Young Millennial Millionaire

Todd Baldwin and his wife are intentional about their finances, and have done incredibly well for themselves.  When I read this article about this young millennial millionaire couple’s budget and cashflow, I was inspired to share it.  Not because others need to do exactly what they're doing, but because it demonstrates what is possible when you have a strong WHY, have no consumer debt, have an emergency fund, and have some solid financial knowledge to work from. Being frugal and not being flashy also played a large role in their success.

​I've highlighted the key points from this article below and also make some recommendations on a few things that they might consider.

Todd Baldwin has always wanted to make a lot of money... 

WHY: He was raised by single mom who struggled working 4 jobs to feed 3 kids. She was worried all the time about money, and he saw it and felt it.  He didn’t want to feel that financial stress when he grew up.

WORK YOUNG: He started working at age 12, shoveling manure for $3 an hour, and when he looked at his $6 in quarters earned, it was more money than he’d ever seen.  He was excited by the thought of making millions!

REAL ESTATE INVESTING: He started investing in real estate at age 23. By age 25 his net worth exceeded $1 million, thanks to savvy real estate investing with his wife.  Their $4.4 million in real estate is supported by $3.1 million loans, which means they have roughly 30% equity.  Their loan payments are currently covered in full by tenant rent, so as long as there are tenants and their lenders don’t call their notes, they’re in great shape.

​FRUGALITY RULES:  This couple lives well below their means, and are able to bank the wife’s annual 6-figure paycheck from her 9-5 job.  They are not showy: he actually wears a $12 rubber wedding ring, and they only own 1 car, a 2009 Ford Focus.  The also make sacrifices to get ahead: they have roommates and don't take vacations or have luxuries. They even have a side-hustle as "secret shoppers", which allows them to get free meals, groceries, entertainment, car maintenance, and sometimes gas!
 
And here's how he and his wife have done it... 

INCOME: $615k gross/yr --> $305k net/yr  ** 80% is reinvested into more real estate

• TODD's DAY JOB: $150k/yr in commercial health insurance field ($12,500/mth gross)
• REAL ESTATE: $460k/yr from 6 properties that yield $38,334/mth gross
• SECRET SHOPPER:  ~$5k/yr ($415/mth gross)

MONTHLY BUDGET:

• MORTGAGE+TAX+INSURANCE:  $0 [net positive $1850]
  • they bought a duplex near Seattle for $900k
    • rent out 1 side for $3000
    • rent 2 rooms in their own side of duplex for $1200 and $850 (Wow!)
    • rent out their converted garage (AIRBnB) for $1500/mth
• UTILITIES+WIFI:  $300
• INSURANCE:  $550 (health, car, life)
• GYMS:  $130
• FOOD:  $25 (so low due to being secret shoppers)
• GAS:  $80
• PHONE:  $67
• SUBSCRIPTIONS:  $30 (Netflix, hulu)
• REWARDS CREDIT CARD FEE:  $6

SAVINGS:

• MONTHLY
  • $8,000/mth put into a high-yield savings account for future real estate purchases
  • $5,000/mth put into a separate high-yield savings account for retirement
  • max out two IRAs and two 401(k)s — his and his wife’s
  • max out HSA (health savings account)
• In 2019, they put $6,000 in both his and his wife’s IRAs, $19,500 in both of their 401(k) plans and $7,000 in his HSA. Any extra money they have left at the end of each month goes toward savings or a vacation.

Really, this couple is doing an incredible job of living life frugally and intentionally in order to invest and create a rich financial future. They’ve sacrificed a lot of fun that others their age have taken advantage of, but the article mentions that they plan to rectify that at some point.  The article doesn't share, however, if and how they are using some of the resources that God has blessed them with to bless others. (Matt 6:19-21) They seem like a couple that would do that. :)

A few recommendations for them to consider...

MY FINANCIAL RECOMMENDATIONS:

• I recommend having more specific savings goals
  1. use separate high yield savings accounts to fund short-term goals (< 5 years). This sinking fund idea is one that my husband and I have been using for years. We set up savings accounts for medium to large expenses (e.g. kitchen renovation, car, roof, bi-annual car insurance…) and then using two pieces of data: 1) the estimated cost of the expense and 2) when we’d like to have the money on hand for the purchase, we put the calculated monthly amount away each month so that by the goal date, the expense is fully funded. Works like a charm!
  2. use an investment brokerage account for long-term goals (goals > 5 years away) rather than saving everything in savings accounts. For example, this couple is saving $5k a month for retirement in a high-yield savings account. Since they’re already maxing out 2 IRAs and both of their 401ks, I would recommend putting the extra money into an investment brokerage account since retirement is longer than 5 years away. 
• Because their income is too high to invest in a Roth IRA, and because they are so young, I would recommend that they convert traditional IRAs to Roth IRAs so that their IRA money grows tax free.
• With regard to their investment properties, I would be cautious about having too much reliance on OPM, remembering that if you can’t afford to keep the property vacant, you can’t afford to keep it. For this couple, a vacant property wouldn’t be the end of the world due to the fact that they have such good cashflow and savings. They could go a little while without a tenant, but there is a break-even point, where that may no longer be the case.  I have to believe that they’re very aware of this.
• Because Todd experienced some stress as a child due to the financial stress on his mother, I thought it might be possible that "making lots of money" had become a bit of an addiction, but in watching the video of him in the article linked above, I have to say that he seems well-grounded and knows that happiness doesn't come from money. He'd also like to be a very present father to his future kids, which he can do because of all they've done to set up their family ahead of time.