I am writing a pledge to join the Million Dollar Club founded by J. Money at Budgets Are Sexy.
What’s it like to be a millionaire?
Prior to reading about personal finance a couple of years ago, I had the following (mis)conception of millionaires:
— They make lots of money (i.e. six-figures and above).
— They have prestigious jobs (i.e. doctors, lawyers, hedge fund managers).
— They fly in their private jets or at least business class, have vacation houses, own a series of rental properties, and maybe have at least one private island.
— They drink expensive wine and eat caviar every day (I hope it’s not unhealthy).
— They only hang out with other millionaires and billionaires, and party at country clubs.
— They always stay at 5-star hotels when traveling.
— They wear brand-name clothes (i.e. Versace, Gucci) and drive luxury cars (i.e. Mustang, Mercedes).
— They vacation in Europe and go to exotic resorts multiple times a year.
What a life!
It wasn’t until I started reading personal finance blogs and listening to Dave Ramsey that I realized such perceptions were misguided. I’m pretty sure I got those images of the perfect millionaire life from TV shows, magazines, and my own imagination.
In learning more about frugality and early investment, I realized that anyone of us can be a millionaire if we work hard, live below our means, and invest wisely.
They cook simple yet delicious meals at home and even live in an RV (instead of mansions). They write passionately about money saving tips.
They are diligent about making the right investments early on in their lives. They wear old clothes that have holes in them instead of worrying too much about looking sharp and classy all the time.
And most importantly, they show me that I too can be a millionaire one day.
Why become a millionaire?
Of course, the millionaire dream won’t happen to me overnight. I have to establish specific plans, stick with them, adjust them when needed, and always remind myself why I need to forgo short-lived temptations.
If you ask me what my ultimate goal in life is, I won’t say “becoming a millionaire.” In fact, I never gave it much thought until I saw Lily’s post where she pledges to join the Million Dollar Club.
What does it mean to have a million dollars? Will it make me a happier person? I’m not sure what the answers are. But I can tell you one thing: I won’t stop saving and investing even when I see the $1 million in my bank account.
If I were to disappear from the earth tomorrow, I’d ask myself the following questions:
— What have I done for my family?
— Have I spent enough time with them?
— Have I tried to help my extended family to the best of my ability?
— Have I explored my own potential by starting my own business and figuring out what I’m really good at in life?
— What am I going to leave for my children and future grandchildren?
— Have I made any impact on other people’s lives, including those I have never met?
But I am not an idealist. In order to provide satisfactory answers to many of the questions above, I need to be on a sound financial footing first. I can’t help others in the best ways I can unless I’m financially self-sufficient.
By acquiring wealth and being responsible with our finances, both Mr. FAF and I hope that one day we can have the resources and foresight to establish a foundation like what Bill and Melinda Gates have done to make a positive impact on other people’s lives, including our own.
It might be just a dream. But what’s life without hopes and dreams anyway?
Our pledge for the Million Dollar Club
In order to reach our lifelong goals, Mr. FAF and I pledge to do the following:
1. Contribute to Roth accounts
Mr. FAF has been in a PhD Program in Computer Science for the past 6 years. I have been the bread-winner of the family for almost two years. We have been saving up for a down payment, aggressively paying off our mortgage, and saving for emergency all this time.
I have a retirement account with Vanguard through my employer. I haven’t made any contribution to it, but my employer has been great about growing it for me at an X% match of my annual income.
Once Mr. FAF settles down at his new job as a Software Engineer in DC later this summer, we each will contribute $18,000 of our annual post-tax income to our Roth accounts. We are thinking about Roth instead of 401k since we expect our income and tax rates to increase in the future.
2. Contribute to Roth IRA
In addition to growing our Roth accounts, we will each contribute $5,500 to our Roth IRAs until our income surpasses the $196,000 limit. When it does, we will consult with a financial advisor to see how we can continue to contribute.
3. Pay off the mortgage early
We will try to pay off the mortgage on our primary residence as soon as possible. We are risk-averse and hate debt whether it’s good or bad. It gives us peace of mind knowing we won’t be homeless if there’s an economic downturn or if both of us lose our jobs.
4. Save 20% for a rental property
Once we pay off the mortgage on our house, Mr. FAF and I will save up for at least a 20% down payment on our first rental property. We don’t want to pay unnecessary money if we don’t have to. And that’s how we feel about the private mortgage insurance (PMI).
5. Pay off our credit card balance each month
Mr. FAF and I make almost all of our purchases with our credit cards (some Asian restaurants only take cash). We pay off the balance at the end of each month to build our credit and avoid consumer debt. We will continue this habit on our way to the millionaire status.
6. Invest in ourselves and our children
The best investment we can make, in my opinion, is in ourselves and our children. Mr. FAF and I will continue to invest in our health and career development. I think I’m done with school. But Mr. FAF wants to pursue an online MBA in the future. I will support him in his endeavors.
We will also invest in the education of our children since you never know what amazing return you can get on it. It is our responsibility as parents to provide Baby FAF and his future sibling(s) the best tools they can access to explore this world.
7. Be generous to family and good friends
In saving up and investing, we will not ignore the loved ones that have helped us through the most difficult times in our lives. We will be generous to the ones that we care about and who show us that money cannot buy us true love and true friendship.
8. Stick with Frugal Asian Finance through thick and thin
I will stick with my blog, Frugal Asian Finance, even when I feel like giving up is the only option. It took me 12 years to finally set up the site. I have learned so much about personal finance (PF) and gotten to know so many amazing PF bloggers.
I will stick with my blog through ups and downs because it shows me what it means to be frugal and supportive of other like-minded individuals.
9. Continue our frugal habits
Mr. FAF and I will stick with our frugal habits no matter if they’re weird or not:
— Wearing free T-shirts
— Using grocery plastic bags to line the trash can
— Getting hand-me-down clothes, toys, and books for Baby FAF and our future children
— Eating mostly at home
— Using used furniture that’s still in good condition
— Flying economy class
— Staying at cheap motels/hotels or Airbnb when we travel
— Using toilet paper as napkins
The list goes on.
10. Always stay humble
At the age of 30, I’ve realized that people tend to show off or put others down when they feel the most insecure about themselves. I know because I’ve been there.
Whether we’re are millionaires or not, Mr. FAF and I pledge to always stay humble and true to ourselves and our values.
The friends who have helped us out when we are poor and have next to nothing are the ones we value the most.
When you are wealthy and successful, people will rally around you. Some of them are well-intentioned and genuinely interested in you as a person. Some look up to you and want to learn from you. And some will look for opportunities to take advantage of you.
I’m sure and hope that Mr. FAF and I will make a lot of good friends in the future. But we will always remember those who want to be with us for who we are, not what we have.
In our journey to financial freedom, Mr. FAF and I will continue to be a frugal couple. We will save as much as we can to the extent that it doesn’t hinder our relationships and our pursuit of a happy life.
And lastly, I want to thank J. Money at Budgets Are Sexy for coming up with this amazing idea that enables us, personal finance bloggers, to get together and make a pledge that will change our lives and our family trees.