Millionaires in the Making: The Magtibays

Aris and Maria Magtibay

Ages: Aris 38, Maria 36
Occupations: Pricing manager and bank manager
Salary: $115,000 combined
401(k): $180,000
IRA: $23,000
529 plan: $14,000
Home equity: $81,000
Emergency Fund: $3,000

Money isn’t just a means for Aris Magtibay of San Antonio, Texas – it’s a full-time obsession.

magtibay03.jpgSince 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.

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.

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