Our New Goal: Grow Look-Through Earnings by 15% Per Year

2018

Starting Net Worth: $50,000

Income:

Leslie: $29,400

Ben: $29,400

A great year for side businesses. We had some big expenses around the house and needed to borrow cash from the HELoC, so that was a step backward. The interest rate was low, so even though we had the cash to pay it off by the end of the year, we chose to keep that money invested in the business where it is earning about 15x more than it cost us in interest.

Salaries got cut again at our day jobs, but the store and other side work more than make up for it.

It looks like we each got a $400 dollar raise, but health insurance went up nearly 20%. Between that and inflation, we took a cut.

At the end of 2018, the market took a nosedive over China trade issues, and we took the money that was going to buy inventory for the store and used it to buy more shares of VOO.

Full disclosure: This is called “timing the market” and you should never do it. It is a losing game. We only did this because:

  1. The store made a decent profit after the holiday rush
  2. We didn’t have the time to properly expand the store the way it deserved (due to school-related workload)
  3. We had not yet maxed out our IRA contributions and did not want to pay extra income tax.

If it wasn’t for these happenstances, we would have kept on investing the same amount, at the same time each month.

Now, looking back on it, what I should have done was taken a look at two possible financial moves.

  1. Keep the money in the store’s inventory
  2. Invest it in VOO

To compare these I would have written up a calculation of our expected look-through earnings for one, three, and five years out for each possible decision.

Investing it in VOO was the correct long-term answer because the earnings from VOO compound at a fairly predictable 5%-6% even with trade concerns. While our FBA business was already hitting the wall of what we could sell without going at it full time (which means little to no compounding there).

TL;DR When wondering what to do, always choose what will let you compound at the highest rate for the longest time.

Other News

This is the year we decide to start this blog.

We’re not working on it much. It’s really just a way to keep track of our journey.

We sensed, way back in 2018 that we were on to something, and we thought we might want to share it with others one day. We really had no idea how big of an idea we had stumbled on, though.

Look-Through Earnings

Again I don’t have the exact numbers but I believe our look-through earnings would have been around $30,000 with a third of that coming from passive investment income.

We met our goal of increasing look-through earnings by 15%!

Assets

Equities @ Cost: $75,000

Cash/Equivalents: $12,000

Ending net worth:

$87,000

Closing Thoughts

It was sometime this year that I started to do the math on our growth trajectories and realized that we were onto something way bigger than what it appeared. I mean, if we kept this going, we would be millionaires.

This felt strange.

I mean, we weren’t doing that much work. After all the stress and effort we had put into previous years with almost nothing to show for it, this felt… wrong?

I think we felt guilty. I mean we had accumulated some serious money and almost all of it had come from just a few hours of actual work.

Meanwhile, we were working ourselves to the bone at our day jobs and it felt like we were getting nowhere.

We were living through something called the Pareto Principle, which states that 80% of results come from 20% of the effort.

This would go on to be one of our cornerstone philosophies here at Three Month Millionaire.

For more details on how we structured our business, or fit the work of running an online store into our busy lives, check our guides:

We also publish unbiased reviews of business tools and software. To see some of our top review posts, Check out:

Or go on to 2019 ($87,000 – $95,000)

Or go back to Income Reports