One million dollars is an arbitrary financial goal that many people aspire to achieve. My husband and I are no exception.
Reaching that 7-digit financial milestone means different things to different people: promises of a better future, comfortable retirement, purchase of a vacation property, self-affirmation, among others.
For us, a million dollar in household net worth means that we’ll be one step closer to financial freedom.
The problem? It won’t be an easy road getting there.
According to CNNMoney’s Millionaire calculator, if we were to reach our net worth goal in 3 short years, assuming that the average return is 4% per year, we would have to grow our wealth by nearly $9,000 each month, which is the near equivalent of our monthly take-home pay.
That means we have to survive on $0 for 3 years!
Yikes! This is clearly not feasible.
Then how are we going to reach our goal on time?
The way I look at it, we have a few choices:
- Bring in more revenue
- Increase the yearly rate of return on our investments (beating the 4% that we have used in our initial calculation)
- Further cut expenses
- All of the above
Yup, it’s going to be “all of the above.”
Wanting to turn these high-level objectives into actionable steps, I decided to make a millionaire to-do list, which is exactly that – a list of to-dos in order to reach the millionaire status.
Without further ado, here’s what we pledge to do for our $1 million net worth:
- Track our net worth monthly
- Eliminate all frivolous expenses
- Keep consumer debt at $0
- Save at least 25% of our gross income
- Start a side hustle (for me)
- Max out RRSP and TFSA contributions every year
- Buy 1 or 2 income properties
- Continue to invest in undervalued stocks
- Renovate the guest bathroom or kitchen
- Invest $2,500 in cryptocurrencies
- Sell our stuff on Kijiji
Now allow me to further elaborate on each of these.
Track Our Net Worth Monthly
Tracking our net worth has been a novel experience, and I’m loving it so far.
For starters, it’s highly motivating when your numbers are going in the right directions. Seeing the steady progress over time never fails to put a smile on my face, and remind me that all the efforts and sacrifices are paying off.
Going forward, I will publish monthly net worth updates on this blog, and it would be an exciting way to keep ourselves accountable for the end results.
I’m still mentally tweaking the format of said net worth updates, trying to strike a balance between keeping numbers private and making the updates interesting, informative and helpful to others.
Nonetheless, I’m really looking forward to sharing our net worth updates with you.
Eliminate All Frivolous Expenses
I’ll be first to admit that, we haven’t always been careful with our spending.
During the first 3 years of our relationship, we thoroughly enjoyed everything the city has to offer and were not overly concerned about splurging on food, fashion, arts and entertainment.
But all that is in the past.
Since we purchased our home last year, we chose to downgrade our lifestyle, so to speak.
The lack of convenient dining options compelled us to cook more at home and forfeit ordering take-outs altogether.
Instead of watching the latest blockbusters on an IMAX screen, we go to our local discount movie theater (which we now prefer – the atmosphere is cozy and the seats are just as comfortable).
A $10 bowl of pork bone soup and a $4 bubble tea would make my week.
And I have completely slashed my shopping budget for clothes.
You know what is shocking to us?
We’re happier than before.
Because we’re saving more, and feeling more financially secure than ever.
Chasing after the hottest fashion trends and the latest tech gadgets can only do so much for your happiness. At the end of the day, financial security does wonders for your peace of mind.
And that was just my long-winded way of saying that: we’re totally committed to living way below our means for as long as it takes to reach our financial goal.
Keep Consumer Debt at $0
Besides a few recurring expenses that get automatically deducted every month, I rarely use my credit cards these days. My credit card statements are as boring as “Terms and Conditions”.
Because we’re practically allergic to shopping malls this year, our consumer debt has been kept at bay. We intend to keep it that way.
Save At Least 25% of Our Gross Income
Many financial planners suggest saving 15% to 20% of your income, but we have to push for higher.
Without some aggressive saving in the next 3 years, we can definitely kiss our net worth goal goodbye.
25% seems like a feasible saving target and we’re sticking with that.
Start a Side Hustle
The idea of starting a side hustle has been on my mind for quite a while. I was looking for something exciting that would complement my professional aspirations.
I briefly entertained the ideas of selling digital prints, building an app, and writing an eBook on growth hacking. None of them felt like the right fit.
Until I stumbled upon another personal finance blog and a light bulb went off in my head: I should write about personal finance!
Not only am I intensely passionate about writing and investing, creating more quality content on the Internet can only further my career. And if I can help others and meet like-minded folks along the way, all the better!
It’s a wonder why I haven’t thought of this earlier.
Max Out RRSP and TFSA Contributions Every Year
Regrettably, I haven’t paid much attention to the state of my RRSP account until a few months ago, not to mention that I’m late to the TFSA party (opened my account earlier this year).
Compared to most people my age, I’m likely behind the curve when it comes to RRSP and TFSA contributions, so I definitely have a lot of catching up to do next year.
Buy 1 or 2 Income Properties
I’ve always had a soft spot for real estate.
I visit open houses, look up online listings, check out model suites, and study floor plans, even when I’m not actively looking for a place.
(Holler at me if you can relate and we can nerd out on real estate together.)
Now that we have purchased our primary residence, we’d love to buy a few income properties to generate additional passive income. We know what we’re getting ourselves into, and we’re willing to shoulder the risk and put in the sweat equity.
With that said, mortgage lenders aren’t exactly head over heels over self-employed individuals. For the moment being, both my husband and I are self-employed (though that might change in the near future), which could prove to be problematic in securing a decent-sized mortgage, considering that we took one out only a year ago for our house.
But I’m not giving up yet.
We have a few ideas that we would like to try, and I’ll share those details in a separate blog post once I have a better read on the situation.
Continue to Invest In Undervalued Stocks
Warren Buffet famously made a fortune by investing in undervalued stocks.
While stock price bargains are getting harder to find, opportunities still present themselves every once in a while (ex: when Blue Apron dipped below $3.10 per share earlier this month).
As a DIY investor, I’m currently employing a buy-and-hold strategy with the majority of our equity investments (which consists of REITs, mutual funds, ETFs, and individual stocks), which means that I do a decent amount of upfront research, but I’m not too concerned with the day-to-day price fluctuations.
Among the biggest winners this year are the individual stocks in our portfolio. I attribute the bulk of the success to 2017’s bullish market. At the same time, the fact that these stocks were undervalued at the time of purchase certainly didn’t hurt.
We will definitely be keeping our eyes open for value investing opportunities.
Renovate the Guest Bathroom or Kitchen
Renovating as a way to increase property value is nothing new.
Our house is certainly not in turnkey condition right now. The kitchen sports a functional but outdated design, and all of our bathrooms probably need to be upgraded, especially the 2nd floor guest bathroom.
To say that there are rooms for improvement here would be an understatement.
Home improvement is not our forte, so we have been relying on professionals to maintain our house (ex: air duct cleaning) and do a few small upgrades within our budget (thanks to IKEA’s bathroom events).
We haven’t been ready to take on any major renovations like overhauling the kitchen or a full bathroom (and our bank accounts are not looking forward to it), but we know that doing so would be necessary at some point in the future, so I’m including this on our to-do list as well.
Invest $2,500 in Cryptocurrencies
I am dabbling in cryptocurrency these days, and I’m happy with my returns so far and will continue to invest.
We’re not oblivious to the fact that cryptocurrency is very likely in a speculative bubble that could burst at any moment, but the upside-potential ratio is just too attractive to resist.
Long story short, $2,500 is the amount that we’re comfortable “gambling” with, and we will see how things pan out.
Sell Our Stuff on Kijiji
We sold our old TV on Kijiji earlier this year, and the experience was positive enough that we would like to try again.
Off the top of my head, I can think of 2 items that we could potentially sell:
- An electric keyboard (great condition, bought during my foolish “music composing” phase)
- A four-legged dining table (good condition, previously purchased from IKEA)
Decluttering + making a little bit of money in the process = awesome!
Yearly Net Worth Goals
Not going to lie. Our $1 million net worth goal is pretty daunting to us.
So we’re taking baby steps by also setting yearly net worth goals that seem easier to accomplish.
We hope that by focusing on achieving shorter-term goals, we’d keep our motivation high and our blood pressures (relatively) low.
Here are our year-end net worth goals for the next 3 years:
2018 net worth goal: $750,000
2019 net worth goal: $870,000
2020 net worth goal: $1,000,000
The goals get progressively more challenging with each passing year, as we fully anticipate that our net worth will grow exponentially (rather than arithmetically) because of rising income and compound investment growth.
You might be asking, why do you need to reach $1 million household net worth in 3 years? Why not 5 years? Why not 10 years?
That’s a valid question.
I guess we don’t NEED to get there in 3 years – 2020 just happens to coincide with a major age milestone of ours (both my husband and I will be 35), and I figured it would be empowering to push ourselves to achieve more during our prime earning years.
With that said, given the many unknowns that are outside of our control, it is anyone’s guess whether we will be able to reach our net worth goal in time.
But we will remain hopeful, have our fingers crossed, and most importantly, tighten our belt and be smart about our money.
Stay tuned for monthly net worth updates!