A couple of days ago, I was reading the September issue of Money Magazine and found an interesting article: “I Saved $100,000 in 3.5 Years on a $54,000 Salary.”
The article in the magazine is a substantially different from the online version. It was the print version that pushed me to write this… I only looked at the online version as a means of conveying the print version. That (print) version leaves out a critical phrase of “from 2004 to 2008 before she was married” at the beginning of the article, which is extremely important context. I’ll dig more into this at the end of the article.
My mind immediately starting doing the math on saving $100,000 with a $54K salary. That seems like a huge amount especially on that salary. With the aid of a calculator, it looks like Bola Sokunbi salary was $189K over 3.5 years. If I presume a 20% tax rate, it is around $150K in take home salary. That’s an exciting savings rate of around 66%. Wow! Great job!
It would seem that she lived on the remaining 40K for 3.5 years. I really need to know more about this! Everyone’s life circumstances are different, but maybe I can learn some new frugal tips.
As I started to read the article, Money Magazine’s narrative unraveled.
Sokunbi works in New York City and commutes from Hunterdon County, N.J. BestPlaces.net has the cost of living at 134. That’s 34% more than the national average. Translation: It’s not a cheap place to live.
She has twin 4 year olds. As a father of a 4 and a 5 year old, I can say that childcare is expensive. I think it could eat up the 40K alone in 18 months, especially when considering two children… especially in a place that a high cost of living. It’s not the kind of thing that you can be frugal with… it’s almost directly paying someone else’s salary. It’s not the kind of think you’ll get a discount on… and even if you could, would you want a discount on childcare?
So the expenses seem to be high. How could Sokunbi make it work? The article mentions in passing that her husband is a doctor. I’m sure having a spouse who is a doctor doesn’t factor into the finances much… or at least that seems to be what Money Magazine thinks.
What else could be a factor? She launched a website 3 years ago that made $25,000 in the first year. That’s not in the salary number. We don’t know what it made in the next few years. According to the article, “She developed it on the side for a year…” We’ll get back to this in a bit.
Does she have more income that’s not salary? Yep, her wedding photography business brings in between $3,000 and $5,000 per wedding.
This is where I stop and stress that I’m not criticizing Sokunbi. She’s obviously working extremely hard and making a number of great financial moves.
I’m criticizing Money Magazine’s title and premise, because the $54K annual salary is extremely misleading. There’s probably another $65,000 between websites and wedding photography. I’m conservatively estimating just 10 weddings a year ($40,000) and the $25,000 from her website (presuming the income didn’t grow from the first year). So that’s around $120K before we factor in what her doctor-husband makes. If he makes $200K (probably not unusual for a doctor in that area), that’s a household income of $300K a year.
If my assumption of a household income of 300K a year is wrong, I apologize. However, the article doesn’t seem to give us a better household number to do a real income/expense analysis.
At least the article does mention that Sokunbi’s mother paid for her college so there’s no student loan debt to worry about. I didn’t see any information about student loan debt for husband, which could significant considering that he’s a doctor.
Let’s dig a little deeper, shall we?
“None of Sokunbi’s friends were saving as aggressively as she was right out of college. Some were making twice what she earned and saving nothing at all… Another tailwind was the fact that she didn’t have much time to spend money. She travelled a lot for work during the week and began a side gig as a wedding photographer on the weekends.”
I find this confusing. The article title sets a focus on the timeline of the last 3.5 years. However, this anecdote seems to go back to the time after graduating college, which the article states was 2004. In the context of the article’s title (“saved $100,000 in 3.5 years”) I thought that travelling for work and being a wedding photographer was part of the “saving $100,000” equation. It wasn’t until I thought, “Hey she had two twin 1 year olds 3.5 years ago, how does ‘traveled a lot for work during the week’ logistically work?
(That’s not to say that it couldn’t work if someone else caring for the twins, but that’s information that I would have liked to know.)
Let’s get back to the Clever Girl Finance website and her “salary.” The Money article also states:
“Two years ago, Sokunbi quit her consulting job to focus on the business full time.”
Well, that undermines the whole 3.5 years of a $54,000 salary, right? It seems like we are looking at 1.5 years of the $54,000 salary, plus whatever the undisclosed amount Clever Girl Finances has made in the last couple of years.
I feel like Money Magazine put me on a roller coaster of mystery income and expenses.
Finally a Lesson!
Yes, “Finally a lesson” is borrowing from one of my favorite cartoons Finally a Lesson about investing in real estate to earn passive income.
After writing all this up, I decided it might be best to go to the source rather than Money Magazine. Fortunately, Sokunbi has explains how she saved $100K on her website.
It seems that most of my confusion here is caused by the context of the prit article. From the source, Sokunbi, it seems the article is cover two different times. The saving of $100K in 3.5 years seems to be about 2004, after college. The stuff about today, well… that’s not relevant. Please forget about the doctor-husband, kids, and the website. Perhaps she didn’t live in NJ at the time either.
Given the true source of the information, we get new, important information (besides that Sokunbi can completely rock a white dress):
She “got a raise and a bonus every year and got promoted raising my salary by the end of the 3.5 years to ~$74,000 (which was really ~$52,000 after taxes).” It seems to be completely false that she “Saved $100,000 in 3.5 Years on a $54K salary.” Even aside from all the misleading stuff I mentioned above, the salary was not $54K for 3.5 years. In addition, the author of the Money Magazine article seems to omit the mention of a bonus. It’s not a big bonus ($1500 after taxes), but it’s “still something” in Sokunbi’s words. It buys a lot of Ramen which seems to have been her food of choice.
The next critical thing missing from Money Magazine’s article is that the money is 401K, which includes her employer’s match. That’s pre-tax money, and free money, which is important context.
Next we have:
“This was also before the last major US recession and so the money I contributed had grown because the stock market had been performing pretty well.”
That 401K had really grown due to the timing the stock market as well. It’s not “saving” in the context of “contributions”, but more of a net worth thing. I’ve been fairly sarcastic here, but if invested $15K in Facebook around $25 (a target=”new” href=”https://www.lazymanandmoney.com/ask-the-readers-is-this-trading-or-investing/”>I did buy Facebook stock at this price) and it grew to $100K, is that really “saving $100K?” I don’t think so.
“I lived at home for six months after graduating from college before moving into my first place which helped me really kickstart my savings because I was able to save most of my pay for those six months.”
Well this didn’t make the Money Magazine article at all, but even Sokunbi acknowledges how much it helped. This could have been part of “her mother paid for her college education” that was mentioned in the article.
And then there’s this:
“The first year of my [photography] business I earned around $10,000. The second year I earned around $30,000. Subsequent years I earned more.”
This appears to have started in her 2nd year of saving. I’ll ignore the subsequent years, because that might be outside of the 3.5 years timeline. Still, we have another $40K of income aside from salary.
There’s so much here that my head is spinning.
If we amoritize the photography business ($40K over 3.5 years) we get around $11K a year. If we take a guess about the average salary (starting at $52K) that “grew every year, plus promotions and the bonus” (my quote not hers), I’d say it’s around 62K (it topped at $72K aside from the bonus).
I think we are looking at around $70K+ income (maybe $75K) and a living-at-home situation which helped her save most of her income. Those savings could be mostly pre-tax in a 401K account that benefited greatly from a bull market.
I need to stress once again that I’m not criticizing Sokunbi. We actually have a lot in common (living at home for 6 months, saving largely in a 401K plan, side hustles including a personal finance website). I’m criticizing Money Magazine for their marketing and confusion about recent stuff (doctor husband, twins, etc.) when they should have covered the story literally a decade ago.
I want to give credit to Sokunbi for working extremely hard and making great financial decisions. At the end of the day, that’s what this article should have been about.