Lazy Man and Money

The Basic Guide to Becoming a Millionaire

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Sometimes I get envious of new bloggers. They start with a clean slate and can write about anything. After blogging for many years, developing a new way to give the same timeless money advice is hard. However, it’s always good to have a refresher. If you are beginning your money journey, this article will be an excellent place to start. If you are well on your way on your money journey and want to take it to the next level, I’ll also include some advanced tips. Beginners, feel free to skip over these sections.

Let’s get started:

Step 1: Be Frugal and Focused

It’s important to know the value of a dollar. Luckily, I grew up in a household where the culture was saving money and not being wasteful. Being frugal came naturally to me. Try to develop a frugal state of mind. Then you’ll instinctively realize that brewed coffee at home and bringing lunch to work can save you $15-20 a day over Starbucks in the morning and Chipotle for lunch. Being frugal can save you more than $500 a month. Those savings will be extremely helpful when we get to the next step.

Additionally, focus on saving money on “The Big Three”: Housing, Transportation, and Food.

  • Housing
    Housing is always expensive, but it’s never been this expensive in my lifetime. It’s not just the price of homes, but mortgages are high, creating a very high total monthly payment.

    There are a variety of ways to save money on housing. Some people get a roommate or two. Another option is to get a spouse – but don’t rush into that one to save money on housing, right?

    Some people buy a tiny house. Some rent a cheaper place. There are entire books about hacking your housing expense to keep it as low as possible.

  • Transportation

    If you live in a big city, you can bike or walk places. That will save you some money on the subway. For the rest of us, buy the cheapest reliable transportation you can. The goal is to get from point A to point B.

  • Food

    Cook at home. Eat out at restaurants as little as possible. Use these tips to eat healthy food without spending a lot of money.

Advanced Tip

If you are buying a house, you want to avoid buying high. How do you know if the market is high or low? There’s an easy metric to understand when to buy and sell real estate.

In 2005, I bought a condo at the wrong time. The metric showed that housing prices were high. My wife and I bought property again in 2011 and 2012. We live in the home we purchased in 2011, and the property we bought in 2012 is worth more than three times today than what we paid for it.

Step 2: Grow Income

You can grow your income by getting more education to advance your career, starting a side hustle, and/or starting a business. We combined growing income with investing by buying a rental property and being a landlord. That’s investing, starting a side hustle, and business – all at once! Thanks to Joe from Retire by 40 for the suggestion.

Overall, the most important thing is that you provide value. If you can identify a need or solve someone’s problem, you can usually demand more money.

Growing income is almost always unique to each individual’s strengths and weaknesses. I don’t know you, so it’s impossible for me to give you actionable advice on what might work best for you. You may find some trusted friends who can help you determine which way to go with this one.

I climbed the corporate ladder for a bit but got burned out and interested in other things. I pivoted to blogging and, most recently, to dog boarding. I also do some freelance customer service as a side hustle. This blog provides a tiny bit of income as well.

Advanced Tip

[This space is intentionally left (not so) blank. If you have some ideas for what should go here, please leave a comment.]

Step 3: Invest

There are a lot of brokerages, and many bloggers make money recommending a specific one. The costs for all the major ones should be low, so the big differentiator is customer service. Unfortunately, you don’t know how good the customer service will be until you cross that bridge. Everyone has their own experience.

If I were starting, I would go to Vanguard.com and create an account. Then I’d set up an automatic investment that transfers money and buys VASGX. VASGX is a balanced mutual fund. It invests 80% of your money in stocks – some in the United States and some outside. The other 20% of your money is invested in bonds.

Sit back and relax for the next forty years. (Okay, maybe look at it every six months or a year to make sure that money is still going in and being invested.)

Advanced Tip

Investing is one topic that can get exponentially complex very quickly. If we stick to the stock market, there’s a metric that can help you know if the market is high or low. It’s not perfect, but it’s better than nothing. I use it to help me plan my asset allocation. I buy bonds when the metric says that the stock market is high. When the metric says the stock market is low, I buy stocks.

Step 4: Protect Your Money

Two main ways to protect your money are Buy Insurance and Avoid Scams.

I know some very smart people close to me who don’t have insurance on some precious stuff. I shudder when I think about it. Buying insurance is some of the best money I’ve ever spent. As we learned in 2020, you never know what disaster lurks around the corner. It doesn’t just have to be a health problem, but it could be a fire or any other random circumstance.

It’s hard to tell you how to avoid getting scammed. You have to develop critical thinking skills. As they say, if something is too good to be true, it probably is.

Advanced Tip

There are a lot of scams out there, and I can’t address them all. My best advice is to avoid MLM scams. They pretend to be “business opportunities,” but 99.9% of people lose money.

There are three more things about MLM you should know:

Final Thoughts

I probably missed a few more steps that would get you to a million dollars faster. Let me know by leaving a comment.

Stress Test Your Money

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Stress Test Your Money

Every article I have written recently starts with one or more reasons why I haven’t been blogging much. We had a planned long vacation of two weeks. There are always a few days before the break for packing and putting our ducks in a row. Then there’s the catch-up time when we get back. It seems to be a good 24 days overall in total.

That’s if everything goes according to plan. Our tenants have had a lot of problems. It wasn’t an easy fix like a new appliance. It was pulling out internal piping and a fight with the condo board, another unit that was impacted, and a few other things. Then this whole thing needed to be repeated again with this same unit (piping affecting yet another unit). It got really complex with eight different parties involved.

During all this, we also had this happen:


He had some health problems when we left, but he still had a quality of life. He got a stroke while we were away, and it was time for him to cross the rainbow bridge.

The kids and I got back a few days before my birthday. My wife had some work on the west coast and came later. The government switched her flight back, and instead of coming in at 11 AM for my birthday, she returned at 7 PM. How do you honestly answer people when they ask, “How was your birthday?” and it wasn’t good?

I’ve started to feel better, though. The last few nights, I’ve watched the new HBO documentary George Carlin’s American Dream. It was hard to come away from that without thinking that he was the greatest comedian of all time. He had jokes in the 1980s and 1990s that are still relevant today. However, I have always loved George Carlin. I had been quoting him on this blog since 2007. When he died, I wrote a small tribute – one of the few times that I decided that I wasn’t going to write about money.

Some of you are thinking, “Cool life update, bro. *Click away*” That would be a mistake.

During all this, we never thought about money.

Vet hospital, how many thousands do you need? Plumbers and contractors, how many thousands for you? Disneyland, Universal Studios, Legoland, San Diego Zoo, how many thousands were you?

It all added up to a big number – more than five figures. We’ll have a couple of months of expenses like that because some went on credit cards and those bills come later.

I would have been crazy about such expenses seven or ten years ago. They would have been a disaster. However, my mental state was the exact opposite.

There are three big reasons why:

  1. Our net worth is much higher

    It’s about 3.5x higher. Our house is almost paid off. (We could pay it off if we wanted to, but with such a low mortgage rate, there is no reason to.)

  2. We have much better cash flow

    My dog boarding business is doing better than blogging was back then. The combination of the two and some other freelance work gives us an extra $50,000 to work with. My wife’s income has also increased substantially. The military does a good job at keeping up with inflation and going from “Year 16” pay to “Year 24” pay is a big move in the military charts.

  3. We have much better liquidity

    When my dog business started to take off, I contributed more to our joint account. My wife started stashing cash aside for pre-retirement. That nest egg also serves as a short-term emergency fund for when stuff like this comes up.

    We also sold a rental property. We have invested most of the profits but kept $20,000 in cash. The plumber’s expenses come from this account, so we won’t notice it. For a couple of months, we’ll let the rents build this back up to $20,000.

Instead of being worried about this financial calamity, I looked at it as a successful stress test. We got punched in the face (financially), and we were able to laugh and say, “That’s all you got?” That gives me confidence that we’ll be able to handle much of whatever comes at us.

Of course, stress testing our money wasn’t plan A. In this case, we’ll take wins wherever we can get them.

Teen Titans Go! Taught My Kids Personal Finance Before Me

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The follow article is brought to you by Kid Wealth. An updated version of this article is Teen Titans Go! Money Lessons.

Sometimes I find personal finance lessons in unexpected places. Sometimes it’s in a a Jack Johnson song. Other times it’s in a kids’ cartoon. They can even pop-up in old re-runs of Fantasy Island that I started watching.

Note: This article may sound like an advertisement, but it isn’t (though Warner Brothers should reach out me). I’m simply a fan of the Cartoon Network show Teen Titans Go!

It started as simple self-preservation. On one hand, I could watch the “Fat Controller” berate Thomas the Tank Engine and his friends for not doing their job, while ignoring the employees who are on the train. On the other, I could look for another show.

While we’ve tried a variety of other shows, the one we keep coming back to is Teen Titans Go!

For those who don’t know the Teen Titans Go! characters, it’s basically five teenage superheroes being teenagers. Instead of saving the day, they are usually doing something silly like finding out what the Tooth Fairy is really doing with all the teeth he (yes, “he” in the show) is doing with all our teeth.

Before we get to the personal finance lessons from the show, I have to mention the Teen Titans Go! to the Movies that’s in theaters. It’s very watchable for people who know nothing of the show and gets a 90% on Rotten Tomatoes, which is very, very good. It’s been compared to Deadpool for kids. That’s probably a good comparison, but it’s hard to imagine Deadpool cleaned up for kids. If you haven’t seen Teen Titans Go, that description isn’t very helpful.

This article has been updated for 2020. I’ve rewatched a few episodes and had more detail to add. Also, we are currently dealing with COVID-19 and making homeschooling fun is at a premium.

Rather than write about the individual characters (as I could do for days), I’ll jump into:

Top Personal Finance Lessons from the Teen Titans

Money is Whatever Currency We Choose

In the episode Two Bumble Bees and a Wasp, Robin (of Batman fame) tries to teach the rest of the gang about money:

“Money is not to be wasted on things that bring you happiness and joy! Money is to be hoarded, until your have enough money that your money makes more money.”

I’m not sure too many children are going to pick up on that last point, but it certainly caught my attention.

Turning to a cartoon representation of money we get this lesson:

“I am paper, but I am also money. All I am is an agreed upon representative of credit. Something you trade for goods and services! So I can be anything.

They go on to ask whether money can be a pineapple. (Actually pineapples have been used as money in history.)

After Beast Boy insists that money is evil and rips up a dollar bill, Robin decides not to pay anyone until they respect money.

Flash forward to later and Beast Boy has a pizza. Robin would like a slice and offers to buy one with a dollar. He soon learns that the rest of the team has agreed that the new currency is bumble bees.

Yes, bumble bees. I told you it was a silly show.

It ends with this hilarious song and dance:

If you are interested, there’s a complete script of Two Bumble Bees and a Wasp here

Focus on Health and Wealth

In the episode, Think About Your Future, Robin announces that he’s buying the Teen Titans all jackets. Raven has an epatheny:

Raven: Aren’t you guys worried about wasting money?… So we have some later?
Starfire: But the later is not until the later. Currently it is the now.
Raven: I know, but aren’t we going to get old one day?
Beast Boy: Yeah, but later .
Cyborg: And it’s the “now” right now.
Raven: Oh, okay, that makes sense.

So they buy the jackets. And then they celebrate with pizza, but not just any pizza it’s “extra-large, extra-extra cheese extra-extra-extra pepperoni, plus “large jugs of the soda” and “a gallon of ranch dip.”

Raven once again warns that perhaps they should eat healthier to avoid health problems later. Again, the rest of the gang doesn’t care about “later.”

The scene ends and we jump ahead to 70 years later.

The gang is old with many health problems. They can’t afford their medications because they don’t have any money.

They suddenly realize that Raven was right. So they do what anyone would do. They build a time machine and send their old selves back to talk to their teen selves into making more sensible choices.

That brings us to this clip about learning how to eat healthy, starting a 401k plan, and an explanation of compound interest.

Everything goes perfectly. In fact it goes a little too perfectly. The rest of the episode isn’t educational, but it is entertaining.
Again, if you are interested in the script, you can find it here

Building Wealth with Rental Properties

No cartoon is dumb enough to create an episode around a boring topic as building equity from rental properties. No cartoon except for Teen Titans Go!

With episode after episode about silliness, the writers created, “Finally a Lesson.”

The best part of the episode is Robin explaining rental property and how to build equity:

If you can’t watch it, here’s Robin’s explanation:

“Equity is the amount of a property you truly own. It’s the difference between your loan balance and your property’s market value. If you sold your property and paid off the bank, the value of your equity is what you’d walk away with. When you build equity, you increase the net value of your asset. One way to do this is by paying off your mortgage.”

The episode takes them through all the steps. First they find the right property – a run down apartment building. Then they get to the financing, which involves getting 20% down, the way that “everyone else does” ask someone else for that 20%.

Then we get to the other fun parts of securing a rental property… the loan process. There’s an explanation of credit scores, securing the right lender, filling out the paperwork, and getting a good faith estimate.

The gang is starting to get very bored, but Robin assures them they’ll be very satisfied in the end. For now, they have to turn their attention fixing all the problems with the building.

There’s a fun twist, but finally, Robin gets us to the satisfying end, “It takes decades to actually build equity, but in 30 years, it will provide a modest cash flow to pay for our numerous old people medications.”

For a cartoon geared at kids, it’s as good of an overview that you’ll get. When my kids are older and ask why we have rental properties, I’ll just cue up the episode on the DVR and ask if they have any specific questions.

You guessed it, the script is available here.

Avoiding College Debt 1

In the episode “Who’s Laughing Now” Beast Boy gets underarm hair, signaling that he is becoming a man. That means finding his spirit animal, which is “like college for dudes who turn into animals.”

With that, we are off on a Teen Titans Go take questioning the value of college.

Raven: Uh, isn’t higher education usually really expensive?
Robin: Yes, but if he chooses the right spirit animal it will open a lot of doors for him.
Beast Boy: That’s right, Robin, my man. And then me and my hairy pits will be on easy street.
Cyborg: Whoa, whoa, whoa. While spirit animals are great, they aren’t necessarily for everyone. I’d hate to see you settle with so much debt and in this economy, whoo! Personally, I think spirit animals have just become big business. Focus more on sports and partying, than education. Now with the money you’d spent on spirit animal have you instead considered in investing in, say, a rental property? Or what about looking into a training school?

Beast Boy: Whoa, check out those bears. Nice. That’s what I want my spirit animal to be!
Cyborg: But the cost of being a bear is astronomical. Maybe you should find a two-year community spirit animal, like that old donkey. Then transfer to the bears. In the end you get the same spirit animal.

Beast Boy gets accepted by the bears and talks to his friends.

Robin: But how are you going to pay for this? I got some government loan of salmon and honey.
Raven: Whoa, that’s a lot of salmon and honey. It will take forever to pay that back.
Beast Boy: Once I’m a bear, I’ll be rich.
Cyborg: While data shows having a good spirit animal leads to a better paying job, there’s no guarantee those spirit animals are going to give you the experience you need to make it in the real world.

When things don’t go with the bears, Beast Boy realizes that he made a mistake.

Beast Boy: I think you’re right, Cyborg. I should have bought a rental property.
Cyborg: Booyah. Told ya.
Raven: Well, consider it a lesson learned.

The last line is a reference to the rental property episode, “Finally a Lesson” that aired 17 episodes before.

Beast Boy: But now I’m in salmon and honey debt and the government is going to kill me!
Cyborg: No way. We’re going to get that salmon and honey back from those garbage spirit animals.

The plan is to play the bears double-or-nothing style in a game of football. In the final seconds Beast Boy figures out the only way to kick the gaming winning field goal.

Cyborg: Have you considered a two-year spirit animal? It’s a lot cheaper and without the distractions of sports and partying, you can focus on learning.
Beast Boy: I knows what you’re saying, bro. My spirit animal is going to be a two-year community donkey!

Since Beast Boy can turn into any animal, he becomes a donkey and kicks the field goal to win the game, and clear his debt.

Cyborg gives a last shaming to the bears:

That’s what you get for convincing people to spent thousands of dollars just to learn things they could figure out for free. Leave them with an amount of debt and a useless piece of paper that reads, “Diploma.” They’re pedaling a dream that doesn’t exist anymore.

The script for this one can be found here

Avoiding College Debt 2

In the episode Teen Titans Vroom, we get another lesson about college debt and career choice. This time it comes from villain Dr. Military. Dr. Military isn’t really a bad guy though, he’s a victim of the student loan system. Let’s start with this witty banter about his career choice:

Dr. Military: Actually, I’m a… veterinarian.

Titan: Everyone knows that’s not a real doctor.

Dr. Military: That may be the perception, but it took me ten years to earn my veterinarian degree. And statistically, it’s more difficult to get into veterinarian school than med school, which means I had to work twice as hard for half the respect and money of a so-called “real doctor.”

Titan: Sounds like you should’ve been a people doctor, bro.

Dr. Military: Enough. If I wanted to listen to someone criticize my career choice, I would have called my parents.

Now let’s get to the root of Dr. Military’s evil doings:

Titan: Please, give up the evil scheme, Dr. Military. You do not have to do this.

Dr. Military: Actually, I do. I need the ransom money to pay off my massive school loan. The high cost of veterinary school combined with my low salary as an animal doctor has put me in quite the financial bind. My evil plan is the only way out of this crushing debt.

My 7 and 8-year-old boys don’t know much about college yet, but this will be something we can revisit as they get older.

Pyramid Schemes Will Make You Broke

I almost didn’t include this episode, but my wife mentioned that I should. I’ve written extensively about MLM Pyramid schemes, so I didn’t feel this addressed the topic very well. On the other hand, many adults can’t understand pyramid schemes, so I can’t expect the Teen Titans to teach kids this complex topic. As usual, my wife is correct and it’s just my own extensive writing that artificially raised expectations.

There’s actually a very good description of a pyramid scheme in this 2 minute clip:

The key money quotes almost always come from Robin and this is no different:

Robin: This is a pyramid scheme!… Not that kind of pyramid! A pyramid scheme is an unsustainable business model, that promises payments to participants, based on the amount of additional people they enroll in the business, instead of focusing on the sale of goods or services to the public… As you can see here, the exponential growth of the “business”, will eventually cause the entire operation to collapse, leaving the participants at the bottom of the pyramid bankrupt, while those at the top walk away rich…

Starfire: I do have the question. Did the mummies build the pyramids?

Robin: There are no mummies! It’s not a literal pyramid!

Almost everyone in MLM doesn’t understand this concept and still go meetings to learn how to show the plan or enroll people in the business. In fact, the people who make the most money in every MLM are the people who have the largest downlines of enrolled people, not sales of goods or services to the public.

Beast Boy joins and makes Pyramid Scheme money which leads to this awesome song:

Of course, the rest of the gang (sans Robin) want all the money, so Beast Boy enrolls them as “money deputies” with himself as a “money sheriff.” Robin warns them, “You are participating in a fraudulent business” and “This pyramid scheme is going to leave you broke, Titans.”

Everything spins out of control and gets mixed in with mummies wanting their money back and the Teen Titans not being able to deliver. They get out of it with some silly stuff that doesn’t make sense, but by this point, they’ve addressed the topic fairly well.

Once again, you can find a transcript of the episode here

Final Thoughts

I really don’t know how much financial information my kids are absorbing from this, but I know that they remember nearly everything they see.

I’ve watched my share of cartoons and I can’t think of any other general cartoon that covers half of the financial topics in Teen Titans Go! There are still a lot of episodes that I haven’t seen, so I might have missed a few money lessons.

Where are the surprising places you’ve found money lessons? Let me know in the comments.

(Originally Published around August 6, 2018)

Do It Now: Check Your Emergency Fund

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Recently, I’ve been thinking about how I written a lot about personal finance over the years. I just came back from a financial conference with thousands of people who produce tons of personal finance content (including video and podcasts) every day.

That’s a lot of talk… and as Aerosmith’s Steven Tyler says:

Talk is cheap, shut up and dance

So today, I’m going to channel my inner Suze Orman. I’m going to assign you homework. And you better do it!

Check your emergency fund. That’s it. If you don’t have one, today’s assignment is easy: START ONE

Don’t be worried if you don’t have one. Don’t even be worried if it isn’t much. I’ll let you on a tiny secret:

I am embarrassed by how small our emergency fund

I’ll get to those details on that in a bit… we have an unusual, complex situation.

First, I want to help you figure out your situation. Then, if you are still interested, you can get your voyeurism on and read about mine. But only if you finish your homework. If you don’t eat your meat, you can’t have any pudding. Sound good? Let’s go!

How to Calculate Your Emergency Fund

To put it simply, an emergency fund is how much money you have in cash divided by your monthly expenses. If you have $9,000 in cash and spend $3,000 a month, you have an emergency fund of 3 months (9000/3000 = 3).

It’s usually easy to figure out how much cash you have. You look at your bank account(s). It’s tougher to figure out how much you spend. Did you eat at too many restaurants too much this month? Did you have a minor car repair? Did you find a big sale on chicken?

Those links above were a test to see if you are getting distracted from the task. I hope you didn’t click on any of them. You can always read them when you’ve finished.

To make calculating expenses easy, I’m inventing my own rule of thumb. What did you expect from Lazy Man, right? On average housing and transportation are half of people’s expenses. You may not be average, but you’d probably know if you aren’t. Thus you can roughly add up your monthly house payment and car payment and double it. So if your rent/mortgage is $1500 a month and your car is $300 a month it would $1800 a month or doubled to $3600. (Doubling accounts for things like food, gas, utilities, coffee, food for your monkey butler… whatever it is.

While rules of thumb may not be accurate, this whole exercise is about creating an estimation. I’ve found that this is the best way to get it done quickly and easily. For me, it works better than getting bogged down in the details until…

Hopefully this rule of thumb can get you to an estimation in 5 minutes or less.

How Much Emergency Fund is Enough?

This is a question that is debated constantly. Most people say 3-6 months of your typical expenses. Some like more security and that’s okay too. Let’s aim for the 3-6 months, because many people don’t have that.

Also, you can always worry about “more security” after you have “security.”

Did your calculation give you more than 3 months? I hope so. If not, you may want to consider it as your next money goal.

Our Emergency Fund Situation

I can’t assign you homework that I wouldn’t do myself. So here’s a little analysis of our emergency fund. I’m not giving you all the numbers, but you might be able to estimate them from the context.

Our emergency is about 6-7 months, so it isn’t as small as I thought above. It is above average, but it feels small. That’s probably because it comes with a lot of “but”s. (I warned you it was complicated.)

Our expenses are very large between three rental properties (all at 15-year fixed mortgages), our own primary residence (same 15-year fixed mortgage), kids’ private school, and other stuff like food, transportation, utilities, etc. We are fortunate that those last three are limited. Our cars are paid off. I’m good at putting together cheap dinners (now is a good time to click on that chicken link above). Our paid-off solar panels eliminate our electric bills.

However, if we lost a tenant (or two), our emergency fund would drop quickly. In the above, I assume our renters all pay their rent. That’s a bad assumption for an emergency.

Also, our cash is split in a lot of different accounts. It feels less because I have to keep some money in certain accounts to keep them from getting overdrawn. There’s not just our personal accounts, but our joint account, the business account for this website, the business account from the rental properties. More than a month needs to sit there to avoid fees. I put that money in and try not to even think about it. In a true emergency, we can get at it, but it doesn’t feel the same as if we a big account with $40,000 in it.

Additionally, and fortunately, we have quite a few different income streams. The diversity of income is, in a way, its own emergency fund. If I’m fired from one job, I have 3 others. That’s why our emergency is complicated.

Extra Credit

If you’ve finished all that, I have some extra credit for you. Simply leave a comment below with at least 50 words about your emergency fund and/or thoughts on emergency funds in general.

I’ll put what I consider to be the best 5 comments in a virtual hat and pick a winner at random. What do the winner get? A $20 Amazon gift card.

What’s Your Net Worth Growth to Income Ratio?

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If you’ve followed FIRE bloggers long enough (about 10 minutes will do), you’ll probably hear them talk about their savings rate. Many are saving 50% or more of their income.

In 13 years of being a FIRE blogger, I’ve never calculated my savings rate. For many people calculating a savings rate is may be easy. With our finances, calculating a savings rate presented a number of problems.

Before I get to those problems, let’s approach how an average person could calculate their savings rate. Let’s say you earn $50,000 a year. You try your best to max out your Roth IRA and 401K, but you also have a powerful need to eat food and have shelter. You’re able to save $10,000. That gives you a 20% savings rate ($50,000 / 10,000). You might want to calculate your income after taxes by looking at a recent pay stub and doing some multiplying. There are no savings rate calculation police checking your work.

It’s a little more complicated for us. Here are the main two complications:

  • I have a lot of irregular income

    I don’t know if who much my dog sitting or blogging is going to make on any given month, much less for a full year. I don’t know what freelance income I might make.

  • Our real estate properties are problematic

    We have three rental properties and a primary residence with 15 year mortgages. Some people may choose 30-year mortgages with lower payments and invest those savings. I could probably figure out what the savings would be with the rental properties by calculating the amount of the principle debt being paid off. I don’t know how to apply to our primary residence. I know I said there are no savings rate calculation police above, but I don’t know what would be close to accurate.

If forced to guess, I’d say that we have about a 50% savings rate. That would be based on the mortgage debt being paid off on the real estate properties and the retirement account savings. That’s the most we can afford with another $30,000 a year in education costs for my wife and kids.

Since I am envious of everyone else’s ability to calculate their savings rate, I decided to come up with my own metric.

Introducing Net Worth Growth to Income Ratio

I track our net worth with personalCapital and an office spreadsheet. I’ve been doing it for years. For this reason, it’s very easy for me to look up how much our net worth grew in any given year. As I explained above, I don’t know how much money we’re going to make this year, but thanks to our tax filings, it’s easy enough for me to look up last year’s numbers. If necessity is the mother of invention, laziness is the father of invention.

Plugging those two numbers into my calculator shows me that in 2018 we had a net worth growth to income ratio of 65.86%.* For example, if we made $100,000 last year, we’d have $65,860 of net worth growth with that ratio.

Where did I come up with this? Well one easily argue that growing your net worth is the most important thing in personal finance. Translating as much of your income into that net worth growth is important.

I was a little hesitant to move forward with this idea, but I reached out to Twitter and got some good encouragement. Here’s a sampling of the responses:

“Winning ratio?” I like that.

“Pretty elegant” I love that.

“More meaningful” than a metric in The Millionaire Nextdoor? That’s amazing praise.

Is the Net Worth Growth to Income Ratio Valid?

In some ways, it’s easy to criticize net worth growth. If the stock market does well (as it has) or the real estate market does well (as it has) our net worth is going to grow despite what we choose to save. It can be a reflection of past savings and investments in combination with our current savings and spending. I don’t know if this is good or bad. It can be seen as bad if great markets are masking a poor savings rate.

On the other hand, if you are able to get this ratio at 100% (the net worth growth and income the same number), you are essentially living as if you spent nothing, right? That’s a very good thing, right? This gives you more of a “bottom-line” view, which some could argue is all that really matters.

I know of a family where both spouses earn a very high income, but they spend a lot of it and are often wondering why they aren’t in a better money situation. This could be a quick tool to show them that making $300,000 may not be helping their financial situation because their their net worth isn’t going up and they have a very, very low ratio.

That last Twitter quote made a good point asking what happens if you are retired. In that scenario, you might not be earning much income, but you’d presumably have a nest egg that might be growing. I’d argue that savings rate doesn’t mean much if you are retired since you likely aren’t saving much of what I presume is an insignificant or tiny retirement income.

Someday soon, I hope to pull some of our old tax forms and calculate some past numbers to see what I can learn from them. Can you calculate your net worth growth to income ratio for last year?

* I’m mixing up ratio and percent a lot in this article. For our purposes, the nomenclature is no big deal.