Can you really create significant wealth even with a median or lower income? 

Absolutely, but it takes strategy and patience.

Our LWR Journey

Here’s a look at our LWR over the last five years:

2020: 48%

In 2020, we became more intentional about tracking our net worth, moving from ballpark estimates to precise calculations. This allowed us to start measuring our LWR accurately. At that time, nearly half of our earned income had been converted into net worth, mostly tied up in real estate. This solid foundation highlighted the need to diversify and understand the equities market better. We also used recent real estate appreciation, helped by some home updates, to get PMI removed from our primary home mortgage. Due to the pandemic surprise,  we put that savings in a separate account at the bank, increasing our emergency funds during an actual emergency, with the intention of investing all of it once we felt more comfortable that our income wasn’t in jeopardy.

2021: 62%

In 2021, our LWR surged to 62% due to several factors: a booming real estate market, disciplined savings, and strategic investments, such as putting all our stimulus money into our IRAs. We refinanced 2 mortgages to lower interest rates. We opened solo 401ks for our self-employed businesses, funded with the pandemic surprise of extra savings from spending more time at home. We thanked our lucky stars that our income streams were mostly steady though the pandemic shutdowns & aftermath.

2022: 73%

In 2022, our LWR climbed to 73%. We continued to manage our real estate investments, maxed our HSA and IRA contributions, continued our automated monthly investing despite the market downturn, and researched long term tax strategies. I researched bank and brokerage signup bonuses (since I wanted to move banks anway) and invested that $1.3k into our retirement accounts. These actions boosted our net worth even in a tough market year.

2023: 87%

With our LWR reaching 87% at the end of 2023, we are seeing the rewards of investing through the downturn last year, as the markets reover to new all time highs. Our efforts to diversify our investments, along with the extensive growth in the housing market since 2020, provided a tailwind for our LWR. Our growing knowledge of the tax code, especially how it applies to small business owners and median income earners, allowed us to lower our effective tax rate. This resulted in us paying a smaller percentage of taxes relative to our total income when compared to the year before.

NEW: 2024: 93%

2024 was a tough year for cash expenses on our rental properties. We had to replace two roofs, install a full set of replacement windows, and pay to take down several dying trees. This all cost tens of thousands of dollars and made our net rental income for the year negative.  Despite that, our LWR increased to 93%. (Crazy, right!?!) This years growth was largely carried by our equities investments, that earned more than we did at our occupations. It’s pretty amazing what happens when compound growth really gets rolling at the tail end of your wealth building journey. We were also able to make use of our lower rental income earnings to do some tax gain harvesting, paying $0 federal tax on about $10,000 of realized long term capital gains from our taxable brokerage. This is an example of how our growing knowledge of the tax code, along with strategic planning during the year, allows us to reduce our effective tax rate.

Want to learn more about Lifetime Wealth Ratio?

Visit last year’s Lifetime Wealth 2024 Update post for more details, like:

• What is the Lifetime Wealth Ratio?
• Why Lifetime Wealth Ratio Matters
• Acknowledging the Grind: Encouragement for New Savers on the Path to Wealth
• How You Can Improve Your LWR 
• Understanding the Challenges for Median to Lower Income Earners
• Strategies for Lower to Median Income Earners

and:

• How to Get Your Total Lifetime Earnings from SSA.gov 

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What steps are you taking to improve your Lifetime Wealth Ratio? Share your journey with us in the comments below!

#WealthBuilding #Investing #LifetimeWealthRatio#SmallAndMightyBusiness #SmallAndMightyRealEstateInvestor #SurprisingWealth

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A Bit About Us

Our journey began with humble beginnings. We’ve navigated through the challenges of creating a life and a living we love, while earing low to median incomes. What started as a modest dream of being able to retire someday has turned into a concrete plan. We’ve been on the SlowFI path, consistently saving and investing for 20+ years. Our income over time has stayed roughly in the 50th percentile, so we are truely everyday Americans. We’ve achieved remarkable results through living below our means and consistently investing the difference. Now in our mid-40s, we are in the top 20% for U.S. household wealth for our age group. This has been possible through conscious spending, consistent saving, strategic investing, and a commitment to lifestyle design where we spend generously on things that bring us value and contentment, while cuting back on things we are ambivalent about. It can be daunting when you hear the stories of tech workers or doctors or other people with large income shovels. We want to share how an everyday couple with median US income has built wealth for the future, while also creating a life we love today.

Why Financial Independence?

Financial Independence means having the freedom to make choices that aren’t dictated only by the need for a paycheck. It’s about gaining control over your time and energy, and being able to pursue what truly matters to you. For us, it’s about creating time for friend & family, travel, and the experiences that bring joy and fulfillment.

Join Us on the Journey

In January 2021, I ran some calculations, projected our investment growth, and analyzed our current spending levels. After adjusting our spending assumptions for future inflation, I realized we were on track to replace our earned income (trading time for money) with investment income (our money making money for us) in approximately 10 years. With 75 months left to go, we’re solidly on that path and we want you to join us. Whether you’re just starting out or well on your way to financial independence, Surprising Wealth is here to support and inspire you. Together, we can make every month count and turn dreams into reality.

Thank you for being a part of our community. Let’s embark on this journey to financial independence together!

Disclaimer: All the tips and stories here are from my own journey toward financial independence. Remember, what worked for me might not work for everyone. This content is for informational purposes only and should not be considered as financial, legal, or tax advice. Always consult with a professional before making any significant financial decisions.