5 years ago, I made the simple decision to prioritize wealth and my finances in life.
Now, I have a $165k net worth at age 25.
It started with a simple decision; a decision to be more than average.
Financial freedom is one of my goals – a goal where, once achieved, I can do whatever I want with my life.
I’m just starting on my journey, and still have a long ways to go.
Along the way to achieving a goal, it’s good to stop and reflect how far you’ve come.
In this post, I will be sharing with you my net worth journey, how I went from a negative net worth to a $165k net worth at age 25, and talk about where I go from here.
My hope is that this post inspires you to reach a little higher, strive to unlock your true potential, and work to crush your goals. Become an overnight success (5 years from now).
A $165k Net Worth at Age 25
I started out from zero, just like you probably did. Zero personal finance knowledge, and zero wealth.
Let’s first touch on what is net worth, and then I’ll get into my net worth journey.
What is Net Worth?
First, what is net worth?
Net worth is one of the most important personal finance numbers to calculate.
Net worth is your assets minus your liabilities.
Assets are things a person owns which have value. Typical assets are cars, stocks, houses, bonds, precious metals, currencies, businesses, cash, etc.
Next, what are liabilities? Liabilities are things a person owes, either to a bank, a financial institution, or another person or business. These liabilities include credit card balances, mortgages, auto loans, personal loans, liens, and the list here goes on and on as well.
To calculate net worth, take assets and subtract liabilities. It’s great if the result number is positive, this means you have a positive net worth. If you have more debt than assets, then it’s time to destroy that debt!
My Net Worth Over Time
Let’s go back – way back.
I started working when I was 13 years old.
My parents told me, “Erik, you are old enough now where you have to contribute to the house. Dad is busy with his work, here’s the lawnmower and gas. Once a week, do the lawn.”
Once a week that first summer, I started up the mower and cut the lawn.
Around the neighborhood, some of the older neighbors approaching retirement noticed my work and liked what they saw.
By the end of that first summer, I had secured 3 of my neighbor’s lawns. $15, $15, and $20, for about 2 and a half hours of work each week.
$50 a week at 13 is pretty solid, and as a natural saver, I gave this money to my parents to put towards college.
From May to September, I was making $50 a week and stocking this away for the future (or about $1,000 a year from this work).
Getting my First Jobs
When I was 16, I started working for a friend’s commercial and residential lawn company during the summer, and in the winter, I refereed basketball games around the city.
Each basketball game I did, I got $15. For mowing lawn, my wage was around $8 an hour.
Through the rest of high school, I worked these jobs and happily saved most of the money I earned so that going into college, I would have a sizable chunk saved up.
Heading Off to College
Before going any further, I probably should say this before I get blasted in the comment section: my parents are very smart and future-oriented individuals. When I was very young, they started putting $100 a month towards my college education and this helped me out tremendously.
I’m very blessed and thankful for the situation I was born into, and realize this is not the same situation many others are born into.
Taking the savings from my parents’ efforts, and adding in my contribution from my work, I entered college with about $20,000 saved up to pay for tuition, room, and food.
Looking at which college I wanted to go to my senior year of high school in 2009/2010, I took price into consideration.
A private college with tuition of $25,000+ a year? Out of my price range.
A state college with tuition at less than $10,000 a year? That will work!
One last thing to mention on the college front: throughout high school, I made sure to start stacking up college credits for the future.
Entering college, I came in with 23 credits, and as a math major, I was at the sophomore level after getting a 5 on the AP Calculus BC test.
I hate wasting time and money, and finished my undergraduate degree in 3 years.
The best part of this, with the initial nest egg of $20,000 and my continued efforts during the summers to work and save money, I finished my undergrad debt free!
My First Money Move
After finishing my undergraduate degree, I started working as a bookkeeper for my dad’s hotel management company, and was making $12 an hour working about 35 hours a week.
Here at 20, I started studying personal finance, self-improvement, and started to seriously prioritize wealth for the future. Financial freedom at a young age became a goal of mine – even though I had no idea what this looked like or how I would get there.
In the fall of 2013, I started a Master’s of Financial Math with the intention of finishing up in 2 years, gaining the proper programming and finance skills to get a job in the financial sector, and become more mature as a person to attract my future employer’s attention. While this program cost $30,000, I knew that with a job coming in the future, a decent paying job, and no debt on my plate currently, the cost justified the choice.
For my first year of my Master’s program. I was able to manage my cash flow and remain student debt free.
In September 2014, my second and last year of my Master’s program, I took out a student loan for $15,000.
While I was working as a bookkeeper at the time, I didn’t want to stress over having $0 in the bank and having to make tuition at some point in the year. My plan was to continue working, but use the student loan as a buffer.
I ended up getting a full time position in January 2015, my first real job, and promptly started paying down my student loan.
After studying personal finance for the past few years before, I knew becoming debt free was a freeing feeling, and wanted to experience it first hand.
A Real Job and 40 Years of Working Ahead of Me
With a $15,000 student loan, a little bit of cash in the bank, and now, a job paying me $63,000 a year, I was in a great place to start building wealth.
With the goal of financial freedom in the back of my head, I opened up Excel on my computer and started running some calculations.
“Okay, I have $15,000 in student debt, and have around $2,000 in incoming cash to play with each month. How can I start building wealth for the future? What will my net worth be in 1, 3, 5, and 10 years with 3% raises and 7% market growth?”
Modeling this out, I saw some decent progress. $1,000,000 at age 37? That’d be pretty great!
I started throwing $1,500 a month towards my student loan, set-up my 401(k) and started contributing a few hundred dollars a month there, and focused on getting back to a positive net worth in the coming months.
You know what’s funny? Life never goes the way you plan it to.
Buying a House at Age 22
June 2015, I bought a house at age 22.
After reading for the last few years about how great real estate was as a passive income generator, I made the dive.
Even though I had a negative net worth, and only about $3,000 in cash in the bank, I thought this would be a great way to increase my wealth.
With 3 of my friends joining me as tenants, July 2015 I became a landlord.
When I moved into my house, I had a net worth of zero: -$9,000 in a student loan, about $8,000 of equity in my house, and $1,000 in the bank.
The kicker was, now, I had an additional $1,650 coming in each month from my renters!
October 2015, I finished paying off my student loan, barely a year after I had taken it out.
At the end of 2015, I had a net worth of roughly $12,500:
Buying a Car, Building an Emergency Fund, and Refinancing my Mortgage
In 2016, I had a few goals. With a cash position of only $5,000, I didn’t think this was enough given my house was built in 1900, and I had read about how important an emergency fund was for building wealth.
Second, I didn’t have a car and being a 23 year old male with a real job, it was probably time to get one.
With cash savings on my mind I set a short term goal for $10,000 in savings, and a $5,000 checking account.
In February, I hit these goals with my bonus coming through, but then went car shopping and bought a 2014 VW Jetta for $13,500. (a great car by the way: 41 mpg on the highway!)
Because I didn’t want to deplete my cash position, I financed $9,000 of it and put $4,500 down.
While I don’t regret the decision to finance the car, I absolutely hate consumer debt, and in the next 5 months, I paid that debt off!
At the same time, I was saving about $2,500 a month in cash, and started to turn towards increasing my contributions to my 401(k) and newly opened HSA (health savings account).
Also during this time, I was learning a ton about personal finance and investing. I came across an article about 30 year mortgages and adjustable rate mortgages in the summer of 2016 and thought, wow, what a great idea for me to try.
August 2018, I applied to refinance to an 5/1 adjustable rate mortgage and locked in a rate of 2.625%.
I sure hit the jackpot with that one…
During the refinance process, my house was appraised at $310,000.
One last thing, at work, I switched teams in April and this came with a sizeable pay increase. My salary now was $73,000, and with this increase, I was able to save even more!
Closing out the year, through my increased cash savings, mortgage paydown, and retirement contributions, my net worth now stood at $69,000:
Starting The Mastermind Within, a Business, Investing More, and Experimenting with Debt
At the end of 2016, I started The Mastermind Within with a good friend of mine with the goal of creating an income stream outside of our houses (he was also house hacking) and our day jobs.
In early 2017, I had a goal to get rid of PMI and in the first few months, paid down over $10,000 on my mortgage.
In the early days of The Mastermind Within, I talked about how I was interested in starting a real business, and exploring entrepreneurship. In May of last year, I started a business, putting $6,000 towards it as our starting capital.
Through the first 6 months of last year, I had increased my net worth by nearly $30,000, and sat at a net worth of roughly $96,000.
In July 2017, I got a raise, and my salary now was $88,000. I still had roommates and was bringing in $1,300 a month. Adding to this, was a statistical consulting side hustle bringing in a few thousand a month.
With a lot of cash coming in (some months I had $3,000+ to allocate to investments or debt paydown), a struggling business, and a desire to experiment with alternative investments and debt instructions, in the last 6 months of 2017, it got messy.
In September, I took out a HELOC (Home Equity Line of Credit) to unlock some home equity (basically unlocking what I had paid off in the first half of the year…) and used some of the funds to help out the business and also max out my Roth IRA for 2017.
In November, I purchased 8 windows and a door, and had it installed for $12,000. These windows were financed it at 0% for 3 years, and a great value add to my house in my opinion. (with this improvement, my home value certainly increased as the previous windows were single pane and from the early 1900s!)
Finally, in the second half of 2017, I bumped up my 401(k) contributions and started contributing a lot more to a taxable account.
2017 was the first year I earned over $100,000 in a year, and because I saved nearly 50% of my income, my net worth over doubled from the start of the year. At the end of 2017, my net worth now stood at roughly $139,300:
Growth, Consistency, and Optimization
In 2017, I made a few mistakes, made some great money choices, and stayed consistent with my saving efforts.
In 2018, I want to continue to grow my wealth, but do it in a smarter way.
2017 was a lot of experimentation, and in 2018, I’ve aligned my actions with what I believe to be a solid way of building wealth.
So far in 2018, I’ve prioritized maxing out my retirement accounts for the first time, looked to continue to build up my taxable investment portfolio, and looked to stop losing money on my businesses.
In January, I maxed out my Roth IRA by drawing down on my HELOC. I’m not going to go into the calculation here, but looking at the returns on what I put my money into in the Roth, I’ve created an arbitrage opportunity for myself.
In February, my bonus of roughly $8,000 hit my bank account, and I put most of this into my taxable account.
Finally, I drew down a little more on my HELOC to eliminate my business debt. I’m now debt free there, but in the hole.
April 22nd, 2018, I sit at just over $165,000 in net worth:
How I Increased my Net Worth by $170,000 in 3 years
As you just saw in the last section, I started my net worth journey with a negative net worth.
January 2015, I had a student loan balance of $10,223 and only $1,978 in cash in the bank; my net worth was -$8,245.
Now, I’m sitting at a $165k net worth at age 25.
A lot can happen in 3 years.
Humans overestimate what they can do in a day, but underestimate what they can do in a year.
How did I increase my net worth by over $170,00 in 3 years?
Really, it boils down to 3 things: I increased my earnings, had an asymmetric financial bet pay off handsomely, stayed consistent with my relatively frugal lifestyle, and continued my education with personal finance blogging and reading.
I’ve had great success, but I’m far from done.
My Financial Goals and Dreams
Financial freedom is my goal in the near future.
I don’t have an exact number because honestly, any number I could put out there, I know that won’t be the end of my story.
I love working and making an impact on other people’s lives. If I set a financial freedom number of $5,000,000 and reached it, I don’t know what I would do.
The last thing I’d do is sit around though.
There are too many people in the world who need help for me to sit around.
One number I do have in my head is $1,000,000. I want to be a millionaire by 30.
$1 million dollars by 30? That’s going to be tough from $165,000 in the next 4+ years.
Inspiring me along the way are some amazing people I’ve met in the last few years:
- Drew, a real estate investor, house hacking expert, and blogger at Guy on FIRE, is 28 and has a net worth of over $500,000. He is crushing it with his portfolio and will be financially independent soon.
- Gwen and J, two amazing young women who have a fantastic money and financial independence podcast, both have amassed savings of multiple 6 figures in their 20s and are now set up for future financial success.
- Steve, a blogger at Think Save Retire, retired with nearly $1,000,00 in assets. He now is an early retiree traveling around the United States in an Airstream with his wife.
- Amy, owner of the site Life Zemplified and Women Who Money, just left her 9 to 5 to pursue entrepreneurship, and is a huge believer in the thought you can accomplish more than you think in a year!
- Adam, a web developer and blogger at Minafi, is crushing it in his 30s with a net worth of over $1,000,000.
- and last, but not least, Bill, from Wealth Well Done. After getting out of prison, he is crushing it with his sales business and has grown his net worth to over $250,000 in the last 5 years!
I don’t know if I’ll make it.
BUT, I’m shooting for the moon, and even if I miss, I’ll be among the stars! 🙂
Concluding Thoughts on Increasing Your Net Worth in Your Twenties
In the last 3 years, I’ve increased my net worth over $170,000.
Here’s the thing though:
I’m not any better than you.
I’m not any smarter than you.
I’m just an ordinary guy in Minnesota doing ordinary things.
5 years ago, I decided I was going to prioritize wealth and work towards becoming financially free.
I wake up in the morning, get dressed, and head to my 9 to 5.
Over these few years, I’ve tracked my income and expenses over time to identify any weak areas in my spending and correct them.
I bought a house and rented the extra rooms to my friends.
Through higher education, forward thinking, and providing tremendous value and taking on more responsibility at work, I’ve increased my income.
Is any of what I did outside of your potential?
Make the decision to be wealthy (it’s worth it).
Readers: what strategies are you using to increase your net worth? What are your short term and long term financial goals? What does your net worth composition look like?