Millionaire Interview 153

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 41 years old and my wife is 39.

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

We have a 7-year-old son.

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

We live in a North Jersey suburb of New York City.

What is your current net worth?

We currently have a net worth of approximately 2.25M.

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?

The breakout of assets are as follows:

• Joint brokerage account: 822,000
• 401k: 290,000
• Corporate deferred savings plan: $68,000
• IRA’s: 495,000
• 529 Account: 45,000
• Home Equity: 515,000

The only debt we currently hold is a $435,000 mortgage @ 3.5% – home value is roughly $950,000.

EARN

What is your job?

I am a managing director of a global financial services firm.

My wife works part time in the health services field.

What is your annual income?

My annual salary and bonus average out to be about $340,000.

Given my level within the organization, I also have a savings component where the company defers 8.5% of my total comp in a long-term savings account. I am 100% vested and the plan escalates by 1.5% every seven years until 65 years of age.

My wife earns roughly $25,000 working part time. She averages about 10-15 hours of work a week. This allows her to be very active in our son’s activities and school work.

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 starting salary was $42,500 and my first year’s bonus was $9,500.

Over the years my salary has increased 6-fold and my bonus about 10-fold.

My industry is strictly focused on client service and satisfaction. My objective from day 1 was to make myself indispensable to my clients.

I deal primarily with global organizations and regardless of my level I was determined to do the best job I could on their behalf and earn the trust of the buyers I was dealing with. Over time, that trust allowed me to gradually take on more and more responsibility and in turn, allowed me to grow my income in kind.

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

I think the best way to increase your income over time is to really identify what the objectives your employer is looking for in your role. So many people think they understand their role but never peel it back to see the forest through the trees.

Always think long term and always ask yourself how you can be doing more for your customer(s) and your employer.

Map out short, medium and long-term goals and do not be afraid to review them with your supervisor.

Be an advocate for your career path. All of this in turn translates into long term income growth.

What’s your work-life balance look like?

My work life balance has improved drastically over the past few years. My employer has made investments in technology that make it more user friendly to work remotely.

Also, the days of working exclusively in one office are a thing of the past. I am fortunate to have access to our NY office which is about a 75-minute commute each way as well as a suburban office in New Jersey which is about a 20-minute drive. So, my day usually dictates which office I work from.

It has made a huge positive impact on my work-life balance especially as my son is growing and getting active in sports.

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?

We only have our job-related income as sources. No side hustles here.

SAVE

What is your annual spending?

Inclusive of our mortgage and property taxes we spend on average of 100k per year.

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

Like most families, food tends to be our largest expense. We spend roughly $1,000 / month on groceries and eating out.

Our household utilities average roughly $600 /month (gas, electric, phone, cable, garbage).

Car leases total $800 / month.

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

We did use a budget when we got engaged and subsequently married. Over time as our income as improved, we consistently increased our retirement savings (paying yourself first) and as our surplus of monthly income grew we felt as long as we continued to save appropriately, we could let our foot off the gas in adhering to a budget.

We have a good sense expense wise to our monthly expenses and if we find ourselves going over, we have figured out how to pull it back. Again, our #1 objective has always been to pay ourselves first, so our disposal income is net of contributions to both retirement and savings.

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

Our goal every year is to max out my 401k plan and both our IRA’s. That is the baseline savings goal.

Extra savings funds split equally to overpayment of mortgage and traditional brokerage savings account. Excluding our mortgage our goal is to save $40,000 in retirement between 401k and IRA’s including company match.

On top of that my company’s deferred savings plan provides another $20,000 in savings that we don’t even see, its automatic.

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

We are big vacation people — we work hard and do not skimp on vacations. When we travel we choose to stay at very nice hotels and eat in good restaurants.

We also use a cleaning lady to keep our house tidy 2x a month and do treat ourselves to wellness splurges (massages, facial etc.).

We recently bought a Peloton which probably at the time was considered a sizable splurge but has been getting a lot of usage as both my wife and I love the luxury of having a great workout just feet away.

INVEST

What is your investment philosophy/plan?

My investment plan begins and ends with the idea of compounding interest – you start with a little and over a period you keep adding, and slowly but surely small additions begin to add and compound and after a lot of rolling you find yourself with a larger ball.

First, I primarily invest in single stock assets. Perhaps given where I work and live, I mingle socially with a lot of fund managers and others within financial services. I can tell you first hand, their ability to pick a good stock is marginally better than you or I. So, I do not think paying for that expertise is wise over time.

My investment thesis is made up of my own findings. First, I believe that one should buy a stock to own a piece of the underlying cash flow. To understand cash flow, you must first understand assets/income to liabilities. Most companies with strong cash flow have similar characteristics (strong debt rating, predictable growth of dividend, beta lower than S&P).

From there you select industries you want to invest in to create a pool of risk, also known as diversification. These stocks represent for me bucket #1.

From there bucket #2 is represented slightly further down the risk curve: municipal and corporate bonds as well as preferred stock.

Bucket 3 is all short-term assets, money market funds as well as opportunistic CD’s.

I use the cash generated in all three buckets monthly to determine where is the appropriate allocation for the income. One month it may be to buy more individual stock. Another month might be to park it in a money market fund. A year ago, when CD rates were rising, I took advantage of elevated rates.

So, my building a portfolio that generates a lot of cash, it allows me to regularly assess the redeployment of the capital as it churns. In turn, it creates more income.

What has been your best investment?

Without question my best investment was buying Apple in 2004 when the iPod was introduced. I bought shares in a brokerage account as well as IRA.

15 years later, have not sold a single share and have well over a 1000% gain in the investment.

What has been your worst investment?

My worst investment(s) have always involved selling a stock with the thought that another idea was slightly better.

The market is a fickle lady and has a very strong ebb and flow. I have always regretted pushing back on the market. There have been many instances where I was quick to sell only to watch the stock appreciate significantly in the coming months / years.

What’s been your overall return?

I tend to average 8-10% returns on my money.

How often do you monitor/review your portfolio?

I tend to monitor my portfolio daily.

I work in financial services, so having an eye on the market is part of my job.

Given the portfolio composition, I tend to review it thoroughly for allocation purposes monthly.

NET WORTH

How did you accumulate your net worth?

Our wealth growth wasn’t sprinkled with fairy dust. We have maintained a few very simple principles.

We have always paid ourselves first via corporate sponsored 401k plans. We have never held credit debt. We have always been cognizant to live within the confines of our income and we have made wise decisions to investing in our primary residence.

It’s a simple formula that often is over thought.

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 believe the greatest strength in the model is also the hardest which is the saving element.

The use of low cost index funds have taken a lot of the guess work out of investing. The idea of taking a dollar and putting it aside for a later date is a trademark of true discipline especially for the younger generation that has a constant tugging of their wallet by a variety of sources. I would imagine the least cool thing one could do with their money is put it in an S&P index fund. However, 20 years later, that person will have something to show for it.

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

Remaining disciplined in the face of life obligations has always been the biggest hurdle.

Whether it was spending more on a primary residence or general spending habits month -to- month, keeping a disciplined approach is always going to be the biggest hurdle.

The good news is that once you adjust your thought process to put it away first, it does become second nature.

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

Consistency, consistency, consistency.

Be consistent in your savings and always put yourself first. Automation through use of technology has made it easier than ever to grow a nest egg.

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

My present goal is to pay off my house before my son graduates college.

I would like to be able to retire early and believe the most efficient way is to eliminate all debt. My target net worth to do so is $5M.

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

We hit a 1M net worth when I was 35 years old.

Coincidently it only took another 5 years to hit 2M.

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

I have made mistakes chasing individual stocks in the past that have come back to bite me. Whether or was selling too early our buying too late I have had some missteps that have cost me. Further, understanding the tax implication for selling stock has been met with untimely and unprepared for bills from the IRS.

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

Start small – savings automation couldn’t be easier in today’s environment.

Set yourself up so the money comes out of your account the day you get paid. Never see the money – and whether it’s $25 or $250 put it away. Month in and month out, it’s the clearest path to financial freedom.

FUTURE

What are your plans regarding lifestyle?

My goal is to be able to have the flexibility to retire when we so please.

Financial freedom is something I take very seriously and want to be able to control my own destiny as it relates being able to slow it down and walk away from corporate America.

What are your retirement plans?

My baseline goal is to retire early – my financial parameters are $5M with a paid off house.

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

I haven’t started to let those concerns seep into my thinking yet – I know I have a way to go and certainly will address them as I get closer.

MISCELLANEOUS

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

I was exposed to finance at a relatively young age as my father’s good friend was his financial advisor.

I took an interest in it and wanted to understand the mechanics of the stock market and how it worked.

I made my first “investment” at 19 years old when I bought into a mutual fund.

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

For most of my adolescence I was an underachiever whether it was academically or athletically. I never was able to find my footing and unless it really interested me, I wasn’t interested in it.

That all changed when I got to my current employer and was thrown into the deep end very early on. I worked on a team where I was the youngest and expected to pull my own weight. The team exposed me to some of the world’s most robust and complex organizations and put a high level of trust in me that I was going to deliver.

That motivated me to work harder and harder and it snowballed, and it really allowed me to step out of what an expectation should be for a 26-year-old.

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

My wife and I support a few different charities – we don’t necessarily have a percentage amount in mind to give. However, when we find a cause we are passionate about we try to be generous.

They usually are organizations that support animals or children with need. I lost an uncle to ALS several years ago and I make it a habit to support research to eradicate ALS.

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 would like to leave my wealth to my son and nieces – I will give some to charity but do want my loved ones to benefit from my blessings.