Save, Invest and Reinvest To Build Wealth

by James on July 22, 2014 · 10 comments

Want to know the key to building wealth? Here's how our savings rate was able to more than quadruple in the last several years. This strategy works for everyone!

It’s always astounding what a difference a few years of investing can make! One of the things my wife Miel and I have been doing is actively driving the process of how we build wealth by investing in stocks, saving aggressively (or not so aggressively) and self managing our real estate.

Well, this long term investing appears to be paying off in terms of higher cash flow.

Back in 2005 we were getting a house down payment together. It took us about 14 months to save up $21,000. That’s not too bad. But contrast that with today. We recently set the goal of saving $100,000 so we can start getting serious about buying multifamily property. So, we’ve been saving like the dickens – and it’s working. Over the past couple of months we’ve managed to sock away about $10,000. That’s about $5,000 per month – far more than our savings rate back in 2005.

Saving 10000 dollars

So what’s driving the change? In a word: assets.

Back in 2005, we only owned one investment property. Now we have four. This has resulted in a couple of favorable advantages, including more flexibility and increased cash flow. For example, we refinanced one of our properties which meant we were able to skip making one monthly payment and got our escrow funding back – this freed up $6,029.07. Also, we are able draw on the profit from our rental properties to add to our savings. Two months from our rental places yielded approximately $1,408.43 in profits. The rest came from our earned income (e.g. salaries) and we’ve been able to make some money from our internet businesses as well ($151.61). The dollar values aside, a major reason we are doing better now is because we have more cash producing assets – more real estate and an internet business.

I’ve always been a bit of a skeptic regarding compound interest projections as they pertain to net worth growth, but if the last few years are any guide, saving and investing over time can really make a difference in your bottom line. You just gotta keep saving, investing, reinvesting, saving and reinvesting again. Eventually the needle will start to move.



{ 8 comments… read them below or add one }

1 Mrs. Frugalwoods July 23, 2014 at 3:41 pm

Absolutely! It’s wonderful to begin seeing your savings & investing work pay off. Congrats and thanks for sharing!

2 AJ July 23, 2014 at 4:58 pm

Hmm.. but isn’t the majority of your savings for this period not repeatable? I mean in the sense that 6k of the 10k is from refinancing. Your normal savings would be $4k or $2k per month?

3 James July 23, 2014 at 9:44 pm

AJ,

Great point – I was thinking about your comment this afternoon. I guess its true that 6k isn’t a repeatable event. But, I think the larger point still holds – the more assets you have the more quickly you can build your wealth.

Thanks,

James

4 James July 23, 2014 at 9:46 pm

Hey Miss Frugalwoods – thanks for stopping by. We appreciate your comments!

5 AJ July 24, 2014 at 8:58 am

James- I definitely agree. The more assets you have definitely helps you build wealth faster. I did ignore the fact that the lower payments you’ll have after the refinance will also increase your savings rate.

How was the process to refi? I have several rentals and just did a refi on my primary residence and the sheer amount of paperwork they need is amazing.

6 James July 24, 2014 at 11:11 pm

AJ,

The banks wanted a LOT of paperwork, lots and lots of paperwork. I think lending standards have tightened up since since the real estate boom of 2008 – for better or for worse.

While I’m on my soap box, I would say that loosened lending standards would probably help. My wife and I probably would have 6 properties now instead of our 4.

Thanks,

James

7 Erick Brunet October 28, 2015 at 1:34 am

Thank you for sharing. It’s very interesting. Hope to hear more from you.

8 Rachyl May 18, 2016 at 9:01 am

Great article! Sometimes it can feel so slow when you are investing, but then all of the sudden you take a look and you made headway.

We are just starting to take our profit from our rental property and put it into dividend paying stocks. I’m sure it will take some time to see those start to make money for us, but it will be so worth it!

I also just started an Internet business (blog), so hopefully in some time I will see a little bit of profit from that. Slow and steady wins the race!

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