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  • Writer's pictureBen LeFort

How I Manage Money as a Millionaire in the Making

Your financial priorities and how you manage money is mostly dictated by the current state of your finances and what’s happening in your life right now. My financial priorities are much different today with a family and financial security then they were ten years ago when I was single, broke, and in debt.

What should your top financial goal be after reaching some of your big financial goals like buying a house? Once you have purchased a house, your top financial priority should be to increase your accessible net worth, which is equal to your net worth minus your home’s value.

In this article, I will review in detail how my wife and I manage our money as a “Millionaires in the Making,” why it’s crucial to focus on increasing your accessible net worth and how to do it.

Reaching the level of “eventual millionaire”

When I say “eventual millionaire,” I mean that I will reach a one million net worth, even if I stopped saving and investing.

  • If I only made my mortgage payments and never saved anything else, I would have a $1 million net worth in seven years assuming a 5% annual return on my current investments.

  • If I were to continue my current monthly savings, I would cross the $1 million net worth mark in about four years.

If I can find a way to save and invest more than I currently am, that timeline will compress even faster.

Why I won’t be hanging any “Mission Accomplished” banners when I cross the $1 million mark

If my 20-year-old-self heard what I am about to say, he would probably try and fight me, but here it is; being a millionaire does not make you rich.

As I have written in the past, your net worth can trick you into thinking you are richer than you are. Put simply, for many people, their home is their largest asset and accounts for the majority of their net worth.

While owning a home can help you quickly increase your net worth, especially if you live in a hot real estate market, your home’s equity does very little to move you towards Financial Independence.

This is because the equity in your home is very difficult to access. Especially if you never plan on moving out of the house, you live in or even the real estate market you live in.

  • If you never sell your home, the only way to access the equity is through taking on debt; either taking out a mortgage or home equity line of credit.

  • If you sell your home and buy another house in the same real estate market, the fees, taxes, and price of the new home would likely account for all of your home equity even if you are downsizing. Remember, if your house’s price has gone up, so has all your neighborhood’s other houses.

  • You could sell your house and rent, but that will increase your monthly cost of living by adding rent to your expenses.

The only sure-fire way to access your home’s equity is to sell your house and move to a real estate market with lower prices. Which the majority of people are not able or willing to do.

The long and short of it is that you don’t want the majority of your net worth tied up in a house that you live in.

When I say I won’t be hanging any “mission accomplished” banners when I reach a $1 million net worth, the reason is that my home will make up a significant portion of that million-dollar net worth.

My only financial priority right now is increasing my “accessible net worth.”

Although we have over a $500,000 net worth, our “accessible net worth” is close to $0 since we live in a hot real estate market where homes’ price has increased significantly over the past several years.

Remember, accessible net worth equals net worth minus the value of your home.

While a $0 “accessible net worth” at age 32 might sound depressing, it’s not. Now that we have reached a level of financial security where our monthly income is significantly higher than monthly expenses, our “accessible net worth” will climb very quickly.

There are two ways to increase your accessible net worth.

  1. Paying down debt.

  2. Investing in assets (apart from your home.)

The only debt my wife and I have is mortgage debt.

  • A mortgage on our primary residence.

  • Another mortgage on a house we rent to family.

We have been paying off each of these mortgages for four and three years. Each year, more of our monthly mortgage payment will go towards paying down principal rather than interest.

As our mortgage balance declines, our accessible net worth will increase.

We also have a solid base of investments, the value of which are roughly equal to the combined outstanding mortgages on both houses. That is how we land at approximately a $0 accessible net worth.

As those investments’ value rises at the same time the mortgage balances decline, our accessible net worth will climb over time.

Even if we stopped saving and investing we would have an accessible net worth of $1 million in approximately 20-years due to the decline in our mortgage and compounding of our current investments.

We can cut that time in half at our current savings rate, putting us on a ten-year projection for a $1 million accessible net worth. At which point, I will truly feel like a millionaire. I should add that this does not include the defined benefit pensions that my wife and I each have through work.

One of the most complicated calculations in personal finance is the current present value of a pension, which I have not taken the time to calculate yet. I look at the pensions as an extra cushion and providing us a significant margin for error.

My plan to accelerate the timeline to a $1 million accessible net worth

Going from $0 to a $1 million accessible net worth in ten years is the baseline scenario that my wife and I are looking at, which I feel quite good about.

However, there is a straightforward way we can rapidly increase our accessible net worth, which is if I can continue to scale up the income from my side hustle.

I take every penny I earn from my side hustle and invest it. The more I can make from my side hustle, the more I can invest, and the faster our accessible net worth will rise.

If I can scale up the income I earn from my side hustle to about three times where it is today within the next year and continue investing all the profits, my wife and I would have a projected accessible net worth in just under seven years (before my 39th birthday.)

Anyone can take a similar path to increase their accessible net worth

Once you reach a certain level of financial stability, it’s important to shift your goals and mindset from “getting by” to working towards financial freedom.

Put in the most simple terms possible; if you want financial freedom, you need to focus on increasing your accessible net worth. Owning a home is great, but the equity in your home is difficult to access, so it has a limited impact on your pursuit of financial freedom.

Focusing on paying down debt and investing in financial assets like stocks, bonds, and real estate (that you rent out) are the two ways to increase your accessible net worth.

If you want to speed up the process, a side hustle with a scalable income is your best bet. That means something closer to a side business rather than a second job where you are paid an hourly wage.

If you can take every penny from the side hustle and use it to pay down debt and invest, your accessible net worth will rise as you scale up your side hustle. That’s the path my wife and I are on as eventual millionaires.


If you want to learn how to track and grow your accessible net worth, check out this class on Skillshare.

This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.

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