ESI Money https://esimoney.com Three Simple Steps to Wealth Fri, 16 Aug 2019 19:02:22 +0000 en-US hourly 1 https://esimoney.com/wp-content/uploads/2015/11/cropped-ESI-MONEY-ICON-3_512px-75x75.png ESI Money https://esimoney.com 32 32 What You Need to Know about Fundrise and DiversyFund https://esimoney.com/what-you-need-know-fundrise-diversyfund/ https://esimoney.com/what-you-need-know-fundrise-diversyfund/#comments Sat, 17 Aug 2019 09:00:54 +0000 https://esimoney.com/?p=5413 As you probably know, I’m a big fan of real estate investing. I currently own three properties with five buildings and a total of 14 units. We purchased them when we lived in Michigan a few years after the real estate meltdown of 2007-2009 and as a result we got them at great prices. As […]

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As you probably know, I’m a big fan of real estate investing.

I currently own three properties with five buildings and a total of 14 units. We purchased them when we lived in Michigan a few years after the real estate meltdown of 2007-2009 and as a result we got them at great prices.

As such, they churn off a good amount of income plus have appreciated quite nicely.

I would love, love, love to buy some more properties, but the markets are not cooperating. In both markets I’d consider buying in (my current town of Colorado Springs as well as Grand Rapids, Michigan where my other places are) are so hot that the prices are unreasonable in my opinion. So for now I sit on the sidelines.

I do have $125k in cash invested with a friend who’s buying apartment complexes in Ohio. He’s paying me 10% on my money, so that’s not really sitting on the sidelines. Ha! But one day he will pay me back the entire amount and that revenue stream will die off.

I have thought about real estate crowdfunding but haven’t jumped in yet mostly because it’s a platform I haven’t tried. I’m more comfortable owing my places outright (which seems strange — most people would probably prefer the opposite) as that’s what I’m familiar with.

That said, I have seen several bloggers I admire jump into it, so I’m intrigued.

When my friends at The Money Mix asked me to run a post of theirs in partnership with DiversyFund (who you’ll learn more about in a minute), I was happy to both read the piece and share it with you.

What follows is their analysis of two popular real estate crowdfunding options. Once you read it, please let me know what you think of their conclusions as well as your thoughts on real estate crowdfunding in general (I’m particularly interested in hearing from those of you with actual experience.)

With that said, here’s the post from The Money Mix…

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If you’re a reader of personal finance blogs, you know that real estate investing is a hot topic. Bloggers plug and review companies like Fundrise, Realty Mogul, and PeerStreet. A relatively new, but highly competitive fund in this space is DiversyFund. The team at DiversyFund asked the team at The Money Mix to take a look at their fund. We’re glad we did.

What follows is a review of our findings and what we think makes DiversyFund unique in the marketplace. At the end of the post, we think you’ll agree that if you’re considering investing passively in real estate, you should give DiversyFund a look.

With that brief introduction, let’s dive in and take a closer look.

Publicly Traded REITs

The most common and readily available way to invest in real estate is via real estate investment trusts or REITs (pronounced Reets). REITs purchase a variety of different types of real estate (residential, commercial, multi-family, etc.) Many REITs offer a diversity of these types of real estate in their funds. Most REITs are publicly traded securities offered on stock exchanges via ETFs or mutual funds. The firms offering these REITs must register them with the Securities Exchange Commission (SEC). They are subject to SEC rules and regulations regarding the formation, purchase, and sale of the securities.

The firms that offer them are investment firms. Registration for investment companies offering products is different than those of private investment funds. I’ll explain that shortly.

Private Equity

In the past, private equity real estate funds have only been available to the wealthy. Individuals must be accredited investors to get into the typical fund. Accredited investors are those with at least $200,000 in income ($300,000 joint) or a $1,000,00 net worth (exclusive of residence). That cuts off the vast majority of the investing public. Only the 1% get into the game. That’s been the biggest complaint and downside of private equity funds.

The other knock-on these funds is the high fees. In the beginning, they had what’s called the two and twenty fee structure. That meant investors paid a management fee of 2%. If the fund made profits, management took 20% of the profit. Most people feel those fees are expensive. Competition and public pressure have brought down these fees. They are still among the highest in the industry.

Private equity funds are pooled investment funds, not investment companies. As such, they don’t have to register as investment companies with the SEC. They get what’s called an exempt status under the SEC Private Advisor Rule. In many ways, this is an advantage to the fund and its investors. Complying with the investment company rules is costly and time-consuming. Reporting requirements, in particular, are eased under the Private Advisor Rule.

Some cringe at what they view as the lack of accountability for private advisors. While the larger investors have been pouring billions of dollars into these funds since the started.

Crowdfunded Real Estate Funds

In recent years, crowdfunding has made its way to real estate investing. Crowdfunded REITs are most often offered in private funds; meaning they are not publicly traded. These newer funds register with the SEC as exempt funds, usually under the SEC’s Regulation Crowdfunding. Crowdfunding in real estate, like with individual or small business crowdfunding allows smaller investors into an investment space that hasn’t been available to them in the past.

Both FundRise and DiversyFund are crowdfunded real estate funds. Crowdfunding provides a way for investors with smaller amounts of money to invest in things commonly only available to the wealthy. It’s been a disruptive force in the investment and small business communities. It offers a method of fundraising that can bypass big banks with high rates and fees. In the end, the winners are we consumers. In crowdfunded real estate, non-accredited investors can play in the same playground as the big boys.

With that background, let me tell you about DiversyFund.

DiversyFund Fee Structure

What makes DiversyFund unique is its platform structure. Platform means the arrangement under which the fund raises money, purchases the assets, distributed profits, etc. Many private equity funds hire outside firms to do everything from researching and buying properties to raising money from investors. Every outside entity used for these things has a cost to it. The more outside resources a firm uses, the higher the costs.

DiversyFund is a vertically integrated platform. They do everything in-house. Their team looks for the properties, analyzes them for value, cash-flow, and growth. They buy properties that need upgrades. They handle upgrades as well. Once purchased, they manage the properties themselves. Investors don’t pay brokerage or middle-man fees.

Their website says they are the only real estate fund with no platform fees. I haven’t personally found another one making that claim. Though management and platform fees have dropped, most REITs still have fees. Fees add up and can reduce investor returns. Keeping them low is one of the keys to success.

DiversyFund has that covered.

Fundrise Fee Structure

Fundrise lists its platform fees (Fundrise eDirect) at 1% as follows:

  • Investment advisor fee – 0.15%
  • Asset management fee – 0.85%

Additional acquisition fees range from 0% – 2%.

Even at 3%, the Fundrise fees are far below what the traditional private equity fund fees opened to accredited investors charge. Though fees have been reduced from the two and twenty, fees of 1% of assets and 15% of profits are common. Many of these firms can get very creative with their fees.

Crowdfunded platforms like Fundrise and DiversyFund and others are far more transparent with their fees. As you can see, they are much lower than most accreditor investment funds on the market.

Fund investments

Like with publicly-traded REITs, private equity funds can invest in many different types of real estate. Some funds concentrate on commercial properties like small strip shopping centers. Others may focus on residential real estate from single-family homes to multi-unit family housing (apartments). Others invest in downtown commercial office space.

Before investing in anything, investors should always know what you’re getting. That’s especially important in real estate. Property location, the type of property, the lease structures, and many other things help determine the return investors receive.

Below I’ll outline the investments Fundrise and DiversyFund make.

DiversyFund Investments

At DiversyFund, they keep things simple. The team believes (and historical returns confirm) that the safest and best performing commercial real estate investments are value-add multi-family units. According to Wikipedia, multi-family units are “multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex.[1] Units can be next to each other (side-by-side units), or stacked on top of each other (top and bottom units).”

Let’s break this down and see why this matters to investors.

Apartments, townhouses, and the like are more affordable housing than single-family homes in most areas. When the team at DiversyFund researches properties, they look for two important things.

First, the area has to be in an economically growing market. Second, the properties they purchase must be cash-flowing. In other words, they have to be already making money for the owners.

The third part of the decision is where the value-add strategy comes into play. They buy properties that need some improvement. I don’t mean foreclosures or rebuilds. Maybe the units need to be modernized. Perhaps they need some exterior cosmetic enhancements. These improvements allow the fund to increase rents, which increases cash flow, and increases the potential for higher growth in the value of the properties.

The goal of the fund is simple – sell the properties at a highly appreciated price over what they paid for the property and any improvements made — having this as the only focus allows them to focus on the properties that meet these criteria.

They are not trying to be all things to all people. Investors in their fund should be looking for long term capital appreciation.

Fundrise Investments

The Fundrise platform offers three core plans as follows:

  • Supplemental income: The goals of the supplemental income fund, as the name suggests, is to produce income. The fund pays out quarterly dividends and invests in income-producing properties. The primary fund investments are in debt real estate assets (real estate loans).
  • Balanced: The balanced fund’s goal is to offer a blend of both income and growth. To do that, they invest in both debt and equity real estate assets.
  • Long term growth: Dividends and income are not a goal of the long term growth portfolio. Managers are looking for properties to appreciate during the holding period. They don’t invest in debt assets. They only buy hard assets.

What about Liquidity?

Any investments in stocks are real estate should be for the long-term. You should not invest if you need your money in the next year or two. Unlike publicly-traded REITs, Fundrise and DiversyFund are private funds. Money invested in them is not liquid. In other words, if you want to get money out before properties get sold or the fund closes, there are restrictions.

DiversyFund Liquidity

Because of the long-term nature of their investments, DiversyFund does not offer liquidity to investors before they sell their properties. High-income and high net-worth investors build wealth by owning and selling properties at a profit. That’s the DiversyFund strategy.

An investor who wants an income from their investments should not invest in DiverfyFund. That is not the goal. Investors in this fund need to understand the value of long-term growth on your investments.

Some investors may look at this as a disadvantage I do not. The folks at DiversyFund know who they are and what they want from their real estate. They are not trying to be all things to all people. I like that too. They know who they are and stay true to their strategy.

Fundrise Liquidity

Fundrise investments state that their investment time frame for offerings is five years. They offer no guarantee that they will liquidate in the five years. Investors receive quarterly dividends. Invested capital and capital gains come with the sale of properties.

Investors can take dividends and capital gains in cash or reinvest them.

Investment Risks

Like any investment, crowdfunded real estate has risks. No fund offers guarantees investors will get the results of the past or the expected returns going forward. Nor is there a guarantee investors won’t lose money. There are economic risks in real estate investing. In a slowing economy and bad job market, tenants may not be able to pay their rents. The value of the properties may not appreciate as expected.

Every investor should take into consideration the risks of this or any other investment they make. A general investment principle is this – the higher the expected return of the investment, the higher its expected risk. In other words, risk and return are related.

Accredited investors tend to have higher amounts of money invested in real estate. Why? They can afford to take more risk.

Smaller investors should carefully consider how much they put into real estate, whether publicly-traded REITs or private equity funds like Fundrise and DiversyFund.

For Accredited Investors

If you’re an accredited investor (as described above) you may also want to consider DiversyFund’s Series A investment. If you’re not familiar with this type of investment, it’s a type of Venture Capital Investment used to fund a company’s operations, marketing, and product development.

The Series A investment is an investment in the holding company and not directly in the DiversyFund Growth REIT.

Offering details

DiversyFund Series A target is $6 million. As of this writing, they have already raised $5 million from 84 investors. That leaves $1 million to go in this round to reach their goal. The minimum investment is $25,000.

Investors in this round receive Secured Convertible Notes. The security for the notes is the company’s real estate assets. Investors receive 12% interest on the notes that have a 2-year term.

The notes are convertible to a Series C funding round at a 20% discount. The valuation cap for the Series B round is $60 million. The goal of these two rounds of funding is either an IPO or a Series C funding round at 10X the original investment. The time frame for the goal – 2 – 5 years.

It’s a unique opportunity that comes with a much higher risk than most. After all, it’s a Venture Capital investment.

Like the Growth REIT fund, though, they have additional security that many VC companies don’t. Notes are secured by real estate. The 12% return for 2 years can be reinvested. They have a very good early successful track record on their fund.

Final Thoughts

There are many ways to invest in real estate. I hope you have a better understanding of how to do that after this discussion. Private equity investing has been the domain of the wealthy for far too long. Crowdfunded real estate funds open the door to investment previously unavailable to smaller investors.

If you’ve always wanted to get into real estate but felt it was out of your league, Fundrise, DiversyFund and other crowdfunded real estate funds open the door of opportunity for you to do just that.

Diversification is important when investing, whether in stocks, bonds, or real estate. Keep that in mind when considering real estate funds. They may be an excellent addition to your current investment strategy. With $500 minimum investments for these two funds, you can start small and see how it goes for you. Both funds offer ways to add additional money.

My recommendation is to stick with the real estate growth strategy offered by DiversyFund. You’ll be getting a diversified portfolio of well managed, multi-family properties expected to sell at a price higher than the money invested in the properties and improvements on them.

The team has vast experience in this space. The team doesn’t take profits until investors. They manage every aspect of the process from start to finish. There are no platform fees. There are no gimmicks. It’s just good, sound real estate investing.

If you’re thinking about adding money to this asset class, you should take a look at DiversyFund.

If you’re looking for a unique Series A offering, we think this one makes a lot of sense.

This post was originally featured on The Money Mix.

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Side Hustle Interview 5 https://esimoney.com/side-hustle-interview-5/ https://esimoney.com/side-hustle-interview-5/#comments Fri, 16 Aug 2019 09:00:23 +0000 https://esimoney.com/?p=5166 Here’s our latest interview with a side hustler! As you know, I love creating a side hustle as part of a fast-track path to financial independence because it can make a huge difference (see this financial calculator), enough to actually get you to FI in 10 years. If you have a side hustle and would […]

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Here’s our latest interview with a side hustler!

As you know, I love creating a side hustle as part of a fast-track path to financial independence because it can make a huge difference (see this financial calculator), enough to actually get you to FI in 10 years.

If you have a side hustle and would like to be interviewed, shoot me an email and we can talk over specifics.

Today we are talking with Andrew from Wealthy Nickel

As usual, my questions are in bold italics and his responses follow in black.

Here we go…

GENERAL OVERVIEW

How old are you (and spouse if applicable, plus how long you’ve been married)?

I am 34 years old and my wife is 33.

We’ve been married for 7 years.

Do you have kids/family (if so, how old are they)?

We have two kids, a 3 year old girl and 1 year old boy. Life is busy these days!

What area of the country do you live in (and urban or rural)?

We live in Dallas, TX. We’ve been here since we got married.

What is your side hustle?

Between my wife and I we have several side hustles, but they mostly revolve around real estate:

We also have a few other side hustles like cash back apps and credit card rewards that bring in a couple thousand per year.

Last year I started a blog to document our side hustles and journey to financial independence, but right now it brings in a very unexciting amount of money for the amount of work I put in.

Is there anything else we should know about you?

We are your typical frugal couple that lives a relatively modest lifestyle without subscribing to some of the extreme frugality practices a lot of lean-FIRE people promote. Not that there’s anything wrong with that, it’s just that I enjoy the challenge of finding ways to make extra money than I do on cutting our spending to the bone.

We got started with our real estate side hustles in 2013, and the past several years have been an undeniably lucky time to be involved in real estate. However, I think real estate is a great way to grow your wealth regardless of the current economic cycle. As you will see from the diversity of things we’ve done, we have pivoted with the market and there are always ways to make money in an up or down market if you’re willing to change and take a few risks.

CREATION STAGE

Is this your first side hustle? If not, could you give us a bit of background on past efforts — both successes and failures?

I have dabbled in side hustles ever since high school (before “side hustle” was a term). I’ve mowed lawns, tutored, and done a little Facebook ad management, among other things.

Most of my past efforts were very part time just to make a little extra spending money to support myself while in school.

My first real side hustle that sparked an interest in real estate was house hacking. I didn’t know that’s what I was doing at the time, but in my mid-20’s I bought a 3 bedroom house and rented 2 of the bedrooms to my friends to cover the mortgage.

After I got married, I kicked the roommates out and my wife and I decided it was too much house for us and moved to a condo. I wish I had had the foresight at that time to hold on to the house as it would be worth almost double what I sold it for, but it wasn’t until a year or so later that I really started to seriously consider real estate investing as a side hustle.

How did the idea of starting a side hustle begin?

I graduated college with a degree in engineering and within a year of working full-time realized that I didn’t want to stay in the corporate world for 40+ years. I had been researching going back to school for a different degree, or perhaps some entrepreneurial venture that would allow me to be in control of my schedule.

In addition to that, after I got married, I discovered the FIRE movement. We had already decided that we wanted my wife to stay home with the kids whenever we got to that point, and so the idea of living off of only my income with a growing family was at odds with the 30-50% savings rate that allows you to achieve financial independence early.

We started talking about what we could do on the side that would be flexible enough for my wife to participate in once she was home with the kids so that we could boost our savings rate and trajectory toward financial freedom.

How did you come up with the idea?

I wish I could say that the idea to create a mini real estate empire with multiple different income streams came fully formed at inception, but it started off fairly slowly. I was still looking for side hustle ideas and was considering different options, but in the meantime, we decided to purchase a rental property with some extra cash we had set aside for investments.

I had been researching real estate for a while and realized that the timing was good and we could find properties in our city that cash flowed pretty well with good potential to build equity over time.

Many people look at rental property as an investment, and then become disillusioned and disappointed when they realize that it is not the passive income stream they thought it was. Luckily, we went in with the mindset that while yes, we were buying a (hopefully) appreciating asset, we were also signing up for a job.

We did and still do our own property management, and in order to get a good deal we bought a house that needed a lot of work. So we had to find and manage the contractors as well.

What made you think this particular idea could be profitable?

I think real estate is still one of the best ways for the average person to grow their net worth over time. It is certainly not a get rich quick scheme, but with that very first rental, I had done the research to know we could be profitable even if we made some mistakes (which we definitely did).

Our first property was a duplex that we bought for around $130,000. It came with a tenant that is still with us today, and their rent covered the mortgage while we fixed up the other side.

We figured we’d be all-in for around $160,000 and be able to collect monthly rents of $2,100 between the two sides. That easily beat the one percent rule, and we thought that after accounting for all expenses we could take home $300-400 per month. Not bad for our first foray into real estate!

What were the early days like — getting your side hustle off the ground, making your first dollar, etc.?

The first lesson I learned in real estate is that a pro-forma is just that, a projection.

We made several mistakes on that first rental property, not the least of which was letting one of our contractors skip town with $15,000 of our money. That was a difficult and expensive lesson to learn, and one that almost made us give up on real estate investing before we even started.

We still don’t know exactly what happened, but the construction project started off well enough. After a few weeks he stopped showing up every day and he was harder and harder to get in contact with. I think he was just a poor money manager, and was using future jobs to pay his subs for past jobs. It finally caught up to him and we were the ones left holding the bag.

Lesson learned – never pay your contractor for work not performed. We had paid for 50% of the job up front because we were naïve and didn’t know any better. Now we structure our contracts so that our contractors only get paid after certain milestones are met.

Because of that experience, the rehab took longer and was more expensive than we had planned. But at the end of the day, we ended up all-in for $180,000 and had it rented out in total for $2,100. Even after our mistakes, we were still bringing in money every month!

We had to learn many things to get that first rental property off the ground, and fortunately, we didn’t know what we didn’t know. If we did, we may never have gotten started.

But by the end of that first project, we had learned how to find a good deal, how to hire and manage contractors, how to find and screen tenants, and how to be good property managers.

BUILDING STAGE

What did you do to grow your side hustle? Were there any specific actions that resulted in major breakthroughs?

After our first project was complete, we realized we’d been bitten by the real estate bug and wanted to keep growing our portfolio. But that first rental had drained all of our cash reserves, so we started looking for ways to generate more money for a down payment on the next house.

That’s when we dove off the deep end of real estate investing and really started turning it into an active side hustle.

I read everything I could get my hands on about marketing to distressed sellers to get properties at a deep discount, and spent a lot of time on the Biggerpockets forums soaking up information.

We started sending out direct mail campaigns to neighborhoods we were interested in buying in, set up one of those “we buy houses” websites, and started networking with other investors. We got very interested in learning how to invest in real estate with no money, and ran a lean operation.

While I would never recommend getting involved in real estate if you are barely living paycheck to paycheck, as long as you have some reserves for emergencies there are a ton of ways to make money on a real estate deal without actually having any of your own money in it.

The more I researched, the more the risk-averse entrepreneur in me liked the idea of wholesaling real estate. If you’re not familiar with that term, it basically involves finding an amazing deal (through the aforementioned marketing methods), getting it under contract, and then selling that contract to another investor who will put up the capital to purchase the home, do the rehab, and either flip it or keep it as a rental.

Wholesalers provide a service to other real estate investors by sourcing great deals so that investors don’t have to spend the time doing their own marketing and running around looking at houses.

This was a major breakthrough in our side hustle, and allowed us to grow our income exponentially. Our very first wholesale deal came from a landlord who lived an hour away from his two rental properties. He had gotten into rental properties and realized it wasn’t for him. One of his tenants trashed his house and took off in the middle of the night, and the other had actually started a small fire in the kitchen.

While I was scared to death, I knew he had the motivation to give me a good deal, and I put both properties under contract with only a $200 option fee out of my pocket. I was able to find another investor who wanted these properties for more than I had them under contract for, and I made a $12,000 assignment fee in the process.

In our first year of taking our new side hustle seriously as a business, we were able to make about $50k in wholesale income, and another $30k on a flip we kept for ourselves. This is net of our expenses, which were around $6k for our various marketing channels.

What sort of time commitment did your side hustle require while becoming established?

At the beginning, I had my day job and my wife decided to get her real estate license mostly to save money on our own transactions, and worked part time for a real estate team helping them with their administrative tasks.

Our time commitment involved putting together direct mail marketing and getting a website up and running, and answering the phone when it rang. I would often return phone calls during lunch and go see houses after work in the evenings to make offers.

I would say that in the beginning growth phase we were spending 10-20 hours per week on the business. The nice thing about the wholesaling model is that the majority of the work can be done over the phone or email. We would go out to see a few houses a week and make offers, but we didn’t have to close on the house, manage contractors, or find tenants. Once we had it under contract and found an investor buyer, our work was done.

When the numbers made sense, we did occasionally keep a house to flip or turn into a rental. We probably flipped 1 house a year ourselves and kept 2 more as rentals. These projects took more of our time, but mostly over a short time period when we were managing the rehab or finding a tenant.

Where did you find the time to work on it?

When we first started, we didn’t have kids which made things a lot easier!

Since my wife and I were both involved, it allowed us to split up the work and get more done. I am more of the analytical researcher, and she is task-oriented and is amazing at actually getting things done.

At first, we were hand-addressing letters to send to houses that we wanted to buy, so we would spend evenings watching a TV show while stuffing envelopes to mail. When calls started coming in, I would usually have to let them go to voicemail at work, and I tried to return them during the day or after work.

Since my wife transitioned to a flexible job as a real estate assistant, she had time during the day to go look at houses and take pictures. I would analyze the numbers at night and see what we could pay, and she would follow up with an offer.

Were you the only one involved or did others help out?

As we got further into the business, we decided to take on a friend of mine to help with answering the phones, going to see houses, and making offers. We paid him strictly on commission, so he would get a percentage of whatever we made on a particular deal.

At one point, we were spending up to $5,000 per month on marketing! It was definitely more than one person could handle well.

Initially I wanted to build this into a full-time business and quit my day job, but as I got into it more I realized I liked it more as a low key side hustle than a full-time business. So about 2 years ago we decided to scale it down and we only occasionally send out marketing. We’re still out looking for deals, but only if it fits our rental portfolio or is such a crazy good deal we just can’t pass it up.

RESULTS

Can you give us specifics on what you earn with your side hustle?

From 2013 – 2018, we’ve made the following profit (after all expenses) in each of our niches:

  • Wholesaling – $123,000
  • Flipping – $85,000
  • Real Estate Commissions – $111,000
  • Rental Properties (Cash Flow) – $136,000

The best thing about real estate are the other benefits you get that add to your balance sheet through mortgage paydown, appreciation, and “sweat equity”.

Our tenants have paid down our mortgages by $32,000, we’ve added $115,000 in equity to our rental properties by buying under market value and fixing them up, and the hot real estate market in our area has added another $290,000 in equity due to appreciation (some of which we’ve cashed out by selling a few properties).

It would be difficult to give revenue and expenses for every category, but on average we make $300 per month on each of our rental properties after all expenses. So if a house rents for $1200 a month, we pay $900 toward the mortgage, taxes, insurance, maintenance, and capital expenses.

We’ve had up to 9 rental units, but currently are down to 7 as we sold a couple that had nice appreciation gains and no longer made sense to hold as rentals from a return on equity perspective.

At the height of our wholesaling business, we were spending close to $4,000 in marketing to find one deal we actually closed on, and we tried to make a profit of $8-10,000 per deal.

Real estate is obviously a capital-intensive business, but we started small and did things that required little to no money and then as we started to make money, put most of our profits back into the business to generate more income.

What impact has this extra income had on your finances?

The extra income generated through real estate has accelerated our path to financial independence. If you add up the income and equity gains, we’ve added close to $1M to our net worth in the last 5 years.

Since we decided to live off of my W-2 paycheck, all of this side hustle income has gone into investments. Some is locked up in our rental properties generating cash flow every month. Some has gone toward maxing out our 401(k) and IRAs.

And over the past year and a half, we have transitioned a lot of our extra income into more passive real estate investments – crowdfunding and private equity investments. Over the long term, I expect these to earn a 10-15% annual return.

Sure I could dump everything into the stock market, but I have developed some expertise in real estate and enjoy analyzing larger commercial real estate deals and participating in them as a limited partner.

What went well in this process?

When we first started out with our one little rental property, I had no idea how deep into real estate we would get. After spending all our cash on the first property, it kind of snowballed from there as we sought out other ways to generate cash to buy more rental properties.

Undoubtedly, we got “lucky” by starting our real estate side hustle near the bottom of the market in 2013. But it still required a lot of hard work and sacrifice to get to where we are today.

I think part of our success was due to the relationships we built with other investors and the homeowners we were buying houses from. First and foremost, real estate is a people business.

Wholesalers in particular tend to get a bad name because a lot of them are, shall we say, less than ethical. We always tried to treat every seller fairly, even if it meant losing out on a deal (and we definitely lost out on some to other wholesalers willing to be dishonest).

But that honesty and integrity also brought us business from referrals and repeat clients. We actually just closed on a house we put under contract over 2 years ago. It was tied up in probate court and contested multiple times, but we stuck around. The seller was appreciative of all the work we put in to finally close the house, and in return we got a house in 2019 at 2017 prices!

What do you wish you would have done differently?

We made plenty of mistakes along the way, but I don’t know if I would change anything. I see most of those mistakes as learning opportunities that got us to where we are today.

At a high level it seems like we were doing a lot of different things and should have focused a little more, but everything was interconnected. At the end of the day, all we were doing was marketing to find a good deal, and once we found one we either kept it as a rental, wholesaled it to another investor, or flipped it ourselves depending on the numbers.

One thing I wish we had done sooner was hire out some of the tasks I’m not great at or didn’t have time for (answering the phones and meeting with sellers). If we had done that earlier, we could have scaled faster and taken advantage of some of the great deals that were available in 2014-2015. By 2016 our market was getting highly competitive with a lot of hedge fund money coming in, so our profit margins were shrinking as time went on.

Financially, our biggest mistake was buying a half duplex that had been illegally subdivided. Of course we didn’t know that, and the title company didn’t catch it either. We worked with a lawyer and tried to work with the owner of the other side, but in the end we took a $30,000 loss to get out of that deal and let someone else deal with the legal issues. I don’t know what I would have done differently there, other than to be more careful in reading the survey and title work. It was an expensive lesson, but one I certainly will never make again!

Has it been worth it? Why or why not?

Our side hustles have definitely been worth it, and have allowed us to achieve financial independence far quicker than I ever thought possible. We are not quite there yet, but because of real estate we are 3 or 4 years away instead of 10 to 15.

When we started having kids, I had to take a hard look at our side hustles and realized I wanted to spend more time at home even if it meant slowing down our path to FI. Because of the hard work we put in 5 or 6 years ago, it has allowed us to continue generating income today even though we significantly scaled back the time we’re investing in our side hustles for now.

What are your future plans for your side hustle?

We are still self-managing our local rental properties and will continue to do so for the foreseeable future. My wife still has her real estate license and while she’s a full-time stay-at-home mom, she still takes on a client here or there and generates a nice side income each year from that.

We’ve scaled back the deal-finding aspects of the business, but with the relationships we’ve built over the years, it seems we still get 1 or 2 dropped in our lap every year.

As our kids get older, we are looking to potentially get more involved again, either in flipping/wholesaling or another aspect of real estate entirely.

I discovered I really enjoy the financial analysis aspects of real estate investments, and want to start a new side hustle helping real estate investors with bookkeeping and accounting for rental properties or flip projects.

I also recently started a blog to document our journey to financial independence and hopefully use our story to help others to do the same.

My wife said I had to pick one or the other (blogging or bookkeeping). So since I can’t do both, right now blogging it is!

What advice do you have for ESI Money readers who may be thinking about creating their own side hustle?

Side hustling can be a powerful tool to increase your savings rate and net worth. But contrary to everything I’ve said up to this point, you don’t NEED a side hustle. It’s become trendy to have a side income stream, but if you don’t have a solid “why” behind it, you are setting yourself up for failure.

I chose to pursue a side hustle to scratch my entrepreneurial itch, as well as provide an additional source of income so my wife could stay home with the kids.

As ESI has correctly pointed out before, one alternative to a side hustle is to focus on your career and increase your earnings there. If I had decided to focus on that path, I would probably be much further along in my career than I am now.

If you do decide that side hustling is right for you, then my best advice is to just get started!

There are an overwhelming number of possibilities out there, and I know when I was first researching ideas I got analysis paralysis and stayed in “education” mode for too long.

Nobody ever became a millionaire by reading hundreds of articles and books on how to become a millionaire. They did it by actually taking action on the advice they read.

So sit down and figure out one business idea you can start working toward today, and list out the steps to get there.

Then start checking things off the list – it may take you a day, a week, or a month, but actually making your first dollar from your side hustle is a great motivation to keep going.

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My Favorite Podcasts https://esimoney.com/my-favorite-podcasts/ https://esimoney.com/my-favorite-podcasts/#comments Wed, 14 Aug 2019 09:00:22 +0000 https://esimoney.com/?p=3710 I have been a life-long learner. Even as a young boy, I read quite a lot (mostly fiction) and enjoyed learning new things. As I got older I went to college and then graduate school which involved lots of learning, of course. But instead of stopping there, I kept reading both books and magazines, especially […]

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I have been a life-long learner.

Even as a young boy, I read quite a lot (mostly fiction) and enjoyed learning new things.

As I got older I went to college and then graduate school which involved lots of learning, of course.

But instead of stopping there, I kept reading both books and magazines, especially on personal finance and topics related to my career.

Eventually, reading gave way to listening as audiobooks became more popular. Then as technology became better and more mobile, I started to learn through listening to podcasts.

Even in retirement I’m learning a lot (see #7 on this list) and almost all of it is through podcasts.

Now and then I’ll mention a podcast in a post and someone will ask me what I listen to, so I thought I’d list out my favorites and give some commentary.

Just to note, these are not all the podcasts I listen to, just my favorites. I probably listen to twice as many as are listed here.

I’ll break them down by topic to make them easier to review.

With that said, here’s my list…

Money

You know I listen to money podcasts! I have to as a financial blogger, right?

That said, I like to learn something from podcasts and it’s hard to find a money episode that can actually teach me something new (I’ve heard most of the advice thousands of times). My favorites:

  • Planet Money — Generally they select pretty good topics, their production quality is top-notch, and the podcasts have a decent time frame (20-30 minutes). This is one podcast that I usually learn something from.
  • ChooseFI — One of the first ones I check every Monday morning. Jonathan and Brad are AWESOME and usually have great guests. The episodes can get a bit long (an hour or so), so I hardly ever listen to a full one (I generally don’t have that much time). This is a theme you’ll see from me throughout — I prefer podcasts in the 30-minute range and the ones that are twice that have to be really good to listen to all the way through.
  • Financial Independence Podcast — Love the Mad Fientist as his topics are always great. Two problems though: 1) he only has an episode about once a month and 2) they tend to be long.

Blogging

Of course I want to keep learning about blogging and here are the podcasts I listen to most:

  • ProBlogger — The Godfather of blogging, Darren is also a great guy. Each episode has something to learn from.
  • Do You Even Blog — I LOVE the host (so funny — even when he tries not to be) and the guests and content are good. One drawback is that most of these are an hour or longer, which is hard for me to fit in.
  • Money and Media — This is done by FinCon, the conference for money media, so it’s not only about blogging but about MONEY blogging. Hard to say anything bad about this one. It has great content, top guests, excellent production, and generally runs about 30 minutes long. I guess the only negative is that it is only on for part of the year — wish it was on the full year as it’s one of my very favorites.
  • The Online Course Show — I have been considering creating my own online course and this was the best podcast I found on the subject. It gets VERY practical and has helped me learn a ton about creating and marketing an online course.

Self-Improvement

Only a couple here since both of these are pretty looooooong. I only listen to episodes here if they feature a guest or topic I really like:

  • The Tim Ferriss Show — I skip 75% of these because they are too long, but the 25% I stick around to listen to for an hour or TWO are amazing. Tim is so curious and always seems to ask the questions I’m thinking about.
  • The School of Greatness — I’m thinking Lewis Howes must be one of the nicest people in the world. Love his show, the guests, and everything about the podcast.

Entertainment/General

These podcasts are for a combination of enjoyment and learning:

  • Freakonomics — I LOVE contrarian ways of looking at issues and this podcast is the king of that. The host’s sense of humor is also very dry, which I love as well. Almost always learn something new here.
  • The Way I Heard It — Here are all the things I love about this podcast: 1) Mike Rowe. His name must mean “common sense” in some language because he has a lot of it. 2) The stories. I grew up hearing Paul Harvey’s “The Rest of the Story” and this show is just like that. 3) It’s short (7 minutes or so). In fact their tag line is “The only podcast for the curious mind with a short attention span” (or something close).
  • Lead to Win — I know Michael Hyatt and have always admired him. The podcast doesn’t usually teach me anything new (after all, I was in business for 30 years), but the production and topics are so good I listen anyway. 🙂
  • Invisibilia — This one is hard to explain. Their site says it’s about the following: “Unseeable forces control human behavior and shape our ideas, beliefs, and assumptions. Invisibilia—Latin for invisible things—fuses narrative storytelling with science that will make you see your own life differently.” That probably still doesn’t clear things up, so my best suggestion is to listen to a couple episodes to get a feel for it. But be careful or you’ll be hooked. 😉
  • Throughline — This is another NPR podcast. In this one they “go back in time to understand the present.” What this means is that they basically give a history lesson as to why something happening today came to exist. Since I love history, this one is perfect for me.

In addition to these, I’m trying out a couple other subjects and it’s too soon to recommend anything. Specifically, I am listening to podcasts on sailing and pickleball. Haha! I know, quite an interesting combination.

I’m also listening to some new money and blogging podcasts. I’ll be sure to share any that I end up loving. 

That’s my list! See any here that you listen to?

Or do you have favorites that I may have missed? If so, leave your thoughts in the comments below.

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Millionaire Interview 143 https://esimoney.com/millionaire-interview-143/ https://esimoney.com/millionaire-interview-143/#comments Mon, 12 Aug 2019 09:00:03 +0000 https://esimoney.com/?p=4975 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. My questions are in bold italics and his responses follow in black. Let’s get […]

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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.

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 am 36 and my wife is 34.

Do you have kids/family (if so, how old are they)?

We have a 1 year old boy.

What area of the country do you live in (and urban or rural)?

We live in a medium sized Midwest city.

What is your current net worth?

$1,244,000

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?

We have some rental real estate — a total of 9 units, 5 single family properties and 2 duplexes.

We both have Roth IRA’s, a SEP IRA and brokerage accounts. Those accounts are made up of mutual funds, index funds, and a few individual stocks.

  • Real estate $1,127,000 (includes primary residence approx $200,000)
  • Roth IRA $165,000
  • SEP $177,000
  • Brokerage $77,000
  • Cash $100,000

Only debt is mortgage debt that totals $402,000.

EARN

What is your job?

I am a realtor and my wife is a teacher.

We both started our careers right out of college and have both been in the same line of work since college.

What is your annual income?

It has gone up since starting our careers, but is also highly variable because I am 100% commission. I looked back at our taxes from 2011, when we got married, $62,000 was our AGI that year.

Our highest was $178,000 — that was 2017.

We first broke $100,000 in 2014.

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 a job during college that was in my field and I made $10/hour. It was a very important and somewhat fulfilling job, but it wasn’t the right path for me. My wife waited tables in college.

What tips do you have for others who want to grow their career-related income?

Set specific goals and review them weekly, and have a plan of action for how you will achieve those goals. That advice has helped me to grow my income.

This is probably not relatable in all lines of work, but for what I do, I try to always take care of the clients’ needs above all else. As long as I do that, the income seems to follow.

What’s your work-life balance look like?

Not great, I think we both work more than we would like.

We both like what we do, but with a new child at home, we like to spend as much time with him as possible.

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?

Kind of, I say our rentals properties are my poorly paying part-time job.

We don’t take home any money from the rental business. We just put all the money back in the business. When the rental account builds, we will use it for a renovation on a new purchase or other capital expenses (e.g. furnace, roof, etc.).

We also have all of the properties on 15 year mortgages or less, so that does also decrease cashflow.

SAVE

What is your annual spending?

Approximately $50,000

What are the main categories (expenses) this spending breaks into?

  • Mortgage $1,125
  • Utilities $ 300
  • Car insurance $200
  • Groceries/Costco $500
  • Cell phone $165
  • Restaurants $200
  • Gas $200
  • Health insurance $1,100 is taken out of the monthly paycheck

Do you have a budget? If so, how do you implement it?

We do not have a specific budget for each month.

We live off of my wife’s income. We pay our set bills like mortgage, insurance, utilities and then set aside $1,000 for the store, eating out, gas, etc. We stick fairly close to that.

However, we will on occasion go over, but this is typically around holidays or vacations.

What percentage of your gross income do you save and how has that changed over time?

Since we got married in 2011, our goal has always been to live on my wife’s income for our basic living expenses. Since my income is variable, we use my income for saving/investing and will use it for big purchases like a car or vacations.

So when we got married, we saved/invested around 35% of our combined income. Now we save/invent roughly 65%.

What is your favorite thing to spend money on/your secret splurge?

Probably vacations. We take 3 or 4 a year usually.

We like to ski and hike, so we usually make it to Colorado at least once a year. We visit family while we’re there, too.

We also like to spend time on the beach or at a lake. We have taken some amazing cruises to other countries.

INVEST

What is your investment philosophy/plan?

Buy and hold for the long-term.

I am pretty simple. I think people will always need a place to live, and building houses is not getting any cheaper, so owning houses should be a good long term plan.

I also believe that business, especially American business, will continue to grow and innovate, so owning index and mutual funds should be a good plan also.

I want to lean a little heavier on the real estate because I work in real estate and feel that I understand it better, and the returns are better if you can put up with the tenant headaches from time to time. When you factor in cashflow, appreciation, and tax benefits the IRR (internal rate of return) should do much better than the S&P. However, it’s not nearly as passive.

Having said that, I do want to also invest in the market. We are about 60/40 now but I foresee us being more 70% real estate 30% equities.

What has been your best investment?

A couple of our single family rentals. They have not done anything crazy but a couple of them are my favorite, popular area in the heart of the city.

Both have appreciated nicely. One we bought for $88,000 and it’s probably worth $135,000. It rents for $955. The other, we bought for $90,000 and it’s worth about $140,000. That one rents for $1,220. I wish I would have bought more of those when the market was not as strong.

Our personal residence was also a great investment. We bought it for $108,000 and could reasonably sell it on the market for $200,000. It has also been great because our mortgage ($1,125 on a 15 yr) is lower for our combined income which allows us to reach our annual investment goals.

What has been your worst investment?

Not worst investment in terms of return but just headache. I bought a little house for $33,000 back before we were married. It was always rented, but it was just constant maintenance and it never really attracted a quality tenant. I sold it about 5 years later for $38,000.

So when you factor in selling costs, I broke even. I still did alright on it because I collected rent all those years. However after we got married, we decided we only wanted to own properties we would be proud to own and that was not one that fit that criteria.

What’s been your overall return?

The money we have in the market has been maybe 8%ish.

I don’t know on the real estate, but If I were to guess, I’d say somewhere in the 13% range.

How often do you monitor/review your portfolio?

I look at what we have in the market every couple weeks.

I check the value of the rentals maybe once a year, but I usually have a pretty good idea about what they are worth.

NET WORTH

How did you accumulate your net worth?

We made a decision, when we first got married, that we would live on one income.

At the time, my wife was making more than me and her income is fairly stable. We decided that we would keep our lifestyle under what she makes and invest what I make.

With some luck and hard work I have been able to grow my income. We have been able to invest more than we did the year before pretty much every year. We have still been able to keep our lifestyle mostly with in my wife’s income, with the exception of big ticket items, such as a car or a big vacation.

Every year our order is first fund both Roth IRA’s then SEP and lastly brokerage. We then use the brokerage account to buy rentals when they come up.

We don’t go look for them we are just ready to buy if we find a good deal. We will purchase them with a 25% down payment that we take out of the brokerage account and use a 15 year fixed rate mortgage for the rest.

The most recent one we purchased we did pay cash for. The purchase price for that was $60,000 and the renovation costs were $40,000. We withdrew $100,000 from our brokerage at the beginning of the year to fund that one.

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?

I think earning would be the top for us because now most of our income is still earned income. We, of course, want to switch it to more passive income later.

But for now, I figure if we can keep the gap between our income and expenses and reasonably invest the rest, that should lead to passive income later.

What road bumps did you face along the way to becoming a millionaire and how did you handle them?

Just keeping our lifestyle in check.

It would be very easy for us to buy a bigger house or a nicer car or any other item on our dream/wish list. I am definitely not opposed to having nice things, we just figure, for now, the money is worth more in the long run if we invest instead of spend.

What are you currently doing to maintain/grow your net worth?

We have had the goal for 2 years now to invest a $100,000 annually.

In 2017 we met our goal by investing $108,000.

In 2018, we were able to invest $80,000 so we were short of the goal.

In 2019, I increased my income goal so this year’s goal is to invest $125,000.

Do you have a target net worth you are trying to attain?

No, we have not set a goal. It’s really not about the number on the net worth statement for us.

It’s more about getting enough passive income to replace our earned income. Our overall goal is to retire early, do what we want, and not have to worry about money.

How old were you when you made your first million and have you had any significant behavior shifts since then?

35 and 33.

We have not changed anything. We continue to increase how much we invest and live within my wife’s monthly income.

What money mistakes have you made along the way that others can learn from?

We could be more detailed with our expenses.

I am also trying to figure out if using our advisor is a mistake or not. We have funds with an advisor and in an individual brokerage account. I know that we are loosing a bit on the fees. However, I have been watching the net returns and they are comparable to what we are getting with index funds. So far from what I can tell, it seems to be a wash. So that is something I would maybe do differently if starting over.

The other small regret I have is not buying more real estate when the prices where so depressed. It’s easier to say that now looking back on the additional money we could have potentially made, but the reality is that at the time we didn’t have the income or means to purchase more properties without being over leveraged and financially uncomfortable.

What advice do you have for ESI Money readers on how to become wealthy?

It’s really simple, but not always easy. Live on less than you make and grow that gap as much as possible.

Then buy investments whether that’s in the stock market or other forms of investment.

Continue to educate yourself about investing and keep investing regardless of what others are saying especially the media.

FUTURE

What are your plans for the future regarding lifestyle?

When I am 50 and my wife 48 I want work to be totally optional. We may continue to work, but I don’t want our lifestyle to dictate that we have to continue working.

The only reason to build wealth is to have more options in our life. I think I will continue to do real estate deals in some form or another, not because I have to, but because I want to. Self-employment allows me to control my time.

What are your retirement plans?

We would like to spend time with family and travel.

We also plan to buy a second home in Colorado.

Financially, our plan is to live off of real estate income without having to tap into our stock market investments.

Are there any issues in retirement that concern you? If so, how are you planning to address them?

Health insurance/care. My in-laws are having some concerns with this now since they retired before 65. Their premiums are extremely expensive and they have fair coverage plans.

MISCELLANEOUS

How did you learn about finances and at what age did it ‘click’?

Maybe 24 or so when I started to have some real estate sales.

Starting a self-employed, commission-based career is a difficult thing to get rolling. I wasn’t making a great income and sales were minimal. I realized that I needed to save as much money as I could from each commission check, since I didn’t know when the next one would come my way.

It was also really helpful that my wife and I have very similar financial ideals (e.g. live simplistic lifestyles below our means, save now so we can live well and retire early, etc.).

Who inspired you to excel in life? Who are your heroes?

My father has been a great mentor, and he never put any limits on me. He encouraged me to try new things and taught me that it is ok to make mistakes. It’s more important to take action, even if you make mistakes. He has always been a big picture person which I believe is an important perspective for building wealth.

I was also a college athlete and one of my teammates and friends is truly the most driven person I have ever been around. He has gone on to become a professional athlete and has been at the top of his sport. That really inspires me because he was not always the most talented, but no one ever out worked him. He says to always bet on yourself. That’s pretty profound to me.

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?

The Millionaire Next Door is a book that I like because it exposes who are really the wealthy people in America, not the people who are on TV portrayed as wealthy.

I also like the concept of Rich Dad Poor Dad. Of course, I think some of the teachings are a bit extreme but the premise is very good. It’s a good book to switch your mindset about money.

The Millionaire Real Estate Investor was a great book because Gary Keller outlines a fairly repeatable investment strategy for real estate.

Do you give to charity? Why or why not? If you do, what percent of time/money do you give?

Yes, I think it is our obligation to try to help others around us. I also believe that the tighter you grasp your money, the less will be able to flow into your hands.

We give a small amount to our local church. We give to a nonprofit that helps with homelessness prevention and emergency assistance. We have been the committee chairs for one of their fundraisers the last few years. We give to a dog rescue and also give to an organization for kids with cancer.

This year we gave in another way also. We had some extra money fall in our lap ($2,500), so we just held onto it. From time to time when we see someone that is struggling, we anonymously gave some money to that individual. My wife and I have both made a gift out of that pot so far this year. So I think we will need to fund that again next year and keep that going.

As far as a percentage, I am not sure, not as much as we should be though.

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?

Yes, we plan to leave majority of it to our child/children. However my hope is that we have taught him/them well enough along the way, that they are successful on his/their own so they don’t need to depend on an inheritance from us. I am sure we will make some gifts to other things also.

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The Sad State of Wealth in America https://esimoney.com/the-sad-state-of-wealth-in-america/ https://esimoney.com/the-sad-state-of-wealth-in-america/#comments Sat, 10 Aug 2019 09:00:18 +0000 https://esimoney.com/?p=5183 For being the richest country in the world, we have some sad financial numbers. I recently stumbled upon the 2019 Modern Wealth Survey from Schwab. It was quite interesting to say the least. Here’s the full survey if you’d like to check it out, but I’ll be covering the highlights. Or should I say lowlights. […]

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For being the richest country in the world, we have some sad financial numbers.

I recently stumbled upon the 2019 Modern Wealth Survey from Schwab. It was quite interesting to say the least.

Here’s the full survey if you’d like to check it out, but I’ll be covering the highlights. Or should I say lowlights.

I have been writing about money for over 20 years (first in magazines and then blogs) and coaching people before that, so I’m pretty jaded when it comes to the average American’s financial status and habits (they are terrible if you haven’t noticed.)

But somehow I always believe things are better than they are. I want to think the best. I want to hope that people are educating themselves on finances and taking appropriate action.

Then I see a report like this and am brought back down to earth.

Anyway, let me share a few of the survey’s findings that I found especially interesting/depressing…

The Joneses on Social Media

Let’s begin with this finding:

More than a third of Americans admit their spending habits have been influenced by images and experiences shared by their friends on social media and confess they spend more than they can afford to avoid missing out on the fun.

Survey respondents place blame on social media platforms and not people—they rank social media as the biggest “bad” influence when it comes to how they manage their money, while they put friends and family at the top of “good” influences.

According to the survey, three in five Americans pay more attention to how their friends spend compared to how they save, with an equal number saying they’re at a loss to understand how their friends are able to afford the expensive vacations and trendy restaurant meals they portray on social media.

Wow. So much to unpack here. Let’s jump in:

1. “Spending habits have been influenced by images and experiences shared by their friends on social media.”

Social media is the new weapon of the Joneses. They post pictures of their over-inflated lifestyle and goad others to try and keep up with them. Keeping up with the Joneses was hard enough when they weren’t in your face, but now Facebook, Twitter, Pinterest, Instagram, etc. make it a million times easier for them to flaunt their supposed wealth.

And, of course, since most Americans have ZERO self-control and want their fun now, they respond by “spend[ing] more than they can afford to avoid missing out on the fun.” Is it any wonder they’re broke?

2. “They rank social media as the biggest “bad” influence when it comes to how they manage their money, while they put friends and family at the top of “good” influences.”

I agree that social media is a bad influence (in a lot of other ways besides money as well) because you compare your average daily life with someone else’s highlight reel. It’s tough.

But I think friends and family are getting off light here. If these groups were really good with money, then they would be good influences. But if they are average Americans, they are terrible with money which means they are not good influences. Said another way, if people are following money advice from friends and family, who we know are not great with money on average, then they are being sent in the wrong direction.

Maybe compared to social media friends and family seem good but that’s like saying eating dirt is better than eating manure — they are both still dreadful.

3. “Three in five Americans pay more attention to how their friends spend compared to how they save.”

Here’s the major problem — people are focused more on outside influences than what they are doing themselves. Bad move. They are focused on the wrong thing and thus get undesirable results.

Not saving (and it’s close cousin over-spending) are fatal money moves at the very top of my list of worst money moves anyone can make. By ignoring savings (and over-spending to keep up with friends), 60% of Americans are dooming their finances.

It all comes back to the fact that if they can’t control spending, no amount of income is going to bail them out of a financial disaster.

4. “They’re at a loss to understand how their friends are able to afford the expensive vacations and trendy restaurant meals they portray on social media.”

Haha! Really? They are at a loss? Well let me enlighten them…

Your friends are able to “afford” all of those things because 1) they spend all the money they have (instead of saving) and 2) likely spend even more than that by borrowing/using credit cards they don’t pay off each month.

So while it looks like they are doing well financially, they are really making no financial progress. None. Their net worth, which is the true measure of wealth (not spending), is going nowhere over time.

In other words, their appearances are a facade. They are actually doing poorly financially.

Ok, so that’s the beginning of what I want to share. Depressed yet? Well, there’s lots more where that came from.

Snapshot of Despair

Next the survey shares these quick facts:

  • A majority (59 percent) live paycheck to paycheck
  • Nearly half (44 percent) typically carry a credit card balance
  • Only 38 percent have built up an emergency fund
  • On average, they spend almost $500 a month on “non-essential items” (eating out, entertainment, luxury items, or vacations — not rent/mortgage or basic necessities)

Some thoughts on these:

  • I am not surprised that so many live paycheck to paycheck. In fact, I’m surprised it’s this low. CNBC puts the number at 78% of Americans. Regardless of the actual percentage, it’s over half, which is a very scary story.
  • Again, not surprised that so many carry a credit card balance and don’t have an emergency fund. It just shows (yet again) that a lot of people don’t have the financial basics under control. Is it any surprise then that the rest of their finances aren’t in great shape?
  • Personally, $500 a month on non-essentials doesn’t sound that bad. It’s about 10% of their income, which doesn’t seem high to me, but perhaps I’m missing something.

Now here’s the “interesting” part. Based on the numbers above, Americans are in pretty bad financial shape.

But, the survey also found that…

  • 59% Consider themselves savers
  • 65% Are willing to sacrifice spending to save for later

These numbers do not make sense.

How can 59% to 65% of them be savers and yet 59% are living paycheck to paycheck?

It’s clear that math is not part of their fantasticalness.

By the way, I spent almost 30 years in marketing and know a fair amount about market research (we made multi-million dollar decisions based on it.) And two things are truer than the sun rising in the east:

  • People almost always answer surveys in a way that reflects better on themselves than reality.
  • There is a HUGE difference between what people say they will do and what they actually do.

More on these in a moment. For now, let’s move on…

Lack of Financial Plan

Here’s one about financial planning:

Despite the benefits of planning, Schwab’s survey shows that only 28 percent of Americans have a financial plan in writing. And among those without one, nearly half (46 percent) say it’s because they don’t think they have enough money to merit a formal plan, 18 percent say it’s too complicated, and 13 percent say they don’t have enough time to develop one.

Ok…so?

Not many people have a written financial plan. What’s the point?

I never had a written financial plan and things turned out ok for me. Sure, I understand if you write things down you have a better chance of achieving them, but the cynic in me can’t help but think Schwab is pushing financial planning services with a vested interest.

Or maybe I’m just a jaded old man. Tell me what you think in the comments below.

What’s it Take to be Wealthy?

Next we enter the part where Americans weigh in on their perceptions of wealth. We’ll begin with this one:

According to the survey, Americans believe it takes an average $2.3 million in personal net worth to be considered “wealthy.” That’s more than 20 times the actual median net worth of U.S. households, according to the Federal Reserve’s Survey of Consumer Finances released in 2017.

Interesting. Obviously they are using a set number to determine wealth versus a relative number because no matter what age group you look at a net worth of $2.3 million puts you ahead of at least 90% of your age group (using this calculator). For younger ages it’s usually 98-99% and not until 45-49 does it drop to 95%. In other words, $2.3 million puts you well, well ahead of the vast majority of Americans.

What’s average? Here are the percentiles. At 50% the net worth is just under $100k. Yikes!!!

And then, we enter the financial Twilight Zone. Consider this:

More than half of Americans are optimistic that they will be wealthy at some point in their lives, and two in five believe they will achieve that goal within a decade. Eight percent say they already consider themselves wealthy, although their numerical definition of wealth is lower—they believe they achieved wealth at almost $700,000 in net worth.

You have to love the optimism of Americans — despite the fact that it’s based on nothing to do with reality.

A few things here:

  • If it takes $2.3 million to be wealthy, half think they’ll get there, and only 5% ever get there, there are a whole lot of people who are going to be disappointed. In fact, the odds are that the vast majority of them will get nowhere near $2.3 million. Only a bit over 10% of all Americans even get to $1 million. And yet over 50% think they will get over twice that amount. Again, math is not part of their fantasticalness.
  • And 40% think they’ll get there in less than 10 years. Wow.
  • The 8% who say they are already wealthy at $700k are a bit more realistic. At least they are already well above the pack (better off than 85% or so of the population). That said, I don’t see $700k as being overly wealthy except in relative terms. From an absolute number it’s not impressive. (At 4% withdrawal rate $700k gets you $28k per year.) It could be a solid part of early retirement is combined with a decent side hustle, but alone it’s not enough to live on except for those who practice lean FIRE.

To take this a bit further, 60% say they are optimistic they will be wealthy some day or say they already are. Here’s how the percentages break down:

  • Already consider self wealthy 8%
  • Within a year 7%
  • Within 5 years 17%
  • Within 10 years 20%
  • Within 25 years 8%

If wealth is defined as $2.3 million, the facts say that 95% of these people are going to be extremely disappointed.

Even if $700k makes you wealthy, 85% are going to be disappointed.

Wealth is More than Money

The above said, most think that being wealthy is more than just having a lot of money:

Despite the high dollar amounts Americans use to define wealth, when it comes to feeling personally wealthy, 72 percent say it isn’t about a dollar amount at all, but rather the way they live their lives.

I can’t disagree with this. As we’ve discussed, being rich/wealthy is made up by things way more important than money.

What Would You Do with $1 Million?

Finally we move on to an interesting question as follows:

When asked what they would do with a sudden $1 million windfall, more than half (54 percent) of survey respondents say they would spend it—on a house first, followed by cars and travel.

In addition, they say they would use the funds to pay down debt (28 percent), invest (23 percent) and save (21 percent). In comparison to other generations, Gen Z respondents were the most likely to say they would save at least a portion (37 percent).

This is where we go back to my experience with market research.

People say they would spend $1 million in ways that appear to be wise. But is this what we actually see?

The two instances I can think of when people come into an unexpected large amount of money are inheritances and winning the lottery.

The numbers show that 70% of people lose all of big windfalls. (Here’s a whole guide on financial windfalls if you’re interested in the subject.) A summary:

There are so many easy ways to overspend, but, according to financial psychologists, it’s even easier if you’re spending an unexpected windfall. Seven in 10 people who suddenly receive a large sum of money like an employee bonus, lottery winnings, or an inheritance will lose it all within just a few years.

Why? “The way we label money has everything to do with how we spend it,” said psychologist and behavioral finance expert Daniel Crosby, Ph.D. In behavioral finance circles, there’s a theory known as mental accounting, which interprets the irrational ways in which people categorize and spend their funds.

According to the notion, we’re more frugal with funds earmarked as important—like those saved for a child’s education, for example—and more extravagant with unexpectedly found money—like a substantially sized tax return. “Since an inheritance is typically not gained very effortfully, it is typically spent more loosely,” said Crosby.

I searched around a bit to see how valid the 70% number is and I’d probably call it a “ballpark” estimate. That said, even if the number is only 50%, that’s still half the people who would simply blow it versus what they say they would do with it.

In other words, what people say would happen is not backed up by the numbers of what actually happens.

Sure, some would spend it responsibly. But at least half would not. They would live it up in some way for a time and then find themselves back where they started (or in some cases worse off.)

In the end, these survey results are pretty discouraging, but I believe it’s better to face the facts and work with them rather than to run and hide.

Plus this is one reason I write and encourage others the way I do. I hope that my words have an impact on at least a few people and help them move from the dismal averages to a life of financial independence and abundance.

Anyway, I’d love your thoughts on the above. Do you see anything I missed or have a different take on the numbers?

P.S. After I wrote this post I found a piece on just how many older people are employed in America. The highlights:

Retirement savings challenges – as life expectancies increase – are one reason Americans might be opting to stay in the labor force.

According to a report from the Government Accountability Office (GAO), nearly 30 percent of people over the age of 55 have no retirement savings and no pension plan. Meanwhile, the personal savings rate has declined from 14.2 percent in 1975 to 6.8 percent in 2018.

Insufficient savings, combined with low wage growth – which the GAO says remains near 1970 levels – rising health care costs and longer life expectancies are creating trouble for many American workers hoping for full retirement.

Ugh.

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Side Hustle Interview 4 https://esimoney.com/side-hustle-interview-4/ https://esimoney.com/side-hustle-interview-4/#comments Fri, 09 Aug 2019 09:00:49 +0000 https://esimoney.com/?p=5149 Here’s our latest interview with a side hustler! As you know, I love creating a side hustle as part of a fast-track path to financial independence because it can make a huge difference (see this financial calculator), enough to actually get you to FI in 10 years. If you have a side hustle and would […]

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Here’s our latest interview with a side hustler!

As you know, I love creating a side hustle as part of a fast-track path to financial independence because it can make a huge difference (see this financial calculator), enough to actually get you to FI in 10 years.

If you have a side hustle and would like to be interviewed, shoot me an email and we can talk over specifics.

Today we are talking with Ryan from Arrest Your Debt.

As usual, my questions are in bold italics and his responses follow in black.

Here we go…

GENERAL OVERVIEW

How old are you (and spouse if applicable, plus how long you’ve been married)?

My wife and I are both 35 years old and we have been married for 11 years.

Do you have kids/family (if so, how old are they)?

We have 3 children: a 9-year-old girl, an 8-year-old boy and a 6-year-old boy.

What area of the country do you live in (and urban or rural)?

We live in an urban area just outside of Phoenix, Arizona.

What is your side hustle?

My full-time job is in law enforcement. My current career has taught me many different skill sets that I use for several related side hustles. I use the skills I acquired in my career to make extra money on the side.

For one, I am an adjunct professor at a local community college. I teach classes related to law enforcement and terrorism to undergraduate students who are interested in law enforcement. Since I spend most of my time in my full-time career, I teach online classes that I can manage and instruct during my time off. This gives me the flexibility I need to teach yet hold a career at the same time.

In addition, I also provide security services for private companies. I am a contract employee so I get a 1099 for my other jobs which is not the best for tax purposes, but it provided additional income. My main security job is at a local mall. The mall contracts local police officers to work there seven days a week. The mall pays me an hourly rate to coordinate the scheduling and recruiting of police officers to work security at the mall for the hours they request. In addition, I also am paid an hourly rate to work any hours I am available for.

Finally, I started another side hustle by blogging. The blog did not start out as a side hustle but rather as a passion to help others. I saw there was a significant need to provide personal finance and debt management help to police officers. Police officers spend the majority of their time controlling situations, yet many of them fail to properly control their own finances. This led me to the creation of my blog which is starting to turn into a side income as well.

Is there anything else we should know about you?

I am a very determined individual and I’m not afraid of failure. Due to this, I have experienced my fair share of failure.

However, with each failure I have grown and achieved more in my life than many people my age. Failure has definitely been the biggest driving force to my success in life.

CREATION STAGE

Is this your first side hustle? If not, could you give us a bit of background on past efforts — both successes and failures?

I have worked many different side hustles over the years in my career and even before my career. I have found that the harder I work, the more opportunities come my way.

Before I was in law enforcement, I worked in a restaurant. I was a busser at the age of 15 and I quickly learned that not everyone shared the same work ethic that I did. As a busser, we would receive a certain percentage of the tips because we helped clean tables and prepare the tables for the servers.

I worked very hard and found that some of the waiters and waitresses were not very good at their job. If I paid extra attention to their tables and refilled their drinks and took care of them, often the people would tip me directly rather than the server. This taught me early on that hard work can pay of monetarily.

As far as my current side hustles, I have been working different security jobs for the past 14 years. These jobs come and go but again I have found that the more attentive and harder I work, the more valuable I am to the employer.

My teaching career has been much more difficult. I got into teaching by obtaining my Master’s Degree and I started applying online for adjunct professor jobs. I quickly learned that blindly applying is difficult to get a job. You pretty much need to know someone to get into the field.

I have applied for 5+ colleges and only a few replied back and later turned me down. I was able to get my current adjunct job because a retired commander I worked for in the past new me and hired me. This again proves that working hard has benefits because I didn’t know I would someday be hired by a supervisor I previously worked for.

How did the idea of starting a side hustle begin?

I fell into the side hustle jobs of security early on by accident. People would ask me if I wanted a job when I was a young officer because they knew I was reliable. I rarely say “no” to opportunities so when I was young and single, I worked as much as I could.

By working hard early on, it has set me up for success 15 years later as I now have several streams of income and not enough time to take all the jobs I am offered.

I didn’t need the money but I learned that having a side hustle was a great way to buy things I wanted with cash rather than a credit card.

How did you come up with the idea?

The security jobs initially found me. Other officers wanted me to work for them so they contacted me.

The online teaching was my idea because I knew it could be an easy way to make income when I retired. I still have another five years before I am eligible for retirement even though I probably will work another 10+.

I am working on creating a teaching resume in the event I want to transition into it later on in life. If I choose not to pursue teaching further, it is not a big deal because it provided extra income while I was doing it.

Finally, blogging was not an intentional side hustle. I originally started writing a book titled, “Arrest Your Debt – Building Wealth On A Law Enforcement Salary.” After writing about half the book, I started surveying the younger officers in my precinct.

After obtaining their feedback, I found most of the younger generation does not read books. They watch videos or read short articles in blogs. This caused me to abandon my book and take many of the teachings and ideas I had already created, and curate them into a blog format.

Blogging has only recently started to create an income and I am excited to see where it goes from here.

What made you think this particular idea could be profitable?

I knew that contract security work would be profitable because I was told early on how much I would be paid an hour and it didn’t require any investment on my end.

Similar to security, online teaching also did not require any upfront money and I was paid a certain amount for each class I taught.

Blogging is a side hustle that does cost me money. I spend about $80 a month on different services to include my host, social media curation and management, and email hosting. I was not making any money on my blog for the first six months and was spending $80 a month to keep it up.

Blogging was more of a passion of mine that has started to turn a profit. I don’t know what type of income it will eventually turn into but it keeps my mind active and is an investment in myself more than anything at this point.

What were the early days like — getting your side hustle off the ground, making your first dollar, etc.?

Security was easy – I signed up, showed up, and was paid. The online teaching took about three months to get signed up and I didn’t get my first class until 6 months later. In the past year I have only been given two classes to teach. I am working on increasing my work load by keeping in constant communication with my employer and making myself valuable.

The blogging side hustle is still slow. I have been doing it for about nine months now and make just a little more than my fees. I have worked incredibly hard on my blog and have put much more time and effort into it than my other jobs.

My blog has created less income than my other jobs and also requires more work. However, as stated previously it is a labor of love and something that is also a benefit to me personally.

BUILDING STAGE

What did you do to grow your side hustle? Were there any specific actions that resulted in major breakthroughs?

I have not had many breakthroughs in my jobs because it seems I am rewarded for my hard work slowly over time. The income has steadily increased over time and I didn’t have any get rich quick moments. It seems that as more time passes, the more my income steadily increases.

What sort of time commitment did your side hustle require while becoming established?

Security and online teaching did not require much preparation to become established but blogging is a whole other story. I have spent approximately 10-20 hours a week on my blog for the past 9 months with very little to show for it monetarily. However, my writing has greatly improved as has my personal finance knowledge which is extremely beneficial.

While blogging has not created significant monetary income, it has provided education and additional skillsets that I feel are of great benefit to me and will pay off in the long run.

Where did you find the time to work on it?

Time is the biggest issue I have when it comes to side hustles. With a regular 40-50 hour full time career and three kids, it can be difficult to find the time to invest in my side hustles. It is a constant work and life balance that I personally struggle with.

If you couldn’t tell, I take great pride in my work and tend to work more than I should. Family time is also important – more so than work, so I struggle with this balance often.

I am on my phone constantly to manage my social media and reply to comments and emails I receive. I rarely have free time where I sit back and relax.

As I type this, I am on vacation in Hawaii watching my kids swim in the resort pool. I find it more relaxing to work than to sit back and do nothing. I feel like I am wasting valuable time if I am not working which can lead to burnout.

Were you the only one involved or did others help out?

For my security and online job, I was the primary driving force to become successful. My employer for my online teaching job was instrumental in getting me the job because I was not able to obtain other online teaching jobs I applied for.

The blogging side hustle is heavily dependent on others. My readers are my most valuable resource as are fellow bloggers. I have learned so much from the personal finance blogging community as well as my readers.

Each day I receive questions from readers about personal finance topics that I do not know much about. Due to this, I research the answers for them and provide the best advice I can in regards to their personal finance situation.

RESULTS

Can you give us specifics on what you earn with your side hustle?

My security jobs are the most profitable. Because I work as a private contractor I make anywhere from $40 an hour to $60 during special events. I trade my time for this hourly rate that I need to manage to avoid working more than I should.

Last year I made about $11,000 from my security jobs that I ended up paying about $3,000 in taxes for due to the 1099 forms.

As far as online teaching, I make about $1,000 – $2,000 a class depending on the amount of students in the class.

Finally, blogging has just started to be minimally profitable. I make about $150 a month from advertisements on my site.

What impact has this extra income had on your finances?

I don’t rely on my side income for any of my bills. The money I make from blogging goes directly back into blogging. I invest it in other resources and things to help me promote my blog.

The teaching income is very infrequent so when I get it, it goes towards my mortgage. Paying off my mortgage is my current financial goal.

My security income is my most lucrative and I have a specific structure for it. I know how much I am going to make each month – around $900 so I plan it out. My security money is split between these four categories:

  • Vacation Fund
  • Vehicle Fund
  • “Fun Money” Fund
  • Extra Mortgage Payment

By using my side hustle income strictly for extra expenses, I can pay for things in cash without having to borrow money. Like the Hawaiian vacation I currently am on!

What went well in this process?

By far the amount of money I make from security is the most profitable and has turned into steady income. I know how many hours a week I am going to work and how much I am going to make from it.

My online teaching and blogging are still up in the air and I am confident that with enough consistent hard work, they will pay off in the end.

What could have gone better?

I really don’t wish much would have gone better because I learn more by doing things over time.

If everything worked quickly, I feel I would take things for granted. I enjoy the pursuit of accomplishments more than the accomplishments themselves.

Has it been worth it? Why or why not?

These side hustles have been incredibly valuable for me personally. Each one has taught me the value of hard work, discipline, and determination.

Also, each side hustle has given me additional life skills I would not have learned without them.

The security job has taught me how to manage other officers and balance an employer, employee relationship with those I hire for the jobs.

Online teaching has taught me how to best bring content to adult learners that I use in my blogging.

Finally, blogging has taught me so much about writing and personal finance knowledge that I also use in my personal life.

What advice do you have for ESI Money readers who may be thinking about creating their own side hustle?

The absolute best advice I can give you is to make sure you are working hard and providing value in your current job – you never know when someone you are interacting with may lead to a great side hustle.

Hard work and refusing to quit has never hurt me in the long run. Each experience I pursue provides me valuable life and career experience. Put your head down and don’t be afraid of failure. You are capable of much more than you realize!

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The Five Biggest Millionaire Regrets https://esimoney.com/the-five-biggest-millionaire-regrets/ https://esimoney.com/the-five-biggest-millionaire-regrets/#comments Wed, 07 Aug 2019 09:00:43 +0000 https://esimoney.com/?p=5204 Regrets, I’ve had a few, but then again, too few to mention. Frank Sinatra Wealthy people have no regrets, right? Haha! That’s often the perception — that because someone has amassed a large net worth then life has been (and will be) a bed of roses. Uh, no. If you thought wealth made life all […]

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Regrets, I’ve had a few, but then again, too few to mention. Frank Sinatra

Wealthy people have no regrets, right?

Haha! That’s often the perception — that because someone has amassed a large net worth then life has been (and will be) a bed of roses.

Uh, no.

If you thought wealth made life all rainbows and butterflies, this post be a shocker.

Today I want to share the biggest regrets millionaires have. In my millionaire interviews I ask them if they could go back and do it all over again, what they would do differently.

Today we have their responses summarized into the top five millionaire regrets.

Just to note, this post is similar to the millionaire mistakes we’ve covered in the past. The difference is that the mistakes are things millionaires did and wish they hadn’t done. This post will list things millionaires didn’t do and wish they had.

As I’ve done in other millionaire updates, I’ll let them explain in their own words and add my thoughts after each point.

Let’s get started…

1. Save more earlier.

By far this is the most frequent response — millionaires wish they had saved more money earlier in life.

Here’s what they had to say on this subject:

Millionaire 40:

I would have saved more as soon as I graduated from college and I would have invested entirely in index funds.

Additionally, I would have purchased a duplex or quad to initially live in which would have become a solid long term investment.

Millionaire 48

I wish I could have maxed out my Roth IRA’s as soon as I had a job in my early 20’s.

Millionaire 49

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.

Millionaire 50

We would have saved more and started earlier.

We would not have panicked when the market crashed.

We would have invested more during the crash.

I probably would have been much wealthier without my flying addiction but it’s my passion. I didn’t go as nuts as I could have on the flying costs but I probably should have recruited co-owners with my first 3 of 5 airplanes long ago which I’ve done for the past 12 years on the latest two.

Millionaire 70

From age 23-33 I did save diligently in my 401K (but did not necessarily max it out) and then would take out 401K loans for big expenses or to pay off bills; essentially I was never able to accumulate any substantive principle. Those early withdrawal or loan penalties seemed like nothing at the time.

It was such a miss to not understand savings and compounding early on. Time is the most important thing in the context of money and I lost or blew 10 years of time and money. I can only imagine what good financial shape I’d be in if I had used those 10 years wisely.

I’d also avoid credit cards- and cash advances and high interest rates, etc. like the plague if I could go back; they really drug me down and kept me down for longer than I should have let them. I clearly had spending and discipline issues as I always made good money and for some reason it was never enough. Now I only use credit cards for big purchases so I can get my points and then I pay the balance off pretty much immediately.

Millionaire 84

Like many people, we should have saved more at an earlier age.

I can relate to this as it’s one of my biggest regrets as well

For many, not saving early (or saving enough early) can be an almost fatal money move. It sacrifices years (or even decades) of compounding — something which can drive wealth at almost any income level. To give that up is a big, big regret.

So I get it, for sure.

That said, kudos goes to these millionaires for seeing the errors of their ways, making changes, and ending up wealthy in the end.

2. Missing career opportunities.

Now we leave the “save” arena and the “earn” world.

Turns out that millionaires have regrets about their careers, despite the fact that they’ve had wildly successful careers.

The following comments summarize most of their sentiments:

Millionaire 38

I think about this frequently. A lot of people tell me I missed my calling in life and should have been a doctor. I would seriously consider going to med school if I had to do it over.

Millionaire 84

I should have been more open to changing jobs rather than being loyal to companies that didn’t return the loyalty. When our boys were expanding their math skills, one commented how I had survived over 100% layoffs during the previous couple of years – and he was right!

A couple thoughts here:

I suspect that many reading this have career regrets as well. Anyone want to share theirs in the comments below?

3. Missing out on real estate investing.

Since we’ve covered, “earn” and “save” so far, why not round out the group and talk about investing regrets? Haha!

Does anyone else find it interesting that the top three areas where millionaires have the most regrets are the three basic tenets of this site?

Maybe it’s just me. 😉

Anyway, here are a couple top investing regrets:

Millionaire 44

Post undergrad – I wish I had taken a harder look at real estate investing as an income source earlier in my career. I always thought I didn’t want the hassle but when I looked at it in terms of financial independence, I realize I would gladly trade a couple hours a month for the cash flow stability over time as well as the ability to leave my full time career if I so choose.

Post MBA – I regret not getting into the housing market in San Francisco. I could have purchased something to live in back in 2010 when I moved here. Really it just means I missed out on a great leveraged bet over the past 8 years.

In general I’ve always shied away from debt that would dramatically eat into my ability to save in the near term, even when doing a deal might be the long term way to maximize my net worth.

Millionaire 45

If I had had the time or interest, I would have pursued the acquisition of real estate.

I would only recommend that to those of you with the time and interest to learn everything that you can about it, due to the obvious risks involved. I do recognize it, however, as an excellent method for wealth accumulation.

Ah, yes. I follow the pack and have some regrets here as well. Namely:

Anyone else have real estate investing regrets?

4. Not getting an early financial education.

We now enter into two more general topics. In this one, millionaires regret not knowing more about managing personal finances earlier in their lives.

This might be a surprise to some. After all, if millionaires didn’t understand managing money early in life, who would?

I’ll let them share their regrets in their own words:

Millionaire 47

I would have studied personal finance more and not hired a financial advisor.

Millionaire 48

I also wish I would have read the Millionaire Next Door earlier and John Bogle’s writings. I think I could have skipped a lot of fruitless study of market timing and stock trading that never panned out anyway.

Millionaire 42

Ask more questions.

Skip the snooty “wealth management” people and go with low-key people you can trust, who want to explain things, are a fiduciary, and charge a flat fee not a percentage of assets.

I was lucky in this area. I started coaching people on finances at my church soon after we were married. I read The Millionaire Next Door soon after that.

The combination of these two got me started on the right path, though it took years to get all my kinks worked out. 😉

Anyone else wish they knew more sooner?

5. Various personal regrets.

Finally we come to more of a catch-all category, most of which only have a slight relationship with money:

Millionaire 39

This is a difficult one but my work/life balance in my 30’s is one of the reasons my first marriage didn’t work out.

I can’t turn back the clock to see if I wouldn’t have put work first what difference it would have made on my personal life or net worth but if I could change anything it would be to enjoy life more then. I am making up for it now though.

Millionaire 60

I would definitely have tried out for the track team in high school. After that I’m happy with all of my career and personal life decisions. I see failure as an opportunity to learn so that next time maybe I can succeed, so I would keep all the failures.

Millionaire 43

My wife and I often have said that one do over would be that we would have had one more child. That obviously has nothing to do with money, but that is one thing we have said to each other.

I have several thoughts here:

  • I had a long stretch where my work/life balance was not in balance. I had too many hours at work and it was tough on me and my wife. Thankfully I eventually got a job that paid me well and only required a 9-to-5 commitment. I was blessed to find it.
  • I agree that failure is a chance to learn. Unfortunately I repeated some mistakes more than once, so I wasn’t always the fastest learner in the pack. Haha!
  • I too would have liked to have had more kids — one at least but maybe two. Our two kids are great, and I simply wish I had more like them. 😉

At some time I’ll probably do a “my biggest life regrets” post or perhaps include them in a retirement update, so for now I’ll leave it at this.

So those are the top five millionaire regrets. See any that you identify with? Or perhaps you have some not on this list?

Share your thoughts in the comments below.

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Millionaire Interview 142 https://esimoney.com/millionaire-interview-142/ https://esimoney.com/millionaire-interview-142/#comments Mon, 05 Aug 2019 09:00:40 +0000 https://esimoney.com/?p=4971 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. My questions are in bold italics and his responses follow in black. Let’s get […]

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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.

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 36 and not married.

We separated fairly recently after a 9 year relationship.

My partner/gf was a trial attorney pulling in a salary similar to mine so while we never combined our finances, it definitely helped having that second income to pay for stuff day to day and around the house.

Do you have kids/family (if so, how old are they)?

No kids.

I’ve got a niece and nephew and my parents still live about a mile away from me while some other family is out of state.

What area of the country do you live in (and urban or rural)?

Southern California – I guess its the definition of suburban sprawl.

I’m about 30 miles south of LA if that helps put it on the map.

What is your current net worth?

My NW is right at 1 mil.

It’s weird writing this because I don’t feel like a millionaire but it all pencils out.

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?

  • 401k – $142k – I just started maxing this out in 2018.
  • Brokerage account – $183k – about 75/25% spit between short term CDs and 4 individual stocks.
  • Home Equity – $300k (50% ltv currently)
  • Cash in the bank – $10k
  • 1031 exchange real estate partnerships – $65k
  • PE RE investment funds – $300k

The last two items are through work.

I don’t have any debt other than the mortgage.

My car’s paid off and I have a few small loans out to people but I don’t really count those as anything substantial.

EARN

What is your job?

I’m an accounting manager for a private equity real estate company. We mostly raise value add investment funds (apartments) every couple of years and there’s a lot of accounting and reporting that goes along with that.

I started here about 6 months out of college – I actually can’t remember if I started as a staff or senior accountant – and was promoted to manager about 3 years ago which really juiced my pay.

I’ll be here 14 years this year and I hope I don’t ever have to work anywhere else.

What is your annual income?

This is from 2018 but its all roughly similar from the previous few years:

  • $105k/yr base pay and bonuses.
  • $90k/yr in profit share – this one varies depending on how we’re doing. Its been as low as $40k a couple of years ago and as high as $100k.
  • $25k/yr from investments – this also varies year to year. The RE funds I invest in are in different stages and the main one right now is in the acquisition phase so there’s minimal income. I’m really expecting this to grow to about $40k-$50k/year in the next couple of years as the rest of my commitments are funded by the end of this year and we start liquidating/selling some of the properties.

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?

My first job was as a cashier at a local home improvement store that hired everyone from my high school since they were just next door.

I was making $8/hour there and left after 3 years making $11hr.

In my senior year of college, the cousin (Debbie) of my girlfriend at the time got me an office job doing some basic accounting and I was able to take night classes the last year and work there full time. The pay was $15/hr which felt like such a huge jump, like it was so much more money.

I remember telling Debbie something along the lines of “If I was just making $25/hr I would be set for life” and she just looked at me like I didn’t know what I was talking about. And I obviously didn’t as a 21 year old kid.

From there it was kind of a whirlwind. The company I was at went through major layoffs just as I was about to graduate and I had to go part time. Debbie pulled some strings and got me a job doing accounting at a mortgage company making $45k/year.

It was a weird place to work at in 2005. It was just as the industry was about to collapse but people were still making money hand over fist.

The owner was some 30 year old pulling in $20k-$30k/month. Everyone he hired was either a family friend, a stripper or an ex con who could sell and close loans. Every other day he would ask me to close the blinds while he did a line of coke off the corner of his desk (we shared the office).

That office imploded overnight 6 months after I got there. About a dozen people packed everything up on a Sunday and moved it into a townhome nearby where they did loans for another couple of months.

I showed up Monday at a tiny 2 bedroom townhouse with 3 people/room and another 6 out in the living room and loft. I left two weeks later.

After doing some minor book keeping/consulting work for about 2 months I got a job at a property management company as an accountant. Debbie called me a week later and offer me an accounting job at the place I’m at now. I think the starting pay was $55k/year. I had been 8 months out of college at that point and felt like I finally made it.

And that’s where I’ve been ever since. My salary has almost doubled but the major increases have been from equity and profit sharing due to being one of the senior employees.

What tips do you have for others who want to grow their career-related income?

This is from my personal experience but it really helped me early in my career to bounce around between different jobs: get exposed to different industries and work cultures and get small pay bumps along the way.

Another tip – from my position today – is be useful to your company and your boss.

I tell everyone I interview that a huge part of my job is to make my boss’s job easier. Whether it’s getting in front of issues that are important to your boss or taking projects off their desk so they can work on other things.

Once I understood this, it made everything easier at work and I started getting bigger projects, more responsibilities and more money as a result.

And lastly, mentors. I would not be anywhere close to where I am today if many, many people not only gave me a first chance, but sometimes a second and third when I screwed up.

What’s your work-life balance look like?

There was a period of a couple of years when we were just starting the first few investment funds where it was stressful. Nobody really knew the processes or how the audits would go, or even the workloads involved. So for about 2 years I probably worked 50 hours weeks and sometimes more.

But as we’ve gotten everything down, at this point I have a very low stress job and I rarely have to put in more than 40 hours.

Sometimes it’s more, sometimes it’s less but I never actually mind because I really like the company and the people I work with.

My hours are relatively flexible and I can take a long lunch or take time off and not have to worry about anything.

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 invest mostly through work.

I’m extremely lucky to work where I do and be able to invest through the company as an employee. Our investors are endowments, huge banks and non profits and the kind of returns they get would never be available to someone like me if I didn’t work there.

The returns on average are 30-40% irr with a 2x equity multiple over the life of each fund. It’s the main reason I’m holding cash on hand – for unfunded commitments that I’ll have to fund over the next twelve months.

I have no idea what my returns are otherwise, my 401k sits there doing its thing. It’s just over 8% for the past 12 months.

My TD Ameritrade account is mostly just to screw around with short term. The 1031 exchange partnerships distribute 4% with an occasional refi and I try to add $5-$10k/year to those just to diversify.

I also occasionally get additional compensation through equity in these deals so the ownership amounts grow throw that as well.

SAVE

What is your annual spending?

Roughly $70-75k/year.

About $2500/mo goes towards housing and utilities.

The rest is mostly screw around expenses.

What are the main categories (expenses) this spending breaks into?

$30k/year on housing, the typical gas/car insurance/cell phone are maybe $5k, $5k on travel, about $5-$7k on home improvements (I love doing this stuff and it’s more of a hobby than anything else), the rest is into going out, art every once in a while and whatever else.

I couldn’t even tell you, most of it is on eating out and going out.

Do you have a budget? If so, how do you implement it?

I don’t have a budget and I’ve never even balanced a check book.

I check my credit card spending every couple of days and try to keep it all under $3k/mo. Once it starts approaching that balance for the month I start getting a little nervous about it and start paying closer attention to it. If it goes over a couple of hundred dollars it’s not the end of the world, but that’s how I keep it in check monthly and pay it off every month.

I like the spending summary Chase gives you from your account and I always review it at the end of the year to see where I can cut back reasonably and it’s always on eating out/restaurants. I do have to keep track of how much cash I’m holding on hand as I basically have to write a check for $20k-$30k every quarter depending on what’s happening at work and what deals are in the pipeline.

What percentage of your gross income do you save and how has that changed over time?

I really never track this.

I’ve always liked saving and never had a problem with it. Today whatever money I’m getting outside of my salary all gets reinvested in something.

It’s definitely gone up over time as I make more money per year since I try to keep my life style the same as the year before. Whatever extra money I make goes to investments or the mortgage.

What is your favorite thing to spend money on/your secret splurge?

Eating and drinking out by far.

I bring a lunch from home 4 days out of 5 and when I eat dinner at home it’s usually chicken breast and vegetables so eating out is a release from my typically healthy diet.

INVEST

What is your investment philosophy/plan?

My plan is to continue doing what’s working, continue maxing out my 401k, continue making additional payments on my mortgage and continue investing through work. The bulk of it being the last one.

What has been your best investment?

I don’t track my historic returns too closely but I “feel” like it’s been my home, even if financially it isn’t true.

I bought it in 2010 with 5% down and avoided pmi through some fthb program that was available at the time. I love living here and it makes me super happy and the value has increased a lot since 2010 – from under $400k to about $600k.

As far as more concrete stuff, I bought a whole bunch of Apple and Facebook stock at the end of 2018 when the market tanked. I offloaded Apple for 20% over the 4-ish months that I held it. I’m up about the same on Facebook in 6 months but will probably hold it for another 10% before selling. That’s the most recent thing.

What has been your worst investment?

I haven’t had any major bombs. Honestly, I might’ve lost a grand or two on some stock I don’t even remember anymore but I’m fairly conservative and I invest in things that I understand.

The worst investments have been the ones that went nowhere and just broke even after a couple of years and at that point I have to consider the opportunity cost.

What’s been your overall return?

This is hard to calculate as the returns on PE investments and the stock market don’t really line up so I don’t even bother tracking it.

The bulk of the money in the PE funds comes in years 3-5 and annualizing it doesn’t make a ton of sense. I get our audited reports every year and I see the increases in value but I don’t go any further than that.

I don’t do bonds other than some short term CDs to keep cash on hand for capital calls.

How often do you monitor/review your portfolio?

Pretty much daily as its something I actually enjoy doing.

My TD Ameritrade account is mostly for me to buy and sell short term so I like following about two dozen companies and reading up on them as much as I can.

NET WORTH

How did you accumulate your net worth?

While I like to think that I’m a fairly smart person and investor, a lot of it has been just being in the right place at the right time and having the means to take advantage of it. A lot of it is luck.

I’ve always been a saver since I was a kid and always had spare money laying around in case something came up. I started buying and reselling collectibles as a teenager and then once I learned about the stock market I started dabbling in that.

A lot of it snowballed. I just happened to be looking for a home when the economy collapsed. My home didn’t require a ton of cash up front and the value increased on its own.

I worked hard and was rewarded for it at work but I also realize that a ton of people in my position are not as lucky or fortunate.

It’s been a combination of just many years of doing the same things, putting money away and investing it in things that made sense to me.

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?

For most of my life its been savings but I started earning significantly more when I was promoted and the amounts I invest now are proportional to my overall income so they both grow in tandem.

But it definitely started with being a saver.

What road bumps did you face along the way to becoming a millionaire and how did you handle them?

I didn’t grow up in this country and I was fortunate to come here as a kid.

We weren’t poor – I always had clean clothes and we never went hungry – but there wasn’t any extra money either.

I heard my parents have screaming fights for years as a teenager and most of it was due to financial hardships. I slept in the living room for a good 3-4 years as a teen because there was nowhere else to sleep.

I don’t want to make this a woe is me tale because my parents are good people and they’ve always done what they thought was best. They’ve never been good with money or life advice and its something I’ve accepted. Their advice while growing up was “go to college, get a degree, make money.”

I’m extremely fortunate that I just happened to run into several people in my life that actually had concrete advice and helped me as I grew up. And honestly, I still have people helping me now. I just learned about setting up a trust a couple of years ago from somebody older and wiser and it’s something I finally did for myself.

At the end of the day, I really feel like things worked out better than I had ever hoped.

What are you currently doing to maintain/grow your net worth?

Keep investing and reinvesting, keep the spending under control, and live below my means in general.

I have everything that I need and there aren’t things I’m pining for.

The long term goal is to sell the townhouse and buy an actual home, but without a family, I can push that off for as long as I want to.

In short, I try to live like I’m making half the money I make now and I’m not sacrificing anything to really do this. I realize that a family and kids will change the calculus but it’s something that won’t be a problem.

Do you have a target net worth you are trying to attain?

I do not.

I never even thought I’d be here. I just don’t want to go back to living the way we lived when I was growing up and worrying about money.

If I had kids to leave everything to, I know I would feel differently but my goal currently is to just not have to stress over finances and I feel like I’m accomplishing that by doing everything I’m doing.

If my NW grows to two mil, I’m not sure it’s going to have an appreciable effect on my life. With that said, I enjoy the process of saving and investing and watching it grow so I’m continuing to do that.

But not because there’s some number I’m trying to reach for myself. I enjoy the process and the results of it and knowing that if I lose my job tomorrow I’ll still be fine.

I’m definitely at a point where I think twice about trading my free time for extra money and as my NW grows, I appreciate my free time more and more.

How old were you when you made your first million and have you had any significant behavior shifts since then?

36

What money mistakes have you made along the way that others can learn from?

I’ve learned the importance of trusting my gut and not listening to “This time its different” and the sky is falling crowd.

I think “experts” can have good advice but a lot of times they’re just regular people who get paid to tell you things they know and they’re frequently wrong.

It’s just blocking out the noise and putting your money in when you’re good, knowing you’re making the right decision and not stressing about the low probability events.

When the economy tanked in 2008 I was sitting on a bunch of cash but I talked myself out of investing most of it because “this time it might be different and it’s scary now so let’s wait.”

If your goal is to wait for the dip and invest then, or wait for some sign and you finally get it, don’t let those opportunities pass you by. Especially not when you’ve been telling yourself that this is the thing you’ve been waiting for.

I’ve always been a believer that the easy money to be made is when there’s blood in the streets. It’s also the hardest time to actually commit. Stick to your guns.

What advice do you have for ESI Money readers on how to become wealthy?

Live below your means but not to a point where you’re miserable. There’s a happy medium.

Yes that painting on my wall that cost $3k could be invested in something else that makes more money and then makes more money later but when I look around my house and look at that painting every day, it makes me really happy.

Saving is important, investing is important, but so is living the life that you have and its always been important to me to find that balance.

FUTURE

What are your plans for the future regarding lifestyle?

I actually enjoy working where I work. The job is tedious at times, but the company and the people are awesome. And I think when I have a family, my perspective on things will shift, but today at the age of 36, I have no real desire to stop working any time soon.

I don’t want to be forced to work to survive and I don’t want to stress about money. The goal is to keep things steady and growing and have options.

What are your retirement plans?

I just want to stay healthy and sane. I don’t have any concrete plans.

I love doing home improvement projects and the outdoors and if I could do more of those things in retirement, I would be totally happy.

Are there any issues in retirement that concern you? If so, how are you planning to address them?

Health definitely.

I’m pretty healthy but everyone has scared me with the healthcare cost stories.

MISCELLANEOUS

How did you learn about finances and at what age did it ‘click’?

I always bought and re-sold things as a kid so I was always looking for something to flip.

As I grew up, one of my friends right out of high school told me about his church group and how they invest together in the stock market. He pretty much taught me everything I knew early on to get started and he’s the person responsible for me going into finance and majoring in that so I’m forever grateful to him. He pretty much started the investing bug that I have now.

Who inspired you to excel in life? Who are your heroes?

My inspiration was growing up poor and hating how it affected our family life.

It’s a weird thing to say but I don’t have any heroes. A lot of people helped me along the way and I wouldn’t be here without their help. My parents let me live at home for free while I was in college and I was able to graduate with substantial savings as a result which snowballed into everything I have now. And a lot of people influenced my career directly and indirectly so I guess it takes a village.

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?

I’m not a huge reader anymore but right out of high school I read The Richest Man in Babylon and Rich Dad Poor Dad. Rich Dad Poor Dad really explained to me the value of assets. The Richest Man in Babylon was such an easy common sense book that I’ve never forgot it and it really reinforced my saving habits.

Do you give to charity? Why or why not? If you do, what percent of time/money do you give?

I give to animal welfare causes occasionally. Single Vision in Florida is an awesome organization run by a dude that really cares for and loves his animals and I encourage everyone to check the place out.

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’m at a phase in my life where I want to have a family and feel like everything is in place to facilitate that. And yeah I would want to leave everything I own to my family so that they’re taken care of.

The Trust I set up recently is basically doing that so If I don’t have children, the money is going to my other relatives/people I care about.

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Retirement Update: Three Years https://esimoney.com/retirement-update-three-years/ https://esimoney.com/retirement-update-three-years/#comments Sat, 03 Aug 2019 09:00:20 +0000 https://esimoney.com/?p=5279 Woo hoo! It’s now been THREE YEARS since I’ve been retired! This milestone is a great time to do a bit of reflecting, so here are some thoughts on retirement overall… First, I’m so glad I did it when I did. If circumstances had worked out differently, I might be still working. Second, I wish […]

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Woo hoo!

It’s now been THREE YEARS since I’ve been retired!

This milestone is a great time to do a bit of reflecting, so here are some thoughts on retirement overall…

First, I’m so glad I did it when I did. If circumstances had worked out differently, I might be still working.

Second, I wish I had done it earlier. My biggest FI mistake was not retiring sooner.

Finally, I am completely LOVING it! I don’t have that “Christmas morning” feeling any longer, things have stabilized and become more normal over time, but I am so thankful that I am not working. I have way more than enough to do (as you’ll see below) and I fill my time with lots of fun things. I want to make the most of my reverse dog years in retirement. 😉

That’s the overview, now let’s get into specifics. Here’s what’s happened since my last update three months ago

Life

  • The winter just kept going this year. We had a huge snowstorm the third week in May (yes, you read that correctly) that was the straw that broke the camel’s back. Oh yeah, then we had several cold (50 degree highs) days in June. We now most certainly want to get out of Colorado for at least part of each winter. We have decided not to move but instead will look to spend 1-3 months in a warmer climate during winter. We’re headed to this place in October to check out several locations along the Florida Gulf Coast. Not sure yet what the winter holds as we may not find something in Florida in time to reserve it for January/February, so it might be back to Grand Cayman in early 2020.
  • Since we’re going to stay in our current house, we’ve also decide to upgrade it a bit. My wife, daughter, and a friend have started work on our main floor (to update it a bit — rugs, decorations, new blinds, new curtains, etc.) But it’s taking some time as we have a lot of other things going on (see below). After this we’ll tackle our upstairs which may require a bit more work and cost (perhaps new flooring as well as some paint and decorating touches.) After that, we’ll address the finished basement and perhaps some landscaping. We figured it was time to upgrade now rather than do it when we decided to move — at least this way we can enjoy it instead of fixing it up for somebody else.
  • The sale of Rockstar Finance sale has been a godsend. Even though managing it was only a couple hours a day, it was a couple hours EVERY day, and something I HAD to work on — a fixed commitment. I much prefer the flexibility to do what I want when I want. Since I don’t have that commitment any longer, I am pretty free. Overall, I’m feeling very relaxed these days. It’s amazing what an extra two hours a day can do for you. One sad thing, it looks like Rockstar Finance has been abandoned by the new owner. I’m sad (and perplexed) to see that happen as it was a great site.
  • One of the things I did with my new free time was re-do the rocked area in our back yard which was growing up with weeds. We removed the rock, put down weed barrier, then moved nine tons (yes, NINE TONS) of new rock from our street where they dumped it to our back yard. All the work was done by my son, my wife, and me over a loooooong couple of days. It was brutal and I’m so glad it’s over. If anything like this needs done again, we’re hiring it out! (My wife was the one who thought “We can do it ourselves” but now she thinks differently.) 😉
  • I’ve started a terrarium hobby. Yep, you read that correctly. I ran into this video which made me think of the small terrarium I loved as a kid. I studied up on it, got the materials, and have made two so far. One is a basic jar I got at Hobby Lobby but the other is a 10-gallon fish tank with various plants I purchased from Amazon. So far, the small jar plants haven’t done well but the fish tank ones look good, so time will tell. Not sure how many more I’ll do — time will tell there too.
  • On July 5 my wife and I joined a group of fellow money nerds on a hike of Seven Bridges. The group was a combination of people here for Camp FI (including some bloggers), some locals, and a few members of the Choose FI Colorado Springs Facebook group. It was a great day and a very enjoyable hike. And we talked a lot less about money than you might imagine. 😉 Afterwards we went for lunch at Ivywild School, an old schoolhouse that’s been converted into shops and restaurants. It was a great day.

Family and Friends

  • The big news in this section is that my daughter got married on July 13 (she got engaged at Easter so it was a rush to put it all together). She married her boyfriend of several years in the Garden of the Gods. His mom did the ceremony (she is the children’s pastor at our former church in Oklahoma) and afterwards we went to a reception nearby. I’ll write a separate post about it, including how we handled the finances and what my daughter and son-in-law decided to do with their wedding money. Stay tuned.
  • The married couple stayed around a week after marrying here, then loaded up all my daughter’s stuff and drove to Kentucky where he is stationed with the army. They already have a house and two cats, so things are progressing quickly. My daughter has created a job for herself by working for a variety of websites (including ESI Money) doing social media, editing, and a few other tasks so her job transferred easily with her. She likes the time and freedom it allows and I’m not sure she’ll ever have a “regular” job. One thing not-so-pleasant: I introduced her to estimated quarterly tax payments which was a welcome-to-adulthood moment. 😉
  • As you might imagine, we got to see my mom and dad at the wedding. The rest of the party were friends and the groom’s relatives, about 30 people in all. Yes, a small wedding as they chose to have it that way and keep most of the wedding money we gave them for an extended trip.
  • My wife completed a conference (May) and a kids’ event at church (June) in addition to her regular duties. She loves working there (part-time) and would do it for free if they’d let her. Ha!
  • My son was all set to work at a local kids’ camp this summer when something better came along. He now works at the Broadmoor, a very nice, upscale hotel and recreation complex in Colorado Springs. He also took a side job as a soccer coach for two 11-year-old club teams. And he did a video for me on The Six Top Millionaire Tips on How to Grow Your Income. We may have some more coming as well.
  • My mom and dad are moving (still slowly) towards leaving Iowa this summer/fall to full-time RV. They are just about to put their home on the market, but they’ve been “just about” to do it for a year now, so we’ll see. They plan to drive down to Florida and vacation with us there in October.
  • My wife’s oldest sister visited us for a week in June. Her husband was doing some work in Denver so she came with him and my wife drove up to get her. They had lots of fun and freed me up to do whatever I wanted! When her husband came to pick her up we had a GREAT conversation about retirement. He’s hoping to retire in December and as you might imagine, I raved about it. Sounds like they are pretty well prepared for it, though it’s hard to be sure without digging into numbers.
  • My wife went to Pittsburgh at the end of July for her sister’s birthday. Her other sister was there as well and the three of them had a great time together.
  • I had an interesting money conversation with a lady about my age after a pickleball game. She asked what I did for a living, I said I was retired, she said I was too young, I said I was 55, she said I looked like I was 40 — the same conversation I have over and over with different people. She asked how I was able to retire — if I had been in the military (which I get a lot too). I said no, that I was in business, to which she replied, “Oh, so you made some good decisions. Good for you!” She was happy for me but also had that “wish I could do it too” sort of look. Five minutes later I saw her in the parking lot driving out in her Porsche Cayenne S (which starts at $66k) and I had a good guess as to why she couldn’t retire.
  • My brother-in-law who lived in Erie, PA (the last of my wife’s siblings to live in her hometown) sold his home and moved to Florida. He’s had enough of 200 inches per year of snow! We hope to see him and his wife in October.
  • One guy in our neighborhood I wrote about in Save and Make Money by Getting Rid of Stuff has upped his stuff level quite significantly. His garage is full of junk so he has to park the family’s cars in the driveway or on the street. But then a storage container was dropped into the driveway containing stuff from his wife’s mother who passed away several years ago (her house recently sold). Not having room to store all this stuff, he built a shed in the back yard to hold some of it. That wasn’t enough space so he also rented a storage facility to hold the rest of it — and needed to rent a U-Haul (of course) to get it there. Ugh. When will the madness end?

Health

  • I’m still working out six times per week (three cardio and three weights). I also am averaging just over 20k steps per day, so I’m moving a lot. One reason for this is…
  • I’ve been playing a TON of pickleball this summer. My wife and I bought paddles and balls from Amazon in April, tried it out, and loved it. We then joined the Pikes Peak Pickleball Association and have been playing at various times with other members. I play more than my wife, generally going to the park near our house every weekday at this point and playing from 8 am until noon or so. It’s a big group and we all play, then move off for others to play, play again, move off, etc., so it’s not like I’m playing four hours straight. That said, it is a good workout and a ton of fun. We’ve met some great friends through it already and it seems like we’re always meeting more.
  • One of those friends got me to play my first pickleball tournament at the end of July. He’s a few years younger than I am (he’s 52), so we had to play down to his age level (which moved us from my level of 55+ to his of 19-54.) In addition, since the tournament was full by the time we met, it was filled at the level we wanted (3.5 rating). So we played up at the 4.0 level. Let’s just say it was a learning experience. Ha! We did win two games (of seven) and almost won a third (lost 11-10) so it was a decent showing. And of course we had fun — so much so that we’ll be playing another tournament at 3.5 next weekend.  
  • I’ve also started eating a bit differently. I do intermittent fasting on the 16/8 plan, which means I don’t eat anything for 16 hours each day and focus all my eating in eight hours. I also do mostly proteins and vegetables, though I do allow more carbs than I probably will in the winter since I’ve been so active.
  • The combination of the exercise and eating right has allowed me to lose weight. I’m now at the lowest level I’ve been in decades — probably similar to what I weighed in college (I have always been on the “thin” side generally, but I had put on a few pounds over the years). I feel great and am loving my slimmed down tone.
  • I’ve been working a lot on ESI Money (see below) and it’s been challenging my mind (a good thing). I also do three chess puzzles a day plus a “hard” Sudoku a few times a week. Gotta keep the mind working as much as the body!

Entertainment

  • Movie day on Tuesdays (discount day) is still going strong. Since my last update we’ve seen Brightburn, Rocketman, John Wick 3, Godzilla, Dark Phoenix, Men in Black, Toy Story 4, Yesterday, Spider-Man, and Once Upon a Time in Hollywood. I’m still getting my Starbucks coffee on most visits which my wife reminds me totally negates the movie discount. Ha!
  • On June 9 I took my daughter to see Les Miserables, our favorite musical. It was good (since the story/music is amazing) but the performances were probably the worst of the four times I’ve seen it. But it was great to be with her and I wanted to pack in all the time I could before she was married and off.
  • As I mentioned in my last update, I did re-play the Spider-Man video game — twice. The second time I played at a higher level and didn’t die all the way through, so I think I mastered it. LOL! It’s such an awesome game! In addition, I got Red Dead Redemption 2 for Father’s Day and am working my way through it. I’m your huckleberry!!!
  • Now that I have extra time in my day I’m also reading much more. Books I’ve read in the past three months include Choose FI, Work Less, Live More, Winning at Retirement, The Old Money Book, Quit Like a Millionaire, The Total Money Makeover, Home Sweet Anywhere, and The Body in Question (heard about on NPR’s Fresh Air podcast). I’ll be covering some of these in future posts.
  • We are still watching some TV but have been so busy that it’s dropped off a lot. We finished the season of When Calls the Heart, are now working our way through America’s Got Talent. We supplement these with Hallmark movies, some island house hunting shows, and This Old House.

Finances

  • Things are rocking on the net worth front! The combination of the Rockstar Finance sale, a hot stock market, and income higher than expenses has our net worth well over $4 million. It’s still hard to believe we’re up $900k since I retired.
  • I mentioned in an earlier post that I’m investing with a friend who is buying rental places. He pays 10% and so far I have $125k there spread over four different properties (I added another $65k in July). I have $75k more ready to allocate if he buys additional places.
  • The sale of Rockstar Finance has also left me time to focus more on ESI Money. As a result, traffic has been up and so has revenue! I’m also working on a few things behind the scenes that will help with both. I have added three new e-series to the site: “30 Days to Great Finances”, “The 52 Best Ways to Save Money”, and “Creating a Great Retirement” plus am still offering the real estate course from Chad Carson. If you want to subscribe to any or all of them (it’s free) you can do so here. I have plans to add new series every couple of months or so, so stay tuned.
  • People are loving my millionaire and retirement interviews. If you want to be interviewed for either of them, drop me an email and I’ll give you details. I especially need retirement interviewees. The Millionaire Interviews are booked way out but my next Retirement Interview isn’t until late September. So if you’re retired and are willing to tell your story, let me know. 
  • I got some good comments about the credit cards I recommended in my annual update, so I wanted to share a few more winners with you. Here’s a list of the best cash back credit cards, one for the best travel rewards cards, and an overall list of the best rewards cards. My personal favorite remains the Fidelity Rewards Visa which pays 2% cash back on everything. I’m still rocking that card and will be well over $1,000 earned myself this year thanks in large part to it.
  • We moved almost $80k into our donor advised fund with the intention of distributing up to $100k this year. I’ve already sent out $35k and am working on a much bigger project for the fall that will involve ESI Money readers. For long-time readers you might remember I used to do a giving effort every November and December. I’m thinking of doing something similar this year. So keep some of your charitable giving handy for then if you want to challenge me in giving away a bigger sum.
  • We are oh-so-close to completing the update of our wills. I’ll be writing about it sometime but the hardest parts have been: 1) deciding how to distribute everything and 2) finding a trustee to watch/mange the money as it gets distributed to our kids.
  • I’m down to $9k at Lending Club and $5k at Prosper. It’s taking me forever to get rid of everything I bought.
  • I’m preparing for FinCon in early September. It’s in Washington, DC, a city I love to visit. Plus I’m flying first class there as part of my new plan to enjoy life even more. I’ll share the details on this spending increase in a future post.

Articles

I’m adding this as a new section — highlights of articles I’ve found interesting but aren’t enough to write a full post about. Here are my selections this time:

  • Seven friends pool money, buy mansion to retire in together — A couple things about this are interesting to me. First, that the friends see this as a way of both funding retirement and staying together. Wonder if this could be a trend we see over in the US some day. Second, the place looks amazing (watch the video). They certainly didn’t skimp on the remodeling expenses.
  • Employees Who Stay In Companies Longer Than Two Years Get Paid 50% Less — A strong case for changing employers more often. Summary: “Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more. As an individual, you’re a CEO of one, and you have a duty to maximize your profits. Why are people who jump ship rewarded, when loyal employees are punished for their dedication? The answer is simple. Recessions allow businesses to freeze their payroll and decrease salaries of the newly hired based on “market trends.” These reactions to the recession are understandable, but the problem is that these reactions were meant to be “temporary.” Instead they have become the “norm” in the marketplace. More importantly, we have all become used to hearing about “3% raises” and we’ve accepted it as the new “norm.” “
  • Time Allocations and Self-Reported Happiness of Retirees: An Exploratory Study — Summary: “Findings indicate that retirees prefer active activities such as socializing, walking, or exercising, as well as those that require human capital, such as working or volunteering, compared to passive activities, such as staying at home and watching television. The need to engage in active activities increased with age, while the desire for passive activities decreased with age. However, most retirees spent more time on passive activities, which contributed to a decrease in overall happiness. There appeared to be a gap between how retirees would like to spend their time and what they actually do in retirement. This gap indicates an area that could lead to a reduction in happiness during retirement.”
  • All Time Greatest Airplane Seat — This is an old video but I love this sort of thing. Who knew this type of luxury even existed? Here’s another, similar video if you want more. And another. It’s great to live vicariously through videos like this.

So, that’s my retirement life lately.

Any thoughts or questions?

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Did Being a Country Boy Help Make Me Wealthy? https://esimoney.com/did-being-a-country-boy-help-make-me-wealthy/ https://esimoney.com/did-being-a-country-boy-help-make-me-wealthy/#comments Fri, 02 Aug 2019 09:00:51 +0000 https://esimoney.com/?p=5114 When I work out, I always listen to music. I’ve tried listening to books or podcasts when exercising, but it just doesn’t work. I have to count (reps) or strain (lifting or cardio) and my attention on anything anyone says is gone. When I’ve tried a podcast or book I end up constantly rewinding which […]

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When I work out, I always listen to music.

I’ve tried listening to books or podcasts when exercising, but it just doesn’t work.

I have to count (reps) or strain (lifting or cardio) and my attention on anything anyone says is gone. When I’ve tried a podcast or book I end up constantly rewinding which makes for a very frustrating experience.

So music it is.

I listen to a wide range of music, from classical to hard rock, but my sweet spot is pop music, mostly from the 70’s and 80’s, when I was growing up.

Song about My Youth

One song that comes up now and again in my mix is “Country Boy” by Glen Campbell.

You can see it performed here if you’re so inclined (the remastered version I listen to is better quality, but you can’t beat the video for helping take you back in time):

Wikipedia says the song was released in 1975 and was “Campbell’s fifth number one on the Easy Listening chart.”

Song Facts summarizes the song as follows:

This was yet another huge hit for Glen Campbell, one of the first Country artists to experience crossover success, and it’s one of this most introspective. He sings about having achieved success and wealth beyond his wildest dreams, but he has lost something of himself and his roots in the process and is wondering why he isn’t fulfilled by his stardom.

The chorus is the part that most resonates with me:

Country boy, you got your feet in L.A.
But your mind’s on Tennessee
Lookin’ back, I can remember the time
When I sang my songs for free

Country boy, you got your feet in L.A.
Take a look at everything you own
But now and then, my heart keeps goin’ home

Just a Country Boy

I was never a “country boy” in the (probably) most likely definition of the word.

I didn’t live on a farm or in the woods, didn’t wear overalls (at least much, they were kinda in style for a bit) and go barefoot all summer, and didn’t own a horse or barn animals.

That said, I didn’t really grow up in an urban area.

First of all, I lived in Iowa, a state with the population of 3.18 million (according to what I could find on Google). This would rank Iowa as #17 in the top metro population CITIES in the U.S. In other words, almost anywhere you live in Iowa could be called the “country”.

Second, I lived in small-town Iowa. We spent my childhood in a decent-sized town of 25k or so (which seemed big to me as a kid), but in high school we moved to a town with only 3k people. Yep, that’s the town’s population.

Third, we did not live in town but a few miles outside of it…in the “country”.

So while I wasn’t roping horses or wrestling steers, I think I most certainly lived in the country.

Small Town Iowa

On a side note, here are a few fun facts about the town I consider my hometown (where we moved just before I started 9th grade):

  • My grandmother was the mayor of the town for 20 years. She was quite a hoot as you might imagine.
  • My high school was a “county” high school, meaning they bussed all the kids from the entire county into the high school. Even with that, my graduating class was just over 100 people.
  • There was nothing for teenagers to do in our town (we didn’t even get a fast food place until after I left) so we always had to go to the “big city”, a town 20 miles away that had 30k people or so. They had a theater downtown, a drive-in theater, and many places to eat.
  • If you did stay in town, the main form of activity for high schoolers was driving around the town square. The town’s courthouse was in the middle of the town and you’d drive around it (the block) to see and be seen.

If you’ve ever seen the movie Grease, it was like the town there. Except smaller.

Or if you watch Hallmark movies, it was like the stereotypical town in those. It was pretty magical at times, especially at Christmas.

I loved it for a variety of reasons:

  • It was big enough for me (I didn’t know any different), provided a safe place to learn, grow, and not kill myself doing the stupid things teenagers do.
  • It was easy to get around — there was never a traffic jam.
  • You knew your neighbors and most everyone else in town. This could be stifling at times, but the pros outweighed the cons by such a large margin it didn’t really matter.
  • I was able to try (and excel) at things I would never have had the chance to in a much larger environment. I was an officer in many school clubs and one of the best speech/drama/debate people in the school. I had the lead roles in the high school plays my sophomore and senior years. I also starred in several community plays/performances (I did mime, believe it or not). The bar was set low, something a young kid like me needed to succeed and develop confidence. By the time I left for college, I had been such a success that I knew I would do well at higher levels.

That said, it wasn’t all rainbows and unicorns.

We were not wealthy by any stretch of the imagination. My parents divorced when I was in third grade. My mom and I lived a lower class existence for many years. I can still remember the days coming home from school (alone, as mom was at work) with a note saying I could have a sandwich and half the Kool-aid for dinner. That was it. The other half of the Kool-aid was for the next day. Things were tight.

The situation improved when my mom remarried during my freshman year in high school. We moved up to upper lower class or maybe even lower middle class. But we were far from wealthy.

In addition, there weren’t many jobs for a high school kid (or a college graduate). I did work at the local grocery store for several years in both high school and college, but that was it. I also “walked beans” (Google it) a bit to earn some money.

But overall, it was pretty idyllic. I look back and am so thankful for those four years of high school that really set the seeds for my development.

Small Town Money Advantage?

The other day while I was gasping for breath at the gym and Glen Campbell was wailing in my ears, I started to think…did growing up in small town Iowa play a key role in developing my money habits?

Then as I looked back, I could see there were ways that it did. Here are a few of them…

1. It made me determined to earn a good income.

You could argue that growing up poorer than average made me determined to do well and that could happen anywhere, not just a small town.

But something about being poor in a small town magnified the issue for me — it seemed like more of a “big deal.”

My mom recounts one of the parent/teacher conferences she had with my algebra teacher. The teacher told my mom:

“I asked John what he wants to do with his life and he said he wants to make a lot of money. I have no doubt he’ll do it.”

I knew what it was like being poor and was determined that I would not live my life that way.

That’s why my planned vocations were all higher paying — first veterinarian, then lawyer, then accountant, then executive (the one that stuck).

2. It helped me know the value of a dollar.

Perhaps this was attributed to growing up in the 70’s when there were still lots of people who remembered the depression around.

But I think being in small town USA that the value of a dollar seeped into you in many ways — how the people acted, what stores were available, etc.

It also “helped” being poor. Others might have thought a dollar wasn’t worth much but when I got one I guarded it closely.

As you can imagine, this perspective came in handy later on as I started my career and wanted to grow my net worth.

3. It taught me hard work and how it was connected with success.

This one is certainly attributed to small town life.

Hard-working people surrounded my daily life — especially farmers and small business people (including my step father).

I saw these people (and knew most of them), how hard they worked, and how they had achieved much of their success through hard work.

They were great examples for me.

Oh, and it’s not by accident that millionaires rate “work hard” as the top tip for growing their incomes

4. It taught me to appreciate the simpler things in life.

This is a big one.

Living in a small town, you have to appreciate the simpler aspects of life because that’s all there is.

Things like driving around the square, going to the county fair in the summer, walking the streets at Christmas to enjoy the people and music, and so forth.

I learned to appreciate and love these basic pleasures. And a love for the simpler things in life followed me throughout my life. That’s why I didn’t need to spend a fortune on this or that thing to bring me happiness — my family and simple activities like going to the apple orchard or having a home movie night were more than enough joy for me.

I know this sounds a bit like I grew up in Mayberry (and internalized the associated way of life) and maybe I did.

My Feet In LA

I never lived in LA (though I did live in Tennessee — and loved it), but after growing up in bumpkin-ville, any city seemed as large as LA. That’s why the “big cities” of Pittsburgh, Nashville, and even Grand Rapids, Michigan seemed like my “LA” as they were so much bigger than where I came from.

Many times during my career I would think back on “Country Boy” and relate to the words he sang:

  • “Country boy, you got your feet in L.A., But your mind’s on Tennessee” — So often, even though I was a “big city success” I longed to simply be home, with my family and friends, and relaxing in a small, Iowa town with no stress.
  • “Lookin’ back, I can remember the time, When I sang my songs for free” — This was a common feeling. I remember thinking so many times 1) what am I doing here/ I’m just a hick from small-town Iowa and 2) they PAY me for this — I was doing it for free 15 years ago!
  • “Country boy, you got your feet in L.A., Take a look at everything you own, But now and then, my heart keeps goin’ home” — Despite success, wealth, net worth, and the ability to have anything I want in live (within reason), in the end my heart is back there in that small town.

In a lot of ways my memory reminds me of the life the Frugalwoods are living. I would guess they are experiencing many of the same joys I grew up with.

That Town is No More

The town I loved is no longer there.

It’s there physically, but it’s a shell of its former self.

Walmart moved into the big town 20 miles away and killed all the small businesses in my town (and for a 20-40 mile radius for the most part). Now only insurance companies and lawyers fill the office space on the square which is 50% vacant.

As a result, the roads, sidewalks, etc. are in bad shape too and these days my town feels more like a ghost town in waiting than a thriving, beautiful Hallmark village.

My parents still live there but are close to leaving, selling their home and living the RV life. I may make it back there one last time before they move or perhaps I’ve seen the last of my town.

Either way, it’s ok, as my fondest memories live in my mind anyway.

So I’m feeling a bit nostalgic these days about my hometown and think that is it to thank, at least in part, for making my finances successful.

And I’m thankful for the non-financial blessings that town gave me as well.

The words from Small Town by John Cougar Mellencamp hit home for me as well:

No I cannot forget where it is that I come from
I cannot forget the people who love me
Yeah, I can be myself here in this small town
And people let me be just what I want to be

Got nothing against a big town
Still hayseed enough to say
Look who’s in the big town
But my bed is in a small town
Oh, and that’s good enough for me

What do you think? Do you think small town living helped me become wealthy?

Any others from small towns? If so, do you think it impacted your finances in any way?

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