A couple in their 30s that paid off their $234,000 mortgage in 5 years and hit a net worth of over $1 million explain how they invest their money and why they only keep $10,000 in their checking account (2024)

A good chunk of their net worth is tied up in their new home in Arlington, Texas, where they moved in January 2023 so that their 16-month old daughter, who was diagnosed with Dravet syndrome in 2022, can get the best possible medical attention at a comprehensive care center nearby.

The couple sold their first home and "netted $100,000 after realtor fees and everything," Brennan told Insider. They took those profits, plus earnings from his online business Budgetdog, and bought a $495,000 home in Texas in cash so that they could continue living without a mortgage payment.

Investments across various accounts make up most of the rest of their total assets. They've built up these accounts by consistently stashing away the majority of their income, which has grown exponentially over the past couple of months, said Brennan. His goal in 2023 is to earn $2 million in revenue.

"Achieving financial freedom used to be more of a game for us," said Brennan, who quit his CPA job in 2021 to focus on his financial education business full-time. "Now it's a necessity for my daughter's health."

The 32-year-old entrepreneur shared with Insider exactly how he's investing his family's money to continue building long-term wealth.

1. Retirement accounts

Brennan and Erin have a handful of retirement accounts: two individual retirement accounts (IRAs), a solo 401(k), which is an individual 401(k) plan specifically for business owners like Brennan who don't have employees, and Erin's employee stock ownership plan (ESOP) from her previous employer.

They also have two health savings accounts (HSAs), which let them contribute pre-tax dollars for health costs but can also be investment accounts and used to supplement their retirement accounts.

"We max out pretty much all of those accounts," said Brennan. In 2023, the annual contribution limit for a solo 401(k) is $22,500; for an IRA, it's $6,500; and for an HSA, it's $3,850.

2. Brokerage account

They also have a taxable brokerage account, which lets you buy and sell assets like stocks, bonds, exchange traded funds (ETFs) and index funds, which Brennan prefers.

You can open an investment account online — Brennan uses Vanguard, but there are many brokerage firms to choose from — and transfer money into it just like you would a bank account. There are no contribution limits.

Note that these accounts are called "taxable" because your investment income is subject to capital gains taxes.

As for how their money is invested in their retirement and brokerage accounts, they prefer to buy index funds, which are low-cost and diversified by design.

"Within every one of those accounts, it's pretty much the same mix," said Brennan, who invests in three specific funds: the Vanguard Total Stock Market Index Fund (VTSAX), the Vanguard Total International Stock Index Fund (VTIAX), and the Vanguard Emerging Markets Stock Index Fund (VEMAX).

3. Accounts for their daughter

Brennan and Erin have opened three investment accounts for their 16-month-old daughter: a Roth IRA, a brokerage account, and a 529 plan.

There are no age restrictions on opening a Roth IRA for your kid, but they have to earn the income that you as a parent contribute. The Schlagbaums opened this account preemptively "for any gig that she does, with my business in particular, that she makes some money off of," said Brennan.

As for the brokerage account, "it's in our name as parents and then we gift it to her at a later date," he explained.

A 529 savings plan is a tax-advantaged account earmarked specifically for educational expenses. Parents (or any other family members or friends) can open and fund this account. While a 529 plan has traditionally been used to help fund college or university, this money can also be used to pay for elementary, middle, and high school tuition.

4. Other investments

Brennan and Erin own a small amount of cryptocurrency. When it comes to risky investments like crypto, their philosophy is to buy a small enough amount so that, "if you lose 100% of it, it's not going to hurt you," said Brennan.

Finally, they have a private equity deal. Meaning, "I personally invested into a company that's privately held and have some equity in there," he explained.

Keeping about $10,000 in cash reserves

"We really don't keep much cash on hand: $10,000 max," said Brennan. It used to be even less, around $3,000.

He's automated their finances so that the majority of their income goes straight into their investment accounts, where it can grow much more over time than it would sitting in a savings account.

Part of the reason they increased their cushion recently is because their income has increased significantly and, as a result, they're contributing even more to their brokerage account, explained Brennan: "We now do a weekly contribution of $2,500 into the brokerage alone, so just from a cash flow standpoint, I don't want to over withdrawal there."

As for near-term emergencies, which they expect more so since their daughter was diagnosed in 2022, "our cash flow can handle that," he said.

Plus, "we have a ton of flexibility with the HSA and we could dip into it at any point in time for medical reasons," he noted. As of February 2023, their HSA balance was at $15,300. "We could literally pull it tax-free today if we wanted to."