How I built a $500,000 Net Worth at 24 Years Old

So I recently learned a very valuable lesson: don't make a claim here on YouTube unless you're willing to back it up. I recently talked about how lessons I have learned from billionaire investor Charlie Munger helped me build a $500,000 net worth at 24 years old. Now, I didn't say this to brag at all; it was just to demonstrate that these wealth-building principles Charlie Munger laid out actually work.

Well, I was met with, let's just say, some skepticism, which is completely understandable given how I didn't provide any type of evidence or go into more depth. So in this video, I'm going to go through my entire investment portfolio, breaking down what investments make up this $500,000. Make sure to stick around through the second half of this video because I will talk about the practical advice that helped me accomplish this.

If you guys appreciate this level of transparency, make sure to hit the like button and subscribe to the channel because I really hope this information helps you out on your own wealth-building journey. Now, let's jump into the video.

The smallest portion of my net worth is in my 401(k). As of the recording of this video, my 401(k) has around $30,000 in it. For those of you that may not be aware, a 401(k) is a tax-advantaged investment account that is typically offered through an employer as part of your benefits package of working at that job. Often, your employer will contribute to your 401(k) through what is referred to as a match.

This means that for every dollar you personally contribute to your retirement account, your employer will also contribute anywhere from 25 cents all the way up to an entire dollar. For me personally, for every dollar I contribute to my 401(k), my employer will put in 50 cents. That means for every $1 I put in, my employer chips in an extra $0.50, giving me a total of $1,500 to invest in this account.

However, there is a cap on how much my employer will contribute each year. At my current job, my employer contributes up to $5,000 per year. Within this retirement account, I'm free to invest this money as I please, so 100% of this account is invested in an S&P 500 index fund. This means my money is spread out among the 500 largest companies in the United States.

As I go through the rest of my investments, it will make sense as to why I do this. The rest of my net worth is relatively concentrated in a few stocks and assets. I follow advice from Charlie Munger when it comes to how to construct an investment portfolio. Charlie's net worth is extremely concentrated, as almost the entirety of his net worth is in two stocks: Berkshire Hathaway and Costco.

Both he and Warren Buffett talked about how when they were younger and had less money, they had very concentrated portfolios. Outside of this retirement account, I completely follow that advice. On the other hand, this 401(k) is extremely diversified and essentially guarantees my investment returns will be the average of the broader stock market.

I view this 401(k) account as essentially an insurance policy against me making a bad investment with the rest of my net worth. I know that if I keep contributing a portion of my income to this retirement account, regardless of what happens with my other investments, I will still retire a multi-millionaire due to the wonders of compound interest.

The next piece of my net worth is in my taxable brokerage account. As of the making of this video, this account is worth approximately $60,000. Going back to what I said earlier about having a concentrated portfolio of assets outside of my retirement account, this is where you will start to see that concentration. This entire portfolio is invested in just a handful of stocks.

The goal of this portfolio is to produce returns that exceed that of the S&P 500. In this portfolio, I followed the framework laid out by Warren Buffett and Charlie Munger. I look to buy simple, predictable businesses with strong moats that are led by great management teams and are selling for less than my estimate of what I actually think it's worth.

Something important that I need to explain here is why I have such a concentrated portfolio. Typically, people are taught that having a well-diversified portfolio of stocks is important to successful investing. I reject this way of thinking and instead follow Charlie Munger's approach. I view stocks as what they truly are: small ownership stakes in businesses, not just things that float around in price on a computer screen.

As a result, I take what Warren Buffett refers to as a business owner's mindset to my stock ownership. Investor Monish Pabrai explained it like this: imagine a businessman in the city you live in, and imagine that he owns three businesses. His first business is an apartment building. This apartment building is in a great school district, is in close proximity to popular parts of the city, and is well maintained. In fact, this apartment is so great that there's actually a waitlist just to live there.

The second business your hypothetical local business person owns is a plumbing business. This plumbing business has been around for decades and is known for its high-quality work, trustworthy employees, and fair prices. The business is so well-regarded that it has been able to capture the biggest piece of market share compared to all the other local plumbing companies.

The third business is the most popular car dealership in town. People have been going here for decades. This car dealership has built a great reputation over time and has become the most trusted place to buy a car in the city. Now, our local businessman here only owns three businesses, but I would make the argument that he's pretty well diversified.

Since stocks are just tiny ownership stakes in businesses, why should stocks be treated any differently? The next largest piece of my net worth is cash. Cash makes up $190,000 of my portfolio. Now, you might think that this is a large amount of cash to have as a percentage of my net worth, and I would actually agree with that statement.

Holding this much cash isn't my way of saying there's going to be a crash in the stock market. I would much rather have the cash invested in great assets that are generating returns for me. However, the reason I have so much cash as a portion of my overall net worth has to do with the largest component of my net worth: real estate.

I own two properties with a total of $245,000 of equity between them. I own a two-unit building, commonly referred to as a duplex here in the United States. This property is worth around $450,000, with a current mortgage balance of around $280,000. The $170,000 difference between what the property is currently worth and what I owe on it is my equity in the property. That amount gets added back to my net worth.

I purchased this property back in December 2020 when interest rates were at all-time lows. I was able to lock in a 30-year fixed-rate mortgage at around 2.7%. This means that the mortgage portion of my housing payment will stay the same for 30 years. Part of the reason why the interest rate was so low was because this property is classified as owner-occupied, meaning that since I live in this property as my primary residence, I'm able to get a better interest rate than if it was just a rental property.

I purchased this house for $345,000 and it was appraised for $395,000. The reason I was able to get such a good deal on it was because it was listed without any pictures. While the previous owner spent a good amount of money remodeling the kitchen in one of the units, that picture wasn't even on the listing online. As a result, the property didn't get a ton of attention when it was listed, and I was able to get a solid deal on it.

In the 18 months since I purchased this property, the real estate market here in the part of the country I live in, and around the United States more broadly, has continued to soar. I think the $450,000 that I estimate the property is worth may actually be a little bit on the conservative side. Additionally, I rent out the unit that I don't live in for $1,600 a month. This covers the entirety of my mortgage payment, all of my homeowners insurance, and even a portion of my property taxes.

I also own a single-family home that I rent out. I have $75,000 in equity in this property. While I am based in the New York City area, this property is actually located in a large city in the Midwest of the United States. I took a unique approach to getting a good deal on this property. When I purchased it, it was extremely run down and needed a complete remodel in order for high-quality tenants to want to live in it.

I purchased a property for $80,000 using cash. The house was in such bad shape that a bank wouldn't even give someone a mortgage to purchase this property. I then hired a contractor to manage the renovations and spent about $95,000 doing a complete remodel of the house. My total investment in this house was $175,000—$80,000 I spent purchasing it plus $95,000 I spent on the extensive renovations.

As a result of the improvements made to the property, the house was able to appraise for $250,000. The difference between this appraisal value and my total investment in the property represents equity in the property that was created because the property was completely remodeled. Banks were now willing to let me take out a mortgage on the property.

Banks will let me take a mortgage worth 70% of the property's value. It just so happens that 70% of the property's value of $250,000 comes out to $175,000, so I was able to pull out all the cash I had invested in the house. As I'm sure you can imagine, there was a ton of work that went into coordinating this project between finding the deal and managing the renovations. A lot of work went into this property.

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Now, let's get back to the video. Learning about personal finance and investing is something I'm truly passionate about. I honestly really enjoy studying it and learning as much as I possibly can on these topics. So in the rest of this video, I'm going to share the three biggest lessons I have learned so far that have helped me get to this current net worth. Make sure you stick around to hear the three lessons because they can help you grow your net worth.

The first lesson that I think is important to understand is the concept of avoiding what I refer to as unproductive debt. The biggest area I see this impacting people, especially young people like myself, is student debt. One of the biggest reasons I was able to reach my current net worth was not taking on any student debt.

When I was a senior in high school, I was choosing between attending two different schools. One of the schools was an in-state public school for which I had received a full-ride scholarship. This meant that all my tuition and room and board was covered. The other college that I was considering was a private school on the West Coast. I received some scholarships to attend, but my annual cost, including living expenses, would have been around $50,000 per year.

This means that I would have had $200,000 in student debt just to get a four-year degree. This one decision of attending the in-state school helped me avoid graduating school with $200,000 in debt. I would have had to essentially dig myself out of a $200,000 hole before even just getting back to a zero dollar net worth.

Actually, the hole I would have had to dig myself out of would have been bigger than $200,000 because I would have also had to pay interest payments on the debt. This is how people in America have been paying on student debt for years but have made little to no progress. I refer to this type of debt as unproductive debt because taking on this debt would not have made me any additional money.

There is no difference in my career prospects and earnings potential between these two schools. I still worked really hard in my in-state school and was able to land a very well-paying job in the field I wanted to enter right out of college. The debt that I incurred for my rental properties is what I call productive debt. This debt allowed me to purchase a productive asset: an investment property that earns me income every month.

The next lesson I learned is about minimizing your big living expenses. The two biggest living expenses for the average person are their housing and their car. In college, I always lived with multiple roommates and rented houses that were far from luxury. Now that I work full-time, I'm able to essentially live for free.

The rent that I receive from renting out the other unit of my duplex and from renting out a room in the unit I live in covers my entire housing payment. The mortgage payment, property taxes, homeowners insurance, and even a little extra to cover repairs whenever they occur are all covered by the rent I receive. So I'm able to live in a relatively high cost of living area on the East Coast of the United States for essentially free.

This means that the money that would have been going towards my rent can now be invested, helping me continue to build my net worth. The other big money trap that people fall into is their car. One of the first things that people do when they get their first full-time job is go out and buy a new expensive car. This one act is keeping many people from becoming a millionaire.

Don't believe me? Just look at this math. Let's say someone spends an additional $300 a month on a payment for a fancy new car versus what they would be paying for driving an older used vehicle. That works out to $3,600 more a year they are spending on having this nicer vehicle. Let's say this person does this for their entire career, call it 40 years.

Assuming that money would have been able to generate a 10% return in the stock market, driving that fancy car is keeping this person from having an additional $1.6 million at the end of our time period. This speaks volumes to the power of minimizing your major living expenses.

This next piece of advice was one of the biggest things that helped me turbocharge my ability to build my net worth: build a side business. Even going back to high school, I have always had some type of side business that has generated income for me. In high school, it was selling shoes online; in college, it was building websites for local businesses.

Now that I work in the investment field full time, one of my current side businesses is this YouTube channel. What this side business looks like depends on each individual person, but here's a helpful framework to think through it. Imagine a Venn diagram with four circles: what you're good at, what you like, what's needed in the market, and finally, what you can actually make a decent amount of money doing.

In order to find a good side business, you have to find something that meets all these criteria. This is the mental model I used to start this YouTube channel. I work as a professional investor, so I have a somewhat deep understanding of investing and what's going on in the markets. I also really enjoy talking about this material and get a ton of enjoyment from teaching these concepts to others.

I also think this kind of content is needed. I see the finance niche here on YouTube continuing to grow, and then finally, a YouTube channel has the potential to make good money if the creator is able to reach a large enough audience. There is also one more advantage to starting a side business while also working full-time: because your full-time job covers your living expenses, every additional dollar you earn after tax from your side business can go towards investing.

This is why having a side business can supercharge your ability to build your net worth. Make sure to like this video and subscribe to the Investor Center because it is my goal to help provide you with knowledge on your own investing and wealth-building journey. If you enjoyed this video, you should check out the video I made on Charlie Munger's wealth-building principle of getting to your first $100,000 as quickly as possible. It is jam-packed with a ton of knowledge to help you out and learn from Charlie Munger.

As always, thank you so much for watching, and talk to you again soon.