How to Burn the Wealth Candle at Both Ends

If you really want to elevate your wealth, you will have to learn to Burn the Financial candle at both ends.

After ten years of studying personal finances, going from a negative $125,000 net worth was not easy. But it wasn’t as difficult as I expected it to be. Getting started and sticking with it was the true challenge. Over this period of time, our wealth (net worth) grew by 700 percent. We are up north of $800,000 in real dollar value.

This puts us in the range to reach $1 million in 2024.

How were we able to keep up the pace? We didn’t negotiate. By opting for a strategic debt repayment strategy, diligent stable investing that doesn’t cut corners, and maximizing our cash flow, we found a method that works. We didn’t choose one way or the other, we chose what works best for us every day. That’s the difference.

Personal finance isn’t an exercise of copy and paste. You have to own your own journey from beginning to end. The leg work helps you realize that you have to want to apply yourself to knowledge building and execution.

Big Ideas from our Financial Independence Journey, Thus Far

Fair warning the journey doesn’t start with big wins. And you likely shouldn’t wish for them as well. I found that wealth has a mandatory gestation period attached. You got to learn to let it bake. If you get it too quickly and without the financial maturity to support you, you can end up spending your money just as fast.

Your Wealth Candle should burn slowly and steadily.

It’s a precision tool, not a blunt instrument nor a flash fire.

Quick wins especially in investments, either stocks or real estate, can make you cocky with your approach. This typically leads to more risk that exceeds your capacity and generates more losses. After that, most people burn more money chasing initial wins.

In my journey, I found that the path to achieving financial freedom splits into two parts. The first is more about gaining control over your mind and your money, the next part is making it grow efficiently.

2022 was a roller coaster year for everyone. Wealth was lost and most people had to reset back to 2020. It hasn’t been easy and it’s definitely going to get tougher. However, it’s a great opportunity to get back to the basics.

Your Lifestyle is Burning Your Wealth Candle

Our Acid Emergency Fund Strategy

If the loss years of 2020-2022 have taught us anything, is that we all need to sure up our savings.

Unfortunately, the average American household is tapping into their piggy bank and yanking out money left and right. First, ask yourself can you support yourself for six months? Second, ask yourself if you can really support your family without income from your primary source. If you are uncomfortable with that answer, you have work to do.

For me and my family, 2022 asked for an extra $20,000 in unexpected repairs and healthcare expenses. All this dwindled our bank savings to $5,000.

With an impending new home purchase in 2024, we have to get our Acid Savings back to where it was and then go beyond.

Rule of thumb, if you have any savings at all, start where you are.

Set a goal of at least $2,500 per adult in your household and then work on $5,000 per child. This could take time but that’s the build-up. After that, shoot for one month’s worth of expenses. Beyond that, if you leveled up, try to get six months’ worth.

My family uses the Acid Savings Plan approach. This is where we stack money in our bank savings, high-interest savings accounts, health savings account, and DRIP portfolio. It’s a tiered approach to an emergency.

Taking Advantage of the Debt Avalanche over the Debt Snowball

My wife and I worked 9–5 jobs. I wouldn’t say we make a lot of money but over time and based on the northeast region, we were able to out-earn our expenses. But that wasn’t always the case.

In the early years, we paid more bills with credit cards than we had the income to show for it. On top of that, the interest fees were killing us.

The first things we had to address were these monthly financial leaks. I still remember going through our numbers, and seeing nearly $200 going to interest alone on balances we were carrying.

While we still use credit cards today, back then we have to pull money from all sources after matching contributions to pay off these problems. Unfortunately, this led to a reduction or full stop of gift-giving for a couple of months. It made no sense to give $50 to other family members while paying $200 in debt. This improved our cash flow that $200+ per month. With less debt to pay and less interest, we were able to give $100 or even $150 monthly. You have to approach the problem from an abundance perspective.

The Debt Snowball is hot since it’s easy to understand from an emotional level, however, we chose the debt avalanche that tackles the highest-interest debt first. It saved us a lot of time and additional fees by comparison.

Net Max Investments – The 15-Yr Early Retirement Goal

From the beginning, our journey was to prove that you can grow richer in your lifetime. The needle didn’t have to move toward billions, I was happy with even six figures of wealth. To get there, we had to construct a financial plan from scratch.

At first, I thought it would take around 20 years to get to $1 million but it’s taking us 11 years. The secret was tax-advantaged accounts, sticking to an affordable home, and tempering what we will want out of life. You really can’t have it all. And you likely won’t want that either. Life is nothing without some challenges and some pushback. This makes the rewards sweeter.

Additionally, I really couldn’t achieve this wealth velocity without a dual-income approach. In this day and age, you really need more than one source of income.

Tax-Advantaged Accounts

You have to take any benefit and advantage you get, especially when it comes to taxes.

Our tax-advantaged portfolio consists of our 401ks, Traditional IRA, Roth IRA, and HSA. Maximizing them in a given year will net you tax savings on either $30,000 for singles or $60,000 for couples. That’s a lot of money over time while you are investing for the long term.

Most millionaires achieve that level through their 401ks and their homes. Why? Tax breaks, if you can’t beat them, join them in tax avoidance territory.

Dividend Brokerage Account to Add Fuel to the Wealth Candle

Beyond our tax advantage accounts, we also have our after-tax investments in M1 Finance.

For the long term, our M1 will be the wealth fuel that gets us started in early retirement and will keep burning until the end. With a goal of a $1,000,000 dividend account, we are looking to yield out about $30,000 annually just from dividends to cover our bills.

For the next 15 years, this will require that we rachet up our investment contribution to an average of $24,000 per year. With a bit of luck, we might be close. See the picture below.

Goals to Keep the Wealth Candle Burning through 2025+

• Max our 401ks, Roth IRAs, and HSA accounts,
• Achieve $75,000 in our after-tax brokerage account,
• Heavily build our emergency fund toward $25,000,
• Buy a new Home, an EV car, and some solar panels,
• Travel to an extra 7 countries (goal of 50 by 50)
• Build an office shed for remote working.

Feel free to let me know if this helped you or confused you.

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