Millionaire Interview 111

Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.

If you’d like to be considered for an interview, drop me a note and we can chat about specifics.

Today we are chatting with Brenda from The Five Journeys and the Early Exit Academy.

My questions are in bold italics and her responses follow in black.

Let’s get started…

OVERVIEW

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

54. Single.

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

1 Child, age 21.

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

Mid-Atlantic (Virginia), suburban.

What is your current net worth?

$1,168,342

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?

• $783,032 Retirement funds
• $295,552 Home
• $89,758 Cash and investments
• ($0 Debt)

EARN

What was your job?

Professional social science/legal researcher. Principal level (highest non-managerial level)

What was your annual income?

$136,275

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?

(Note: I used SSA earnings history to reach back into time).

I had a late start on earning a decent salary.

At the very lowest point of my life, my income was $3,317 (in 1995). That was the year I turned 32 and was getting by on temporary low-wage jobs and borrowed money.

I was a new PhD trying to find a job in a bad academic market. Over the course of 3-1/2 years, I lived in 5 different states, trying to find an opportunity that would launch my career.

In the latter part of 1996, I caught a break and took a full-time position as a Crime Analyst, bringing my income up to a luxurious $22,401.

Less than a year later, I accepted a position in the DC-area that took advantage of my doctoral degree and experience. I became a researcher on national-scope projects, more than doubling my salary in 1997 to $56,051.

For the next three years, I was rewarded handsomely for my hard work. By the time I left that position in 2001, my salary reached $78,522.

I negotiated the same starting salary when I moved to my next (and last) position, which was located in a city with a much lower cost of living.

From there, I worked for a non-profit organization with average salary increases of just 3% per year.

In 2010, I broke through the $100,000 mark. When my position ended in 2018, my salary was $136,275.

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

Negotiate! If you work for a non-profit or for the government, you’ll be caught up in spirals of low cost-of-living increases and in tough times, you won’t get a raise at all.

The most important thing anyone can do is negotiate for the highest starting salary for which you are qualified. All your subsequent years of work are based on that starting income.

And I think this is particularly important for women—research demonstrates that women tend to be offered lower salaries and don’t negotiate as tenaciously as men.

If you are resigned to small salary increases, then push for a promotion or be ready to leave your organization for one that provides the pay and benefits you deserve.

And consider bringing in additional income. For instance, after receiving my organization’s approval, I picked up some extra income by consulting on a federal project.

And today, there are so many opportunities for side hustles that I encourage everyone to look for opportunities beyond their immediate workplace.

What’s your work-life balance look like?

I was fired from my position in April 2018. Since then I’ve turned to my passion of writing a blog and to creating the Early Exit Academy. While it might sound like I’ve just ducked the question, the work-life balance played a major role in job burn-out and is the underlying reason why I finally lost my cool and walked away from it all!

You can bet I was passionate about my career. Maybe too passionate. I worked on court reform issues related to domestic violence and elder abuse.

Even at an early stage, I knew that my employer didn’t really care about this field of work. My projects were constantly short-staffed and each day I jammed 18 hours of work into a 10-hour day.

My pleas for help went unanswered, and in the fall of 2017, I decided to take a break. I took a month away from the office, visiting the family farm in Wisconsin, learning how to carve wood at a folk school in North Carolina, and hanging out with my naturalist gang in Shenandoah National Park.

When I returned, I was a changed person. It was time to shift that balance away from work and toward creating the next chapter of my life.

Overall, I can say that I’ve sucked at achieving a healthy work-life balance. It’s just the way it is.

You see, passion is about jumping in and obsessing and never letting go. And honestly, now that I’m an entrepreneur getting ready to launch the Early Exit Academy, my passion is back full force, and the balance board has fallen to the ground!

Did 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 did not have any stable source of income beyond my career.

Apart from earning an extra $3,000 or so from a consulting side hustle a few years ago, I’ve been too engaged in my career and raising a child to afford the time to create a side hustle.

Even my blogging efforts have yet to earn a profit.

SAVE

What was your annual spending?

After taxes, I put 56% of my income into retirement and savings and spent the remaining 44%.

What were the main categories (expenses) this spending broke into?

I focused on tracking my savings, so I did not religiously track my spending by category.

But by the time I left my employer, here’s where my after-tax income went:

• 56% retirement and savings
• 7% housing expenses (utilities, maintenance)
• 8% insurance (homeowners, auto, health)
• 29% miscellaneous spending

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

I used a system I refer to as a “backwards budget”—I budgeted according to my savings goals first, and then modified my spending as needed.

My primary tool was an electronic checkbook register (Excel) and a four-year plan that I updated at least once every year. The plan helped me identify and track financial goals and modify them based on achievements and a change of circumstances.

In some ways, my method might be called a “pain budget.” I diverted high sums of money into retirement, investments, and savings until it hurt!

If I had to pull money out of savings to pay for things that were important to me, then I’d re-evaluate and lower my ambitious savings goals.

The budget was a work in progress and sort of fun to maintain when I saw how it helped me accumulate money.

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

Gosh, I wish I had saved these calculations over the years!

In practice, I have always tried to live off of half of my income. Since I’m single, I never had another income on which to depend. So I got into the habit of treating my income as if it had to cover two people.

When my job ended, there was no one who could support me, so that philosophy paid off big-time.

The biggest booster for my savings rate came in 2013, when I paid off my mortgage. I had taken the mortgage out when I purchased my home in 2001, and even though my interest rate was low, I wanted to be free of debt.

So without a mortgage, I focused on maxing out my retirement accounts and building a solid savings/investment portfolio.

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

Travel!

A few years ago, I joined a friend on a trip to Machu Picchu in Peru. How marvelous! And I was able to spend some time in Germany with a side jaunt to Prague while on a business trip.

Next year I’ll return to Germany to visit my brother and his wife (thanks to frequent flier miles).

And before I lost my job, I had ponied up the cost of a tour package to join my local group of adventurers on a trip to South Africa, including a safari in Kruger National Park. I can’t wait!

I don’t mind splurging on experiences that I can carry with me for a lifetime. It beats buying stuff I don’t really need!

INVEST

What is your investment philosophy/plan?

Low-cost index funds from Vanguard.

I’ve been a rather aggressive investor, pouring money into stock index funds. Bonds have not done well for a long time, so it’s hard to get excited about bonds.

Now that I’m in my 50s, I’ve started to play defense with my portfolio.

Since most of my money is in retirement funds, I’ll focus on that component. When the market tanked in 2008-2009, my retirement account dropped 35%. I hung on tight, continuing to invest in stocks during the recession and the next year, my retirement portfolio was up 57%.

Psychologically and financially, I can’t afford to lose 35% of my assets at this age. I understand that 10% corrections are common, but I fear riding the market all the way to the bottom again.

So every Friday, I write down the value of my retirement funds. And each time it hits a new high, I note it and calculate what the value would be if I experience a 10% loss. If I hit that 10% loss mark, then it’s time for me to consider the markets and determine whether to go into protection mode by moving money out of stocks into a boring money market account.

I haven’t reached that territory yet, but I suspect the time is coming soon.

What has been your best investment?

I tend not to invest in individual stocks, for the reasons you will see below, but one of my solid investments is in a DRIP (dividend reinvestment program) with a company called Welltower (WELL).

Since my work was on aging issues and our baby boomers are all entering retirement age, investing in a fund that specializes in senior housing and health care aligned with my values and demographic changes.

And since dividends are automatically reinvested, it’s done pretty well.

What has been your worst investment?

When the markets tanked in 2009, I decided to try my hand at investing in individual stocks. I soon learned that I was great at BUYING and terrible at SELLING.

While I didn’t lose much money overall, my decisions on individual stocks were costly.

I rode a Chinese solar power company stock to the top of its zenith all the way to the basement. Yep, by the time I sold, it was worth pennies on the dollar.

And I bought shares of Netflix, back when the stock price was around $6. The company appeared to be on its last leg, so I sold it for a small profit. Today the stock price reached $349. Ugghh!

Thankfully, I didn’t invest large sums of money and it helped me learn a valuable lesson. Stick to index funds!

What’s been your overall return?

For my retirement portfolio, I’ve averaged an annual rate of return of about 9% between 2006 and 2018.

But since I continued to contribute during this entire time, I’m really struck by the magic of compound interest.

I’ve grown the retirement account from $100,000 in 2004 to almost $800,000 in 2018.

How often do you monitor/review your portfolio?

I monitor/record the value of my retirement portfolio every Friday.

I also glance at my other investment accounts to see if there have been any changes that need my attention.

I’ll research and consider portfolio changes if I’m seeing a decline in values.

NET WORTH

How did you accumulate your net worth?

My net worth is simply a result of making a pretty good salary, living below my means, and investing in the stock market through my retirement account.

I grew up in a working-class family. I’ve never inherited a dime.

It’s a basic story of spending less than I earned and investing the “leftover” money.

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’m a savings hound. These days I’m dipping into my savings to invest in the Early Exit Academy, so if all goes well, I hope to report back as an Investor Queen!

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

I sure don’t feel like a millionaire, and I can’t believe you’re asking ME this question. Oh yea, my net worth is over $1,000,000! Holy cow!

Road bumps? How about sinkholes that swallowed up my entire life?

I referred to my experience at the very beginning, but how does fitting every single belonging you own into a tiny Honda hatchback sound to you? Might be okay when you’re 18, but I was in my early 30s. I was miserable, living a life of despair and poverty. I saw no future.

I don’t know that I “handled” this sinkhole; rather, I chose to survive from one day to the next.

The one thing that may have saved me was writing and dreaming. I created a super sleuth and outlined a mystery series that helped me mentally escape my predicament. That’s how I survived. And some days, that’s the best a person can do. Now that I’m at the other end, I just can’t believe it!

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

Great question. I’m investing in myself by developing online courses—the Early Exit Academy for Young Escape Artists, and the Early Exit Academy for Mid-life Dreamers—that will teach others how to become financially free and live the life of their dreams.

My goal is to make financial freedom more accessible and to introduce new audiences to the concept of FIRE.

By the way, to me FIRE stands for Financially Independent, Re-inventing and Exploring.

Yes, I want to grow my net worth, but nothing I’ve done in my life was just about money. And that still holds true.

If I can create a livable income from the Early Exit Academy, that would be outstanding. But if I can help others realize their dreams, that would be the sweetest deal of all. We’ll see how it all turns out.

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

I’d like to build a net worth of $2,000,000. With a 4% withdrawal rate, that would give me $80,000 per year.

While I don’t need that much to live on, I worry about the cost of health care and long-term care expenses in the United States.

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

I’m a new millionaire!

I started documenting my net worth in 2007, when it was $365,156. In 2017, at the age of 53, my net worth hit the $1,000,000 mark.

It’s a nice number, but hasn’t resulted in any behavioral shifts. And now that I’m not bringing in a salary and pulling savings to invest in my business, I can see how quickly my net worth can diminish if I’m not careful!

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

I’m not sure this is a money mistake as much as it is a career/job/life mistake.

I believed that hard work and education would buy me the American Dream. In the end, I should have invested more time in building connections. Because when my position was downsized and I had a shiny new PhD, my work ethic and education meant nothing on the job market.

So my biggest advice is to spend time building connections with people who can help you get your foot in the door!

I mentioned the money mistakes I made investing in individual stocks. But here’s the thing. These mistakes didn’t break the bank and I learned some valuable lessons.

Everyone makes money mistakes. We just need to learn from those mistakes and stop repeating them!

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

Make a plan! The most powerful first step anyone can take is to create a plan.

State your purpose up front – why do you want to become financially independent? Then make a commitment to saving as much as you can and learn to live off of whatever is left over. Slow and steady wins the race.

FUTURE

What are your plans for the future regarding lifestyle?

My net worth, especially my investments outside of retirement, has bought me a window of time in which I can afford to create the Early Exit Academy.

I envision a future in which the Academy and my writings pay for my expenses, contribute to my net worth, and allow me to indulge in occasional travel to exotic locations around the world.

What are your retirement plans?

I would be the world’s worst retiree if retirement is defined as “sitting around and doing nothing.” I can’t imagine a life in which I’m not writing or creating or learning.

My goal is financial independence, so that paid work becomes optional.

I’m not there yet. But when I am, I don’t know if I’ll slow down.

The older I get, the more I realize how limited out time is. And there are just so many things I want to do before my own exit.

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

I applied for long-term care insurance when I was 50 years old, and I was denied.

The health care system In the United States is broken—medical expenses are the biggest source of bankruptcies. If I become ill, who will take care of me and how will I pay for it?

I predict the health care situation in this country will get worse before it gets better.

So occasionally I toy with the prospect of moving to another country where my dollar goes further and health care is affordable. I’m just not hopeful that the US can resolve this issue during my lifetime; and if not, I don’t want to end up in poverty as a result of medical expenses. That’s my nightmare.

MISCELLANEOUS

How did you learn about finances and at what age did it ‘click’? Was it from family, books, forced to learn as wealth grew, etc.?

I’ve always been frugal and my family focused on needs, rather than wants. But living in absolute poverty in my early 30s was an experience that will haunt me forever.

While I saved a lot of money once I got my career going, I didn’t really have a formal plan until I was 40 years old. Then I began to devour the personal finance literature and I even set a $1,000,000 net worth goal (though I’m late in achieving it).

The book that really launched my effort was David Bach’s Smart Women Finish Rich.

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

I’m a sociologist, which means I study how society shapes us. Even from a young age, I was very aware of the social structure that holds people back based on race, gender, ethnicity, language, class, and even appearance.

When I was a teenager, I was directly impacted by Title IX, which enabled girls (including myself) to play team sports for the first time. So my early heroes were female athletes – Billie Jean King and basketball player Anne Donovan. I’m inspired by people who overcome adversity and once they do, they hold the doors open to others.

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

While I was employed, I donated regularly to the local domestic violence organization and the animal shelter.

While I’ve temporarily halted cash donations, I carry out local environmentally-focused work in my capacity as a Virginia Master Naturalist—in the first 9 months of 2018, I volunteered over 130 service hours.

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 have one child and while I plan to leave her with enough funds to ensure that she will have basic necessities covered for a number of years, the remainder of my funds will go to local charities.

Should my business bring in additional wealth, I may create a scholarship fund to help someone from my hometown community attend college.

I believe an inheritance should be spent to improve the lives of those who aren’t lucky enough to have an inheritance!