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Financial Freedom

Down the Financial Freedom rabbit hole: Part 2

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Don’t gamble! Take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it. – Will Rogers.

In my last post, Down the Financial Freedom Rabbit Hole, I talked to you about having over $300,000 in retirement savings. In this post, Part 2, I will talk about the behavior you will need to use to get there.

One of the biggest lessons I learned about life is that you have to give to get. There is no free lunch. Nothing is free. You have to work for everything you have. And don’t let anybody tell you any different.

Even starting out with nothing, you can end with something.

However, it won’t happen overnight.

Little by little everyday you make progress. You have to set a goal. And you have to focus. Much like Obi Wan Kenobi’s Jedi Master in Star Wars said to a young Anakin Skywalker.

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So without further ado, here are some of the behaviors that can help turn you into a millionaire. And we’re off…you can now wave goodbye to broke in the camera and say hello to financial freedom.

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Learn to sit on a box until you can afford a chair. – money quote

Starting from scratch was not easy. The number one thing I did was make a goal. It does not matter how big or small, you have to start with a goal.

You cannot get to a destination without first knowing where you are going.

My ultimate goal was $1M USD. I then broke it into actionable steps.

Get a job that offers 401k’s with a match was one of them.

I also knew I had to increase my income. Whether it be sales, HVAC School, plumbing, teaching, or college, you have to find a way to make a living and bring some money home.

I took Dave Ramsey’s saying literally in when he says it is not what you are willing to do that will make you rich, but what you are willing to give up. And I gave up a lot. Nights out with friends, parties, vacations, you name it. But the sacrifice was worth it as it moved me closer to my ultimate goal: freedom.

I would spend my nights studying (sometimes up to 8 hours a day!) and doing my college work. Then I would spend my days looking for jobs that offered retirement accounts with matching contributions. Since I chose the college route, I knew that after I got my degree, that I would use that to negotiate a better job with higher pay.

I couldn’t just start in at the top. It’s like what the late rapper Young Dolph said on being wary of helping those who refuse to help themselves (“Million Dollaz Worth of Game” interview, 2021): Everybody wanna start at the top. Everybody wanna start at the top, and everybody wanna ball off the rip.

So true. How can you possibly start at the top? You don’t know anything. You have to put in the work if you want to get ahead and if you want people to respect you.

Dolph sounds a lot like one of my favorite Disney characters, Scrooge McDuck.

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A panel from an Uncle Scrooge comic by Jack Bradbury. Character created in 1947 by Carl Banks.

So if you find yourself mopping floors, but earning the respect of your fellow workers and the CEO that leads to creating long lasting relationships, getting mentoring from those who played the long-game and won, you climbing that corporate ladder to one day being in the C-suite, count yourself fortunate to work your way up to the top you lucky duck! Pun intended.

Those that try to skip putting in the work miss out on opportunities and experiences that are necessary rungs on the ladder to success that are needed to stay at the top. You have to work late nights, get up early and be consistent. Nobody ever got rich sleeping all day.

Once, I got that magic 401k, I went to work investing in it. That was around 2007. However, my account was increasing too slowly.

I needed to figure out a way to free up some capital to make it go faster. That’s when I figured it out. One of the best ways to start investing larger sums of money with minimal effort. Change my behavior and attitude toward material objects. Namely; cars.

I would pay off my car and then not get into another car payment.

I would instead redirect that money to my investments. I gave up on the desire to having a flashy car in parking lot and focused on financial freedom. I paid off my car in 2009. I have not had a car payment since.

This along with paying off credit card debt, in my opinion, is the best ways to build wealth.

After that, my investments started to take off. I also opened up a Roth IRA around 2011 to invest even more money. I did this because when I did the math, it showed that if you max out your retirement accounts; $23,000 in your 401k and $7,000 in an IRA which are the limits in 2024, with a 10% return, you could hit $1 million in 15 years. That’s less than two decades! It takes the average millionaire about 27 years to get there.

Simple plan: Pay off car payment and max out retirement accounts. I just gave you the magic ingredients to the secret sauce.

Come on, let me get a 5-star rating for that advice like Nora got on Upload.

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As of this writing, I am closing in on hitting my next target of $400,000 in investable assets. I was getting closer to my goal of $1M in retirement savings.

Getting so close to my goal made me realize that personal debt is the mortal enemy that threatens to suck the money out of your wallet and the joy out of your life.

I wanted to slay debt like my favorite Marvel comic book character Red Sonja does her enemies.

I wanted to strike first and show no mercy when it came to getting rid of and staying out of debt like Cobra Kai!

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I felt like Carmen Sandiego when she meticulously plans her escapes…with style. I was leaving debt behind and flying toward freedom.

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You can do the same. By changing your behavior to earn interest instead of paying it by investing. Until next time…

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Financial Freedom

Down the Financial Freedom rabbit hole: $303,980.45 down {$196,019.55 to go}

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`Curiouser and curiouser!’ cried Alice – Alice in Wonderland by Lewis Carroll

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My sentiments exactly Alice! As I watched the Suze Orman show trying to learn about personal finance, that is exactly what I thought to myself.

What is this strange new world called financial freedom? The more I watched her show, the more I wanted it.

Essentially, do I take the blue pill or the red pill?

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What if Neo had taken both pills? | A Reflection on a Summer School and Feelings of Madness – The Brown Hijabi

As the title of this post implies, I took the red pill.

Financial Independence. I wanted the ability to do what I wanted, whenever I wanted without being tied down to a 9-to-5. But how would I do it? I needed a plan.

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Much like the Scooby gang needed a Scooby trap, I was going to have to plan my way out of the rat race and into financial freedom. A financial road map. That’s what I needed.

Official Discussion Series] Scooby-Doo on Zombie Island (Oct. 31) : r/Scoobydoo

It was like what Gail Vaz-Oxlade of Til Debt Do Us Part would always say in the intro of her show, I needed to go from red to black. My investment picture of over more than a decade is listed below.

Here’s a sneak peak behind Greenbacks Magnet financial magic curtain. Up first, from red. Then fade to black. Or in my blogs case, green.

Financial chaos bleeds. Here’s the red.

  • Oct, 2023: -$16,000 (market + house value ↓ )
  • Sep, 2022: -$22,000 (market crash + loss of 2nd income)
  • Sep, 2021: -$15,000 (market crash)
  • Apr, 2020: -$20,000 (market crash continues + pandemic)
  • Feb, 2020: -$19,000 (market crash; where the bleeding really starts)
  • May, 2019: -$10,000 (market crash)
  • Dec, 2018: -$14,000 (market crash)
  • Oct, 2018: -$10,000 (market crash)
  • Feb 2018: -$4,900 (market crash)
  • Jan, 2016: -$4,000 (market crash)
  • Aug, 2015: -$5,000 (market crash)
  • Jun, 2013: -$4,000 (market crash)
  • Sept, 2012: -$14,000 (market crash + cash crash + got a new home!)
  • Feb, 2010 -$1,000 (market crash + got a new job!)
  • May 2009: -$3,000 (market crash + laid off)

Financial triage has prevailed. Here’s the black.

  • Nov, 2023: +$27,000 (market rebound + 2nd job + house value ⬆)
  • Oct, 2022: +$17,000 (market up + mad hustlin’ 2nd job)
  • Mar, 2022: +18,000 (market up + bought condo)
  • May, 2020: +27,000 (market rebound; the green starts rollin’ in)
  • Jun, 2019: +$9,800 (market rebound)
  • Jan, 2019: +$10,000 (market rebound)
  • Aug, 2018: +$6,300 (market up)
  • Feb, 2017: +3,900 (market rebound)
  • Mar, 2016: +$5,000 (market rebound + tax refund)
  • Oct, 2015: +$6,000 (market rebound)
  • Feb, 2015: +3,300 (market up)
  • Aug, 2014: +$2,000 (market up)
  • Jun, 2010: : +$4,000 (market rebound)
  • May 2008: +$2,000 (market up)
  • Dec, 2006: +$1,000 (got a new job!)

First, I got rid of any payday loans and made a promise to myself to not ever sign up for them or any car title loans. Done.

Second, I needed tp pay off my car loan and stay away from car payments. So I paid off my SUV and freed up that monthly payment of $448.65 in 2009. I have not had a car payment since. Done.

I needed to get rid of the $20,000 personal loan I took out for $333 monthly. Done.

I needed to increase my income. So I finished my bachelor’s and got a higher paying job. Done.

I needed a goal to aim for. I decided upon one short-term and one long-term and one sensational dream goal.

Short-term I needed a $10,000 savings emergency fund. Done.

Long-term I wanted to retire a multi-millionaire. So I needed at least $2 million. Sensational dream goal is $10 million. I decided to break this all up into smaller goals. Therefore, I would start by having investable assets of $100,000. Done.

Then $250,000. Done.

Next was $300,000. Done.

Although, having over a quarter of a million-dollars is an incredible feat in itself, I had no time to rest on my laurels. I must keep going.

Then I started to press on toward my next goal of $500,000. After that is accomplished, I will set my sights on $750,000. The next leg in the journey would be $1 million.

At that point, I would be a 401k millionaire.

The next goal is to double my money. I would get to my next several money milestones by increasing my 401k contributions by 1-2% every year.

No vacations unless they were paid for with cash.

I also got a second job to bring in more income.

I signed up for credit card and checking account bonus offers that brought in thousands.

I invested my old car payments in index funds like the VTSAX and individual stocks like Apple, Google and Amazon.

And every time I got paid I would put a small portion in my Roth IRA.

I also make sure to keep track of my investments every month.

I’ll breakdown more of my behavior on how I went from $0 to over $300,000 in my next post.

Stay tuned…

Financial Freedom, Financial Independence

The road is paved with financial hurdles

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Like I said, I didn’t learn about investing until I was in my 20’s. So guess what? I was broke! Every dollar that came in went out.

It wasn’t until I saw a Kiplinger magazine on the boyfriends table and read it that I started to understand what it meant to manage money. Like a lot of folks I did not grow up learning about finances. It was not taught in school. And it was not talked about much at home.

Pretty much everywhere I went money was a taboo subject. I learned so much about money in that one article that I was hooked. I went to the library and checked out about five books on personal finance.

I know in the beginning it was a lot of Suze Orman and people I saw on television like celebrities whose books I read. Then I moved on to money experts like Peter Lynch, Warren Buffet and John Bogle. I also found books by money bloggers.

I remember over time going from $5,000 to $150,000. I increased my 401k contributions every year and eventually got to saving over 25% of my income! I knew that it was not enough to just open an investment account. I had to also invest that money.

A huge misconception is that if you open a brokerage account for Roth IRA then you are investing. Wrong. You have to tell the money where to go. If you don’t, its like putting popcorn in the microwave, shutting the door, and then saying to the microwave now pop without setting the timer telling it how long to actually cook the food.

I didn’t know this either. I just did what my 401k told me to do. Pick a fund. And that’s okay. You are just getting started.

What really helped me go from $0 saved to slowly making my way to over $250,000 in investments was watching a show on CNBC it was called…The Suze Orman show.

Investing, Retirement

Stock CEO

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Merriam-Webster definition: Rockstar: a famous and successful singer or performer of rock music.

Greenbacks Magnet definition: Stockstar: a successful investor of stocks and index funds.

I knew there were only six ways to get rich rich: marry money, inherit money, build a successful business, exploit a talent, get lucky i.e. win the lottery, and spend less than you make and invest your savings wisely over a long period of time. That is basically it. The rest are details.

There are many roads and paths to wealth, but all of them come down to six once you weed out all the details. Wealth has to be pursued. It will not just fall into your lap. You have to work for it. The result of hard work is success. The success is measured in dollars. Even though money is just a tool and one barometer for measuring success it is the yardstick that lets you keep tabs on how far you can come in a job done well.

But as we all know building wealth is easier said than done.

It can be as elusive as getting those Taylor Swift Eras tour concert tickets! And like her, I have a blank space and I’ll plan to write millionaire after my name. Ha!

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After reading books like The Automatic Millionaire, The Simple Path to Wealth, Your Money or Your Life and a ton of celebrity autobiographies, it occurred to me that even on a modest income, you can rise out of the poverty ashes and rise like the phoenix to wealth.

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You just need a plan. If you tried your hand at the first five ways to wealth and failed, you could always be working on the sixth path of saving and investing your way there simultaneously.

If I could not be a ballplayer, rapper, or business owner, I could always invest my money and be the CEO of my stock portfolio. I could be a stock CEO. I could be a stockstar. No college diploma required.

There are 5.3 million millionaires and 770 billionaires living in the United States. Millionaires make up about 2% of the U.S. adult population. Therefore, if you make it to $1 million in investable assets, you are wealthier than 98% of the U.S. population.

Statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich. Having $1 million will put you in a very exclusive club. The double comma club.

Although, the top 1% can earn as much as $955,000. Those annual earnings can seem far out of reach in a country where less than 10% of all households earn more than $200,000, according to the U.S. Census Bureau.

Working toward $1 million is still a lofty and worthy goal. Forbes reported in 2022 that the bracket’s minimum net worth is much higher — a cool $11.1 million. That would mean to be in the top 10% would be a minimum net worth of $1.1 million. This is an achievable goal. See some of my investments below.

My index funds are shown in dollar and my individual stocks are shown in shares.

Stock Portfolio

Investments2012201820202022/23
VTSAX$20,000$100,000$158,000$220,000
Amazon102
Apple2050100
Google330

Over time, I have increased my exposure in individual stocks while also investing in my index funds. I also decided to open up four different retirement accounts: Traditional IRA (Rollover from a previous job), Roth IRA, 401k and Roth 401k. I was able to get both the Roth and regular 401k from my employer(s) over the years. The IRA’s are what just happened over time.

Each retirement vehicle offers different benefits. In order to have more flexibility with my money I have two of each IRA and 401k. See below for definitions and pros and cons or the Roth 401k and IRA and more her from Empower.

What is a Roth 401k?
A Roth 401k is an employer-sponsored retirement plan. But unlike a traditional 401k, contributions are made with after-tax dollars.

The Roth 401k was introduced in 2006 to give Americans a new type of retirement savings vehicle to complement the popular Roth IRA, which was introduced in 1997. Roth IRAs and Roth 401ks are similar, but there are some pretty significant differences you should understand when deciding which one is right for you.

Pros and cons of a Roth 401k
A big advantage that the Roth 401k has over the Roth IRA is the possibility of an employer matching your contributions up to a certain percentage. Employer matches are the closest thing there is to “free money,” so if you’re deciding between a Roth 401k vs. a Roth IRA — keep this in mind. It’s also important to note here, though, that if you receive an employer Roth 401k match, the matching funds could also go into a traditional 401k.

A con, however, is that a Roth 401k account can sometimes have fewer investment options than a Roth IRA.

Pros and cons of a Roth IRA
On the flip side, Roth IRAs generally offer more investment options than Roth 401ks. With a Roth IRA, you generally have a large number of investments to choose from, including stocks, bonds, cash alternatives, and alternative investments. With a Roth 401k, you are limited to the investment options offered by your employer’s 401k plan.

However, one con of a Roth IRA is the income limit associated with this type of account. If you earn too much money, you won’t be able to contribute to this option. Roth IRAs also aren’t sponsored by an employer, which means that there is no employee contribution match.

The most distinguishing characteristic of 401(k)s, whether Roth or traditional, is the high contribution limit, allowing employees to save up to $22,500 per year in 2023. For workers over age 50, the ceiling is $30,000.

Meanwhile, annual IRA contribution limits are $6,500, while workers over 50 years old may contribute up to $7,500 per year.

A Roth 401(k) has a required minimum distribution beginning at age 73, but starting in 2024, the minimum distribution requirement will be eliminated entirely for Roth 401(k)s thanks to the SECURE Act 2.0, which was passed at the end of 2022. Previously, Roth 401(k) account holders could roll their plans into a Roth IRA and avoid the requirement entirely.

That means if you are one of the lucky ones with access to the Roth 401k, then you can essentially put money away for retirement with after-tax dollars and pay nothing on the earnings when you begin your withdrawals and no tax period in your retirement.

I knew that if I could make sure to always focus on investing a portion of my income that I could build wealth no matter what.

My definition of a stockstar is listed above. However, I have a barometer to measure my goal as well.

In order to be a Stock CEO and be one of the big boys, I looked at the compensation packages of CEOs in America. And CEOs are paid! The average salary of a Fortune 500 CEO is $15.9 million per year. The highest-paid Fortune 500 CEO is Elon Musk. In 2021, Musk saw compensation worth around $23.5 billion. He achieved this by exercising Tesla stock options given in a 2018 multiyear moonshot grant.

CEO pay has skyrocketed 1,460% since 1978.

CEOs were paid 399 times as much as a typical worker in 2021; that is up from 366-to-1 in 2020 and a big increase from 20-to-1 in 1965 and 59-to-1 in 1989.

The average CEO salary in the United States is $821,100 as of May 25, 2023, but the range typically falls between $620,600 and $1,057,900.

However, some CEOs like Warren Buffet accept a salary of $100,000. Some have gone so far as to take a salary of $1. For example, in 2010–11 Oracle’s founder and CEO Larry Ellison made only $1 in salary, but earned over $77 million in other forms of compensation. In some cases, in lieu of a salary, the executives receive stock options. Top CEOs like Elon Musk & Mark Zuckerberg take 1 dollar salary. and know the history of a $1 salary & perks that comes with a one-dollar salary.

Why do CEOs make $1?

The CEOs can afford to earn $1 as they make money through other ways like stocks and equity. This also helps them in avoiding taxes.

Who are the CEOs in the $1 salary club?

Some of the CEOs who take a $1 dollar salary are: Elon Musk (Tesla), Mark Zuckerberg (Meta formerly Facebook), Meg Whitman (Quibi), Larry Page Sergey Brin (Google).

Once I did my homework, I decided that I was going to be a stock CEO.

I may not be running a billion-dollar Fortune 500 company, but could manage a million-dollar stock portfolio.

Every dollar I invest would be my employee.

I would unleash these little worker bees to do their thing and help me build wealth with the power of compounding. That would be my equity pay package and golden parachute when I left work behind.

For example, Presidents / CEOs at companies that have raised Over 30M typically get between 250K and 5M+ shares. However, smaller companies that have raised Under 1M are more generous with their stock compensation as it ranges between 2 and 40%+ for Presidents / CEOs.

Therefore, I could reckon that a CEO of a small firm could get around 100K and between 10K-200K shares. Let’s say a small cap company like Ethan Allen, which has a share rice of $26.40 and a market cap of $667M, then a CEO would have between $263K and $5.28M in stock.

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Therefore, if I had bewteen1K and 10K in stocks or index funds such as GOOGL at $125 a share or the VTSAX at $101 a share, I would have $100K to 1.25M in investments. This is a CEO stock equity level right there. Having 10K in shares or $100K-1M in investments means you are a stockstar.

At 550K in investable assets, you are in the top 20% in net worth. At $1.1M, you are in the top 10% of net worth individuals. Think of it like this, if you can’t be a rap star, baller, or Rockstar, you can be a financial Rockstar. Just keep investing.

Like Rihanna, said:

To be what you wish
You gotta be what you are
Only thing I’m missin’
Is a black guitar index fund

hey baby I’m a Rockstar stockstar!

Real Estate

Elected officials sleeping on couches while pulling down a salary of $174,000

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Greetings to all you wealth-building enthusiasts out there!

We are in the homestretch of the New Year.

New Year’s Eve 2022 is a mere two days away.

Let your 2023 resolutions start to take shape and begin shortly. However, let us have a few moments of reflection over the last year shall we.

A recently elected Congressman, Maxwell Alejandro Frost, had a rent application rejected weeks ahead of being sworn in. He is unable to afford an apartment in Washington DC, as the median rent is $2,395, due to his bad credit.

Frost had to quit his job to be a full-time candidate. Seven days a week, 10-12 hours a day. He is couch surfing with friends until he can again have access to a livable wage after driving for Uber did not leave him enough to pay all of his bills. Thus, the reason for his bad credit.

He is far from alone in this situation. In 2018, Alexandria Ocasio-Cortez (AOC) couldn’t find an apartment in DC. She didn’t have the money.

At the height of COVID, more than 100 members of Congress are sleeping in their taxpayer-funded Congressional offices in 2020.

Let us provide some context here.

While rank and file members of the U.S. Congress make a decent salary ($174,000 a year), they don’t receive a per diem. Meaning they have to pay for everything out of their own pockets while some, other members do receive a per diem that can be used for housing. If you think this is unfair or strange, consider that for most of the period between 1789 and 1855, the only compensation senators and representatives received was a $6 per diem.

The fact that housing has become so unaffordable is just insane. I wrote a blog post about how I used a Roth IRA to buy property. However, not everyone has access to these means. Especially, if you have no retirement accounts to begin with.

Many officials were screaming poverty at the time they were seen working in their offices by day and converting them into bedrooms at night.

When the rent becomes so high that those helping write the laws are sleeping on couches, we need to address the matter of housing affordability.

Why not have communal living spaces? Similar to college dorms. This is far better than sleeping on a cot in your office.

What about building micro apartments? Enough space for a bed, couch, bathroom, small kitchen, and closet in about 500-600 square feet.

There has to be some affordable solutions out there. I had to do some thinking outside the box to start buying property with my Roth. Maybe that is what we need. Some out of the box solutions for long-term housing problems.

Real Estate

An investment action inspired by Supergirl: how you can use your Roth IRA to buy property

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Buy land, they aren’t making anymore of it. – Mark Twain

I am a firm believer in the learning curve. A learning curve is the rate of a person’s progress in gaining experience or new skills. Through time and experience will your ever-increasing knowledge and skills grow to help you make better and wiser decisions. That includes not only in your personal life, but in your financial life as well.

This post was inspired on an episode from the television series Supergirl (2015-2021). In an early Season One episode, two or three, Supergirl (Kara Danvers played by actress Melissa Benoist) is having a talk with her boss, Cat Grant, at her job with the company CatCo.

See the events of that exchange below.

Cat penned an article for the Tribune on Supergirl’s blunder at the port and ordered Kara to get it ready for posting. Kara wondered why Cat was constantly criticizing Supergirl, claiming that Superman never faced such heavy backlash. Cat expressed that women need to work twice as hard as men to succeed, pointing out that Supergirl, despite her good intentions, is still a novice; she left Flight 237 in the bay after saving it and now caused an oil spill while trying to prevent a fire. Since Supergirl’s job is a learning curve, Cat advised her to start with smaller targets and work her way up, similar to how the latter rose through the ranks at the Daily Planet.

Put simply, no one starts in at the top. You have to work your way there. Wealth building requires the same.

You have to learn to manage one dollar before you can manage one million. You start small and work your way up. Then it hit me. You can use one wealth building tool to help you build another. They are both levers that can be used to help you scale up your wealth.

It is like the S meaning on Supergirl’s costume. It is the family crest for the House of El; it means Stronger Together.

Both your Roth IRA and home investment can help you build wealth faster. They are both stronger together.  

The major fortunes in America have been made in land. – John D. Rockefeller

New Home, Construction, Industry, House

Buying a home takes money. You generally need money for two items: Down payment and closing costs. You can use funds from your Roth IRA to do this.

Roth IRA withdrawal rules allow you to take out up to $10,000 earnings tax and penalty-free as long as you use them for a first-time home purchase and you first contributed to a Roth account at least five years ago.

Normally you would need to wait until you are age 59 1/2 to start withdrawing funds. If you withdraw money from the account before age 59 1/2, you will typically have to pay a 10% penalty on the amount withdrawn. The distribution will also be subject to taxes. However, there are certain circumstances in which you might be able to take out funds from the account before reaching age 59 1/2 and not incur penalties.

One exception to the early withdrawal penalty is for the purchase of a first home. To be considered a first-time homebuyer, you cannot have owned a primary residence at any time during the previous two years.

This $10,000 exception is available for every individual, so a married couple can withdraw $10,000 from each of their IRAs for a total of $20,000 that can be used for a down payment.

In addition to purchasing your own home, you may qualify to help others buy their first house. IRA owners can withdraw funds penalty-free to help their first-time home buying children, grandchildren or parents purchase a home. Sweet!

However, $10,000 is the lifetime maximum for first-time homebuyer withdrawals. Therefore, the total of your withdrawals must remain under the $10,000 mark to avoid the early withdrawal penalty.

Many of you out there may say why not a traditional IRA. There is a method to my madness. Bear with me.

The reason for using a Roth versus Traditional IRA is that while there will not be a penalty on early IRA distributions for a first home purchase, you can expect to pay taxes on the amount withdrawn when using a traditional IRA.

For example, if you are in the 22% tax bracket, a $10,000 withdrawal for a home purchase will lead to $2,200 in taxes. For a couple in the 24% tax bracket who withdraws $20,000, the taxes due would come to $4,800.

However, this is not the case for the Roth because you have already paid taxes on that money so you owe no income taxes on money that is withdrawn for a first time home purchase.

So if you are all in on this plan, then let’s get down to business.

Ninety percent of all millionaires become so through owning real estate. – Andrew Carnegie

The rules for using a Roth IRA rather than a traditional IRA are slightly different. You can withdraw any contributions (not earnings) at any time from your Roth IRA before retirement age without penalties as long as the account is at least five years old. You will be able to withdraw any amount up to the total amount you contributed without being subject to taxes.

In addition to your Roth IRA contributions, you might opt to take out some of the earnings in the Roth IRA. You can withdraw an additional $10,000 from the earnings under the first-time homebuyer exemption.

This is where the withdrawal exception comes into play. You may withdraw a combination of both contributions and earnings or just earnings to use toward your home purchase.

Just remember that if you are only using earnings the cap is $10,000. Any penny above that will trigger the 10% penalty in a traditional IRA or just the the income taxes in a Roth IRA.

You can always take out funds above the $10,000 threshold if you are taking out contributions only or in addition to earnings.

Again, simple math can help you build wealth.

We don’t have to be smarter than the rest. We have to be more disciplined than the rest. – Warren Buffett

My method of using the Roth IRA early withdrawal exception.

First, I did some research and found out that if you qualify as a first-time homebuyer, you can withdraw up to $10,000 from your traditional IRA and use the money to buy, build, or rebuild a home.

Second, I learned that with a Roth IRA, you can withdraw your contributions tax- and penalty-free at any time, for any reason, as long as you have held the account for at least five years.

This got me thinking. At the time, I was renting. I had opened up a Roth IRA more than five years ago. I had been squirreling away cash in it since opening it up with T Rowe Price starting with $50 dollars a month.

I also opened up a second Roth IRA with another brokerage at another time as not to mess with the good thing I had going with the first one as you could no longer open a Roth IRA with T Rowe and continue with an automatic contribution of $50 per month.

Do not scoff or turn your nose up at investing small sums of money. Over the years dealing with both accounts and after regular and sporadic contributions over time my T Rowe account grew to over $10,000 as did my other one. I had well over $25,000 in both not counting my 401(k), Rollover IRA, or other cash and investments.

I was skeptical about moving forward at first with this decision to buy property. My first. Then, I thought about what Wayne Gretzy and Michael Jordan said, “You miss 100% of every shot you don’t take.”

This quote helped me as well. Progress always involves risk. You can’t steal 2nd base and keep your foot on 1st.– Fred Wilcox

Therefore, I went for it.

I started by combining both accounts. Then, I cashed out $13,000 of of my Roth IRA.

The first $3,000 was in contributions and the additional $10,000 was in earnings. After, using the funds for closing costs and a small part of it for renovations, I ending up paying taxes on a tiny portion. The grand total: $238.

I was shocked! I couldn’t believe it. I felt like I should have taken the plunge long ago.

Alas, we cannot look backwards, we can only go forward. Within a few months of me owning the property it had increased in value by $14,000. That is more than what I withdrew to get the place.

And owning gave me such a sense of peace. That right there is priceless. I decided to do some updates and renovations to feel better about the space I was in. It took some hard work and time, but it was worth it in the end.

I got inspiration from several places. I knew I wanted the feel of how I always felt every time I walked into a Restoration Hardware.

Restoration Hardware The Gallery at The Estate in Buckhead - Gilbane
Restoration Hardware Front Entrance

I got the idea to base my bathroom feel and design on the Marriott and Caesar’s Palace in Vegas. Clean lines, white, simple and elegant. I also went with frosted sliding shower doors that you could not see through.

Hotel review: Las Vegas Caesars Palace - 9Travel
Caesar’s Palace Las Vegas
First Look: JW Marriott Hotel Macau – Business Traveller
JW Marriott

My bedroom is my center and place of peace. I call it my home base. I also always have a mini home office in my bedroom as I like to roll out of bed in my pajamas and write, work and check the stock quotes.

75 Bedroom Ideas You'll Love - November, 2022 | Houzz
Houzz design

And I love an organized closet. I got inspiration for mine from the Container Store. Although, mine does not look like this, I did make sure it was organized with all of my suits, shoes, and sweaters together like in the picture below.

Custom Closets & Custom Closet Design | The Container Store | Custom closet design, Wardrobe door designs, Closet designs
The Container Store Custom Closet Design

Lastly, the heart of the home. The kitchen was inspired by honey + lime. Stainless steel appliances and organized kitchen cabinets make life easier. Again, although my kitchen does not look like this, it was done with something like the picture shown in mind.

Kitchen remodel, Samsung stainless steel french door refrigerator at Best Buy
honey + lime kitchen design

Every time I think back and ask myself if I made the right decision I think of this quote from FDR.

Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world. – Franklin D. Roosevelt

Amen.