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My liquid net worth is probably about 2/3 of my annual income, and I'm 37 years old. Do I wish I were further along than I am? Of course... but am I unhappy with myself because I'm not? No... because each situation depends upon one's circumstances. Here are mine:

When I was a teenager, my mother bought a copy of The Wealthy Barber and encouraged each of her three children to read it. This was my first real introduction to finance and investing in any kind of formal sense. There are a few lessons that I learned from that book, but the most powerful was just how big compound interest works over time. There were a few lessons/ideas in that book that upon further learning I have rejected, but that book planted the first the seed.

Well... no... actually it didn't - the first seed was planted before I ever read that book - allow me to explain a bit.

I have an M.B.A. these days, and my concentrations were corporate strategy and finance. I've worked as a corporate financial analyst ever since getting my M.B.A. (about four years ago). I've been around the Fool a while - and am not as big an expert as many around here, but I am certainly no newbie.

But the lessons I learned before even cracking the spine on The Wealthy Barber probably account for about as much as everything I've learned since. How can that be?

Well... I had a typical middle-class suburban upbringing. My parents bought as nice a home as they could afford, in one of the best at the time (and I think still is) school districts in the state. My father was a C.P.A., my best three friends' fathers were an engineer, a lawyer, and a small businessman (owned his own small business). Maybe slightly upper-middle class would be a better description of the neighborhood.

So how was it I learned as much at 15 or 16 as I've learned since, even including evertying here at the Fool or in my formal education?

By watching what financial decisions my parents made.

You see, my friends' parents would typically buy new cars ever 5 years or so... sometimes even a Mercedes. Impressed with these new cars (especially the Mercedes), I'd ask my parents, "Why don't we have new cars?"

My father would say, "Because the depreciate a huge amount the second you drive them off the lot. A car's just transportation, as long as it's reliable that's what really matters, and there are more important uses for the money than paying all that depreciation cost."

Another of my friends's parents (the engineer) liked to buy new, fancy electronic devices. He actually bought a Betamax in the early days - when they were very expensive. Even after VHS had won the war, we still didn't have a VCR - even after the prices had become far more reasonable. Then cable television arrived in our neighborhood. All of my friends had cable television. I envied all of those channels they had, especially the ability to watch more baseball games than I had access to with our little T.V. with the rabbit ears on top. I asked, "Why don't we have cable?"

My mom would say, "Because there's enough junk on television, why do I want to pay for more junk? Besides, there are more important things to spend the money on."

Deciding what's most important to you, and spending your money accordingly... that's the lesson I learned from my parents, and one that rivals all I've learned since. Maybe the Mercedes and cable T.V. were what were truly important to my friends' parents - I'm not second-guessing their lifestyles - but this is the lesson I learned and how I learned it.

Anyway, after reading The Wealthy Barber I knew I could someday be wealty if I just started early enough, and kept at it.

When I got my first job (I'd had others that lasted several months, this was the first lasting one) in college, the company offered a 401(k) after a certain period of employment - 50% matching up to 6% of my pay, and fully vested from the start. I, of course, contributed the 6%, taking full advantage of that matching. You see, The Wealthy Barber had taught me how much money 15% return could add up to over time, but an immediate 50% return? No way I was passing that up.

So, I started off selling popcorn at a movie theater. Became an usher, cleaning the theaters after the movies... became a supervisor, an hourly manager, and then a salried manager. All this time I was fiddling around in college, not really getting anywhere (a different story), but all the while contributing to my 401(k). I never made very much money (movie theater managers don't make a lot, and concession attendants even less), but I was contributing what amounted to 9% of my pay the whole time.

One other important lesson I learned at the same time... it was from my freshman economics course... the lesson was that of opportunity cost. I quickly coupled this opportunity cost lesson with my Wealthy Barber lesson and came to an epiphany of sorts.

Avoiding paying interest is the same thing as earning it.

Avoiding paying 18% credit card interst is the same thing as earning 18% investment interest - and I knew how absolutely huge 18% interest would be over time.

I've almost never carried a credit card balance in my life... thanks to that Econ 101 course I took when I was maybe 19 and thanks to The Wealthy Barber I read when I was maybe 16. Sure, sometimes my little, boring, economy box on wheels needed to be repaired and I didn't have the money (the e-fund lesson came later) and needed to get to work. So I would use a credit card from time to time for occasions such as this, but I'd always pay it off as quickly as I possibly could - never, can I recall, ever carrying any credit card balance for more than three months.

Well... I finally 'saw the light' and actually put some effort into college. Once I did, I went full-time, straight through, including summers while also working full-time (all the while contributing to my 401(k)). After a brief hiatus, I enrolled in grad school. Now this necessitated taking out some student loans, but I took out the least I could, and continued to work full-time while attending grad school full-time (I was one of two students in my entire class to do this). No, I didn't have much free time - was I a glutton for punishment? No. My fellow students who worked only part time, or didn't work at all (and there were many) were borrowing not only the money for their tuition, but for everything... their living expenses, even their toothpaste.

I wasn't about to borrow money for toothpaste if I could avoid it.

And all the while I kept contributing to my 401(k).

A few months before I graduated I quit my movie theater job - both because I had outgrown it and didn't like it much anymore and also to be able to spend more time looking for a new job. About 9 months later (6 months after I graduated) I found my first financial analyst job. Of course, signing up for the 401(k). While my amassed 401(k) money had, by this point, pretty much equalled my income (as a movie theater manager), my income suddenly went up by about 70%, so on the income vs. nest egg scale I slid back down the ladder several rungs.

Obviously, not a bad thing when one considers why I slipped down those few rungs.

After working at that job for about three years (my income rising another 20% over those three years), I found another job - this one paying about 25% more than the previous one had. So, in the span of about four years my income had grown to about 2 and 1/2 times what it had been when I was managing movie theaters. Needless to say, my contributions to my 401(k) couldn't (or didn't) keep up with that kind of growth - so I kept slipping down the income vs. net worth latter with each passing year.

I've picked up adequate insurance along the way, have a big enough e-fund now, and continue to save and invest... maybe I'm still behind pace to actually FIRE - and maybe I need to contribute even more than I am. But I am on pace to have at least a normal, comfortable retirement - and that's no small task these days.

So, my liquid net worth (investments + e-fund, not counting cars, furniture, etc.) is only about 2/3 of my annual income, and I'm already 37 years old.

But when I look back, and consider all of the circumstances I'm left with one conclusion... I'm left saying to myself...

"You could have done better, sure... but not bad... not bad at all."



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