One of the most important things anyone can do is figure out early on how to build savings, no matter their salary. We’ve heard this story time and time again of individuals who suddenly leave gifts worth millions to schools, all while working a job that didn’t earn nearly enough.
In the case of this Redditor posting in r/MiddleClassFinance, they have never made over $80,000 in a single year. That said, they have fantastic financial discipline and have managed to build a multi-million-dollar net worth before they are 40 years old. It’s an age-old lesson from this Redditor on how to do things right with money.
Middle Income Millionaire
With an income that has hovered between $60,000 and $80,000 over the last 18 years, this Redditor admits they earn well below the average income in their area. In fact, they realize their income has barely risen, even as others around them have seen more significant financial growth each year.
The caveat here for this Redditor is that they began investing from the moment they started working, all while living below their means. As a result, they have a $2.4 million net worth with $880,000 in ETFs, a Roth IRA worth $ 470,000, a Traditional IRA worth $540,000, $120,000 in cash, and an additional $450,000 in home equity.
What’s fantastic about this Redditor’s story and the first thing I would say to them if I had the chance is that if they don’t think they did anything special, they are wrong. This kind of financial discipline is available to everyone, but few people have the power to actually follow through and curb their impulses enough to really save.
A self-proclaimed introvert and gamer, there are only cheap hobbies, no children, and no spouse to worry about. As a result, this has even allowed them to save an incredible $35,000 on $60,000 in income in one year, with their employers’ 401(k) matching.
Best of all, this individual is completely aligned with living a BaristaFIRE-like job. They are relaxed when they go to work and don’t have a lot of the pressure that higher earners have to deal with every day in order to take home hundreds of thousands a year, all while trying to save their own millions toward retirement.
How to Achieve a Strong Retirement Number
The most important takeaway from this Redditor’s account and what I would congratulate them on most is the whole idea of living small and thinking big. As they grew up in a household where frugality was normal, they had five people in a one-bedroom apartment, so this kind of upbringing gave them the right financial discipline from the start.
The good news is that even if you don’t have a similar story, you can absolutely follow in their footsteps by thinking differently. Whether it’s living with roommates and keeping rent low or even adding roommates to a home you own to help with the mortgage, there are good strategies all over.
As for how this Redditor did what many would consider difficult, they did what everyone should do and started investing from day one. The breakdown of their portfolio was admirable, with 25% in the S&P 500 and 75% in the NASDAQ. I’m proud of this Redditor for smartly dollar cost-averaging their $35,000 investments into retirement and brokerage accounts to help protect their downside.
However, they also had some help here from employer matching with 401K funds, of which their company matches up to 10%. Even if your company doesn’t do something similar, you should absolutely take advantage of what is arguably “free” money toward retirement.
Add this to splitting savings between Traditional and Roth IRA accounts to balance, take advantage of, and the returns this Redditor was seeing were 3-4 times their total contributions.
The Lifestyle Behind the Numbers
Another big area of commendation for this Redditor is the lifestyle they continued to live with their income. As part of living below their means, they developed and already had cheap hobbies like gaming, reading, and cooking, and don’t travel all that much.
The introverted lifestyle also keeps going out to a minimum, so there isn’t a ton of money being wasted on meals and nights out. Basically, there is an effective tax rate of only 15%, so there is a lot for this Redditor to be praised for in how they created this financial discipline.
Where They Go From Here
Having already reached $1 million in a retirement account, which was a personal goal, the Redditor is onto something even better and has already more than doubled this number. This means they have stopped adding to their retirement accounts and are simply letting compounding take care of the rest.
However, there is some worthwhile advice everyone should take to heart to try to be as disciplined as this individual. First and foremost, follow their footsteps and maximize your retirement contributions, as it really is tax-advantaged and “free” money.
Beyond ETFs, which are great for broad market exposure, I think it’s okay for this Redditor and others to look at things like REITs and TIPs for portfolio balancing. Keeping track of your spending also doesn’t seem to be an issue here, but it’s easy to take your eye off the ball with just one slip-up. Stay mindful and keep track of every dollar going in and out.
The bottom line is that everyone reading this Redditor’s story should heed their advice and understand that once you reach financial independence, it’s easy to let things loosen up, but staying mindful will allow you to enjoy life without feeling deprived. Just continue to set new goals, whether it’s learning, traveling, or giving back, as money should serve your life and not the other way around.
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