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.
Today’s interview is with Mr. FIRE by 2023 at Fire Checklist.
Editor’s note: this interview was conducted in early February.
My questions are in bold italics and his 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’m 51, my wife is 52.
We’ve been married 11 years (the 2nd marriage for both of us).
By the way, marry once and marry right (this second go-around for me is a Winner!).
Do you have kids/family (if so, how old are they)?
I have three (ages 16, 20 & 21– two of which are attending a university), my wife has two (ages 22 & 31). We are empty-nesters, which is terrific.
What area of the country do you live in (and urban or rural)?
Texas (suburb of a larger city)
What is your current net worth?
$1.98 million
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?
- Primary Residence: $420k (mortgage of $173k @ 2.80%)
- Taxable Brokerage: $900k million
- Real Estate Crowdfunding: $425k
- Cash Savings: $100k (earning 1.55% APR)
- IRA: $105k (invested in various mutual funds, most of which are alternatives)
- Physical Bullion ($35k-gold/silver bars & coins)
- Checking account: $17,000
EARN
What is your job?
I am a sales trainer (I was in sales for 9 years, been a trainer for 13 years).
I’m as far as I’ll go in my career, in income-earning potential and that’s fine with me.
What is your annual income?
Myself $150k/year.
My wife is retired (living off a pension called “Hubby!”)
Tell us about your income performance over time. What was the starting salary of your first job and how did it grow from there?
Upon graduating college I was a personal trainer for 5 years. I worked 7 days per week and got burned out, so I changed careers and got started in sales in 1995 and my starting income (commission only) was approx. $3,500/mo. Over the course of 3 years it doubled to approx $7000/mo. Within 2 more years I was earning $100k+.
I became a sales trainer in 2002 and my income has grown from $100k to the present $150K (this year I’ll earn $180k but this includes a one-time $30k signing bonus as I joined a new training company in Dec. 2017).
Up until late last year my wife earned $125-150k herself. Now it’s only me but with so little debt, we can get along fine on one income.
What tips do you have for others who want to grow their income?
Mine grew from staying in the same profession. I’ve changed jobs a few times in order to grow but I’ve always been in the same industry.
I’ve changed jobs recently to better my income and my quality of life (went from traveling every week to now only once per month and the salary is larger!)
What’s your work-life balance look like?
I work four days per week on average, never more than five as I have weekends off and this usually includes a 3-day weekend.
My wife and I spend a lot of time together. She was in the automotive industry. Her dealership was bought out by a public company last year and she decided to call it quits. She does plan on “side hustling” contract labor a little at a time this year (contract labor usually pays $350/day).
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?
My real estate crowdfunding earns an 8% preferred return so this cash flow is generous (last year my earnings from R.E. crowdfunding was a little over $25k).
My investment income from option writing averages $1500-2000/month. Overall though my primary income is from my job.
SAVE
What is your annual spending?
Last year we spent over $100k but we earned a combined $270k.
This year and for the foreseeable future we plan to keep it confined to $70-75k.
Our one big expense is the property tax bill on our primary residence. I do not escrow so it’s a large check I write every December. This most recent check was $10,500. (Property taxes in TX are high, though there’s no state income tax so it’s a fair trade-off, I guess.)
What are the main categories (expenses) this spending breaks into?
Entertainment (we dine out an ave. of twice per week which equates to $100/week). We also attend 3-4 concerts per year, one trip to Vegas per year and one nice trip (luckily our first class tickets are FREE using my frequent flyer points, our hotels like Ritz Carlton or Sheraton are FREE, using my hotel points). I have “travel-hacked” for years from the perks of my business travel. For instance, in the Spring we are flying first-class to Rome and staying at a luxury hotel, the airfare and hotel were FREE due to my perks from previous job-related travel. Due to my reduced travel we won’t be able to do this for much longer, but we decided this year to parlay all those perks into a trip of a lifetime.
HOUSEHOLD:
- We have Direct-TV/Amazon Prime & Netflix: this adds up to approx. $100/mo.
- Food/Groceries: $500/month (is this a lot for two people? Probably, because we eat healthy and healthy-eating is more expensive).
- Property taxes/Homeowners/Umbrella policy/Auto insurance: $15,000/year
- Health Insurance: (thru payroll deduction) $280/pay period ($560/mo)
- Mortgage: base mortgage is only $420/mo. I make a $1500/mo. payment in an effort to aggressively pay it down. I add additional one-time per year payment of $10k to principal, it’s steadily decreasing. I had planned on paying it off this year but under the advisement of my CPA I am staying on this current payment plan.
- Utilities/pool-cleaning service: $400/mo.
- Tithe: I pay 10% of my pay to my Church.
Do you have a budget? If so, how do you implement it?
We do not have a bona fide budget but I am watchful of our spending, capping it at $70k this year this year.
What percentage of your gross income do you save and how has that changed over time?
I’ll max out my 401k this year (over 50, so it’s $24,500) with the new job (the match is 6%).
I save an additional $1000/mo. from my paychecks AND I never spend any of the cashflow from R.E. Crowdfunding. All of the dividends and interest from crowdfunding is transferred to a high-yielding money market, yielding 1.55%.
All total this adds up to $61,500k+ per year into savings/investments.
What is your favorite thing to spend money on/your secret splurge?
I have two Rolexes and an extensive firearms collection (why else would I reside in TX!).
We also own a Harley Davidson and we enjoy riding on weekends, weather permitting.
I have approximately 50 bottles of wine (nothing too expensive, I bought all of this while visiting wineries during our travels)
INVEST
What is your investment philosophy/plan?
I am very risk-averse. Unlike most of your interviewees I do not invest passively in index funds. I hold mostly cash and the funds I own are all actively managed by very capable managers. The real estate crowdfunding was my idea of consistent cash flow from a negatively-correlated asset. Of my $900k in a taxable account, $450k (over 1/2!) is spread over three bona find hedge fund limited partnerships, all three are long/short equity hedge funds. Of the three, the one with the most net long equity exposure is only 60%.
Some of your readers will read this and think that hedge funds are risky. Some are! Not mine as they use no leverage and are never fully invested. The funds’ short positions offset the long positions which reduces risk. Back in the Summer of 2015 when the markets sold off in sympathy of the BREXIT vote, these 3 hedge funds didn’t suffer, and two of the three were up during that period. They only loser was down 1.2% in August of 2015.
As for my own investing/trading I own a couple of actively-managed mutual funds, managed by Jeffrey Gundlach of Doubleline Capital. I own 1500 of a preferred ETF (PFF) which pays monthly qualified dividends.
With $150k “play-money” I sell/write puts and calls along with credit spreads. This is relatively low risk as the options I write are far out of the money. On the rare occasion where a stock was “put to me” I immediately sold covered calls, collected the upfront call option premium, and the following month the stock was called away at a profit.
Philosophy: I am more inclined to slowly grow capital while at the same time preserving it. My goals are to earn 6-7% per year with minimal risk. In investing the ONLY thing an investor can control is risk, nothing else. I feel mine is closely controlled.
As a side note, I do believe this Wall Street “party” will soon end in sorrow. Many of your interviewees & readers as well as these many early retirement/FIRE bloggers I avidly read each day; the ones who have the majority of their net worth in index funds, will be hurt very badly.
Everyone is “long term” while the markets are on the rise and everything is rosy. Every dip has been bought and investors are conditioned to this behavior. It’ll all be very painful for those “long-termers” when the next geo-political induced panic sets in. I’ll be the one among us who’ll be hedged and heavy in cash. I keep my powder dry for this very reason. I’m too close to early retirement to lose capital. A loss of 25-30% and I would have to postpone early retirement which happened to many unfortunate folks in 2008.
I’ve always been this conservative. I’ve never been fully invested. Thru mid-2017 I was 50% invested in equities. I sold off those profitable positions (my tax bill will be high this year!) and am now holding cash and I’ve been adding to my initial hedge fund investments. As my R.E. Crowdfunding deals mature and pay out capital (I have three maturing over the next 14 months), I am not sure if I’ll reinvest in other R.E. crowdfunding deals or place that capital into my cash savings as additional dry powder.
What has been your best investment?
529 college savings funds when my kids were born.
I continued investing in these throughout their youth. These have paid off big time and there’s enough in these 3 accounts to fully fund my children’s college expenses. The 529’s have taken care of this financial burden in full. In fact there will be a surplus in my oldest child’s 529 when she graduates next year, so I am able to transfer that remaining surplus to the younger children tax-free.
What has been your worst investment?
Two years ago I was introduced to a Chef who needed an investor to back his 2 gourmet burger restaurants. His burgers were outstanding and the local newspaper voted his creations the #1 burger in the metroplex. Everything looked promising. I never saw a single distribution, he was full of excuses. I threatened him and lo-and-behold he declared personal bankruptcy and my $50k investment was wiped out.
There was a lesson learned here, several actually. Why in the hell am I investing in something I know nothing about? Investing in the promises of a stranger? What a FOOL I turned out to be.
Luckily my CPA informed me I could use this loss against my capital gains so in the end it worked out, though that $50k was gone forever,
What’s been your overall return?
My spreads and option-writing earned me $46k last year, less than I would have earned had I invested all my cash in an S&P 500 index fund but I sleep well at night actively managing the positions, managing risk, with minimal exposure potential market volatility.
In 2017 my three hedge funds earned: 9%, 6% and 2% respectively. Far less than the S&P 500 performance but with only half the exposure and much lower standard deviation (a measure of volatility).
How often do you monitor/review your portfolio?
I log into my brokerage account every day.
My hedge funds are marked-to-market (valued) once per month, but my options positions trade all day and I trade around the positions a couple of times per month.
NET WORTH
How did you accumulate your net worth?
Readers will find this interesting: $1 million of my net worth was from an inheritance.
The remainder of our net worth is from saving a portion of our income over the years. Combined we have earned $230-270k per year for a number of years which goes a long way in a state like TX. We indulged, we have nice things, but we also SAVED.
To your readers: Many of you stand to receive an inheritance (or some other windfall) whether you realize it or not. It may come as a surprise one day. Who would have thought Grandpa who lived on TV dinners and peanut butter sandwiches had millions socked away and YOU are in his will! This stuff happens. I want to impart some very valuable wisdom to your readers; this actually happened to me. It can happen to you.
My advice is DO NOTHING FOR ONE YEAR. DO NOT immediately buy that a new car or house, place the money in a brokerage account and spread that wad of cash over several 6 month, 1 year and 2 year CD’s.
Furthermore, DO NOT share this information about the inheritance with anyone! Don’t tell your closest friends or else they’ll resent you. Don’t tell co-workers, they’ll be out to get you!
DON’T place your trust in anyone.
Final piece of advice, NEVER loan money to friend of you’ll destroy a friendship.
Is it hypocrisy to be a Christian and follow-though on this advice? NO! The inheritance was a blessing and one should pay a tithe offering if one feels compelled, but it’s not an obligation to help everyone out. You loan out money to everyone who requests it of you, you’ll destroy those friendship AND you’ll end up like all those unfortunate lotto winners who gave all their winnings away and ultimately ended up living in a trailer park, destitute.
I could go on and on about this but I believe your readers get the point and I hope those that inherit, heed my advice.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
When you have money you have a target on your back!
Friends, family, everyone wants a loan or a hand-out. It’s best to be discreet. Learn to say, “No but hell No!” when asked for a loan or for you to invest in their latest investment opportunity. That crappy investment I made in the burger joints; the chef/new business partner was introduced to me by a friend who knew I had money. He’s no longer my friend….
JUST SAY NO!
What are you currently doing to maintain/grow your net worth?
Preservation of capital is paramount to us with a little bit of growth kicked in. We stay conservative and cautious with investing and I continually save. I feel we are on the right track.
Do you have a target net worth you are trying to attain?
$2.5 million debt-free. If we can accomplish this in the next 5 years I plan to retire early.
At the $2.5 million mark I should be able to retire and live on $75k per year. We do plan to sell our primary TX residence by that time, take the cash and purchase land and a home in a state like Arkansas or Tennessee. $500k cash will buy quite a bit of land and a 3-bedroom home in either of these states.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I became a millionaire at age 47.
Does sudden wealth change a person? It shouldn’t. I feel wealth magnifies who you already are. If you are a caring person, wealth will magnify this attribute and you’ll be more caring and more gracious. If you’re a jerk prior to becoming wealthy, you’ll become a bigger jerk.
The one thing we millionaires have is PEACE OF MIND, and that’s WORTH A LOT! Money doesn’t buy happiness but it does provide peace of mind!
If you could rewind to when you first started out, what would you do differently?
I would have started investing in an IRA as early as possible. Even though it was only $2000 maximum contribution for the longest time, it still would have compounded and grown.
I waited until my forties to start contributing to tax deferred investment accounts, which is STUPID.
Fortunately, the majority of our liquid net worth is in a taxable account so there are no tax penalties when we need cash in early retirement. I won’t tap the IRA for a long time.
What money mistakes have you made along the way that others can learn from?
The advice above will be worth its weight in gold to many of your readers. ALSO, place your assets in a Living Trust. This protects your assets and it passes to your heirs directly, bypassing probate. Probate is a pain the arse! Avoid it if you can.
For ultimate privacy consider setting up an LLC and placing your primary residence and any investment property in the LLC.
Both an LLC and a Living Trust can be set up at legal zoom. This is how I set up mine. It’s rather simple and far less expensive than hiring an attorney.
DO hire a CPA for your taxes. I don’t use turbo tax or any other tax software. My hedge funds and crowdfunding send me K-1’s and they’re a mess at tax time. At the end of the day, a CPA will save you thousands in taxes AND time! Time is our most important resource.
If you had to give advice to ESI Money readers about how to become wealthy, what would it be?
Start saving and investing early.
SHUN DEBT! Pay off your credit cards each and every month and don’t buy something you can’t afford.
Hey, if you NEED a new car to replace your old bucket-of-bolts, and you are offered 0% financing, take that deal! That’s the exception. Drive Hondas and Toyotas, not Audi’s!
When it comes to investments, stick with an asset allocation you are comfortable with. One that allows you to sleep well at night. Just because you’re 25, what rule states you have to be 100% “all-in” stocks? Keep some cash on the sidelines for bargain-hunting later on.
Did anyone ever watch the original “Louis Rukeyser’s Wall Street Week?” One of the regular panelists was Martin Zweig, a very successful investor. When he was most bullish he was only 60% invested in stocks. Theater panelist and Lou snickered at him for this ultra-conservative stance, but he called the ’87 crash and his subscribers and managed accounts made money on that Black Monday. The guy was brilliant and he always had liquidity and he did a great job managing risk. He never cried in his soup when markets were falling. He’s an investor I’ve tried emulating all these years and I have no regrets about it.
FUTURE
What are your plans for the future regarding lifestyle?
I mentioned we plan to sell our home and downsize a bit (our home is 3,100 square feet which is large for two people). We will buy some land and have several dogs and outdoor “barn cats”. I’ll hunt on my land, we’ll have fresh eggs from our chickens and plan to set up an outdoor pistol range.
Gameplan: Pay off home over next 4 years, retire in 5-6 years with $2.5 million debt-free. Pay cash for the next home and land. Live on $75k per year.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Yes, only one big concern: HEALTHCARE COSTS!
This healthcare problem is the biggest risk we all share. If Washington doesn’t come up with a solution soon, we are all doomed. This affects EVERYONE. We are all in this one together….
MISCELLANEOUS
How did you learn about finances and at what age did it ‘click’? Was it from family, books, forced to learn as wealth grew, etc.?
I was a personal trainer when I graduated college and I had some affluent clients. A couple of them were in the financial industry and I learned quite a bit from them. One happened to be a retired floor trader from the CBOE options exchange. He made a fortune in the IBM options pit and retired at 40 years of age. He taught me a great deal about options, spreads, etc. I trade based on his lessons to this day.
I have read many books. I read Barrons every Saturday. I pay attention to the “gurus” in the financial news (Bill Gross, Jeffrey Gundlach, Michael Farr, etc.) and I am watchful of their appearances and interviews on TV.
The best investment book ever written in my humble opinion is “Fail Safe Investing” by the late Harry Browne
There is an open end mutual fund that invests according to his principles and I personally own this fund. It’s terrific as it is diversified in negatively-correlated assets.
Who inspired you to excel in life? Who are your heroes?
The late Martin Zweig (mentioned earlier) was an inspiration. I called his office once and he actually took my call. He was very friendly and personable and as a result I invested in his closed-end fund, The Zweig Find (symbol: ZF).
That friendly phone conversation made huge impaction me. You can be wealthy and still be nice to people. Same goes for Wall Street trader, “Trader Vic” (Victor Sperandeo). I spoke with him several times over the phone and this made an impact.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I tithe 10% of my paychecks to our church. This is important to my wife and me. I have faith and I believe this is what I should be doing and I do it whole-heartedly. I can guarantee you that my life (and financial life) changed when I began tithing. Since that first tithe check I wrote I have never worried about paying bills, if there will be food on the table, etc.
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?
I am leaving $100k to each child. The remainder goes to my wife thru my Living Trust. If we both die together, simultaneously the children are Beneficiaries of the Living Trust in its entirety.
FINAL NOTE:
My hope is that your readers appreciate my candor. Many fortunes have been made and later lost due to poor decision-making. There are consequences to every action. It’s important that privacy, asset protection and capital preservation (when investing) are taken extremely seriously.
In this age of robotics-investing and passive indexes we are all so caught up in savings money in fees, we lose sight of the mere fact that this is a crowded trade.
When THE sell-off finally arrives, these index funds all holding the same stocks in their top 10 holdings and they’ll all sell them at once to meet redemptions (since they’re fully invested at all times).
Diversify into “alternatives” whether that be real estate crowdfunding, rental-properties, precious metal bullion liquid alt hedge-type mutual funds and hedge funds (for accredited investors) or even cash/CD’s.
This is global financial system. What happens in Europe affects the US markets, affects China, Japan, Bangladesh, and Luxembourg. International diversification only benefits a falling dollar. It’s not negative correlation. To be truly diversified means allocating your assets in negative correlations. When I mention precious metals I am not talking about ETF’s like GLD. I mean purchasing physical gold and silver. Start with a roll of Morgan Silver dollars and evolve from there.
Also, having some cash on hand in the event of emergencies (and ATM failures like Puerto Rico!) is a good idea. If you hold some physical precious metal bullion, that cash on hand will never erode due to inflation. Think about that one a minute!
Accidental FIRE says
Great interview. While I agree (there really can’t be a disagreement…) that the selloff will come and it’ll likely be big, is it your position that the selloff will happen and the market will never recover?
I’m not worried. I’ve used the index fund strategy since the 1990’s, and am more than fully FI. Went through big crashes and held, will do so again. I’m confident things will always recover, but I suspect we might disagree on that.
Kudos to you on a great interview!
Dave says
There are many different paths to becoming a millionaire. Some people get there by investing and others get there the old fashion way. You did it both ways. You developed your career and received a nice inheritance. It looks like you are set up nicely for when you decide to retire. Thanks for sharing your story and welcome to the club.
MrFIREby2023 says
Thank you Dave. I was a little concerned about this interview at first because I didn’t want anyone looked by at me with scorn since I inherited some of my wealth. I do realize though that many readers here will come into a windfall like I did. It might be totally unexpected. If anything I hope thy heed my advice.
MrFIREby2023 says
Good morning Accidental Fire. You’ve seen me comment on your own blog before. I faithfully read your interesting blog. I’m not a “permanent-bear” but I’m concerned about all the risks. I believe the financial firm GMO is correct, over the next 5-7 years equity returns will be flat at best.
Therefore I have to find other ways to earn cash flow and capital gains. This next decade for equities may be a decade of flat returns (other than dividends). Therefore aim cautious.
I will redeploy cash into sectors (recently I purchased REITs) that are oversold from a panic or valuation standpoint….but I will still hold quite a bit of cash. I’m 51 but Inhave to think like. 61 year old whose only a few years from retirement. You wouldn’t want to be fully invested in equities at that age.
Accidental FIRE says
Thanks so much for reading my blog, I really appreciate it! I don’t disagree with your position, to be clear. I’m a bit younger than you, so that gives me a bit more risk-tolerance in years. And I’m not fully invested in equities either, I hold the Vanguard Total Bond Index with a substantial amount. But my equities are probably ~80%, right now (and dropping recently of course). I’m still confident with that at my age. I survived ’08 without selling and without mentally stressing out, so I’m ready for the next one.
Crusher says
Thank you for providing such great detail. It takes a great effort to provide so much thoughtful information.
Even though your path has been different from ours in many ways, there are many similarities including a mindfulness regarding finances. That seems to be a common thread amongst financially successful people.
Your strong feelings regarding not sharing financial information challenges my own which is always helpful. Just this past year I have decided to share more openly with those that I care about regarding are personal finances. I find it odd that people will share the most intimate details of their sex life but money is a taboo topic and not to be discussed openly!
Thank you for sharing a get posting!
MrFIREby2023 says
It’s great that you’re being helpful but also BE CAUTIOUS! Don’t be so trusting. Loved ones and family members will have slight resentment toward you. It’s hard to believe but it’s true. We live in a society where we almost have to apologize that we’re successful. That’s a load of crap! Be very wary and cautious with people and I think it’s best practice to be discreet about your wealth an safeguard your wealth from others who only want to advance their agenda.
Crusher says
Absolutely a very fair and prudent approach.
Kudos again on executing a very successful plan! Thank you so much for sharing so fully!!
Tom @ Dividends Diversify says
Interesting investing approach and philosophy. It wouldn’t be for me, but admire anyone who has an investing plan consistent with their risk profile, understands the pros and cons to the plan and sticks with it. I get a pretty good sense the investor understands these principles from how he speaks about it. Congrats on your financial accomplishments! Tom
Jason@WinningPersonalFinance says
The keeping cash on the sidelines discussion is an interesting one. I’m 34 and pre-FI. I have no problem being close to ? in equity index funds. I agree that once you you’ve reached your financial goals, it’s time to play a little defense. Would love it if you could shed more light on how you expect your portfolio to perform in good and bad times. One thing I fear is getting too fancy with something like an options strategy and totally missing out on market appreciation or suffering even more than the index in a crash.
MrFIREby2023 says
Hi Jason,
To answer your question about my expectations for returns; if I capture 1/2 the returns of the S&P 500 in an UP year, I’m pleased. In a down year I always expect to outperform the markets by a wide margin. This is due to cash levels, options strategies, my real estate Crowdfunding returns AND my alternative investments.
Your own portfolio doesn’t have to be that complicated. On my blog fire Checklist I just wrote a 3-part series on articles on investing in Alternatives. I encourage you and everyone to read them. I have provided examples of several “liquid alt” mutual funds I’m invested in that will provide a ballast for your portfolio during volatile times. As for my options trading (put selling), it’s not that risky. I manage the risk very well though it does require some time commitment. It enervates steady income for me and im not having to own the common stock outright. For example, this morning I sold 2 puts on AAPL that expire in May at a strike price of 170. I am betting that AAPL closes above 170 by mid-May. If I’m right I keep all $1280. of option premium I collected today. If it closes below 170 I am hedged up to the amount of premium I collected per option which was 6.40 per option ($640 each x 2 puts = $1280).
I recently wrote an article about this and I provided a link to the book i recommend on the subject (“options Machine”). Take care!
MrFIREby2023 says
AAPL option update: I made a trading error this morning and it turned into a profit! I was using the Charles Schwab trading app on my iPhone and just now realized I sold APPL 170 calls this morning, not the puts. Hallelujah! This trading mistake ended up making me $275 in profits.
I immediately exited these calls and simultaneously sold AAPL 155 puts. I took advantage of the huge market selloff and sold these at a lower strike price and of course, much lower risk.
I also sold puts (strike prices below the market) on XLK (technology ETF) and SPY. All total the premium I collected today was over $1700.
This is the type of thing a I do with my “play money” which is set aside for this purpose.
Arrgo says
I agree with your comment about keeping your wealth and finances private. Nothing good will happen if you start telling everyone and it’s none of their business anyway. Like you said, they’ll always be scheming on how to get a hand-out or loan from you. If you are out, they’ll expect you to pick up the tab or pay the bulk of any costs. Or even at work, maybe you’d get less of a raise or bonus when they are splitting up that money since your manager will think you are loaded and give it to someone less deserving since they feel sorry for them etc. Most people are their own worst enemy when it comes to money and are responsible for the situations they are in. I like to analyze these types who cry how broke they are. You see all the stupid things they do yet want someone to always “help” them and bail them out. Most friends, neighbors etc would probably be surprised if they knew what I have. I’ve caught a few breaks in life along the way, but most of it has been by investing automatically over the years. Its been amazing what the long term compounding has done. I also started way back when the IRA max was $2000. I think I was about 24 and it seemed like a good thing to do although it also felt a bit odd thinking about retirement already at such a young age. Glad I did it though and now my accounts plus (401k) are huge. The funny part is I dont feel like i’ve put that much effort into it other than the going to work part of coarse. Start early if you can. Even put some in at 18 or 19 if possible. Enjoyed the post.
MrFIREby2023 says
Arrgo!
I love how you put it; you made a profound statement. We are our own worst enemy when it comes to money!
I encourage you to read an article I wrote in March, “the art to saying No!”
It’ll hit Home and you’ll enjoy reading it.
Take care and Be blessed.
MRFIREby2023
Reader says
Really enjoy Millionaire Interview Series.
Millionaire 49, curious as to how you handle blended family finances. Do you and your wife have a joint estate plan and will give equally to each kid and step kid, or do you have separate estate plans? How do you handle kid expenses after they turn 18? For example, do you cover any expenses for kids and steps who are over the age of 18, and if so, do you try to give equally to all kids and steps? Are the two of you (and exes) funding college fully for all kids and steps, or are they treated differently? Do you and your wife share all your banking and account information with each other, or is there a tendency with either of you to keep some things separate, since it is a 2nd marriage with kids from past relationships? Sorry for all the questions – it’s a topic that’s not often covered and it’s interesting to hear how different millionaire + couples approach these sensitive issues.
Kristy says
Great interview, and appreciate your advice. I’ve read before the sage advice you offer on receiving a windfall. Much appreciated. We all need that reminder.
My children each received a nice gift from Grandma last year, and the oldest (23) was able to open her Roth, because of/with that sum. She is in her first year teaching in an expensive city, and saving is difficult. I’ve instilled in her the need to establish an emergency fund, as she has learned of the consequences, medical exp, and vet exp ( told her she didn’t need a pet yet) == the vet exp has exceeded her own medical expenses.
The others used it towards college, however, they will both be able to open a Roth this year with earnings, at 18 and 21. That will benefit them ten-fold going forward.
MrFIREby2023 says
Kristy,
That’s to your parenting your kids have their act together, kudos to you Mom!
Starting a Roth now at her age is the best thing your daughter can do. She’ll be in better shape than us when she reaches our age! She’ll be on FIRE!
MrFIREby2023 says
Wow! What a great question! Blending families is extremely tough. I’ll say this now out in the open; being a step parent has been life’s biggest challenge for me! When I’ve tried to discipline my step daughter, my wife defended her like a Mama Bear defending her cubs! LOL! Thank goodness they’re all out of the house, mine included.
Estate plans: we have separate plans. She has some money (low six figures) set aside for her two daughters in the event of her death, as well as some rental property. All of this were assets prior to our marriage and they rightfully belong to my wife and later, her kids. I want no part of those assets.
Approximately 2/3 of my assets mentioned in this ESI article are from the inheritance and in my state it’s separate property, one of the main reasons I set up a revocable living trust. The home equity is OURS. We have one joint checking account, plus she has one of her own and I have one of my own. All of this is really no big deal and there’s no issues with $. I pay for her pedicures, her clothes, fuel, dining out, etc. etc..
(like as mentioned, she’s on a pension…ME! )
I personally set up my kids’ college funds (529’s x 3) when each were born, during my previous marriage. My step kids did not attend college, they both attending an expensive beauty school (Toni & Guy) which my wife paid for herself with her income. She only “retired” this past August.
As for expenses, college tuition and housing is covered. Their mother pays for their food. Luckily I don’t have an ex-wife life Alan does (Judith) on 2 1/2 men! We get along fine with no issues nor bitterness. I paid 1/2 for their 3 cars and she paid 1/2. All 3 kids work part time while in college and they pay their own auto insurance and incidental expenses.
My step kids are aged 22 and 32 (my wife has 3 grandchildren from the older daughter) and they’re both on their own financially.
Overall, through trial and error it works.
Reader says
Thanks for your reply! Nice to see how and that it worked out from someone who’s been there, done that!
Ray says
I was curious about the reasoning presented to you by the CPA when advising you not to pay off the mortgage sooner, if you don’t mind sharing even more.
And thanks for presenting your investment philosophy, it is always interesting to hear from people who are doing it differently and thus being able to learn something new.
Greg Schliesman says
Interesting to hear you accumulate firearms. I do as well. A lot of people don’t realize how good the return is on this investment assuming you are buying the right ones at the right prices. I accumulate primarily SW, Colt, Winchester and Ruger, and nearly all pre-1964 vintage. I would be curious if your strategy is the same or different?
Thanks
MrFIREby2023 says
Greg,
I don’t have too much in the way of vintage firearms. I’m not a prepper and not a crazed lunatic (I want to make this point to all readers out of respect). I enjoy hunting birds (dove, duck, quail and varmints (coyote and wild hogs) so my primary go-to guns are hunting shotguns and scoped bolt action rifles. I have a few handguns and some nice S&W high-caliber revolvers that are my sidearm for hunting hogs or for snakes.
In other words, all of my firearms are “functional” and wouldn’t be considered weapons of human destruction. I feel compelled to make this point due to the times we live in. For protection I have our 3 German shepherds who have the run of the place. They’re our first line of defense. I have had a concealed handgun license since they started issuing them in TX, though a I don’t carry a handgun on my person. I’ve actually walked into a convenience store in Houston a few years ago as it was being robbed. I wasn’t armed But my presence distracted the 3 robbers (just kids but still thugs) and disturbed them enough to leave the establishment without incident. All I can say is that cashier and myself were blessed that day. Maybe the robbers saw something i didn’t (like an Angel?). I can’t explain what happened but it happened and it was divine intervention, no doubt! The whole time I had a Handgun in the console of my car that I didn’t have immediate access to. I’m a proponent of the 2nd Amendment BUT at the same time we do need a solution to the shooters running rampant. We need more armed guards, we need stricter background checks. That’s my opinion. Thanks for the comments Greg and Iagree with you, tour vintage collection is valuable and a great investment. I wish I had purchased that colt Python revolver a decade ago when a I had the opportunity! Dog Gone It!
MrFIREby2023 says
Another great question. I planned on paying off the mortgage completely this past summer. My CPA advised against it. She replied like this.
“Do you want to know what wealthy people do? They buy as much home as possible and mortgage 80% of the property (20% down to save PMI) and they finance it as long as possible.”
Her reasoning is that they’ve taken advantage of low interest rates and ever increasing stock prices. In my special case she thinks it’s better to keep paying it for a few more years and keep my liquidity (from having the cash available). You see, when you have liquidity, you have flexibility, Which provides more peace of mind. My loan structure is strange anyway and she makes since. I only had a 7 year ARM @ 2.80%. I’ve paid this sucker down to the current balance of $168,000. My property is worth $425,000. Why not keep the liquidity (and flexibility)? I’m only paying $5k per year in interest and it’ll be paid off before I retire early.
My best friend is a wealthy ($15 Million+) 47 year old who owns and constantly buys rental properties all over town. He is someone I trust wholeheartedly (he’ll be the custodian of my estate) and I go to him for financial advice. He’s obviously done a lot of things right to be so wealthy at such an early age. I got a 2nd opinion from him and he agreed with my CPA. His reasoning is that rates will continue to rise and my rate of 2.80% will become extremely valuable.
Here’s my little trick: I have my exact mortgage payoff in an online savings account (purepoint financial) paying me 1.60%. The net I’m paying for the mortgage after factoring this savings in is only 1.20%!!! That’s a super low rate, and with the tax deduction on top of that I’m literally paying zero interest on my mortgage.
I hope I’ve made this all very clear.
Jacque says
Thanks for explaining that. It makes perfect sense.
MrFIREby2023 says
Your certainly welcome Jacque. That same savings account that was paying 1.60% is now paying 1.75%. That means I’m now only paying a mortgage rate of 1.05%! At some point in this interest rate cycle and as the FED gets “cuter,” my effective rate will eventually be 0%!
MrFIREby2023 says
Thanks ESI for the interview. Your readers are classy people and very nice people. I enjoyed the interview and all questions are welcome. Be sure and subscribe to my blog!
Jason says
Thank you for the detailed answers to this interview. Like some of the other readers I might disagree with you on the returns over the next decade. I personally think we are in a secular bull market, which typically has 15-18 years of above average returns, but then we we will definitely have a pretty big market drop. That said, I think it is great what you have done. If it works for you that is wonderful and there are some great lessons to be learned here. My question for you is how did you run across these hedge funds? You noted, at least it appears, they are in your brokerage account, did you purposefully put a lot of that money in that account instead of tax-deferred (e.g. 401ks, etc).
Whatever the answer it sounds like you are doing well with your strategy. Wonderful job and keep up the great work.
MrFIREby2023 says
Hi Jason,
To answer your question on hedge funds…There was an investment company that existed a Couple of years ago called Sliced Investing that offered several hedge funds to investors. After the company was bought out by a venture capital firm that wanted to go in a different t direction with Sliced, they liquidated the funds. I reached out to 2 of the funds myself and invested with them directly.
I do own a few liquid alt (quasi-hedge funds) thru Schwab. If you go to my blog site, read my article, Alternatives, part II, here’s the link:
https://firechecklist.net/2018/03/31/alternatives-part-ii/
This should cover the further details for you and these funds featured in the article don’t require investor accreditation like my 2 bona fide hedge funds do. Good Luck to you!
C @ Working Optional says
I like this interview – it made me think.
I’m a diehard index fund junkie who’s going to remain that way, but am slowly becoming more open to alternative views and opinions in my 40s. 🙂 I didn’t have any $ invested during the dotcom bust but lamented I didn’t have more cash lying around to invest when 2008 hit.
In any case, slowly trying to diversify new cash into alternatives for the next few years.
Oh, and nothing wrong with receiving an inheritance! 🙂
MrFIREby2023 says
C,
I would begin diversifying into Alternatives NOW, not over the next few years. You need buffets because this return to higher volatility is here to stay thru at least 2021. I follow long term cycles (via technical analysis) and the days of low volatility are gone probably KT for the duration of our lifetimes. The debacle of $XIV was the end of low volatility.
You’re probably sitting on some nice paper capital gains on your index funds, consider paying back and reinvesting the proceeds in the liquid alt mutual funds I highlighted in this article:
https://firechecklist.net/2018/03/31/alternatives-part-ii/
Also, open a high yield savings account and place some CASH in there. They vary in yield from 1.50% – 1.60%.
I use purepoint financial (1.60% and rising!).
Believe me, you’re not going to lose out on equity index upside. The highs are probably in. If not the upside for the next couple of years is 3100-3200, basis the S&P 500. The goal over next few years is capital preservation and finding cash flow opportunities, capital appreciation is over for a little while.
Good luck.
Alex C says
Awesome post. Great to hear from someone who believes in defensive position financially.
You mentioned the desire to keep dry powder. Do I take it you would invest in stocks at a certain or after a significant correction? If so what would the scenario look like?
Also of interest was some allocation to precious metals. ESI ran a post on this some time ago which was great. Would love to know more on how you go about stacking PM’s.
Well done.
MrFIREby2023 says
Good Morning Alex,
I am never “fully-invested” in stocks. At my absolute most Bullish stance; I’d be 60% Long stocks, 5% in call options (and/or short put options, leveraged Bullish position) and the remainder in cash & hedges. I always keep dry powder available. I have some key levels below the current market where I’d be averaging into during a market correction. I also follow cycles and there a cycle turn due in May which could be the point the market makes a low. I’m a technical analyst so a I see the world and the financial markets through “a different lens” that most of the readers here.
Precious metals: my advice is to begin with purchasing rolls of Morgan silver dollars (maybe start with eBay or one of the reputable precious metals dealers I mentioned in a recent article on my site:
https://firechecklist.net/2018/04/01/alternatives-part-iii-cash-bullion/).
After you have a few rolls of common date Morgan silver dollars, then Begin accumulating silver bullion; at present I like rolls of 25 Canadian Maple Leaf coins. You can also buy stacks 10 ounce bullion bars Which sell for a very small premium over spot. If you have enough cash flow consider solar cost averaging into gold bullion. For a two year period I purchased 1 oz of gold bullion each and every month. It was part of my monthly budget. Once gold hit $1250 I stopped the practice.
Lily | The Frugal Gene says
Always love these. Your burger restaurant incident was a lot like my mother in law family’s venture. They promised a burger/fast food restaurant with the money and they did nothing with the money but squander it. This is why I feel soooooooo awkward whenever people ask for a personal loan, at that point, it’s no loan. It’s basically a gift.
I hear the WAIT ON IT windfall advice a lot and it’s solid advice that’s not taken enough. People hear it, but they don’t HEAR it really.
Brian says
I appreciate the insight into your overall investing strategies, the info on your real estate crowdfunding experience, and the alt article (site is not currently working).
MrFireby2023 says
Thanks Brian.
I’m glad you found my interview informative. I closed down my site due to my concerns about privacy and my desire to remain anonymous. Since this interview #49 we’ve relocated to a rural spread of 15 acres. We are now living “off the grid.”
Thanks again.
Richard says
I do appreciate the alternative view and pathways . . . it’s equally important to take a close look. I have several key objections, though clearly sympathize with keeping one’s financial info private as hell among family members and friends, while nevertheless remaining skillfully helpful with pearls of solid financial wisdom here and there. On that front, short-term cash protection (one year’s living expenses, or perhaps two, ideally) is like pure day or sunshine to most everyone, compared to the night, or the not-having. And yes, US healthcare and rising insurance costs are a menace to all, outside of the relatively poor (Medicaid bounce downward) or alpha HNW (4 million +). As for the objections, I vehemently counter any assertion that eating healthy is more expensive. Not if you’re a serious gardener and a moderately skillful, disciplined shopper. I pay much less now, about 70% less than even 15 years ago, while also vastly improving the health profiles of two, though the latter is a bit harder to quantify. I’d also argue that passively investing in index funds via dollar-cost averaging is the only way to be, even 100% in equities at most any age. Only a $4 million war chest would convince me to, perhaps otherwise, conservatively CD out the remainder of life, with returns even below the rate of inflation, with remaining significant cash protection in high-yield savings. Till then, 100% equities, dollar-cost averaged, never in bulk, with some light international hedging (VGSTX, for example) instead. This also keeps fees nearly non-existent and taxes dirt simple, never requiring a CPA, though I also appreciate the mortgage strategy. Beyond that, I am horrified at the idea of tithing–I will stop there. I also can not recommend a strong metals position, whether on paper or physical. I think it’s a security risk and a false hedge . . . if the American economy thoroughly craters, evaporating all market returns and most every company, and a great portion of the world with it, I have to ask anyone, how long do you think silver bars and deadlocks and your firearms will get you? Life is near worthless under such extreme conditions; I see no need to fear the worst-case scenarios, only practically enabling better ones with your eyes open, head clear.
Richard says
Meant to say ‘deadbolts’ . . . I think you know what I mean.