Bark less, Wag more, Be generous

How to Save Half a Million Dollars

How to save half a million dollars.
Whoohoo! Half a Million!

As of the time of this writing, my wife and I have saved and invested half of a million dollars in just under six years. To be clear we’re already millionaires, but in 2015 we opened a brokerage account that would be used to fund our very early retirements and started from scratch. We ignored all the other money that we had and let it grow, then started over at a metaphorical 0.

Now we’ve saved half a million dollars.

It wasn’t easy, but we’ve done it. Here’s the playbook on how we got here, and what’s next.

Step 1: Have A Purpose and a Plan

The best possible thing you can do for your life is to give it a definition and map your actions against this definition. At work, my personal plan is “Build a world-class development package that helps everyone do their best work faster.”

This allows me to add more color to the statment be judging my actions.

  • How does this meeting help build a world-class development stack?
  • Is this team enabled to do their best work?
  • What do I need to build to make Jira* world-class?

Then I get to decide if the meeting is worth my time or a request is worth building. Having a purpose for your money makes it so much easier to define how to get where you’re going. Anyone who isn’t focused on this goal isn’t worth my time or effort.

Deny the meeting invite, say “No” or “Not right now” it’s fine! My goals aren’t your goals, and that’s ok, but I won’t be distracted by the noise. I will ignore your pings and emails. It’s not personal; it’s purpose.

The same concept applies to your financial lives, without a purpose for saving we’ll just be doing it to do it. For me it’s not about the money, it’s about the freedom to do whatever I feel is right.

* I don’t work for atlassian, but I manage their tools for a large company.

Step 2: Save Like a Madman

A few years ago we went crazy with our savings. Like really crazy. Our household savings rate started to climb, from 20% to 30% then 50%, and 60%. Once we had a plan for moving forward we knew what to do. Now that we’ve been doing this for a few years we look down and we’re several hundred thousand dollars richer.

Meanwhile, we didn’t upgrade our house or cars, kept expenses low, and didn’t splurge for the best of everything. We spend sensibly on things that bring us joy and forget about everything else. We also got a few raises along the way.

Every month my wife and I pass a bi-partisan budgetary agreement. We define what we’re spending every month and how we’re spending it. This means we can track how much we’re saving and where we’re wasting money.

When it comes to saving we also made sure the money is working for us. We broke our saving down into a couple of categories.

  1. Emergency Fund (cash)
  2. Roth IRAs
  3. Brokerage accounts

We fund the accounts in that order. Only once we had a full 4-month emergency fund did we invest in a Roth, then only when we had a fully-funded Roth IRA did we invest in a brokerage account. Order matters.

Step 3: Maximize work Benefits

This is the fun part. I’ve already written about why I love my ESPP, but I also invest every bonus and raise. I get my full 401(k) match every year and even a free gym membership. Every year I review my work benefits looking for anything that’s changed, updated, or can be exploited to increase my net worth.

I’ve heard of companies that offer student loan repayment, tuition reimbursement, adoption fees, child care, some even pay for trade schools and apprenticeships.

Take advantage of everything that you can. These are things that come at a great cost to your company, but few actually use them. For example, I have a friend who got his company to pay for his MBA. Once he graduated he left the company and found another job. I’m sure he’s getting paid more and doesn’t have student debt. Win, Win!

Step 4: Work and Wait

Here’s the hard part. Waiting. We worked and saved, spending very little. It’s not hard to save half a million dollars, it just takes time.

After consistently investing and for over five years we’re finally at this bit milestone, but it’s only going to get better from here. Investing is an endless game, there is no end.

We’ll be spending the rest of our lives buying more index funds and ensure that the generation of people in our family are multi-multi-millionaires. It’s their job to screw this up, and it’s my job to prevent it.

What’s next for us: Half-a-Million Plus

Harrison Ford Shrug GIF by Star Wars
What’s next? I don’t know.

Seriously, I’ve got no idea what’s next. Kids? Maybe? I’m quickly reaching the point where money isn’t adding anything to my life. Hoarding cash like a dragon adds no value and no fulfillment. So obviously I’m going to keep saving and keep investing, but I honestly can’t think of a legitimate reason why.

This is why I’ll be quitting my job soon. There’s simply no reason for me to continue.

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