Millionaires in the Making:  Adam Baker, San Diego, CA

Age:  30

Occupation: Investment Banker

Salary: Approximately $325,000

Home:  Estimated value around $650,000; $125,000 in equity

SEP IRA:  $150,000

College Savings Plan: $10,000

Cash and Cash Equivalents:  $200,000

Debt:  Mortgage only-put $125,000 down payment in cash

Cars:  Has never had a car loan.  Has always paid cash for his cars including his current truck, a 2003 F-150

Since birth, Adam Baker has always looked for two things:  a great deal, and a way to make money.  At the ripe ole age of 10, Adam Baker was selling his toys to neighborhood kids down the street.  At 21, he was socking money away for retirement.  At 25, he was paying cash for his now wife’s engagement rings.  No matter his situation in life, Adam has always had his eye on his life goal:  Become a millionaire by the time he was 30.

Although his thirtieth birthday has passed and Adam is not quite the millionaire he thought he would be, he is well on his way to accomplishing the other goals he has set for himself and his family:

1. Retire
        at 50 without depending upon social security

2. Have
        enough cash that him and his family could live for two years without
        having to work

3. Have
        enough saved for his daughter, Evelyn, to go to college without having to
        come out of pocket

4. Indulging
        in a romantic trip to Greece
        and Italy
        on his 25^th wedding anniversary.

With Adam being a self-employed Investment Banker, he faces many challenges; One being that taxes are not taken out of his monthly paychecks, but payable estimates are given to him at the end of each quarter.  Although Adam must save for quarterly taxes he still manages to put into place many simplistic strategies that help him accomplish those goals listed above.  Over the course of the last four years, Adam has consistently made an annual salary of over $250,000 and currently makes a minimum of $300,000.  Adam is paid a monthly stipend of $8,333 and a bonus at the end of the year making up the rest of the $300,000 total salary.  To accomplish those four goals above, his savings strategy is quite easy to understand.  His family lives off of the $8,333 a month while never touching the annual bonus.  To break it down even further, over the course of a year, Adam and his family live off 1/3 of his income and save 2/3’s of their income. 

With the $200,000 a year that Adam saves, he puts it into many different investment accounts. First, he maxes out his Sep IRA. Being a self-employed Investment Banker he is able to invest a minimum of 25% of his income or $45,000 a year into his SEP IRA which is tax deductible.  Second, over three years ago he converted his 62 year-old father’s Key Man Term Life Insurance policy to Whole Life without having his father, who had just suffered from a heart attack, be reinsured.  The annual cost of the life insurance is $17,000 with a pay out of $500,000 tax free.  Thirdly, he has self-directed his IRA to do hard money real estate loans making an excess of 12% on his investments while the stock market is in a bear market. Finally, the remaining cash he has left is held in a Vanguard Municipal Bond Fund which can quickly be used for purchasing tax liens, writing covered calls, and income property.

Most of Adam’s monthly expenses are associated with his wife’s car or their utility bills.  His wife traded in her 2007 BMW, and a $600 a month car payment, for a 2008 Saturn Vue so that they could save $300 a month on a car payment and over $100 in gas.  Their utilities run about $800 a month which includes a security system for their home.  Adam and his family spend about $400 a month on groceries and anywhere between $100-$500 a month on entertainment.  To the Baker’s, entertainment consists of a great dinner with family and friends or weekend getaways.

Although Adam and his family don’t live the lavish lifestyle of their friends and family, they manage to enjoy life to the fullest.  Between camping with their friends in their RV once a month and weekly family get-together’s they consider themselves quite fortunate.  They have also been given the opportunity to travel to amazingly beautiful destinations such as Hawaii, Canada, Los Cabos, Mexico, and New York just in the last three years alone.  Adam’s focus may be on saving for the future, but having fun and enjoying life with his family is a priority at the top of his list.