I dedicate this post to my Sky-Glasses, whom I let be stolen. I hope that the thief treasures them as much as I did.
What This Series Is Going To Be About
This series is going to be my story about growth, possible entrepreneurship, and journey to 99K. I’m going to write about the skills that I obtain, the problems I try to solve, my investment decisions, my successes, my failures, the lessons I learn and the people that I meet. Now, I understand that’s a lot to write about and digest, but lets skip over that and instead talk about what I mean by 99K.
$100,000 is a lot of money, and a benchmark goal for many. According to Sam Dogen, it typically takes the average American more than 35 years of life to obtain this benchmark. Right now, I’m 21. Of course I have time to wait till I’m 35 and slowly earn a 100K, but I’d like to get things done a little faster. That’s why I want to challenge myself to go from zero to $99,000 as fast as possible. I don’t know when I’ll be able to achieve it, but I do want to see how far I can get in a year.
If $100K is the goal, I want to be a hipster and stop just before the goal. Choosing 99K over 100K also makes the challenge look slightly more attainable, due to psychological pricing. But, to be completely honest, I chose it because its an odd number. According to Neil Patel (an online marketer), odd numbers outperform even numbers. I also want to test out his marketing principles and see if I can replicate the trends he sees on his own blog. Choosing “99K” as the title of my challenge is my first step to do so.
How hard Is It Going To Be For Me?
Making 99K in a year for some people is super easy because they have a high paying salary, whereas for others its extremely difficult because they are making minimum wage. I fall towards the easier side because I’m actually in a relatively privileged position (relatively low student debt, relatively high paying job, generous parents). As a result, making the jump to $99K isn’t going to be as hard for me as the average person. Nonetheless, its still going to be tough and I want to rise to the challenge. Let’s get started with my financial statistics so we can understand just how hard its going to be to get myself to 99K.
Student Loan Debt
- Loan A: $3500 loan @ 3.860% interest. This loan has currently accrued $36.24 dollars worth of interest and is growing at a rate of $0.37 per day.
- Loan B: $5500 loan @ 4.660% interest. This loan will not start accruing interest until 4 months are over (as of 10/3/2016 today).
- Loan C: $5500 loan @ 4.290% interest. Once again, this loan will not start accruing interest until 4 months, as I am currently in my grace period.
- This totals out to $14,536.24 owed to the department of education.
- $5,500 combined sitting between a roth and regular IRA. About 3.7k is invested in a REIT, and 1.7k is in cash.
- $9,000 in a checking account.This totals out to about $14,500 in assets
Thus, after performing simple math, my net worth is about -$36. After letting taxes eat my salary alive, I can currently expect to earn about 50K after a year, so after two years I suppose I would be done after some hard-core saving. But that’s boring. Plus, there’s no way that I could save 100% of my take home pay for two years. As a result, I have to optimize and augment my finances.
In order to reach 99K in a timely manner, I’m going to have to find ways to cut expenses, (lessen my tax burden, sharpen my budget, payoff student loans) and add to my income (create revenue inducing side-projects). First, lets get into my plans to lower my tax burden.
Because I am a single male in California, Uncle Sam gets to screw me pretty hard. If I did nothing, I would end up paying a grand total of 19.6K to taxes. However, I can use a 401k, HSA, and an IRA to severely reduce my taxable income. By making use of all the tax advantaged options available to me, I only give the government 10K. I can easily do this as it simply involves depositing money from my paycheck into an account. However, I could take this a step further by obtaining a cash flow neutral property.
Let’s entertain the fantasy that I was able to procure a cash flow neutral property. There are a lot of variables associated with this, but for the sake of the fantasy, lets assume that I somehow managed to get a loan for a property in California and was able to rent it out such that the rent covered any possible repairs, mortgage, property taxes, and property insurance. According to zillow, the average price for a property in California is 480K. Assuming that I could get a 4% interest rate, I’d be paying about 19.2K in interest per year. Now, here’s where my tax savings would come in, because the property is cash flow neutral, I’m not losing any money every month because the rent is covering all property expenses. As a result, I can deduct the interest from my taxable income. My new excel sheet would look like the following:
I end up saving about 4K on taxes through this method. However, its pretty dam risky and actually isn’t worth it unless the cash flow from the property is positive. I will, however, be taking care to max out my tax-advantaged accounts to make sure that I don’t pay much more than 10K to the government.
Sharpen The Budget
In order to make sure that I keep most of the money I make, I’ll need to cut down my living expenses as much as I can. I’ll have to learn how to meal prep so that I can cut down my food expenses and cut down a bit on entertainment. I don’t exactly have a well defined budget at the moment, so that’s definitely something I’ll have to work on. Ideally, I need to take control of 3 main categories: housing, transportation, and food. I’ve currently got transportation & housing under control. However, as far as food goes, I’ve got a lot to sharpen.
Kill The Loans
In order to minimize the amount of interest I pay on my student loans, I need to pay them off quickly. As of writing this post, I’ve already scheduled a payment to completely destroy my 3.5K loan. As for my other two loans (11K total), I plan on taking advantage of my 4 month grace period to save enough money to kill them off in one payment to avoid paying any interest on those as well.
Obtain New Skills
In order to create profitable side projects, I’ll have to learn a lot of new skills. Currently, I’m looking at learning the swift language and perhaps get into app development. Of course, I can’t expect to make any profit right out of the gate, but over the long term, I’ll have opportunities available to me proportional to my skill set. Thus, investing into my skill set now will probably pay out big time in the future.
I accepted this challenge to stop saying “I can’t” and start thinking about how “I can”. I want to use this challenge to test myself and see what I’m capable of. Although the following meme speaks a lot of truth, I’m willing to do something that isn’t simple in order to achieve 99K.