FrugalTrader (FT) reaching his long-term goal of a net worth of a million dollars inspired me to tell my personal financial story. Similar to FT, I’ve set out a financial plan to reach a net worth of a million dollars by age 35. Through discipline, hard work and determination, I’m already halfway there, recently reaching a net worth of $500K at age 29.
I received a lot of positive feedback from my recent article in the Financial Post: How this man plans to be mortgage free by age 31. In less than two years I’ll own my home free and clear of any debt. Like most Canadians I have most of my net worth tied up in real estate; once my mortgage is paid off, I plan to diversify by investing in my TFSA and RRSP.
Here’s how I’ve grown my net worth to a half-million dollars and you can, too!
Live like a Student after Graduation
While it’s important to celebrate after graduation, you have to be careful when it comes to debt. It often makes sense to delay major purchases like a house or a car until you’re able to at least start paying back your student debt. Instead of renting a condo downtown for $2,000 a month, I decided to stay at home for another three years, paying my parents $600 a month in rent. I was able to save the difference and put it towards my down payment for a house.
Pay Yourself First
This will seem like a no-brainer for many, but it’s still worth mentioning. After graduating from university debt-free and landing a well-paying job, I started saving immediately towards home ownership. I contributed $250 per week to a low-fee mutual fund account. When I found my dream home, I had well over 20 per cent ($170,000) set aside for my down payment. I was able to avoid paying mortgage insurance (CMHC) and put the money towards my closing costs instead.
Until my mortgage is paid off, I’m committed to being very strict with my spending. While I’d love to travel to Europe, that can wait until my mortgage is paid off. A lot of people make the mistake of overlooking smaller expenses, such as mobile phones, daily lunches and coffee, but they can really add up.
While I do go out for coffee with friends, I don’t make it a daily habit. If I went to Starbucks daily and spent $3 on coffee, that would add up to about $90 per month. I’m not saying you can’t enjoy yourself, but if you’ve committed to growing your net worth, you have to be willing to make sacrifices and prioritize your spending. Even though I work 80 to 90 hours per week, I still find time to cook meals at home. I also save money on groceries by shopping at discount supermarkets and packing my lunch.
Buy a Home in An Up-and-Coming Neighbourhood
One of my favourite tips from David Chilton in his latest book, the Wealthy Barber Returns, is to avoid the “biggest financial mistake” by buying too big a house. Even though I was pre-approved for a mortgage on a home with a maximum purchase price of $470,000, I decided I was only comfortable spending $430,000. I ended up purchasing a beautifully-renovated three-bedroom bungalow with a basement apartment for $425,000 ($45K under my maximum purchase price). By purchasing in an up-and-coming neighbourhood I’m still able to live in a decent area and live in a beautiful house today while, at the same time, collecting rent.
Becoming a First-Time Landlord
As a single first-time home buyer in Toronto, I decided to take on the added responsibility of being a landlord. Instead of living upstairs, I decided to live in the basement and rent the upstairs to a family. I got this brilliant idea from the host of HGTV’s Income Property, Scott McGillivray, who lived in his basement for nine years while renting out the upstairs unit to save money.
While this may not be a suitable living arrangement for everyone, if you’re single and aspire to be mortgage-free sooner, it’s worth considering. Instead of only making $800 per month for renting the basement, I’m able to bring in $1,550 per month from the upstairs, enough to cover my mortgage payments.
Set Stretch Goals
Goal setting makes achieving your lifelong financial aspirations seem a lot more attainable. For a goal to be effective it has to be time bound. By breaking your goal into smaller steps, your long-term goals won’t seem as difficult.
After graduating from university, I set the stretch goal of owning a home within two years. Although it ended up taking me nearly three years, I was able to eventually find a home I’ll be able to grow into and live in for the years to come. My next stretch goal is to be mortgage-free at age 31 and I’m well on my way!
These are just some of the ways I’ve been able to achieve a high net worth in my late 20’s. Although there are many other ways to attain a high net worth, you’ll have to be determined and willing to work hard.
Do you have a high net worth and want to share your advice about how you got there?
If you are interested, here are some other stories from high net worth readers.
About the Author: Sean Cooper is a single, 20-something year old, first time home buyer located in Toronto. He has experience in the financial sector as a Pension Analyst, RESP administrator and Income Tax Preparer. He holds a Bachelor of Commerce in business management from Ryerson University. You can read some of his other articles here.