How this couple became a millionaire with their retirement accounts
Andy and Nicole Hill were on the couch watching an episode of Suze Orman’s show when they kept hearing a familiar phrase: net worth.
“On the show, they were talking about net worth all the time,” Andy Hill said. “Net worth, net worth, net worth.”
A light bulb went out. Their own net worth would surely be high… right? The couple had a combined income of $ 130,000 and they had already accumulated $ 16,000 in retirement accounts.
So the Hills sat down and did the math – and the number shocked them. They weren’t as wealthy as they thought they would be. In fact, they had a negative net worth of – $ 50,000.
Knowing your net worth is a relatively simple calculation. You take your assets, or what you own, and subtract your debts, or what you owe. “[Nicole and I] wrote it [all out] on a big whiteboard upstairs in our space room, ”Hill said. Net worth changes over time and can go up or down as your financial situation changes.
At the time, most of the Hill’s debt came from student loans and auto loans. They also owed more on their home than it was worth after coming out of the 2008 recession.
This awakening, which happened in 2010, gave Andy and Nicole the boost they needed. They wanted to have children and be in a good financial position before their children were born.
Today, the Hills are millionaires. Andy runs their blog, Children and money marriage, a platform dedicated to helping young families create wealth and prosper.
Here is how they did it.
A negative net worth reality check
The first thing was first: get out of debt. They agreed to live on just one of their income, so that they could use the other’s income to save, pay off debts and invest.
They set out to free themselves from their debts before the arrival of their first child a year later. To meet their goals of paying off $ 50,000 in debt in one year, they began to meet once a month to discuss strategy.
Write down your numbers and understand your current situation. Once you’ve tackled a small feat of paying off debt, you’re inspired to pay off more. Don’t let the nuances of your debt repayment journey deter you from being in good financial shape.
They have reduced their expenses. “We were spending a lot of money going out to bars and restaurants, going on vacation or going to concerts. But we also looked at areas where money was flying out the window, like unnecessary subscriptions and high bills, ”said Andy Hill.
And they became more intentional about how they spent their money. They used a spreadsheet to budget and track their expenses. Twelve months later, they had eliminated their student loan and auto loan debt.
“With a year of wrapping up, we did something that helped create a movement for us that was going to change our family tree. It gave us the courage and motivation to move forward, ”said Hill.
Then they decided to work on paying off their mortgage. They spend $ 3,000 per month paying off the mortgage, using tax refunds, bonuses and working commissions for the mortgage balance. In four years, the Hills have paid off their mortgage of $ 195,000.
Increase income and invest aggressively
One of the keys to the Hills’ success is that they have increased their income through ancillary activities. Andy started his podcast, Marriage Kids and Money, and learned how to monetize it.
“I started to figure out how to make some money around 2017 with my podcast. In 2019, Nicole and I were both doing sideways pushing. She was taking care of the house organization and I was making some money, mainly from podcast advertising, ”Hill said.
The couple also sold items on Craigslist: “I sold things like a road bike that I used to do triathlons, handbags that Nicole no longer used, old baby clothes, furniture. .
The Hills had an average annual income of $ 190,000 for ten years, but continued to live on around $ 70,000 to $ 80,000 even after having children. They saved around 40-50% of their income, which was mainly used to pay off debts and invest in tax-efficient accounts. “We had the privilege back then to do six figures and then it grew from there,” Hill said.
The Hills have taken advantage of taxable investment accounts like 401 (k), Individual Retirement Accounts (IRA), and Health Savings Accounts (HSA).
Andy maximized his 401 (k) to take advantage of his company’s 15% contribution. The couple also maximized their Roth IRAs and HSAs. “I saw the benefit of having tax diversification in our accounts,” Hill said.
Experts love Roth IRAs because they help supercharge your retirement savings. Because of their flexibility and tax benefits, Roth IRAs protect you from taxes when you put money aside. In addition, the Roth IRA money grows tax-free and you can withdraw it without paying tax on your income or contributions when you reach retirement age.
For many years, the Hills have invested in low cost index funds. Index funds allow investors to invest their money in multiple stocks instead of just one. They help maintain the diversification of financial portfolios. “I saw the ease of index funds probably six years ago, and have been investing in them ever since,” Hill said. “I like index funds because they make it simple. It helps me relax and take charge of my life. I want to do other things with my time and not worry about this stuff, ”Hill said.
Life after reaching the millionaire mark
The Hills became millionaires in 2020 by paying off their debt and increasing their savings in their 401 (k), Roth IRAs, and HSAs. The couple also reached Coast FIRE, which is when you have enough money invested in your retirement accounts that, without any additional contributions, your investments should grow to cover your expenses at the traditional age of retirement. These milestones gave them additional freedom.
“We made changes to our lifestyle just as we hit that million dollars. In January 2020, I left my career in corporate event marketing to become an internet content creator. I work about 25 hours a week, and have a dad and a husband present. It sounds like the more balanced life I was looking for, ”Hill said.