Millionaire Interview 148

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 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)?

45. My boyfriend and I just celebrated our 10-year anniversary.

No plans to get married. I know many women wouldn’t prefer this arrangement, but it works for me!

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

No kids.

I’m close with my parents (who are divorced), my brother and some of my many cousins and their kids.

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

Large, expensive city on the East Coast.

What is your current net worth?

$2.46 million

What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?

• $101K in savings accounts
• $1,028K in qualified investment accounts
• $936K in regular brokerage accounts
• ~$400K value of my one-bedroom apartment
• No debt.

EARN

What is your job?

I run a department at a large (500 to 1,000 employees) non-profit.

What is your annual income?

$183,000

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?

When I started out in journalism in 1995, my salary was $25,000. I received another offer for $26,000 and was too panicked about finding any work at all to negotiate!

My salary grew as I took on management responsibilities and moved into the tech sector. I didn’t move around a lot, and probably could have gotten higher salaries if I had.

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

Don’t chase management roles for the money; pursue them if you enjoy being a manager and are good at it. If you’re not, you can grow your salary more happily by becoming a top-notch specialist in whatever skill set does inspire you.

What’s your work-life balance look like?

Pretty good. While I see colleagues working nights and weekends, I rarely do.

I’m up to 5 weeks of paid vacation time a year, and I take about 4 weeks of that each year. I walk to work, so my time isn’t sucked away by a long commute.

Even so, I never have enough time to keep up with all the non-work things I want to do and can get stressed about that.

Part of that is getting older — I guess none of us keep the energy levels we had in our mid-20’s! Also, my work involves a lot of interacting with people, and I need a lot of recharge time from that.

I have reduced my work hours to 80% and that’s helping. (The salary listed above is my full-time salary; I’m only drawing 80% of it now.)

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?

No. I have taken on contract work in the past, but I now value my free time too much.

I come from a family of serial entrepreneurs, but I somehow didn’t get the gene that compels all of them to start businesses…

SAVE

What is your annual spending?

I spend between $33K and $38K a year, not including income/payroll taxes.

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

Again, this is without income taxes:

• Housing (including everything; repairs, insurance, utilities, etc.): $16K
• Travel + vacations: $7.5K
• Groceries + eating out: $6K
• Health insurance (my share; employer pays a much bigger share): $2K
• Clothing, including athletic gear: $2K
• Hobbies and recreation (music, books, supplies): $2K
• Other: $1.5K

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

No. I track everything through Quicken and monitor at least once a month, but I make spending decisions case-by-case.

I read Your Money or Your Life about 20 years ago, and it really resonated with me. It also echoed a lot of what my parents modeled.

So I know what it takes to earn a dollar, and I know what I really value, so I spend on things that make sense for me.

If I decide to spend money, say, on a high-end bike, I am confident the value I’ll get is worth the money. And I trust that I know my values well enough that it won’t get out of hand.

My spending has stayed roughly the same for 15+ years.

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

I save 57% of my gross income (including employer matching funds) or 75% of net income.

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

I don’t really splurge on things (see above). When I buy something expensive it feels like a good choice, not a splurge.

What does feel like a splurge is working reduced hours — that’s definitely a luxury!

INVEST

What is your investment philosophy/plan?

Keep it simple and low-cost.

What has been your best investment?

I don’t look at individual funds or stocks that way. I just I look at my well-balanced portfolio as a whole.

What has been your worst investment?

I do have some worsts! To me, this is money that I shouldn’t have lost, had I been smarter, and if I had made what I now consider to be good decisions.

I lost a lot of money on company stock when I was working in high-tech in the early 2000’s…not just options I was granted, but shares I purchased at the employee discount rate. I should have sold periodically to hedge against a drop in value. I didn’t think of it, and my financial adviser at the time didn’t steer me that way.

Before that, a different financial adviser had me in a bunch of individual stocks, most of which never recovered from the first Internet crash.

How bad were those mistakes?

Twenty years later, I’m still carrying forward the resulting capital losses on my tax returns.

What’s been your overall return?

You know, I actually don’t know that!

I have about 80% in various stock index funds and 20% in bond index funds, so whatever that would have returned over the past 20+ years is the answer.

How often do you monitor/review your portfolio?

I check my asset allocation every month or two, and direct my new savings into whatever is lagging behind my target allocation.

NET WORTH

How did you accumulate your net worth?

Mostly saving from my salary, which has meant spending money only on things I truly value.

My parents have gifted me money over the years. About 20% of my net worth is thanks to their generosity. They didn’t completely change my financial trajectory — they never bailed me out of a bad spot or enabled me to do something I wouldn’t have done anyway.

For a long time, I even left that money out when calculating my net worth. That said, their support has definitely accelerated my path to financial independence. (If I ever get down about all that money I lost in the market, I remind myself about these gifts.)

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?

Save.

My modest spending habits built my savings even when my salary was low and when investing went sour.

And while I have a good salary now, there are certainly more lucrative career paths I could have followed if a high salary had been my main goal.

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

I covered them under “worst investments.”

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

Same as always — spending wisely and maintaining a simple, low-cost investment strategy.

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

I had my eye on about the number I am at now, because my rough calculations suggested this would allow me to comfortably stop working for money. Now I’m reflecting on whether there’s anything else I might want to buy (e.g., bigger place to live) that might not work under this number. I’m pretty close to declaring victory!

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

40. I didn’t realize until just now how much quicker the second million came!

The biggest shifts since then are that my boyfriend moved in with me, so my living expenses went down a bit, I’ve gotten a promotion so my salary is higher and I have access to a 457b saving plan, and of course the stock market has had a good run.

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

See “worst investments” above. The underlying cause of those mistakes was that I trusted “experts” to steer me straight, instead of educating myself.

I’m much more confident now and tell anyone who will listen to learn as much as they can about managing their own money.

I do consult a financial adviser, but to check and challenge my own thinking — not to replace it.

Things that some people would consider unwise that I am happy I’ve done:

• I lost money on a friend’s business. I knew I might never see the money again, and decided that supporting the business was worth it. I feel good that I took the risk.
• I live in an expensive city. Given my skills and field, the most interesting work is centered in the expensive cities, so living here gives me many professional options, which I value highly. I also love the car-free life and enjoy walking/biking/public-transiting all over the city.
• I paid off my mortgage. I could have made higher returns by continuing to make payments and having more investments, but I prefer the simplicity and the feeling of being debt-free.

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

Know what you value, and build your life around that.

Money is not an end in itself, so if you focus on it, you’ll end up somewhere you don’t actually want to be.

FUTURE

What are your plans for the future regarding lifestyle? 

Early retirement!

I had age 50 as my target, but since I’ve been feeling pretty burned out lately, I will likely pull the trigger within the next year or so.

The biggest wildcard is whether I want to be able to change my lifestyle in any major way — a two-bedroom apartment instead of one-bedroom? It’s tough to work through what 60-year-old me or 80-year-old me might regret. I *think* the answer is that I would regret spending years in a job that didn’t excite me any more…but it’s hard to know for sure.

What are your retirement plans?

First, hobbies and activities! I do a lot of running and biking now, and expect to do more. I have so many creative projects in mind that I’m too drained to work on regularly now, so I could spend a lot of time on those.

Second, being more active in my community. I used to volunteer a lot and sit on boards, and organized a lot more social gatherings. Those are all things that I hope I’ll want to do more of when I have more flexibility.

I’ll travel some but not a lot. I’m fortunate to have had many travel adventures all over the world already. When I do travel, I imagine staying for a while in one place (maybe where I have family or friends) or doing long bike trips to experience places at a slower pace.

Finally, I could see myself (after much rest!) doing part-time work. I think I would prefer the predictability of a part-time staff position at an organization (I have my eye on one), rather than chasing down consulting or project work.

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

Well, there’s the ever-present question of how to pay for health care! I’m working with my financial adviser to understand the options and risks. So far, the projections look reasonably positive.

Most of my worries are around career-related issues: Not having a work-based identity will be a big shift. Will I feel like I’m wasting the skills I’ve worked so hard to develop? I want to keep making the world a better place, and am not sure what my impact will look like without a traditional job. If I do decide to work at a regular job again, will it be hard to get hired?

So I’m spending the next several months doing some career planning — networking, informational interviews, talking with a career coach — to give myself confidence that I’ll be able to find or make appealing options.

MISCELLANEOUS

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

My parents taught good lessons both explicitly and by example from when I was very young.

Right out of college, before I even read Your Money or Your Life, I was essentially living by the book’s principles. Reading it just confirmed that I wasn’t crazy; everyone else was. 🙂

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

My mom’s family has a long history of high educational achievement. My grandparents competed against each other to be valedictorian of their high school class. (My grandmother won!) As in many immigrant families, advanced degrees and academic excellence were expected as the norm.

Both sides of my family are also full of hard workers who take immense pride in their work, whether that work was running a gas station, cleaning a school or performing surgeries.

A strong ethic of helping others is also assumed — from donating surgical skills to towing someone who couldn’t afford it for free in the middle of the night.

When I feel like not putting in my best effort, one of my family members always pops into my head and I’m like, “Nope, Uncle Charlie wouldn’t have accepted this!”

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?

Your Money or Your Life, obviously. 🙂

The Little Book of Common Sense Investing by John Bogle was helpful as I was making the break from my early financial advisers.

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

For many years, I gave about $2K a year, about as much as I spend on clothes or hobbies.

I also used to volunteer a significant amount of time — anywhere from 10-60 hours a month.

At one point, I even took three months off from work to volunteer overseas, in the country my mom’s family is from.

When I “retire,” I expect to get back to this. Giving time isn’t a good option now, as I’m struggling with burnout. And when I give money, I do a fair bit of research, so lack of time has decreased my giving as well.

I feel okay about this partly because I do work at a non-profit, for a lower salary that I would have at a comparable job in the private sector. So I’m still (indirectly) giving up something to improve the world.

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’ll leave some money to family, but a relatively small slice. For the bulk of my estate, I’ll choose a small portfolio of nonprofits, and might even do a charitable remainder trust when I’m older.

The way I see it, money is really just power over a certain amount of resources — I’ve built up the ability and responsibility to choose what to do with $2.46 million of the world’s resources. I want to be a good steward. While providing security and choice for myself and loved ones makes sense, there’s no reason we should exclusively benefit from those resources.