Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
This interview took place in March.
My questions are in bold italics and their responses follow in black.
Let’s get started…
OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 38 years old.
Do you have kids/family (if so, how old are they)?
I have no spouse or children.
What area of the country do you live in (and urban or rural)?
I live in a suburban neighborhood in the Mid-Atlantic US.
What is your current net worth?
My net worth is approximately $1.6 million.
I only include liquid assets in calculating this, as I don’t think of things of which I can’t divest myself (i.e. automobile) as wealth.
Others may wish to factor those in, but I don’t.
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
My assets are largely all in stocks, bonds, funds, or cash equivalents.
I have no real estate investments at present, but I’m considering buying some land out West.
I’ve been able to avoid debt my entire life.
EARN
What is your job?
I work in what I would loosely call the cyber industry.
I used to work full-time until I reached the $1 million mark in my early 30s, at which point I entered semi-retirement.
What is your annual income?
My annual income fluctuates in the mid-to-high five figures.
Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?
I had part-time positions in high school and college, which probably generated a few thousand per year.
My first job after graduation was a little over $50,000. It grew slowly over the next few years until I changed employers.
At that point it went up over 50% to a little over $100,000.
It obviously dropped substantially after semi-retiring. I’ve actually only had three years with over $100,000 income.
What tips do you have for others who want to grow their career-related income?
As I say above, my own biggest jump in income happened when I changed employers.
I’ve seen many other people in the cyber industry achieve similar magnitude jumps the same way. I might be able to replicate that jump if I felt inclined to change employers again, but I don’t.
What’s your work-life balance look like?
As you might imagine, semi-retirement is quite nice.
I’ve been able to devote much more time to creative pursuits and other bucket list things.
It was a bit nicer pre-pandemic, as I worked two long days a week. Now I seem to check in with the office three to four days a week, even if just for a couple hours.
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
I’ve done some political prognosticating at times. It was quite profitable, if not quite ballsy, to make a prediction in December 2020 that Joe Biden would be the winner of the 2020 election.
I also do financial coaching.
SAVE
What is your annual spending?
I would ballpark my annual spending in the low to mid five figures, probably always under $30,000 unless I replace the roof or buy a car.
I don’t actually keep track of my spending total because I’ve never desired much that money can buy.
My spending organically stays well under my income, and my net worth keeps increasing anytime the stock market isn’t crashing.
What are the main categories (expenses) this spending breaks into?
Most of my spending is on required expenses such as utilities, groceries, property tax, auto insurance, etc.
I occasionally buy expensive sports tickets if my team is in the finals, but even then I buy the cheapest seats that have a decent view.
During the pandemic I went on a clothes spending spree and spent several thousand, which is probably more than I’ll spend on clothes over the next 20 years.
Do you have a budget? If so, how do you implement it?
I don’t personally keep a budget.
I feel that budgets are most useful if a person either has a tight margin between their income and their required expenses, or faces self-control challenges that they need to overcome.
I strongly encourage anyone who identifies with either of these to keep a budget and applaud them for doing so. No weakness is a problem if you can identify a way to overcome it and execute.
What percentage of your gross income do you save and how has that changed over time?
Aside from withholding for tax and such, every single dollar I earn from employment goes directly into their retirement plan, which is managed by a well-known and highly-reputable mutual fund provider.
I’m able to do this using backdoor conversion rules, which results in tens of thousands of dollars of Roth money every year, in addition to my Roth IRA contributions. I further increase my Roth contributions by decreasing my tax withholding to the greatest extent allowable and then making quarterly estimated tax payments.
What’s your best tip for spending less money?
Write down a list of the five things that bring you the most joy or fulfillment in life.
Then make a second list of all your optional expenses, meaning things like restaurants, movies, Louis Vuitton bags, etc.
Choose one item from the second list that doesn’t contribute to the first list, and cut your spending on that item in half.
See if your life gets worse by doing so. It won’t. Once you see that, you’ll be able to cut more from those second list items.
Another way to spend less money is to look closely at every major or recurring expense and look online for ways to reduce it. I’ve found countless ways to reduce the amount I spend on various things without actually sacrificing quality of life.
For example:
- Listen to audiobooks on Libby instead of purchasing an Audible subscription.
- Try buying groceries from Walmart instead of Whole Foods.
- Buy discounted airline gift cards from Costco.
- Use cashback websites like Rakuten.
- Learn what each coverage item on your auto insurance addresses and you’ll probably identify two or three that aren’t actually doing anything for you (but never skimp on liability coverage!).
- Ask every store and ticket-seller if they have a military, senior, or student discount if you’re one of those.
- Buy your next phone on Black Friday, it may be free.
The list goes on and on and on.
What is your favorite thing to spend money on/your secret splurge?
My single splurgiest purchase is my car, which I finally bought after wanting for several years.
The sticker price was just under $100,000 including sales tax, but I reduced my out-of-pocket cost by using a car negotiator (see previous question).
I also maximized the amount I charged to my credit card for the cashback rewards, and took advantage of the federal EV tax credit (see previous question).
The final cost was a bit under $90,000, not including trade-in.
INVEST
What is your investment philosophy/plan?
When I started investing soon after the financial crisis, I was excited to buy individual stocks for every company I thought would make a comeback. Most did, and I did quite well.
But keeping up with the news for each company became tiresome after a few years, and I saw that the S&P 500 was continuing to generate strong returns. Over time, I divested of most of my individual stocks and reallocated those monies to the index fund.
As my net worth has grown, I’ve also shifted more of my assets to fixed income, inspired by the saying “You only have to get rich once.”
In retrospect, this shift was a mistake, as equities enjoyed the longest bull market in US history and continue to hit new all-time highs almost every year. My net worth would certainly be over $2 million now if I had stayed fully in equities.
But I wouldn’t move all my money back into the equities basket today, so it’s clearly a case of 20/20 hindsight.
What has been your best investment?
As far as investing strategies go, gifting appreciated stocks to my parents is something I’ve been excited about doing since I learned of it. As long they hold the gifted stocks for their entire lives, I’ll get the benefit of the cost basis step-up when I inherit, and owe no tax on the gains as a result.
As far as individual stocks go, GOOGL (Alphabet Inc.) has produced the greatest return. It has multiplied 8x or more on a substantial initial investment.
But the S&P500 index fund has seen a 4x return during the same period, and without A.I. risk, which is why I’m steadily divesting.
By the way, I avoided GOOG, which is the sister class to GOOGL. It has no voting power and no dividend, so I question it as a true ownership stake in the company.
What has been your worst investment?
My worst investment was something I didn’t buy.
In 2009 I became aware of a certain asset that nobody had heard of then, and everybody knows now. I found a website to purchase a token amount of it, but it was a shady-looking website I had never heard of and it asked for every piece of information you would need to commit identity theft: name, address, SSN, bank account, etc. I got cold feet and backed out.
If I had thrown caution to the wind and completed the purchase I would be a movie producer now.
How often do you monitor/review your portfolio?
I do a monthly check-in on each of my accounts to calculate the change in my net worth and make sure everything is in order.
NET WORTH
How did you accumulate your net worth?
As I say above, I made a good but not amazing amount from employment.
I managed to retain the vast majority of it by keeping my expenses low.
I invested that money during the longest bull market in US history. The rest is history.
I did also inherit a sum of money in my early 30s, but even if I hadn’t my net worth would still be well over $1 million.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
Although I’ve earned a good amount of money over my adult life, I’ve never given a great deal of thought to it. It came about mostly as a byproduct of a career that rarely required me to give much thought to the topic.
It’s possible to “win” at saving through two methods: defeat systems set up by people who typically aren’t paid enough to do a good job or to care, and defeat the part of you that wants things you don’t truly value. The second comes naturally to me, and I view the first as a fun opportunity to devise creative winning methods.
The only way I see to “win” through creativity in investing is to defeat systems created by other people who are mostly very educated and have fancy pricing models. I don’t see myself beating people like Jim Simons and so I don’t try.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
My net worth hasn’t experienced any dramatic road bumps to this point, aside from the same market pullbacks experienced by every other stock investor.
But one never knows what good or bad things tomorrow may hold.
Do you have a target net worth you are trying to attain?
$1 million and semi-retirement was my target, which I’ve long since attained.
I don’t have any concrete target at this point, my only financial goal is to continue to grow my wealth over time.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I was in my early 30s when my net worth first hit $1 million, though it immediately dropped off a cliff due to a market pullback.
I was in my mid-30s when my net worth first hit $1 million excluding the impact of the inheritance.
Entering semi-retirement was the biggest shift. Aside from that, my biggest change was to loosen up on some of my spending habits and be more willing to buy things that I truly care about.
What personal habits and/or traits have you developed that have made you successful at growing your net worth?
Mathematics and psychology, mastery of which are key to managing one’s finances, are both deeply fascinating to me, so much so that I obtained a degree in each, along with a graduate degree in the former (though ironically I completed the bachelor’s degrees before developing an interest in finance).
This perhaps has led me to become very innovative in some aspects of personal finance, as I’ve independently identified strategies such as the parent gifting and the Roth/withholdings mentioned previously, among others.
My analytical mind also leads me to examine every large or recurring expense in my life to find ways to reduce them without sacrificing quality of life. And I have the willingness to put in the effort – I like to say that effort is the one talent you can choose to have.
On the simpler side, with a small number of exceptions, I simply haven’t craved expensive things throughout my life. It’s very difficult to build wealth if you live like the characters in The Wolf of Wall Street, and less difficult than most people believe if you can feel satisfied with what you have.
And for any expensive purchases I have made, like my car, I’ve had the self-control to wait until my net worth was at the point where giving up the money would have no noticeable impact on my life.
What money mistakes have you made along the way that others can learn from?
I would have achieved much better returns if I had stayed fully invested in equities and ignored fixed income.
But I wouldn’t change my allocation today so it was a case of 20/20 hindsight.
What advice do you have for ESI Money readers on how to become wealthy?
If you’re like most people in the U.S. who have a salaried job, the biggest factor you have control over is your spending.
The challenge of spending often comes down to mindset more than strategy, and unfortunately changing a mindset is much more difficult than changing a strategy. Every loud voice in American culture is pushing you to be someone who wants to spend, and we usually try to be the person others want us to be.
If you truly wish to become wealthy, I know you can achieve this by becoming a person who wants that wealth more than the things money can buy. If you achieve that mindset, the path will become much easier than you imagine.
That said, I wouldn’t encourage you to hoard money at the expense of doing what you truly care about in life. Becoming rich in pocketbook and poor in spirit would not be a victory.
As I say above, align your spending with the things that bring you the greatest joy or fulfillment. Invest the rest after you’ve paid off any outstanding debts.
Also, avoid extreme sports or other activities that can result in significant injury. As you age, injuries can become a major drain on both your wealth and your ability to enjoy life. It may seem out of place to mention this, but it’s a concern that is wildly undervalued in the marketplace of ideas due to the fact that most people, myself included, prefer not to speak publicly about their own experiences with it.
FUTURE
What are your retirement plans?
I spend much more time pursuing personal interests since entering semi-retirement. My most money-related retirement activity is I’ve begun leading free personal finance seminars through my employer. Since I’ve been able to achieve something that most people want to but haven’t, it’s an ideal way to give back. I’ve gathered a fairly consistent following, with around 100 employees attending each of my meetings.
I’ve also started doing one-on-one financial coaching, which allows me to help people with the unique challenges that they face. Since I built my wealth in ways that most people can emulate, I’ve been able to share my methods, and more importantly my mindset, with the people I coach to set them on the path to where I am.
Other things I’ve been focusing more on include traveling, nature photography, fiction writing, and performing comedy.
I just spent over a month living in Yellowstone National Park for free by doing tasks to help out around the park part-time.
I spent the summer before in New York City to have the Big Apple experience; I did the impossible and found a studio apartment in a safe neighborhood about 15 minutes from Times Square that cost about $1300 a month and allowed me to park my car for $1 a day.
I’ve also written a novella that won a small award and was published.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Health is the main concern for me, as it is for many others. I’ve sustained sports injuries that still give me some problems. I don’t have a good sense of what impact they may have later on in life, including but not limited to medical bills.
I’m an optimist about scientific progress, and remain hopeful that superior treatments may be introduced in the coming decades.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
I actually didn’t pay much attention to money growing up. My family wasn’t wealthy, but my parents were always very frugal and set that example for me. Even when pursuing employment during school and after graduation, I never gave any thought to the salary offer because I was pursuing what I wanted to do and the pay would be what it would be.
My very first day of work was the exact same day that Lehman Brothers collapsed, and the orientation leader had CNN on the screen during the breaks between the orientation sessions. I mostly ignored their coverage of the meltdown because at that time I knew nothing about finance, had never heard of Lehman Brothers, and had little to no interest in the story.
I only started thinking seriously about money once my first job started depositing substantial sums into my checking account, and I realized that if I accumulated enough wealth during my 20s and 30s, I would be able to (semi-)retire early and give much more of my focus to my creative ambitions.
I grasped that letting my salary sit in a checking account wasn’t the best option, but at that point I had no idea what constituted a good rate of return or how risky various investments were. I had no mentor, so I listened to the many voices in the media saying that equities were historically cheap and had the potential to produce outsized returns over the coming years, and decided to commit some money to the stock market.
Once my money was actually at risk, I realized I needed to educate myself on what I was doing. I devoted (too) many hours to studying the stock market, individual stocks, options, etc. by reading investment books and articles, studying stock charts, and waking up to the financial news every morning.
Even though I had no one to guide me, I developed enough expertise over the following years to have a reasonably thorough understanding of security investment, and to comprehend that most clever trading strategies could only produce meaningfully greater returns by taking on more risk than I felt comfortable with.
I gradually shifted my investment strategy to be more concentrated in index and bond funds, and to stop caring whether XYZ stock was up or down that day. As I did this, I also became more aware of the magnitude of the impact of spending habits on the ability to grow wealth. After all, you can only invest what you can keep.
Since then, I’ve let the stock market grind ever higher and turned more of my attention to opportunities to optimize the amount I have to invest. I’ve finally translated that into my personal finance seminars and one-on-one coaching, where I teach people the things that nobody taught me.
Who inspired you to excel in life? Who are your heroes?
My mother and her father are my role models when it comes to money, and in other ways as well. They taught me the value of frugality and minimizing debt.
I wish I could have learned more from my paternal grandmother, as she had a great deal of success in business and investing, but I was too young to appreciate those things at the time.
I’ll avoid using the word “hero,” but I’m an admirer of Warren Buffett. He has an indisputable track record and he says a lot of things that just make sense.
Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?
“A Random Walk Down Wall Street” is all you need to know about investing, especially the early chapters.
“The Psychology of Money” is all you need to know about how to manage your money.
I’ve read many other books on finance, but none that I feel strongly enough about to include as a third recommendation. Instead, I can give two that are also crucial to a good life.
“Influence” by Cialdini is everything you need to know to protect yourself from those who would seek to take advantage of you, and also from yourself.
“The Top Five Regrets of the Dying” is a must-read to ensure that you’re living a life you won’t regret as so many others have. I recommend skipping the preamble.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I typically prefer to give time rather than money. I’ve participated in many volunteer events over the years such as Habitat for Humanity, serving dinner at homeless shelters, etc. My personal finance seminars could also be considered a volunteer activity.
If you do give money to charitable causes, I recommend looking into using QCDs to reclaim the charitable deduction taken away by the TCJA, even if that means having an elderly relative make the contribution on your behalf.
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
This is something I haven’t yet dedicated a great deal of time to because I don’t have any dependents, and I imagine having many more decades before my time comes.
I’m also hopeful that effective life-extension technologies will be introduced to the world in the not-too-distant future, especially now that A.I. has entered the picture.
I’ll be intensely curious to see how societal attitudes toward mortality evolve as these technologies transform from science fiction to science fact.
Great job in reaching your financial goal at an early age to provide you the “option” to go part-time.
Since, you have interest in Finance, you may want to consider getting your Securities Licenses. After I retired, someone recommended it to me and I believe it was one of the best decisions I’ve made. I’m able to make some money, help others to grow their wealth; I am totally remote, just need a phone, computer and internet; self-employed.
I’ve given it a passing thought in the past but have never pursued it. If there are any specific licenses you feel are most relevant I’d be interested in looking more into them.
Nice to see someone enjoying their best life without feeling “left out” by societal pressures of marriage, kids, and accumulating as much wealth as possible. Didn’t know that gifting stock to parents to receive it tax-free as an inheritance was a thing, but I guess I would feel guilty about “not paying my fair share”.
How cool that you volunteer your time teaching financial seminars. Any recommendations on how to get started doing the same?
Having a built-in audience through my employer is a big advantage. I don’t have much insight on how to find an audience from scratch. I had (and still have) a lot to say on personal finance topics, so I made a long list of topics I think are interesting to discuss and started sending out invites. The crowd keeps growing and I keep going.
Interesting read, and an interesting approach/philosophy about it all. Thanks for sharing.
The Roth and withholding/quarterly payments part peaked my curiosity. How does that work? Typically Roth rules are based on income level, and quarterly withholdings make no difference to that – it’s just a different way to pay ultimately the same annual amount, and can’t influence what rules apply.
The Roth strategy uses an employer-sponsored plan, so there’s no income limit to qualify as there is for a Roth IRA.
VERY impressive! Sounds like you are living your best life while you are still young, good for you. I was very intrigued with your strategy of gifting stocks to your parents and then inheriting them back on a stepped up basis. That’s just brilliant! I wish I’d thought of that while my parents were still alive. Thank you for your interview, I truly enjoyed you sharing your experience.
As a fellow “cyber industry” employee, I can strongly relate to what this person is saying with respect to earnings increases by jumping between companies. I’m actually in the market for a new position right now while closing down my company, and I’ve seen variations of more than 25% across major public companies in the space (and those aren’t advertised numbers, but rather what I’ve discussed with interviewers) for similar positions.
For readers who are professionals, another thing to be aware of — especially as you grow in seniority and have more equity compensation — is that not all companies’ equity-based pay should be treated equally. While none of us can predict the future of the market, we can see past performance and (roughly) understand the demand for the products and services these companies are providing.
Thanks for sharing your thoughts in this interview!
I like your comment, “I gradually shifted my investment strategy to be more concentrated in index and bond funds, and to stop caring whether XYZ stock was up or down that day. As I did this, I also became more aware of the magnitude of the impact of spending habits on the ability to grow wealth. After all, you can only invest what you can keep.”
This outlook has also helped us build substantially more wealth than most of our peers.
Thanks for sharing!