Wealth Grows Like A Tree

I live in a neighborhood with a lot of old trees.  We have trees on our property that are at least thirty feet tall, and there are others throughout the neighborhood that are even taller than that.

These trees have been here for a while, well before the neighborhood was built in the 1990’s.

As I looked through the trees the other day, thinking about raking once all the leaves started falling, it occurred to me that people simply don’t plant trees that large.  It just doesn’t happen.  If I want a tree in my backyard, I’m going to get one that’s anywhere from a few feet tall to maybe ten or fifteen feet at the most.

A fully mature tree with roots that stretch far into the ground that’s been around for many a decade?  One of those isn’t making it’s way into my yard, and probably yours, anytime soon.

Your Tree Of Wealth

I started thinking about it and realized that trees are a lot like wealth.  You look around and you see people that have built wealth.  Whether it’s a famous person like Warren Buffet who defines wealth to someone who lives comfortably in retirement because of modest wealth, chances are they did not simply get their wealth planted as it stands today.

Instead, they started off small.  They planted their tree of wealth.

They took care of it.

They watered it, so to speak.

They allowed the roots to grow and spread.

They watched it slowly grow taller.  Maybe so slow that they didn’t even realize it was growing, but when they took a step back and looked at it compared to a few years ago, the difference was noticeable.

One day, they looked at their tree of wealth and realized that it had grown to a significant level and it was all because they gave it care, time, and patience.

Reasonable Expectations

In thinking about how trees grow, the same needs to be said for wealth.  It doesn’t grow quickly overnight.  Patience is key.  For those who are looking to build to a certain level of wealth, expectations must be set.  Time must be allocated.  Care must be given.  Progress has to be measured.

It all fits together.

Readers, if you envision your wealth, does it help if you think of it as growing like a tree? Both up in the sky and through the roots that strengthen it below.  How do you apply the principles of growing a tall tree to growing your wealth?

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It’s Been Two Years Since Our Refinance

Two years ago we completed the re-finance of our house.  I thought I would go through some of the numbers and things that have happened.

Original Loan: 30 year mortgage, 5.875%, closed July 2007
New Loan: 15 year mortgage, 3.375%, closed November 2011

Increase in monthly payment: $157.69

Reduction in total term: 10 years, 8 months

Principal paid on new loan in the first 24 payments: 10.67%
Principal paid on old loan in prior 24 payments: 4.97%

Amount ‘extra’ paid on new loan over last 24 months: $0Amount ‘extra’ paid on old loan over the prior 24 payments: $4,144

Number of months before euphoria of making double the impact wore off: 2

Number of times I’ve regretted not taking a longer term re-finance so that I could have extra cash each month: ~5Average amount of time (in seconds) for me to completely dismiss that idea as ‘the crazy talking’: 4

Happiness on a scale of 1 to 10 when my tax preparer followed up to make sure that the reduced interest amount for 2012 was correct: 10

My calculated age at end of original 30 year term: 62My calculated age at end of new 15 year term: 52

My kids ages at end of original 30 year term: 28 and 26My kids ages at end of new 15 year term: 17 and 15

So, some things to take away from the above numbers:

  • mb-201311contractIf we stay in our home and don’t make any adjustments to the mortgage, we will have it completely paid off prior to the kids starting college, which has always been a goal of mine.
  • We would also have at least 10 years of being mortgage free while still being in the workforce.  This would definitely help set the table for a more successful retirement.
  • When I was still paying on the old mortgage but working through the details of the re-fi, the numbers were incredible to me.  By paying essentially what I was paying anyways every month, I’d be making almost double the impact.  That was awesome for the first couple of months.  Luckily, I anticipated this.
  • Paying the mortgage off early is not a priority right now.  Any extra money goes toward savings goals such as saving for a new car, home improvements, travel, or retirement.
  • If I were to pay the mortgage early, I would likely do so when I could pay off the entire balance at once.  So, if I made a boatload in the stock market and my trading account balance (after taxes) exceeded my mortgage balance, it would be then that I might consider a payoff.
  • We are nowhere near that possibility in our current state.
  • But I’m OK with that.
  • I think we chose the perfect term length.  It doesn’t crimp our lifestyle and keeps us honest to our savings goals.  The truth is that extra cash flow would be nice, but wouldn’t be worth it at all.

 I know many of you must have taken advantage of the low rates back around the time they hit thier low point.  I’d love to hear from those who have had their re-fi’s and how you’ve fared, emotionally and financially, in the subsequent months.

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Great Read Friday: I Jinxed Myself – September 6, 2013

I had a feeling when I posted last month that our net worth had made positive gains for fourteen months that I was probably jinxing myself.  Sure enough, the streak came to an end as our net worth fell for the first time since June 2012.  Largely driven by the stock market taking a breather, our net worth fell by 1.5%.

mb-pennyI guess that can only mean one thing: It’s time to start another streak!

Here are some great posts I’ve read over the past few weeks.  I hope you enjoy them as much as I did.

A buffer of cash in your checking account can help in many ways, as pointed out by How I Save Money.  My favorite positive reason is simple: peace of mind!

All Financial Matters points out one of my pet peeves, that Tropicana raised prices by way of charging you the same as you used to pay but giving you less.  Argh!

KrantCents has a very resourceful list, outlining 25 odd jobs that can make good money.  If you’re looking for some extra cash, and want to do something that’s well worth the time, check this list first.

Keeping with the jobs theme, I always love reading about people’s job histories, and Tight Fisted Miser had a whole slew of entertaining and foundational jobs that provided many good insights into the workforce.

I remember when I moved into my first condo in 1999, a neighbor told me that she had already paid off her condo.  I couldn’t fathom this.  Apparently, I wasn’t the only person who assumed that everybody has debt, as found here at Plunged In Debt.

If you’re transporting your pets by way of automobile, Funny About Money wants to remind you to please carry them properly and safely (for you and the pet)

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Fourteen Months And Counting

Hopefully I don’t jinx it, but I recently completed our monthly net worth review and we have had positive net worth gains for fourteen months running!  It truly has been a bull market!

Of course the bull market is a big contributing factor toward our gain.  Between our retirement accounts and investment accounts, we’ve definitely been taking advantage of the gains.  I only wish I had more to invest up front!

The housing market improvement has also helped, as I’ve estimated that our home has gone up about 9% in that time frame, which is based off of estimates from comparable homes that have sold in the neighborhood over the same time.

By The Numbers

Consecutive Months of Net Worth Gain: 14

Percentage Gain In Net Worth Over That Time: 38%

Rank in Net Worth Gains Since I Started Tracking Net Worth (January 2002): 2nd

Highest Number of Months of Net Worth Gain Since I Started Tracking: 17 (March 2004 through July 2005)

Just a few more months to break the record.  What do you think the chances are?

Have a great weekend!

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.