How We Made A Million Dollars

In this post I’ll tell you how we made a million dollars and became a millionaire household.

I’ve already written posts on How to Become a Millionaire and How to Become a Millionaire in Canada that details our approach to saving and investing our way to a million dollars.

This post is different in that it’s a reflection on our journey and our own personal story.

How We Made a Million Dollars and became A Millionaire Household

At the beginning of this month, when I was analyzing my finances, I saw that we finally passed an important milestone on the road to financial freedom. My family’s net worth rose above the $1 million mark for the first time ever. Even before I started this blog, a major financial goal of mine was to grow our net worth beyond a million dollars. Last month, as the fam and I enjoyed our summer beach vacation, we became a millionaire household. In this post, I’ll tell you how we did it and how you can too.

First, I want to say that, unlike others who managed to make a cool Mil, we never designed and sold a cool App and we certainly didn’t strike it rich in real estate. We didn’t build and sell a business, nor did we happen to invest at the right time in the next big stock.

We made our first million the unglamorous way: by following the tried and true approach of saving and investing our hard earned money, while also paying down our debt.

Now I’ll be the first to admit that there’s nothing sexy with this approach. In fact, I’d say that it’s a pretty boring way to become a millionaire. But I guess slow and steady wins the race.

Our Journey to Making Our First Million

The funny thing is that while I feel like it took us forever to get here; it actually took less than 10 years. In fact, the other day I was looking through some old docs on my computer when I came across an old net worth update from July of 2012. To my surprise, at that point in time our net worth stood at $296k. So it took us 5 years to go from there to over a million.

During those 5 years we had some major life events that impacted our finances. Our children were born and besides the financial hit from the Mat leave, our monthly budget swelled significantly. Kids cost a small fortune. Diapers, clothes, toys, car seats, strollers, etc. All of those expenses put a huge dent in our budget. Not to mention daycare and preschool. Kids are definitely not cheap.

Along with kiddies comes the need for a larger vehicle like a Minivan, SUV or Crossover. We just couldn’t get by with the old Chevy Cavalier and Toyota Yaris. So we bought a mid-size SUV (and kept the Yaris). We paid cash for the new car but I had to sell some of my investments, so it set us back some.

Next came the bigger house. A family of 4 can’t really live in a small 2 bedroom townhouse. So we bought our final home – a 2-storey detached – in one of the hottest real estate markets in the country. With a bigger house we went from having virtually no mortgage debt to nearly $500k! Not only was the house costing us a lot more money than the old one, it needed about $70k in upgrades! All this happened at the best possible time for us too…during my wife’s mat leave!

Staying the Course: Saving and Investing Our Way to A Million Dollars

Yet through it all, we stuck to our plan to become millionaires.  Our net worth kept steadily rising, as did our passive investment income. During that time I wasn’t able to invest the kind of money that I wanted to. But I still made it a point to save something and invest it. I used every trick up the sleeve that I could to stretch our dollars.

As much as we could, we tried hard to keep our expenses at a manageable level. We used coupons and shopped at discount stores whenever we could. We put our savings in registered accounts like RRSPs and TFSAs and used the tax refund to invest more or pay down debt. We continued to reinvest our dividend income so we could continue to grow our assets and our passive income. I even made a brief, 2 year foray into the world of rental properties in my search for making outsized returns. My wife and I did everything we could to keep us on the right financial track.

The Great Thing About Investing Is…

There’s no question that we worked hard to get to where we are today. But you know something? It wasn’t just us working. The great thing about investing is that your money works for you. At the time I really didn’t see it working for us. But looking back on the last 5 years in particular, there’s no way in hell we managed to save $700k. So what happened?

In the last 5 years we saw the stock market and real market rise significantly. In addition to making regular savings contributions, our financial assets have grown significantly due to years of stock price appreciation, dividend increases and reinvesting that income. I expect that our annual dividend income will reach nearly $13k this year (2017). That’s $13k being invested and continually reinvested to earn us more and more passive investment income.

How much will that income be in another 5 years? If we continue on our path toward financial independence, then I think we could easily achieve $25-30k in passive income in another 5 years. But growing our investments and passive income is only one side of the financial freedom equation.

The Other Side of the Equation: Our Debt

Saving and investing our money in growth assets will only get us so far, the other side of the equation is reducing our level of debt. On that front, we still have a ways to go to pay down our mortgage balance of $370k. With the specter of rising interest rates, getting rid of this huge mortgage debt will be a big priority for us.

How to Become a Millionaire?

Our path to a million involved a two-pronged approach: save and invest in income generating assets while paying down debt. Now that it’s been a few years, we’re starting to see an acceleration in the growth of our assets and the income that they generate, while our debt is decreasing. If these trends continue, getting our next million will be that much easier. After all, we’ve all heard that earning your first million is the hardest. It only gets easier after that due to the magic of compound growth.

Is Our Financial Journey Over?

Not even close. This blog is about financial independence. Achieving a million dollars in net worth is a huge milestone for sure. But it’s not the end of our road to financial independence because, well, a million dollars ain’t what it used to be! Some people may think that a million dollars is enough for early retirement and there are some who have walked away from it all with their loot. But I’m not really all that interested in eating Mac n Cheese in a “Van Down By The River” for the rest of my life. Not to mention that there’s no way in hell my wife would go for that. We’re happy where we are and our goal of financial independence involves achieving it and maintaining our lifestyle. Otherwise, what’s the point of it all?

Thanks for reading this post on how we made a million dollars.