How We Stack Up to ESI Money’s Brilliant Wealth Building Tips!

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This weekend, I read again one of my favorite articles by ESI Money, who retired at 52 with a 3 million dollar net worth.

I love his personal finance blog, but I particularly love the post above because it summarizes some brilliant but very simple tips for building wealth.

I was curious to see how my husband and I would measure up to his advice.

In my case, I made my share of financial mistakes in the past.  Even though I’m in a much better position now, I do worry I’m going to repeat the same mistakes or make even worse ones.

I summarize below where I think we’ve done well, based on his advice, and where we fell short. (Spoiler alert – the screw ups were aplenty!) 

My post is just an evaluation of where we pass or fail in each area he listed, as we try to reach our own financial goals. Read his article to get all of the details.

#1 – “Get an advanced education in a valuable field”

In his post, he talks about the importance of getting an advanced degree in a valuable field.

Perhaps because I didn’t get to attend school until 16, I view the benefits of an education as priceless, more so for an advanced degree.

If you want to put a dollar value return on your higher education investment, Salary.com estimates that over 40 years, a Bachelor’s degree is worth more than 2.1 million.

According to US News, those with Master’s, Doctoral, and professional degrees earn 2.67 million, 3.25 million, and 3.65 million, respectively.

His advice:

  • Higher education will pay off over one’s lifetime with higher income earned.
  • Getting an advanced education in a “valuable” (high-ROI) field will further accelerate wealth building over one’s lifetime.

How we measure up to this advice:

  • Grade: I’ll give us an A+ in this area. Weeeeee!!
  • I got both my undergrad and master’s degree in business, enabling me to make a very decent salary that will probably only rise over the next decade.
  • My base/bonus comes to 141k, but with variable pay like RSU’s, SPIFFs and other cash incentives, my total income is usually around 175-180k.
  • My husband, alternatively, got an undergrad and masters in a low-ROI field.
  • Even still, we were able to completely overhaul his resume and market his skills to raise his income from 50k to 126.5k.
  • In some cases, not all, it’s possible to earn a healthy income, regardless of what one majors in. Getting an advanced degree in a valuable field will certainly make it easier, though.

 #2 – “Focus on Growing Your Career”

ESI Money talks about the importance of growing your career to consistently earn more.

He’s averaged over 8% salary increases every year until retiring, which increased his overall earnings by millions.

Amazing!

Read his post on the 7 steps to grow any career for some fantastic tips on how to maximize your earnings over your career.

His advice:

  • A career should be treated like a multi-million dollar asset. Those looking to build wealth should strive to increase their annual pay by at least 3% a year to keep pace with inflation, if not much more.

How we measure up to this advice:

  • Grade: I’ll give us an A- for effort.
  • We’ve done well so far, but I think we need to develop a long-term plan and strategy for how we’ll continue raising our income each year. I plan to focus on this much more in the coming months.
  • Do I think we can average 8% raises consistently until we retire? Probably not. But if we can each squeeze an additional 5% out of our employer each year, that’d be fine by me.

#3 – “Control Spending”

No matter how much we raise our incomes, if we can’t maintain or increase our savings rate, we might as well not even have bothered!

Other than giving us more discretionary income to blow, it will do zero good in helping us reach our early retirement goals.

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His advice:

  • Focus on raising your income AND controlling spending. Don’t just push for salary increases every year, and expect to build wealth, when your spending is increasing by the same amount.

How we measure up to this advice:

  • Grade: Had I evaluated us two years ago, I would have given us an F. Now, I’ll give us a B+.
  • In prior years, we did not spend a ton of energy finding ways to control our expenses.
  • This year, however, we’ve made some massive improvements in cutting costs, while maintaining a great standard of living.
  • Once our student loans are paid (mine in particular), our savings rate will increase from 21% to 65%.
  • We’re moving in the right direction, and making fantastic progress to get our spending a low as possible.

# 4 – “Eliminate Debt”

I don’t hate many things in life, but I’m willing to make an exception for my student loans.

I cackle with glee endlessly day-dreaming about handing over my last payment of blood money to Sallie Mae. That evil witch shall control my wallet no longer! Mwahahaha

Yes, I’m sort of a weirdo, but I really don’t like debt.

I don’t consider our mortgage “good debt” either, even though we’re on a 15 year payment plan, at a 2.5% interest rate.

I’m well aware that leverage can be used wisely to build wealth rapidly (i.e. point in case with real estate investments and rentals, or in our case, spreading a low interest mortgage over the maximum term and investing the extra money).

But for many people, myself included, having easy access to loans could make irresponsible borrowing that much easier.

For example, it scares me that I’m really considering taking out a separate mortgage for my sister in a few years.

On the one hand, I need to figure out a long-term housing plan for her. 

On the other hand, have I seriously learned nothing from my experiences struggling with 160k of consumer debt at one point??? Ugh. I really don’t know.  

Bottom line is that I need to seriously keep myself in check when it comes to debt.

His advice:

  • Any amount of debt could hold one back from reaching financial independence.
  • The financial (and psychological/emotional) benefits of not having any debt can’t be stressed enough.
  • In addition to raising your income and cutting costs, focus your energy on eliminating debt….and then do whatever it takes to never get back into debt again.

How we measure up to this advice:

  • Grade: F
  • If we’re looking at past mistakes, I FAIL pretty hard here. My husband, that lucky son of a gun, gets a clean pass!
  • I do think we’re on track in this area now though, as long as we don’t take out any more debt.
  • Instead of a 15 year mortgage plan, we are actually considering paying off the house in 7-10 years. Like many people, I’m torn on going with this approach since historically investing that money would generate much higher returns over time. 
  • The problem is, I just don’t trust myself around debt, and I want to get rid of it.
  • It might be the more risk-averse, mathematically inferior decision, but the faster we pay off our mortgage, the easier it will be to avoid any debt in the future.

#5 – “Invest Early and Often”

ESI Money practically waxes lyrical in talking about time being one’s greatest investing asset.

The longer your investments can grow on their own, the greater they’ll become.

Start investing at a young age, people! Of course, few people (myself included), actually do.

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His advice:

  • Start investing as early as you can;
  • Consistently increase the amount invested over time;
  • Focus on passive investments (low-cost index funds), instead of actively managed funds;
  • Stay the course – don’t panic and sell when the market drops (which it will do many times in the short term).

How we measure up to this advice:

  • Grade: I’ll give myself another FAIL for past mistakes. Go me!
  • Because I took out way too much in student loans, I haven’t been able to invest as much, or start as early as I should have.
  • Despite my past financial mistakes, however, I do still have time on my side. I’m only 31 now, and since I plan to retire at 45, I have 14 solid years ahead to let my current and future investments grow.
  • In 14 years, we’ll go from a -300k net worth to a 4 million net worth. Time in the market combined with decently high incomes, plus keeping costs low, will get us to this goal eventually (as long as the amount we can save each year stays the same, and barring a zombie apocalypse, of courseee).

#6 – “Marry Well”

SO TRUE that you can take all the right steps financially, but if you partner with someone who constantly screws up with money, you’ll probably never get ahead.

The opposite is also true – marry the right person, and you could both be rolling around in piles of money before long ;o)

His advice:

  • Find someone who shares your financial goals AND who is disciplined enough to take the steps needed to build wealth over time.

How we measure up to this advice:

  • Grade: I give us an A+ in this area. Woohoo!
  • While the jury may be out on whether I picked a lemon by marrying my husband, I know he ended up with a pretty awesome life partner <3 <3
  • Sort of kidding, we’re both pretty decent ;o) We’re not perfect, but we are on the same page financially. We’re both working towards the same financial goals, and we support and complement each other quite well, if I do say so myself!

#7 – “Have goals and a plan to reach them”:

I couldn’t agree more with his assessment on the importance of financial goals.

Having a money plan with clearly defined action steps is critical for reaching financial milestones.

His advice:

  • Set both short and long term financial goals for yourself.
  • Write your goals down, and learn how to set SMART ones.
  • Break your larger goals down into smaller ones – that way you can celebrate many small successes which all lead up to your bigger end goal.

How we stack up to this advice:

#8:  “Track Net Worth and Cash Flow”

His post also talks about the importance of tracking both net worth (assets – liabilities) and cash flow (budget).

His advice:

  • If you don’t already track your net worth and cash flow, start as soon as you can.
  • The importance of having a budget can’t be overstated. It allows you to forecast and plan expenses, while giving visibility into areas where spending needs to be managed better.

How we measure up to this advice:

  • Grade: B+
  • We’re doing fine with net worth tracking, but I think we could improve our budgeting. We go over budget sometimes, partly because of inaccurate forecasting of legitimate expenses and sometimes because we just spend too much.

#9: “Develop Side Hustles”

Read his post to get an example breakdown of how much earlier you could retire by earning extra in side hustle income.

Then cry really hard once you realize that all of the future years you’ll be spending trapped in your mind-numbing, soul crushing job could have been drastically reduced!Bah!

His advice:

  • On top of taking steps to maximize earnings from a full time job, find a profitable side hustle to accelerate your savings rate.

How we measure up to this advice:

  • Grade: B-
  • We’re doing great with looking for ways to maximize our side hustle income, but I think we could do even more. I’m GREEDY, what can I say? Or maybe I’m sick of our debt…
  • In total, we’re on track to bring a combined 55k or so in from side hustles over the next year.
  • Our side hustles:
    • We recently started renting out two of our upstairs rooms on Airbnb once a week. This nets about 10k per year.
    • We’re thinking about dog-sitting through Rover to bring in 2,800 per year extra. Not a ton, but we love those furry little monsters so it’s not really ‘work’ for us.
  • My side hustles:
    • I consult on the side, which right now will bring about 36k per year, if I keep up with it.
    • I’m considering getting a part time job on top of this, even though I work pretty crazy hours right now and volunteer on the weekends.
    • I plan to do this while I pay off my loans, or until I lose my mind – whichever comes first.
  • My husband’s side hustles:
    • My husband started bringing in some extra money through Uber driving, Uber Eats, Door Dash, and even Task Rabbit.
    • He thinks he can make an extra 8-9k per year on these alone.

 #10 – Learn about Money and Manage it Yourself

This is probably the most important piece of advice. There’s an endless supply of money managers and financial advisors that would love nothing more than to manage your money at a steep fee.

Time spent educating yourself on managing money will pay endless dividends (wow, I’m clever).

ESI Money mentions some excellent books and money blogs to help you learn the basics of managing money.

I would recommend also checking out Rockstar Finance’s Financial Book Directory. I’m a huge book nerd so I’ve read a lot of these myself, but there are still quite a few on my list to tackle. Each book has a short summary on the content, along with a rating.

His advice:

  • The best way to avoid being taken advantage of by money managers or financial advisers, is to learn to manage your own money.
  • Work on building up your personal finance knowledge, and then act on what you learned!

How we measure up to this advice:

  • Grade: B-
  • We’re doing okay, but there’s definitely room for improvement.
  • I’d love to set a goal of reading one personal finance book every week, but right now it’s a struggle to find the time with the full time work load, and side jobs. I usually average one every 2.5-3 weeks.
  • I do keep up with a lot of personal finance blogs though, because I can’t help it – I’m addicted!

So overall I think we’re on the right track.

Yes, there were screw ups, but we’ve made excellent progress over the last two years. It’ll be critical to stay focused and committed to our goals for the next 14 years.

How well do you think you’re currently doing working toward these wealth building tips? 

Are there any areas you could improve in? 

I LOVE hearing about people’s financial goals and what is being done to reach them.

8 thoughts on “How We Stack Up to ESI Money’s Brilliant Wealth Building Tips!

  1. Thanks for writing! The biggest piece of advice that helped my wife and I was educating ourselves on money. We were clueless when we got married 10 years ago. I had wealth advisors with Fidelity tell me to put most of our retirement savings in expensive actively managed funds. It cost us tens of thousands and would have cost more had we not smartened up early enough.

    1. I totally agree! I’m glad you guys kicked your ‘wealth’ advisors to the curb! My husband’s boss pays a scary amount in management fees for his team of wealth managers, and he says himself he probably should have just put the money in an index fund – the returns have been less than impressive.

  2. What a great idea! I like applying these frameworks to our situation as well to see how we are doing and where to improve. You are doing a great job 🙂

  3. Don’t beat yourself up over the debt, Ava. I graduated from college with almost 50k of debt, and my parents paid for most of my school! You did the best that you could with much fewer resources compared to most people. I think you’ll retire many years before 45.

    1. Thank you!!! My husband tells me this all the time :o)

      It’s funny, I tell people I care about not to be hard on themselves, and I genuinely mean it because it never seems warranted. But then I turn around and do the same thing to myself. Thanks for the reminder!

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