[What up what up! Been getting a TON of response from our post the other day on the history of our net worth, so thought we’d continue the fun and share another person’s financial background today ;) Can never see too many numbers about money, am I right?! Take it away, Jimmy…]
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Inspired by J. Money’s recent, “How we grew our net worth to $900k,” I offer the following: “Jimmy’s History of Personal Finance.” Below is a quick summary on my $652,000 net worth and how I got there. I am 52 years old and a native Texan.
Retirement account ($253,000) – I’m a career educator and probably the best financial decision I made was maintaining my participation in the Texas Teacher Retirement System. Current assets are at $253,000, however, I will draw a six figure annual pension based on my 30 year career as a teacher and administrator.
Tax advantaged accounts / 403(b) ($180,000) – I began investing in tax advantaged accounts my first year of teaching, but I have never maxed out those contributions. Big mistake! Let’s compound that mistake with a divorce at 46 that reduced the account by 50%! I have always viewed this money as that which will buffer my TRS retirement pension and provide cost of living adjustments (COLA) which is not in the pension plan. Kids: Start maxing out your tax advantaged accounts immediately and don’t get divorced.
Taxable accounts / Roth 403(b) ($20,000) – Retirement investors should max out tax advantaged accounts prior to starting taxable accounts. I did the opposite; started a Roth without maxing out tax advantaged accounts. Not sure why other than bad planning and lack of understanding. Silver lining: I have avoided some tax consequence in retirement via the Roth 403(b) and will likely continue to invest in Roth IRA’s after I retire from TRS.
Cash on hand ($23,000) – I maintain this cash on hand as an emergency fund and am on track to build to $40,000 prior to retirement.
Texas Tomorrow Fund ($90,000) – One of the best financial decisions I have made was investing in this tuition reimbursement program sponsored and underwritten by the state of Texas. I enrolled both my daughters in the plan which charged a nominal monthly amount ($236 total for both girls) and froze tuition and fee rates at the date of purchase. I invested $48,000 for enough tuition credits and fees for both daughters to earn bachelor’s degrees and the investment grew to $90,000 over 20 years. Not the best investment on percentage increase, however, significant peace of mind and a great insurance policy on college tuition and fee increases.
Windfalls ($120,000) – I have benefited from two cash windfalls in my life: a vacation buyout at work ($30,000) and proceeds from an inherited oil and gas lease ($90,000). My former spouse and I spent $70,000 of the total on house upgrades, car debt and tithing, and maintained $50,000 as part of our emergency fund. When we divorced, we split that $50,000.
Cars and houses (net $81,000) – Ah, cars and houses. I have been blessed to drive paid off cars since 2011 and will never purchase a new car again. I currently drive a 2008 Honda CRV with 110k miles that is probably worth $5k. I have purchased three homes in my life and netted $35,000 on the first sale, $0 on the disbursal of the second due to my divorce, and currently live in the third. I hope to pay the third home off in the next 5 years.
Health Savings Account ($5,000) – Enrolled in this tax advantaged opportunity as soon as it was available with my employer and have accrued $5,000 thus far for future medical expenses. I anticipate continued growth here as my daughters become independent and assume responsibility for their own medical needs.
Tithing ($15,000 a year) – I am a Christian and have strived to tithe 10% of my gross income over the years. It took a long time to make it adding 1% a year. I include tithing here as I believe tithing is part of my financial plan and has had a positive impact on the bottom line in my net worth.
Life and disability Insurance ($0k) – No cash value here as the policy is a 15 year term and not whole life insurance, however, incredible peace of mind for my children in the event of debilitating illness or untimely death.
Budgeting and expense tracking ($0k) – I have budgeted money and tracked expenses since I began getting paid for my work time when I was 12 or 13. While I have it as zero monetary value, the behavior of tracking expenses and budgeting is a foundation to my net worth.
Scorecard
Ranking my behaviors on the scorecard below. I feel good about the positives, want do overs on the negatives, and sure would like to have worked that windfall differently. All in all, I’m going to give myself a low B- or a high C.
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Thanks Jimmy! That pension and tithing is off the chain!
If anyone else would like to divulge their financial history with us, hit me up and we’ll make you famous.. In the meantime, here are other fun financial snapshots to ogle: Other People’s Money Series
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Just wanted to say “go Jimmy!”
Great job Jimmy. Very inspiring!
Jimmy –
I want to know how you can have a six-figure government pension….
I have a large 401K (maximum contribution for 20 years) and have paid into Social Security all of my working life. I have earned very good wages (just shy of six figures for more than a decade). My private company discontinued pensions after paying into mine for four years because it could not afford them. With my 401K (assuming a 3% payout; waiting until I am 70 and it doubles in the 10 years until I withdraw) and Social Security (assuming that I work until full retirement age at the current wage and do not draw until age 70) and the small pension will not add up to six figures annually in retirement.
These types of extreme retirement plans are why states are facing financial crisis status and the taxes are rising.
Those city/state pension plans are no joke, especially if you started in a smaller town in the 80s/90s…my father is a retired fireman pulling a six figure pension. He never made 6 figures while working. It’s insane. Good on you Jimmy for taking advantage!
I have to agree that a six figure pension for a 30 year teaching job is not justified. I would not count on that being sustainable in the future. 70% of new jobs pay less than $20 an hour and a significant number of people have unsustainably high housing costs already. The tax revenues from all these low paying jobs will not support these huge bloated pensions. Are these people to become homeless to pay these pensions??
PaulaH and Liz,
I concur with your concerns about the viability of tax supported pensions. In our state, the TRS pension is actuarily viable and sustainable, however, it is a political issue with the state so it does have some vulnerability. I am comfortable with that low risk and will have patterned my life in retirement to live off very little of it anyway…probably close to leanFIRE with a paid off home when I finally hang it up.
I would challenge your assertion that my low six figure pension is not justified. If you read the handbook, conform to its guidelines, get vested and work hard, whatever you are paid within those guidelines is justified in my book. And I would offer that I have dedicated my working life to a public service career and have not been compensated near what I would have been in a private sector position. Please excuse my lack of humility here, but based on my experiences, education and work ethic, I would be a top earner in the private sector and would have substantially more retirement savings than I do based on 30 years of heightened income. I do recognize as PaulaH points out that I might not have the nut to generate a six figure pension however. At 4% withdrawal, $2.5m would be necessary and I might not have gotten there. Instead, I figured out my gig early on (year 1 or 2), did the math and have excelled in my near 30 years. Everyone has their own path and I have been blessed on mine. I appreciate your thoughts and enjoyed reading them.
Awesome work, Jimmy! Another example of how small, consistent actions lead to big things over time.
I completely agree with you on tithing. My husband and I stepped up from tithing on our net income to tithing on our gross income a few years ago but somehow have been able to make even more progress on our goals.
Y’all inspire the crap outta me…
We give a lot more than we used to (money and time, if you count helping people with finances?!) but I sure could be better about tithing :( I like the idea of slowly increasing it by 1% like we talk about with all our other goals so why should it be different?!
(Have also seen more money/opportunities come the more we give away too… really is amazing how that works!)
Thanks for the all the kind words of support! I appreciate all your thoughts and not going too harshly on my scorecard assessment…would love to have done some things differently, however, I will take the +/-/x as noted and be thankful for all of it.
On the tithing portion, I hope my comments did not seem to be “prosperity gospel.” I am not an adherent of that idea but do agree with Rho and J$ that when you open your hand and give you are blessed.
Thanks again and J$ keep it up man!
Great job Jimmy, keep it up!! Another great example of someone taking their finances seriously and having a healthy net worth.
Dang, Texas TRS – is rock’n. You got 30 years in and a six figure pension? That beats TRS in Alaska…I have 25 years in and collect half of your total…..For folks wondering, most pensions in state government are based on a percentage of salary, but many states, including Alaska, have now switched over to a 401k style system…2% average of the three highest years and an additional 2.5% for each additional year is the calculation used when I retired.
PS…40 percent of teachers are not covered by Social Security because they teach in jurisdictions that have not elected to participate in Social Security. That includes almost all teachers in 15 states….Alaska, California, Colorado, Connecticut, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island, and Texas.
Even if they worked in the summer, like most teachers have to do, and have jobs pre. and post teaching career, that pay into S.S., there is a law (Windfall Elimination Provision – WEP) that will reduce any future S.S. payments by about 70%. Think your getting $1200 a month?Nope, more like $300. Don’t believe the S.S. statement you get in the mail or check online if you are a teacher from on of the 15 states. This really hits single widowed women the hardest. If you somehow work 30 years pre/post teaching, like my dad did, then you do get your full S.S. benefit….but your widow does not get to collect the higher amount when you die…Be warned, these are things they never tell you about when you get your teaching job.
Damn – thanks for the insight!
I’m curious about your statement: “Retirement investors should max out tax-advantaged accounts prior to starting taxable accounts. I did the opposite; started a Roth without maxing out tax-advantaged accounts. Not sure why other than bad planning and lack of understanding.” I understand that logic with regards to a taxable brokerage account…but not a Roth account. Wouldn’t the logic be to (1) invest up to the employer match in tax-deferred accounts, then (2) max out Roths (if eligible), then (3) finish maxing tax-deferred accounts, and lastsly (4) invest in taxable accounts? Since the majority of an account’s value at retirement will be attributed to growth…it would seem to be more advantageous to take advantage of tax-free growth available with Roths. Am I missing something?
That’s what a lot of people do, yeah. Always mixed opinions on that though :) Maybe he wasn’t getting the matches at all until he realized?