How this Frugal Lawyer Reached $1M by Age 34

Approximately six years ago I stumbled upon Million Dollar Journey and started to read faithfully. At the time, I had just started to practice law and was in reasonable financial shape but with no real sense of direction or sense of how I was doing.

I remember FrugalTrader doing a monthly net worth post and thought that was an interesting approach to seeing how much money I had. So I started to do the same thing. As I am a goal oriented person, I would also have a yearly goal of increasing my net worth by 15% per year. The simple act of focusing on the numbers allowed me to focus on being frugal, on saving my money and saving for the future.

Approximately a year ago, at age 34 I crossed the million dollar mark, and a few months ago I fully paid off my house in downtown Toronto.  FrugalTrader  asked me to provide you with my roadmap to both of these goals.

Income/ Savings

The old saying that you have to spend less than you make is true. I tried to focus on making more than I spent. Since I wanted to pay off my mortgage (originally $340,000) within the first five years, I knew I had to increase my income to make it possible.

I am lucky (but worked hard) to have a profession which pays well and, if I go above and beyond at work, it allows for a big monetary bonus. Therefore, reaching my goals may have been easier for me, simply based upon the numbers in my paycheck.  Of course, I have a lot of  opportunities to keep up with t he Jones, and mine are all lawyers!  From what I have seen, a higher paycheck usually leads to an expensive lifestyle.   The new associate at my firm drives an Audi A6, and most of the other associates travel to Europe each year for vacation.  Me?  I do not own a car and use my bicycle and public transportation to get around.  It can be difficult to say no to consumerism and focus on my financial goals, goals which no one at the firm would necessarily know about.

How did I reach my financial goals?  I basically maintained a simple lifestyle and banked my raises. My primary goal was to pay off the mortgage,  so I made a decision to put all raises and bonuses towards the mortgage.  In addition to using extra money towards the mortgage, I max out my RRSP and TFSA annually, and keep a six month emergency fund.

Economics versus Sleep

The economics of paying off my mortgage probably doesn’t make mathematical sense. I was paying 3.79% on my mortgage and there are a lot of dividend ETFs paying more then that. That said, I knew that I would sleep better once my debt was gone. This is a personal decision, and it might not be the decision everyone will want to make, and I accept that.

It also means that, right now, approximately 70% of my net worth is in my house. This will change now that I’ll funnel my money into the market and other savings, but it’s a valid criticism to some.

What’s Next

JD Roth of GetRichSlowly talks about Stage 3 of personal finance being “What’s next”. This is when your debt is under control, you’re saving money and things are moving in the right direction. After paying off my house, I am still going through this issue. My goal prior was definite and therefore it was easy to save. Now, I need to determine what my next goal is.

I have decided to set aside ‘fun’ money, that I can spend on anything I want. It sounds silly, but it’s liberating to think that I have X dollars each week that I ‘have’ to spend and so if I want new jeans, I go buy new jeans. The fun money will be less than 5% of my take home pay.

Having worries about how to spend my money, where to save it, and what to do next is exactly why I wanted to pay off my debt. I now am the true master of my paycheck and at age 35 have limitless opportunities!

About the Author: David is a young lawyer in Toronto.  When he isn’t saving or working, he spends a lot of time outdoors being active and doing charity work.

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7 years ago

I’ll echo the sentiments, great job saving more than you spend, that in itself should be the focus of the article. The end value of the short term goal ($1M, $2M etc) is secondary to the main ideas of living within your means, setting goals, and planning around taxes.

Careful of falling into typical commenter’s trap of begrudging him his earned income. Some folks worked hard before they knew they had to in order to follow paths towards careers with above average incomes. We all made choices somewhere along the way. Sure some choices are easier for others, some parents more supportive than others, but hard work is something we can all do or not do. I’d bet becoming a lawyer is no cake walk, nor are the hours required to get there and sustain the profession.

Good for you, and thanks for sharing.

7 years ago

Congrats on your high salary + bonuses.

7 years ago

I totally agree, it is an accomplishment. Many people have made millions of dollars and gone bankrupt (It’s HammerTime!)

On the other hand, it is germane to the story to include the average salary of the last 5 years I’d say.

7 years ago

It is an achievement. Whether it’s huge, miraculous, or just notable depends on your salary. Not everyone can avoid spending $1m.

7 years ago

@Miiockm, I think having a high salary is part of the achievement. Sure it’s easier to save $1M if you have a high salary, but earning a high salary isn’t easy.

7 years ago

Whether this is a huge achievement would depend on your salary.

Debt Free Mommy
7 years ago

David I really enjoyed your post, you should be very proud of yourself. Yes, it’s way easier to save money when you don’t have the expenses of a famil but it’s also incredibly seductive to start living a “big life” when you live in downtown Toronto and work with people who make a lot of money.

I have seen lots of people making a lot of money, spending a lot of money. It really don’t matter how much you earn if you spend it all.

I wish that more women were reading about finances… if you are reading this why not check out my blog: Debt Free with an RRSP – One Woman’s Quest.

I, too, was inspired by MDJs blog but I’ve always thought that there aren’t enough women investing.

7 years ago

Gotim, it may be that revealing your intentions not to stay too long could limit your pre-retirement income. It seems a lot more likely that most lawyers simply think in terms of income and can’t give up that income. That would drag others along to think in the same way. Once it becomes normal it’s hard to change that. Maybe there are a lot of lawyers who are satisfied with their work.

7 years ago

David – congratulations on your approach. Like you, I am a pracising lawyer and started reading Milliondollarjourney and Get Rich Slowly in 2007, in my second year as an associate on Bay Street. It was an incredible motivator, although unfortunately I still seem to always lag behind Frugal Trader by about two years in time and four years in age – in my case, with two young kids and a stay-at-home spouse.

Law is one of those classic “UAW” professions (see “The Millionnaire Next Door”), with emphasis on flash over substance. Unlike engineering, it also seems to be one of those professions w here nobody admits that they may want to retire early. Perhaps this is part of the image of power we always keep up, unlike engineers who are allowed to be ruthlessly pragmatic? I have always been amazed that a disproportionate number of early financial blogs are written by engineers, and none by lawyers. If, statistically speaking, we are one of the most unhappy professions, shouldn’t we be all over frugality and methodically plotting to get to FI as quickly as possible?

I am now a partner in a regional firm in smaller market. A few months ago, I managed to shock one of the articling students when I let it slip that my wife and I had an entertainment budget. He could not fathom why anyone would do that.

With a stay-at-home spouse and kids, I managed to get to about $600K net worth so far in the same time frame as you. Still not bad, but technically still in the UAW category. Kids will definitely set you back, but once you have your framework in place, you should still do quite well going forward.

7 years ago

As Ed Rempel might say, “Would you rather have $1,000,000 in stocks or $1,000,000 in a house?”

I would rather have 500k in a house, and 500k in my business, and 0 in stocks…

/damn you multiple choice, write within the box, questions