I Became a Millionaire… sort of

Today I learned that I became a millionaire. Since 2019 I have been calculating our families net worth at the end of each month. I highly recommend you engage in this quick and easy exercise. And this month we hit a milestone.

When I ran the numbers at the end of May, I discovered that we had joined the 2 comma club, i.e. we had become millionaires (on paper at least).

Under normal circumstances, this would be something to celebrate – and I recognize this is a milestone that many households in America would love to hit.

But for several reasons, I feel a bit melancholy about this.

1. This milestone is temporary.
2. Much of the equity is in our rental property (and we would have to sell to get the cash).
3. Even though it is factored into our net worth calculation, we still have a lot of debt.

Let’s run through these issues one at a time…

My Millionaire Status is Temporary

When I started tracking the net worth of our family almost 5 years ago, I didn’t anticipate we would hit the 7-figure mark this soon. When I started tracking my net worth, the first calculation was $198,000 in June of 2019.

Many of our gains came from our primary residence which increased in value by $300,000 in the past 5 years, my good fortune to have invested heavily in Apple which has increase in value by 339% over the past 5 years, and a financial gift of $162,000 that my Wife received from her Mother.

But this status is temporary.

I will write more about this in the coming months, but my Wife and I have decided to separate at the end of June.

In fact, I just signed a lease for a small townhome just a few minutes down the road that starts on June 15th.

So even though I’m a millionaire today, this status is short-lived. After my wife and I separate, we will divide our assets and my net worth will be cut in half.

Equity in Our Home Doesn’t Feel Real

If I were to open up a bank statement and see a balance of $1,000,000 – that would make me feel like a millionaire.

But simply averaging the value of my home between the amounts I can find on Zillow and Redfin doesn’t seem real.

Just because some website tells me what my home is worth doesn’t mean that someone would actually pay that amount. Also, there would be fees and commissions associated with the sale that would pull back the actual value.

Frankly, if I discounted the value by 5% to account for these costs and uncertainties, that might be a better picture of where we are at. (And this would pull us back under the 7-figure mark, if only slightly).

My Debt Still Cripples Me

Right now our debt service, not including our mortgage and HELOC that is paid for by the tenant that is leasing our home, is $3,600 per month.

That’s $3,600 per month that I have to pay before I can pay the rent on my new townhome, buy groceries, or put money away into investments (and frankly, I can’t start investing until I’ve paid off all this debt anyway). I will be taking on all of this debt after my wife and I separate, so this is quite a burden!

Here is how it all brakes down:

1. $26,182 – Personal Loan ($1,304/month installment payment)
2. $2,546 – Remainder of my student loans ($300/month for the next 7 months!)
3. $29,709 – Car Loan ($607/month)
4. $25,942 – Credit Card #1 ($800/month minimum payment)
5. $12,452 – Credit Card #2 ($400/month)
6. $4,306 – Credit Card #3 ($250/month)

Total Balance = $101,137 and $3,600 per month in payments.

What makes this worse is that I know this balance may go up before it goes down. Not only do I have the last payment due for my children’s summer camp ($1,500 will get added to credit card #1 on June 14th), but I will undoubtedly have expenses related to moving into my new residence at the end of the month.

But a big reason that my wife and I are separating is that she is unable to control her spending, even when presented with numbers like this. After we separate, any additional debt either of us take on will be our individual responsibility alone.

My goal is to pay off the personal loan, my student loans and the three credit cards within the next 12 months, leaving my car loan as my only debt and adding an additional $100,000 to my net worth.

Who knows, I may be back to millionaire status sooner than I think!