The Pinnacle Point

I am a big advocate of Dave Ramsey and his "baby steps". If you haven't read his book, "The Total Money Makeover", I highly recommend it. A Cliff's Notes version of the baby steps:



The last step "Give" is actually described as "Build Wealth" in the book. And, as part of building wealth, he encourages you to always (1) spend, (2) save, and (3) give. Since I just recently finished step 6, paying off my house, I am now ready to tackle, the last, elusive step 7: BUILD WEALTH. That's what this goal is all about.

Dave describes the pursuit of Step 7 as reaching the Pinnacle Point. It's like reaching the top of Mount Everest in a financial sense. Basically, the goal is to save so much money that your money makes, on AVERAGE, as much or more than you do at your day job. The way to calculate this is to take your yearly salary and divide it by .08. For example, if you made $80,000 a year, the Pinnacle Point would be $1,000,000. If you make $40,000 a year, the Pinnacle Point would be $500,000. The reason for this is that the stock market, since its inception, has averaged about 12% return. If you invest in good growth mutual funds, you should be able to expect to get, ON AVERAGE, something close to 12%, however, you need to also account for taxes and inflation, so using 8% (2/3 of 12% saving a 1/3 for taxes and inflation) is a good approximation.

I will highlight some milestones along the way in my pursuit of the Pinnacle Point:

- Net worth reaches a million dollars
- Net worth reaches the Pinnacle Point
- 401k reaches a million dollars
- 401k reaches the Pinnacle Point
- Personal investments reach a million dollars
- Personal investments reach the Pinnacle Point

The reason I separate 401k from personal investments is because I cannot touch my 401k without penalty until I am 59 and a half years old. I'll turn 39 this year, so I have 21 years before I can realistically spend that money. So, I'd really like to invest in a personal account just like my 401k, but money I can access without penalty whenever I want.

As a point of reference, I'm starting with a net worth of $600k, 401k @ $400k, and personal investing at $0.



I will likely not even start personal investing until next year because we have a lot of plans with our money this year like rewarding ourselves for reaching our last financial milestone, buying things we've put off like new tires and a carpet vacuum, and we want to get a fuel efficient used car, too. Fortunately, with absolutely no debt, if we can both keep our day jobs, it shouldn't take too long to do all those things with cash and start the personal investing next year.

Like my last financial, life goal, I likely won't have constant updates, but I will try to pop in from time to time to at least give progress reports and communicate any particularly good or bad financial developments.

Originally Posted by Jason

I will likely not even start personal investing until next year because we have a lot of plans with our money this year like rewarding ourselves

buy a nice frock imo

Ha. Well, we have a couple home improvement projects we'd like to do like a build a dedicated poker room in the basement plus a hot tub and a trip to New York later this year.

Save 1k pay off debts, sounds familiar.

gl with the investing, will be interesting to see how it goes.

Got my Full Tilt $ finally ...
That's about 2.5 paychecks all at once ... which is nice.
Net worth @ $619k - 401k finally up a little bit for the first time this year.

I meant to post sooner but I've been super busy. This is a close to mid-year Mint dot com screen shot of net worth:



The stock market has been pretty even keel and up just a tad. I've made some extra money playing poker. My wife and I have both been working like normal plus acting reasonably responsible with our money, too. We have actually had several expenses come up that have kept us back a bit more than we would like. For example, we are adopting a 4 year old girl whose mother (a friend of my wife) has terminal cancer. The lawyer fees and home study fees are significant although it would be a LOT more if we were adopting someone we didn't know through an agency. Also, one of our dogs has had some health issues and we paid for a couple of surgeries that weren't exactly cheap either. But, so far (knock on wood), he's doing well now, so it was DEFINITELY worth the money.

We're up about ~$40k from when we started less than 6 months ago, so I'd say that's pretty darn good. The plan is to keep doing what we've been doing and hopefully build up more cash and deter Murphy from knocking on our door as much as we can.

.....we are adopting a 4 year old girl

None of my business but I suppose the girl's mother has planned to help to some extent with funding the girl's life expenses. Then again, I'm sure the mom has many bills to pay regarding her health issues. Just curious because you didn't mention this unplanned financial burden (along with all the joyful benefits, of course).

We're going to have a $100 per month envelope system in the interim period for the child. I expect that will be $200 or so once she is completely ours. The mother has a life insurance policy and I'm not sure how much if any will go to her. Generally speaking, I don't consider children to be a huge expenditure. Sure, they need things and it can add up, but it's not like a house or car payment IMO. With no debt, it's definitely a lot easier.

I should be posting more updates, but this is such a long term goal that short term updates are easy to forget about. In personal news, the mother sadly passed on in October and we fortunately got legal guardianship of our new daughter in early December. We are in the process to get an official adoption. Finances were pretty rough during that period for legal fees and feeding an extra mouth but I think we finally got things under control more or less.

My wife works as a studio photography manager and her studio closed. It was a corporate decision and a bad one because that place was making money hand over fist. She has a new job in the company going on locations to shoot photography but we have been doing the legwork to open our own studio here in town. We were hoping to be the only game in town and make money hand over fist but some random company has already seized the opportunity of renting the location she was in. We are not deterred, though. We are going to be in a MUCH more affordable location AND we are going to do a MUCH better job in terms of service and products. My wife has managed this job in this location with two different companies for around 10 years or so. Our hope is to drive them out of business and then take their location so we have two locations. But, one step at a time: tentatively on July 1st, my wife will be on her own for the first time. This is exciting and scary. Hopefully it pays off in the long run.

My Mint.Com screenshot:


We are approaching the 700k mark which is pretty good I think considering in just about 1 year and 3 months, we've improved it up near $100k. I make less than 6 figures and my wife makes about half of what I make. The power of not having a mortgage and having investments can REALLY allow your net worth to grow. Fortunately the investment market the past couple of years has been bullish. I'm challenging my wife to make more money than me with our company.

When my wife and I did our budget this month, I proposed for us us to strip our budget down to bear bones: no eating out, no allowance money for the two of us to spend on whatever we want, no fun money for our daughter. Instead, just pretend like she's completely out of work and doesn't have any clients or business. With all of our normal bills AND business bills, can we survive? So, this month, between that, a poker check that should clear for me, and a few other random income spots, we are supposed to have, on paper, a REALLY good month. Hopefully we do, because we still need to raise a bit more money for our business which is slated to open in a couple of months.

I'll hopefully have some update on the business one way or the other. I hope it ends up being good news.

Been a hot minute since I posted but I noticed for the first time in late 2019 that I passed 1 million in net worth:

https://i.imgur.com/SCBYeSr.png

Unfortunately most of that is exclusively in my paid for house plus my 401k that I can't touch without penalty until I am 59 and a half. I'm currently 46.

So, the next goal is to try to raise enough money to generate some passive income like a paid for rental. It would be nice to have another million in investments or cash that I could easily access if needed.

FWIW my net worth last I checked was around 1.4 million. It has been 1.5 and got really close to 1.6 but the markets have been a bit down lately.