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Ages: Aris 38, Maria 36 Money isn’t just a means for Aris Magtibay of San Antonio, Texas – it’s a full-time obsession.
Aris has documented all of his spending in Microsoft Money since graduation. If he buys a $3.99 value meal on his debit card at McDonald’s, it goes into the books. He says he takes no offense to the teasing he gets from coworkers and friends about his obsession. “Although I must admit: if I spent as much time trying to make money as tracking the money I have, I’d be a rich man,” he jokes. Aris’s big indulgence is the lottery - $7 in tickets each week. He calls it his investment that hasn’t paid off just yet. He and his wife, Maria, were both born in the Philippines, although his family moved to Virginia when he was 3 years old. Maria spent most of her life in the island nation before the couple married in 1993. Aris met Maria while vacationing there, and she moved to the U.S. just three weeks before their marriage. They have a son, Jared, who’s 13. The couple has built up $14,000 in a 529 college savings plan. They’re adding $100 a month, hoping to reach $20,000 by the time Jared is ready for school. Aris and Maria earn a combined $115,000 a year before taxes. He works as a pricing manager for a telecom company, and she’s a manager at a bank. They each sock away 10 percent of their salaries in 401(k)s, putting in a total of $1,150 a month. Their employers match add an additional $500. They also put $50 per month into their Roth IRA. The Magtibays bought a new home in San Antonio early this year for $315,000 with 20 percent down, spending some of their emergency savings to make the down payment. They pay $1,500 a month towards a 30-year fixed-rate mortgage at 6.25 percent, and expect to pay it off in 21 years. “The goal is to pay the mortgage off before we begin dipping into our 401(k)s and IRAs,” said Aris. After buying the house, their emergency savings are down to $3,000 in cash. They also have $1,200 in a bond exchange traded fund (ETF). Aris handles his own investments wherever possible and says he prefers ETFs and individual stocks over mutual funds. Maria’s Roth IRA is also in the aggressive growth Janus Orion Fund. Aris is trying learn more about investing and has recently started to trade options. They can take years to learn and can be risky. The couple owns a 2006 Nissan Pathfinder and a 2006 Nissan Altima, both of which they lease for a total of $850 a month. “I think that’s our Achilles heel,” said Aris. “We’re the type who wants to drive something brand new every five years.” Each month, they spend $600 on food, $500 on utilities, and $700 on taxes. They’re also paying $700 a month on $11,000 in credit-card debt. For security, they have two term life insurance policies for $500,000 each, plus homeowner’s insurance for 120 percent replacement value. The couple’s goal is to have $1 million in assets, including home equity, by the time that Aris reaches age 50. After their retirement, they’d like to have $100,000 a year in income to live on. Our Expert’s Take: The Magtibays are in pretty good shape, and on track to be millionaires by age 50 - but they could do better, said Greg Gardner, Certified Financial Planner with Gardner Group wealth management. “They need to really beef up their savings account so they have six months worth of emergency liquid savings,” he said. In addition, Gardner estimated that they are currently saving enough to withdraw only $93,000 annually in retirement - short of their $100,000 goal - assuming they live to 95. In order to make up the budget gap in retirement, he listed three options. “They can buckle down and work one year beyond the typical retirement age of 65, or they could choose to save $850 more per month now, or adjust their spending down at retirement,” he said. “But they’re definitely going to be able to save a lot more money once Jared leaves the house,” said Gardner. For their emergency fund, they should have $20,000 to $30,000 – essentially six months worth of expenses – at the minimum. It should be completely liquid, in an interest-earning account like a money-market fund, says Gardner. Finally, they should purchase larger life insurance packages, he said. “They’re a little bit underinsured at the moment,” said Gardner. “If one gets laid off, there’s not enough money in the emergency savings or the taxable investment accounts to draw on. If you were forced to liquidate money from the 401(k)s and IRAs, you’re talking taxes and penalties to get to those funds.”
Are you a millionaire in the making? Tell us why at millionaire@cnnmoney.com.Posted by Lex Haris 9:47 am 30 Comments
 | Add a comment These folks aren’t Millionaires in the making, they are the typical american household. 2 leased vehicles, credit card debt, and too much house they can’t afford. They even buy lottery tickets!! They are one major disaster from becoming homeless or worse.. Posted By William, Baton Rouge, LA : December 31, 2007 1:20 pm
Late to this party… the comments below are amusing. Tim’s appraisal (from Boise, 07-25-2007) isn’t as illogical as some seem to think, even if he’s not a accountant. “Home equity” isn’t a fixed value (if your home is destroyed by a flood, and you’re not insured for it, does someone hand you an $81,000 check?)… Barring a disaster, your home’s value can in fact decrease, and there are closing costs to consider when, and IF you can sell at any given time… So, I’d weight this aspect of their net worth lower, or at least realize it’s an asset with a high beta. Leaving the house out of the picture, or at least considering that in today’s market, they would perhaps not realize the full amount of equity presented (they have to sell at a loss in an emergency), that place’s them below $200,000 net worth. It’s also unrealistic to rely on the figures about net wealth you read on these websites as a comparison of one’s performance. The average American has abysmal saving and spending habits, and a family with $11,000 in high-interest credit card debt, and auto loans on two late model vehicles needs to straighten out priorities. The fact is, they probably are doing better than the average couple the same age, which explains why so many people here piled on Tim for suggesting they aren’t as finally well off as the article might have one believe… Posted By Dan, Washington, D.C. : December 1, 2007 4:44 pm
It is great to see people excelling but what I find disturbing is the outlook we as the middle class have. If you have a middle class outlook you will always be middle class. If you look at millionaires the same can be said. We have to get out of that habbit. Even though its great be a millionaire at 59 or so, Who really wants to wait that long for it. Changing our views is necessary to achieve your wildest dreams… Posted By Steven, Honolulu : November 9, 2007 5:50 pm
I can’t believe no one has mentioned Aris’ penchant for the risky trading of options! Between this and wasting money on lottery tickets Aris is shooting himself in the foot. Dude, you cannot afford to risk or throw away money! While the desire to learn about investing is admirable, recognize that investing for the long term and gambling with options in hopes of a quick strike are two very different things. Leave the options and stocks alone until you have maxed out all 401K’s, IRAs, Roths and 529s - and gotten rid of the credit card debt. It is highly unlikely stocks and options will net anywhere near the percentage you are paying for credit card debt. Also, the family’s car expense is way out of proportion to their income. Posted By Chris Dallas, TX : October 9, 2007 4:18 am
this couple is doing a spectacular job. if they keep doing what they’re doing and apply their tax return to their CC debt then they will have the 11k paid off when they get their taxes back. once they do this, they should apply the $700/mo to their emergency fund. minor adjustments i would make is not paying extra to their mortgage. there is no benefit to it. use that extra money to invest more in their retirement funds. also, i think they should cut back on their home insurance to 100%. Posted By dave, boston : October 3, 2007 9:42 am
Seems like a lot of Dave Ramsey Fans here! Posted By Dave Ramsey Convert : September 27, 2007 3:20 pm
They should eliminate credit card debts because credit card finance charges are not tax deductible, and at least six months reserve for emergency funds, Remember, nothing is guaranteed in this world anymore and nothing last forever, I do believe they have a very good potential to a better and brighter future. obviously, they are planning ahead most especially for the kids, but do encourage the kids to do good and they should excert efforts in order to qualify for academic scholarhips and grants, as parents we can only do much for them but we should also teach them to be responsible when the right time comes, in short be practical, life is so simple and short. Posted By Leila of New Jersey : September 27, 2007 12:34 pm
They are on the right track but need to make a few adjustments. 1st, drop the 401k to the 5% match level, and throw ever penny they can at those credit cards. Roll them to a 0% if they have to but there needs to be $1k minimum a month, more like $1500 going to paying that off. Don’t even thing about paying extra on the house until the credit cards are gone and DON’T do a HELOC to replace unsecured debt with secured debt against your home - BAD IDEA. 2nd-they’ve got to change their car habits. $850/month for the rest of their life will make no one but the car dealer rich…the only thing stupider than buying a new car is leasing one. The article says they “own” these cars. They own nothing except a contract requiring them to pay $850/month. If they’d to buy used cars and pay them off in 3 years, and drive them for 7 they could potentially have hundreds of thousands of dollars extra in retirement. After they take care of this then beef up the emergency fund. They are doing pretty good, but I don’t think they will do nearly as good as they could if they can’t get over their obsession with new cars. Posted By Russ, Indiana : September 26, 2007 5:29 pm
a dumb plan is better than no plan at all.The fleecing of cars is a very poor concept that only gives the dealers a much larger profit margin on the sale. Its the worst thing to do. Thats thousands per year lost, no equity at all. The 28 per month for lottery could go down to 7 per month. Afterall, we are talking about odds of millions anyway. The difference could apply to the water or cable bill.The largest danger to this family is the credit card bill. Stop all non matching retirement contributions including the 529 until its paid in full. Thats 20 percent lost, never to be recovered. The cycle must break. Also, Macdonalds for lunch is a poor choice. The chance that you will make a consistent rate of return beyond market norms by not diversifying is almost nill. Give that a thought as well. Its ok to handle your own afairs. But professionals do tend to do better in the long haul. Thanks, RB Posted By rich alabama : September 2, 2007 7:54 am
I think these guys are doing great. I agree with an earlier comment, “you have to live and have fun to”. Raising a child (children) is very expensive, as I have four, and what they have amassed while doing this is very impressive. Keep in mind, their income figure is before taxes. I would focus on the credit card debt, and no way would open a HELOC. (an 11k HELOC gives you how much of a tax deduction at their income?/not worth it, keep the equity!!!) Drop the 401K to 5-6% (for a year), unload the cars for cheaper ones, and apply the additional funds to the credit card. They could also lower the 529 deposits for one year and stop the Roth ($50.00) for a year (Again, what is the tax savings a $600.00 a year Roth/Minimal!). If they applied these funds to the Credit Card, it should take a big chunk out of it at the end of the year and they could re-evaluate. At that time they could probably get a 0% intro card for 12 months and knock the rest of the balance off! Once the card is gone, bump everything back up. I think this is a less agressive way to pay it down than the “expert” recommends. They are only in their late 30’s. It is not like they do not have a few years to make up any loss in investments over the next 12 months. My hats off to them, good job! Thes so called “experts” seem to think that if your not saving 50% of your income, your not doing it right. Thats bogus! Posted By Brent Harder, Dublin, Ohio : August 6, 2007 8:34 am
The one blemish may be the credit card debt, but they are doing well. I hope that I’m able to do as well by the time I get to their stage. Posted By terri, baton rouge, la : August 5, 2007 1:24 am
Susan above had the best idea! Don’t pay the mortgage early, pay of the credit card! They should apply for a balance transfer credit card with 0% apr. That will buy them a year, and save $8400 if they can pay it off over the next 12 months. Posted By Mike, Philly PA : August 2, 2007 8:22 pm
I agree that the ammount of credit card debt seems a bit high and is not mentioned by the expert. 6 months of take home pay in reserves is insanely hard to generate. My guess is they wont have 60k in savings till their home is payed off and kid out of college. Posted By Starbuck Jones, Twin Falls Idaho : July 30, 2007 3:58 pm
There is no point to opening a HELOC just to pay off credit card debt. They can knock out the credt cards in about 10 months. It won’t change the spending patterns just moving the debt. They should go out less and bump up the 401K. The house is on the edge of being too much house for the income. Posted By Jeff, Houston, Texas : July 30, 2007 3:47 pm
They are doing well, but they can do better. Here are some suggestions: 1. Pay off the credit card debt ASAP. Stop contributing to retirement funds or perhaps get rid of the new cars and purchase older, but reliable ones. Just by paying off the credit cards & saving to buy vehicles in cash could save them over $1000 a month, all of which could be put towards retirement savings. Never lease a vehicle– you lose so much money! Buy used vehicles instead! 2. Quit buying lottery tickets! They could save $336 a year if they do this one step. I know that this isn’t a lot of money, but every little bit of cash helps. 3. They need a lot more money in their emergency fund (at least 3-6 months of expenses). A job layoff or an injury can completely wipe out what they worked so hard for… 4. $600 a month for food for 3 people? I would try to get this down to at least $400 a month! Posted By Amy Pittsburgh, PA : July 28, 2007 10:16 am
Tim - It’s not called “Millionaires Right Now” it’s called “Millionaires in the Making.” I’d be willing to bet that an exceedingly large number of couples who just purchased a home would be in the red. I would re-run your numbers and see what everything would look like when they hit 50… I applaud them (except for not paying off the credit card debt immediately). Posted By Nathan, D.C. : July 27, 2007 12:48 pm
Kudos to the Filipinos!! I have several Filipino relatives that are hard workers and have a good handle on their money and future. Sure, everyone has to have some kind of vice, like investing or buying groceries. But this family has a plan and are taking steps. What is the majority of America doing?? My advice, pay down debt through a Heloc, invest your tax refund every year in high yeilding stocks, keep 6 months reserve available, repeat-get rid of debt (except for mortgages)! And don’t rely on Corporate America. Invest in Real Estate and start your own business!! Posted By Proud to be a Filipina, Hard working (self-employed) & successful, Kentucky : July 27, 2007 11:18 am
In response to Tim from Boise, ID: While I agree with some comments about the risk of options trading - as long as it is within reason (such as $7 a week in lottery), and he is not putting his entire portfolio in lottery and options, why not? Some people spend way more that $7 a week in cigarettes or alcohol or other habits. I call my lottery purchases my retirement plan - however, I also have close to $1 milliion dollars in net worth. Lighten up and have fun. Posted By Long Bow - Toronto, Canada : July 26, 2007 11:33 pm
Tom… Check your math… To obtain one’s net worth you have to add all of their assets and subtract their liabilities… they do not have a negative net worth.. Posted By eric houston, texas : July 26, 2007 7:52 pm
Just a comment to Tim in Boise… I do agree that the credit card debt is not a reflection of a millionaire - but is of a millionaire in the making since they are making efforts to eliminate the debt. Also — not sure where you came up with their net worth?? If they put 20% down on their $315k home they would have at least $63,000 in equity, not to mention the principal does go down every month when they make their payment so the $81,000 doesn’t seem too far fetched. Total net worth = $260,000 This is actually quite an accomplishment for this family since according to another article on CNN Money, the average net worth of a 35-44 year old is only $77,600. Posted By Tracy Colton, Phoenix AZ : July 26, 2007 5:56 pm
Instead of trying to pay down the mortgage in 21 years they should be trying to pay off that credit card debt ASAP! Paying interest to credit card companies is like flushing money down the toilet. Get an equity line and pay off those credit cards to minimize the interst. Cut the cards up!!! Posted By Susan, Clearwater, FL : July 26, 2007 4:33 pm
Tim from Boise (1st comment above) needs to rethink how to calculate net worth. He forgot to add back in the $315,000.00 value of the home. The net worth is $277,200 (using his figures), not -$37,800. Maybe the correct figure will impress him. Posted By Curt, Minneapolis, MN : July 26, 2007 3:52 pm
Tim in Boise’s math is worse than his attitude. Their net worth is actually $299,200 (basic double entry accounting says you can’t take the debt without the asset…), and this net worth number is more than 6 times the average for a couple their age. These folks are doing a nice job. Yeah, their emergency fund is a little low, but that can be built up quickly, and the 529 is still under their control until they do make draws. At that point, giving up the cash asset has a benefit that far out weigh sadding student loan debt. The option play is smart, as long as you limit the speculative portion of your portfolio to not more than 10%. This means continually reallocating when you are lucky enough to hit a big gain. If you ask me, their only vice is the $7 on lottery tickets weekly ($364 annually). This is an investment which will NEVER pay off, cut it out! Hang in their, and keep saving. You are on your way. Posted By Brett, Louisville KY : July 26, 2007 2:53 pm
I dunno about the credit card situation. Right now I have two cards - one at 0% and one at 9.9%. In contrast my 403(b)s are averaging 20% annually. Where should I put my spare cash…. Leasing I think is about the same as buying older cars - and don’t forget that buying another car means downpayments (usually) that might wipe out that already small safety fund. I’d stay put until the lease is up then rethink. If they’re in a lease-type-loan then at least they may be paying off some of the loan value - otherwise they’re throwing money away. Posted By Bennett, Syracuse NY : July 26, 2007 11:48 am
These folks are definitely not millionaires in the making. They are debtors in the making. Posted By Tim, Boise ID : July 25, 2007 10:39 pm
“Aris’s big indulgence is the lottery - $7 in tickets each week. He calls it his investment that hasn’t paid off just yet.” “Aris is trying learn more about investing and has recently started to trade options. They can take years to learn and can be risky.” Sounds like a gambler in the making to me… Posted By Jim East Lake, Oregon : July 25, 2007 4:20 pm
Exactly who are these experts? Every “Millionaires In The Making” article always has snarky comments from the ‘expert’. These people are doing a wonderful job here. They have a good financial plan set up. Why do the experts always say that people need to take further steps? You cannot be prepared for every financial mishap that will occur. There is always potential to lose your money. But this couple is doing good. I do not think that they need six months worth of savings. Three months should be sufficient. What is wrong with their life insurance package? Half a million dollars seems pretty good to me. If a person cannot manage $500,000 bucks, more money is not going to solve things. These experts seem cowardly and sheepish to me. Saving isn’t everything. You have to live and have fun today. It doesn’t make sense to always be worried about the what-ifs of life. Posted By Yadgyu, Harkeyville, TX : July 25, 2007 4:09 pm
This couple is right on track if you ask me. $115K income and over $200K in investments. And only $11k in debt which is constantly decreasing way to go!! It should only take them a few months to beef up their emergency fund. If they decrease contributions to their 401K Posted By Stacey, Atlanta, Ga : July 25, 2007 3:41 pm
I’m suprised the expert said nothing about that credit card debt. Is the 600 they spend on food charged to this credit card? What is the cash flow of this card? Is the debt growing or shrinking? Personally I would stop contributing to the 529 and the roth and put the money towards reducing the credit card debt. I would also think buying 2 modest used cars (2 years old) would be cheaper then leasing. Another option would be to open a HELOC and use the proceeds to pay off any high interest credit card debt. It just seems silly to contribute so much in to different savings and still pay (what is usally high interest) on a credit card for such a high balance. Another question might be whether $100,000 a year in retirement is enough? assuming a 3% inflation rate- in 30 years that 100,000 a year is equivalent to aprox. $41,200 BIT. (and decreases in value through the life of their retirement). I would think that quite a modest retirement? Posted By Scott, Chicago il : July 25, 2007 12:39 pm
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Are you millionaires in the making?
Millionaires in the Making are smart about choosing investments and they get a kick out of socking away money. They don't spend frivolously but know how to enjoy life, they keep an emergency fund, save for retirement and education expenses, and try to keep debt to a minimum.
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Since getting his degree in finance in 1991 from Old Dominion University in Norfolk, Va., he’s putting abstract concepts from his education - like asset allocation and the importance of compounding money - to work in the real world.
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Only morons lease cars — a goal of $20,000 for the college fund means they have decided their kid is going to tractor trailor school — Have they told him — “Son, Mommy and Daddy care more about shiny cars than your education”