisted of 100% equities.

I owned VTSAX, BRK-B, VTIAX and nothing else.

2019

I reached my retirement goal number!

Most financial advisors recommend that when you are in retirement, you want to own bonds to reduce volatility and risk.

So in 2019 I bought my first Bonds.

I bought BND (Vanguard’s Total Bond Market Index Fund).

I also bought VMATX (Vanguard’s MA Muni Bond). Muni Bonds are great because the dividends aren’t taxed at the federal or state level.

(2019)– I spent a total of $204,000 on Bonds.

(2019)- My portfolio only consisted of VTSAX, BRK-B, VTIAX, Bonds and nothing else.

Even though I reached my retirement goal in 2019, I didn’t rely on my assets for income. I still worked part time, and even bought more index funds in 2020.

2020

In 2020 the market crashed more than 35% due to COVID!

I was not scared of the crash. In fact I told many friends I was excited for the crash! I bought more total market index funds (VTSAX) during the crash! A crash is a great time to buy because it means stocks are on sale!

(2020)– I spent about $150,000 buying Vanguard’s Total Market Index Fund (VTSAX)

(2020)– I sold all of my Berkshire shares (BRK-B). After 8 years, my Berkshire shares were not beating the market, so I decided to sell them all. I also wanted to simplify my portfolio.

(2020)- My portfolio consisted of VTSAX, VTIAX, Bonds, and nothing else.

It’s amazing that the total market index fund (VTSAX) has doubled since 1/1/2019!

My Real Estate Investments, Year by Year

2013-2016

Every year I spent about $100,000 buying rental properties.

(2013-2016)- I bought 4 rental properties.

For each rental property, I spent about $100,000 for the down payment and any renovations. (I put down 25% as the down payment and borrowed 75% of the purchase price).

The rent from my rental properties completely covered my mortgages, real estate taxes, HOA fees, and other rental expenses.

I turned one of my rental properties into an Airbnb business. The money I received from the Airbnb was more than double of the regular market rent!

2018

(2018)- I sold one of my units.

I made more than double the return on this investment!

I invested about $115,00 into this unit and made about $189,000 in profit.

(I paid $460,000 in 2014, and sold it for $649,000 in 2018).

2021

(2021)- I sold one of my units.

I made about 4X THE RETURN ON THIS INVESTMENT!

I invested about $100,000 into this unit and made about $300,000 in profit.

(I paid $320,000 in 2013, and sold it for $640,000 in 2021)

Conclusion.

Yes I’m very lucky that the total market index fund has been compounding over 15% a year since 2013. I’m also very lucky the Boston real estate market has gone up more than 60% since 2013.

But in order to be lucky, you need to be well prepared. In order to be well prepared, you need to save money. And in order to save money, you have to live below your means. By delaying gratification, I won the ultimate gratification, retirement!

Do not save what is left after spending, but spend what is left after saving.”- Warren Buffet

Luck is what happens when preparation meets opportunity.” – Seneca

Our 2020 Expenses

In 2020, my wife and I spent less than $60,000! This is even after my wife rented an apartment in Taiwan for 6 months!

2020 Expenses- $59,604

Here is the breakdown:

Rent- $31,200
Food- $11,188
Auto- $938
Vacation- $7985 (wife stayed in Taiwan 6 months)
Shopping- $3033
Entertainment- $270
Gifts/Donations- $750
Misc- $4240

For a more detailed breakdown, look at my Mint App below.

Our 2019 Expenses

In 2019 my wife and I spent less than $60,000!

2019 Expenses- $59,487

Here is the breakdown:

Rent- $31,200
Food- $9,794
Auto- $1544
Shopping- $3236
Gifts/Donation- $2500
Vacation- $5793
Misc.- $5420

In 2019 I bought my dream TV, the Samsung Frame for $2200.

Who said I can’t live a “Rich” life?!

Below is a more detailed breakdown from my Mint App.

My $30,000 lifestyle in Boston

People often say, “How can you live in Boston and save money? It’s so expensive!” I believe you can have a great life in Boston by only spending $30,000 a year.

Even after I got married, I still only spent $30,000 a year. (We spent $60,000 as a couple)

The breakdown of our 2020 expenses as a couple is right here.

The breakdown of our 2019 expenses is right here.

Below is the breakdown of my expenses when before I got married.

Rent- $1500 a month

I used to live a nice 2 bed apartment in the Symphony area for $3000 a month with utilities.

I had a roommate, so I paid $1500 a month. Rent will be your biggest expense so it’s important to get a roommate to cut down this expense!

I lived right in the center of Boston. I could walk to the bus/train station in 2 minutes, and I could walk to work in 2 minutes.



Restaurants- $300 a month.

Boston has many great restaurants that cost $30 for a meal or less.

If I ate meals that cost $10, I could eat out 30 times a month. If I ate meals that cost $30, I could eat out 10 times a month. I tried to mix it up.

Here were some of my favorite restaurants:

  • Giacomos- Great Italian- $20-$30
  • Petit Robert- Nice French Bistro- $30
  • Symphony Sushi- $10 for their lunch specials
  • Cafe Mami, Sapporo Ramen, Dig Inn, Greco, Tasty Burger, Bon me, and Blaze- $10 or less.
  • Numerous Chinese restaurants in Chinatown- $10-$30
  • Numerous Korean restaurants in Allston- $10-$30.

Now I didn’t always eat at cheap restaurants. With a $300 budget I could splurge on $100 restaurants once in a while!



Groceries- $200 a month

The best place to get high quality but cheap groceries is Costco or Wegmans. Buy and bulk and freeze items! Since I didn’t have a car, I had Instacart deliver groceries from Wegmans.

Here is a sample of the groceries I often bought:

  • Wegman’s Chicken Thigh- $1 a pound, or $0.33 cents a serving
  • Wegman’s Ground Beef- $3.99 a pound or $1.33 a serving
  • Veggies- $2 a pound, or $0.50 a serving.
  • Rice-$30 for 15 pounds, or $0.10 a serving.
  • Oatmeal- $11.39 for 4 pounds or $0.14 a serving.

My meals usually consisted of rice, some kind of meat, and veggies.

Here is a sample of my meals:

  • Breakfast- Oatmeal and a banana- $0.50
  • Lunch- Teriyaki chicken thighs with rice and broccoli- $1.25
  • Dinner- Thai spicy ground beef or pulled pork with rice and string beans- $2.25

Eating like this only cost $4 a day, or about $120 a month!

Now you could say, how boring! What if you want to eat steak, fish, and snacks! Keep in mind I still had another $80-$120 to spend each month to buy steaks, fish, and snacks on occasion.

If you think I’m cheap, check out Savingsherpa.com (another early retirement financial blogger who lives in Boston). He only spends $80 a month on groceries!



Transportation- $100 a month.

Boston is really small so you don’t need a car. Since I lived in central Boston I could walk or take a bus/train to almost anywhere in Boston. It only cost $2 to take a bus or train. I often took Uber Pool which was really cheap.



Personal Items- $50 a month.

$50 a month covered personal items such as toiletries, soap, paper towels, etc.



Misc.- $3600-$5100

I was free to spend $3600+ a year on whatever I wanted! I spent it on vacations, entertainment, clothes, and special night outs.

The great thing about Boston is there are so many things you can do for free or that costs very little.

Some of my favorite things to do: Explore different charming neighborhoods, walk through parks, visit museums, hotels, all kinds of festivals, free concerts at music schools, bike rides and more!

You get to spend another $500-$1500 a year by simply signing up for a credit card! You can get details from thepointsguy.com

How a couple can reach $1 million in about 10 years.

If you make about $65,000 and your partner also makes about $65,000, you can reach a net worth of $1 million in just 10 years!

Before you say that’s impossible, let me break down the simple math and strategy.

Part 1- The simple math and strategy.

  1. Max out your 401k and IRA each year. Ask your partner to do the same.

    You contribute up to $19,500 to your 401k as an Employee for 2021. You are allowed to contribute up to $6000 to your IRA for 2021. This means you can contribute a total of $25,500 each year into your Retirement accounts.

  2. Which investment should you buy in your 401K/IRA?

    Simply buy an S and P 500 Index Fund. Don’t buy anything else. Buy Vanguard’s S and P 500 Fund if it’s available since they have the lowest fees.

  3. Wait 10-12 years, and you/partner will be a millionaire! It’s that simple!


How did I reach this estimate? Let’s run the numbers.

Historically the S and P 500 has returned 10% a year on average over the long run.

No one can say for certain what an S and P 500 index fund will give you in the future. Experts say it’s reasonable that an S and P 500 index fund will give you 6%-10% return a year on average over a long time period.

Let’s say your 401k/IRA only gives you a 6% yearly return over 12 years. You will reach $1 million in 12 years! (You can use an online compound calculator to calculate the return. Input $51,000 each year, and input 6% annual return.)

Let’s assume your 401K and IRA gets a 10% compounded yearly return over 10 years. You will reach reach $1 million in 10 years!

You might say, “If I invest so much money into my 401k and IRA, I won’t have any money left for living and having fun!”

Well as a couple, after paying Fed Taxes and MA Taxes, you will still have about $60,000 to spend on living expenses. (You can use Turbotax calculator to figure this out). My wife and I only spent about $60,000 a year for many years and still had a lot of fun and vacations.

Here I show how I lived a great life only spending $30,000 a year.

Here I show how we had a great life spending $60,000 in 2019!

Here I show how we had a great life spending $60,000 in 2020!