The following is a millionaire interview I first published on a previous site. But this one has a couple different twists.
First of all, this is the first interview that’s taken place with TWO millionaires — a father and a son. I had contact with the son and he offered to answer the questions with his dad. I think the results are terrific!
Second, the interviewee reached out to me recently and offered to update the results in this post. So I’ll run the initial interview (which occurred in 2013) first and then give his updated comments up to the present time.
As usual, my questions are in bold italics and their responses follow in black. The piece starts with an opening statement from the son:
When ESI provided the opportunity for this interview, my father agreed to do it along with me and we got to find out a little more about each other’s thought process and strategies. This has been a really interesting and positive experience for us.
My father has been a mentor, and apparently the financial information he has shared with me over the years has stuck. It became clear to both of us that I am my ‘father’s son’, in the best way. We both got MBAs while working full-time, and did it before getting married. In addition, both of us have Shadow Assets* that throw off a bit of cashflow. Neither of us have debt. We don’t have any need for life insurance, and are both self-insuring our potential needs for long-term care. These similarities are coincidence, and we both learned this about each other through this interview. Maybe “coincidence” is the wrong word. 🙂
The biggest differences in our investing style is that my father always had a diverse portfolio, rebalancing through additional savings. My style has been more to the extremes, first with CDs, then several decades of 100% equities until getting burned in the two ‘00 Bears, and now back to CDs. This interview was enjoyable for us, and we hope readers also find it of interest.
How old are you (and spouse if applicable, plus how long you’ve been married)?
Father: 81, spouse of 55 years is 78.
Son: 53, spouse of 21 years is 54.
Do you have kids/family (if so, how old are they)?
Father: 4 kids ages 53, 52, 51 and 47
Son: No kids, 3 cats ages 12, 10, 8
What area of the country do you live in (and urban or rural)?
We are both native to Los Angeles, and both relocated to N. Cal in the past two years. All of our extended family is now within a one-hour driving radius. My father lives in a nice suburb with excellent access to shopping, services, transportation, culture, and recreation. I live in a rural region, where I drive by 100 cows to buy a half-gallon of milk. Both of us are well-suited for our current residences, and really enjoy the respective advantages.
What is your current net worth?
Father: $3 million ($500K primary residence, $1.25mm equities, $750K CDs/cash, $500K bonds)
Son: $2.5 million ($500K primary residence, $200K equities, $1.8mm CDs/cash)
What is your job (type of work and level)?
Father: Started as a CPA, worked up through Controller and VP positions, ended as a CFO for a publicly traded holding corporation. My wife was a Registered Nurse, took a break to raise our children, and returned to her career in Nursing and Health Services. We both enjoyed our work, and were very good at it.
Son: Until retiring in early 2013, worked in consulting, specifically project management working on large civil projects. Not a typical career-path, as my work is project-based with a beginning-middle-end; this required being nimble and marketable in order to join new project teams. I found after 30 years of scrambling to get-and-keep jobs, while balancing the work/compensation/location options available, I was ready to leave the workforce. My wife was a Director in the grants and research area for medical and scientific research. She was also ready to leave work and move on to other interests, and retired at 50.
Fortunately, I have never been unemployed, while able to live and work in the geographical region of my choice. A big part of that was luck, as I have seen my contemporaries have to move for jobs. Another big thing that impacted my work was the development of some powerful software. The job I did in 2013 took six people to perform in 1988; the difference was the speed and accuracy of software. Very clear to me where the U.S. productivity improvements have come from.
What is your annual income?
This subject is a little sticky. Even though we are both anonymous to ESI Money readers, we are known to each other. Without actual numbers, my father’s compensation is comparable to what the Chief Financial Officers for publicly-traded corporations earn. My compensation was never outstanding, but was respectable for the level of work I performed, and provided a decent standard of living.
Over 30 years of post-college full-time work, my salary grew at a compounded annual rate of 7.7%. The big jumps happened when I switched projects and/or switched companies. The last few years had no increases, and the economic environment for my field appears to have contracted a great deal. Fewer jobs and opportunities, and the compensation compression I see in all industries, make a tough environment going forward. More seasoned people fortunate enough to keep working are ratcheting downward in position and compensation.
How did you grow your income so high?
Father: Went to school at night at a name school, got the degrees and license. More leverage, respect and opportunity with degrees. It was a good way for people to see right away, by looking at a resume, what was accomplished and how the trajectory of the career progressed.
Son: I worked a lot, and for most of my younger years I had a side job in addition to my full-time job. Trading time for money, this allowed me to save more than average. My first jobs were in entry-level service positions, dealing with difficult people, unpredictable business environments, and knowing I could easily be replaced. It took a long time to develop skills in order to make better money, and both my wife and I went to school at night to improve our abilities and employment opportunities. I also obtained professional certifications, and sought training opportunities (often paid for myself) which demonstrate a skill level and commitment; those certifications and MBA were helpful to get my résumé in the ‘keep’ pile for employers and clients.
What is your main source of income (be as specific as possible — job, investments, inheritance, etc.)?
Father: Investments.
Son: Investment income, mostly CD interest. It is working out so far, we live a simple life with a low overhead. If we want something, we buy it and don’t sweat the expense. But for the most part, we find ourselves limited in material desires. One lesson I recall from my father, right after finishing college and wanting to buy a cool car, was that if I could defer my spending in order to begin building net worth, it would make a big difference in the years to come. He was completely right, and it kills me to say that. 🙂
What is your annual spending?
Both Father and Son have no housing expenses, and avoid conspicuous consumption. This allows us to continue to spend less than our investments produce, and neither of us sees that changing in the near future. Fortunately, we are able to support our satisfactions.
Father’s spending provides a comfortable lifestyle in a nice home.
Son’s expenditures are less than $50K/year, with occasional exceptions for big-ticket items like home improvements, cars, etc.
How did you accumulate your net worth? Also, please share any mistakes you’ve made along the way that others can learn from.
Father: Following common-sense tenets of PF, and a bit of luck. I don’t want to talk about mistakes. 🙂 Some of it was timing (inflation, S. Cal housing market increases, taking calculated risks, making the right choices when decisions had to be made). A GI loan at low-interest rate financed our first home.
Son: My father taught me to read stock tables, back when there were stock tables. He helped my brothers and I set up savings accounts. I remember my first piggy-bank, the kind you would insert coins and they would roll into the correct respective columns. The concept of saving, and spending less than I earned even at my first minimum wage jobs, was always practiced. I had a full-time job, and at least one part-time job, into my mid-30s. I invested in CDs until my late 20s, and then began saving and investing in equity mutual funds.
The advantages of Index funds led to them as my core holding. One advantage my parents conferred upon me, was allowing me to live at home after college for several years while saving for a house. No way would I have been able to supercharge my savings start without their generosity. My spouse got on board with the FI/RE goals, and for quite a few years our incomes went to 40% savings, 30% taxes, 30% living expenses.
What have you learned in the process of becoming wealthy that others can learn from (what can others apply to become wealthy themselves)?
Father: Just get started, don’t wait. It will never be the ‘right time’ if you wait. Spend less than you earn. Follow basic principles of personal finance, and you will get to where you want to be.
Son: There is no race on, so as long as you are making progress to your goals then don’t forget to attend to the care-and-feeding of the rest of your life. I sometimes have forgotten that not everything is measured in dollars, and ‘money’ is not synonymous with ‘happiness’.
If possible, get a spouse that shares your values and goals. You will have a lot of fun together, and build security together. If a compatible spouse doesn’t happen, that is ok too; just don’t make the mistake of tying your future to an incompatible spouse.
The marketplace and opportunities are transient and unknowable, so don’t beat yourself up too badly when misfortune strikes. By the same token, when good fortune comes along remember to be humble and don’t mistake luck for brains.
There is a huge downside to risk, and being a self-identified “risk-taker” implies being a “winner.” The “risk-takers” in the world have a survival-bias; so don’t mistake “risk-taker” for “winner.”
Also, get yourself some good parents; that can be huge. My Mom and Dad have been generous with their time, money, and knowledge for all their kids. The biggest gift from them has been giving us the tools to go out into the world.
What are you currently doing to maintain/grow your net worth?
Both of us are attempting to maintain our net worth, with a conservative outlook. We do not see a bright economic future for the U.S., or any sector with growth potential. We do see a disconnect between the real economy, the reported economy (i.e. unemployment and inflation rates), and the market economy (i.e. stock and real estate markets) which in times past has been used as a predictor for the future economy. This disconnect, and the unpredictable environment created by Federal Reserve actions, lack of correlated government revenue and expenditures, and the unfunded entitlement promises for U.S. citizens that are ignored by both citizens and politicians, has stopped us from any pursuit of growth through risk.
We have both ‘turtled up’ until this disconnect is resolved. Or isn’t.
Do you have a target net worth you are trying to attain/maintain?
Father: trying to maintain current net worth, and conservatively manage resources to reduce risk.
Son: Not anymore. My target has changed (continually increasing) over the years. Like they say in my work, “if you can’t measure it, you can’t manage it.” In 1990, I felt I could retire on $500K; my wife and I hit a $2 million target in 2006, then watched helplessly while markets snatched back over $1 million in value. So we are done trying to ‘attain’ and instead will attempt to ‘maintain’.
What are your plans for the future regarding lifestyle (for instance, will your net worth allow you to retire early, downsize jobs, etc.)?
Father: Maintain lifestyle. We have been fortunate, no major health issues so far.
Son: My wife has grown an art-related business she really enjoys, and has cultivated a customer base from scratch over the past few years. We are both committed to keeping our home a ‘drama-free zone’, and have been reducing our exposure to stressful activities, people, news/entertainment, and anything else we find that does not improve our quality of life. We do what we want, when we want. Interestingly, that freedom has limited our wants.
Is there any advice you have for ESI Money readers regarding wealth accumulation?
My father had an excellent career, and his background as a Division 1 college athlete and time in military service provided a good foundation. He learned, and then demonstrated, the ability to work hard as part of a team. And his individual performance produced good results for his teams. While every action and effort may not have a quantifiable value, the sum total of those actions over time will produce results and value that can be quantified. The value he demonstrated helped a great deal in determining his future opportunities.
So, get good at something, good enough where it is a fact (not opinion) that you are good. Then apply those principles for excellence in work and investing.
Son: It will take a while to reach a ‘critical mass’ that throws off sufficient cashflow to allow FI/RE, and that time is going to pass anyway so you will want to have something to show for the years. Track your progress, even a simple spreadsheet will be helpful; a yearly snapshot is actually kind of fun to look back on and see progress (or lack thereof). Mistakes will be made. But if you just make them once, then persistence and habits will pay off. Personal finance comes down to just two things: 1) save more; 2) spend less. That’s it, nothing more.
*Shadow Assets – Shadow Asset examples include: Royalty payments, Pension, Social Security, Disability, Annuity, Unemployment, Alimony, etc. The value can’t be perpetuated beyond the recipient’s lifespan, but does have an equivalent value in Net Worth to calculate cashflow.
That was the original interview. Now here are some extra tips and updated financial information from the interviewee:
Here are a few more observations and notes, as a contemporaneous addendum to the Interview.
As a little kid, I recalled my Father participating in Toastmasters International, and coming home with a trophy. When I graduated, I also joined Toastmasters to develop public speaking skills. Job interviews always asked about this, and public speaking is a useful skill anyone can learn. Do it.
Also, as a 25 year-old, my Father advised me not to max out my 401(k), but to contribute for the match. He noted that I would want to have the after-tax money available for a down payment on a house. Another excellent piece of advice that served me well.
Keep additional savings separate from existing investments, in order to tell what the real return is. Mutual fund companies will do it for you automatically, and your individual return by fund and in aggregate will tell you what you need to know. Even with the setbacks of the double-ought bears, our NW has increased at a compounded rate of 12.5%, since 1996. I will tell you straight-up, in 17 years of keeping records of my returns I have only beat the market benchmarks two of those years. That should reinforce what a real investor already knows. You should also be able to determine how much of your NW is due to savings, and how much is due to investment returns.
For us, returns as a percentage of NW – 52%. So roughly $1 million was savings, and $1 million was in gains; most people have no idea what their ratio is, and overestimate their gains. It is easy to track, so know it; don’t be one of the self-deluded. Most of the savings occurred in the last 15 years, and the two double-ought Bears occurred in the past 10 years, twice cutting our NW in half.
Avoid flaky people, and anyone who cannot be on time, who says “I’m not a detail person”, “I’m bad with names”, “that’s just the way I am”, “I forgot”, etc. without irony. These people are forewarning you that they are deficient by choice, and won’t change. Nobody is a “detail person”, “good with names” or “punctual” naturally; it takes effort and practice and (most of all) respect for others. Sooner or later, you will have to pick up the flake’s slack, and they will let you down. Don’t be that flake.
Social Security – my Wife and I plan to take benefits as early as possible for two reasons. 1) 85% of the S.S. benefit is taxable beyond $24K/yr in earned income (this includes IRA, 401(k), 457(b), etc. withdrawals). 2) the ‘break-even’ for taking early benefits (62 at 70%) to our regular payout (67 at 100%) is age 78. Not only is the risk for an early demise removed for 15 years (not once, but twice for each of us), but we feel the utility value of a few hundred dollars a month in extra benefits after age 78 is lower than in earlier years. More info on the taxation of SS benefits here.
Taxes and IRA Rollover withdrawals – we have determined the tax implications, and find the potential for compounding is outweighed by the benefit of minimizing taxation. Our plan is to begin early withdrawals using the 72(t) Rule, realizing smaller amounts over more years. This will significantly reduce our tax bill, as well as keep our S.S. payments from being taxed at greater amounts. The traditional advice for leaving tax-protected income as long as possible to allow maximum compounding; withdrawing tax-protected income with 72(t) in the 10 years before full SS eligibility will allow us to be taxed at the lowest brackets over a longer period of time. You can find more info and run test scenarios here.
Net Worth Update
Four years later. My wonderful Wife and I are now married 25 years, every one of them good. Still no kids, but we are still trying so maybe someday.
Net Worth changes:
Father – $3.0mm then, $3.8mm now
Son – $2.5mm then, $2.9mm now
This was a fun one. Turns out, both my Father and I intentionally underestimated our NW. Both of us did it because we didn’t want the other one to feel like they were in competition with the other. Whatever my instinct was there, I’m sure it came from my Dad.
This is also the reason for not revealing our salaries in the original, but now I think it is okay to say my top salary for the last four years I worked was $140,000/year. And that my Dad made $250,000/year plus bonus and stock options in the late ‘90s. We certainly were never competing with each other, but there is something about dollar amounts (salary, net worth, auto or home costs) that turn into a comparison.
Nobody we know will be reading this, unlike the original interview. My siblings are fine, and are on the ‘retire at 67’ plan; I would never share this information with them, as there is only downside and would lead to questions that don’t need an answer. BTW, the technique for low-balling/sandbagging in personal matters is called “lying down”, and yes, that is a double-meaning.
One lesson my Dad did share with me, was to never measure a man by the thickness of his wallet. There are far too many out there who believe they are ‘transparent’ when they tell you their salary, how much their kitchen remodel cost, etc. when what they are doing is bragging. And inviting you to ‘compete’ with them. They are usually sure they make more, or are worth more, and want you to know it. It is an unpleasant characteristic to find in people, and it certainly doesn’t make me think well of them. Plus, you never see a security guard or retail worker talking about this stuff. Filters and boundaries, people.
I’m like everyone else, interested in salary, net worth, costs. On the internet, we are anonymous and the info is interesting, useful and entertaining. But IRL, the subject causes problems, jealousy, gloating, resentment, etc. It never makes both parties feel better, or improves relationships.
All of that leads me to this (not so fun) one. My Father has since been diagnosed with Dementia. It has come on fast, and he requires 24-hour care. Fortunately, my Mom is willing and able to do most of it, and their children’s families are really stepping up. I’m able to be useful by handling administrative, bill-paying, taxes, and financial issues. His last years will not be what we all hoped for, but he is still teaching me lessons in embracing reality, and making the most of each day with a great attitude.
There are some additional challenges faced by my folks, but they are better faced because of their planning and execution of Earning, Saving, and Investing. Thanks for the opportunity to share, ESI!
It’s clear from your interview that you and your dad love and care about each other very much. I’m sorry to hear about the dementia diagnosis but it sounds like he has a wonderful nurse at his side.
Thanks for sharing the details of your journey to millionaire. Wishing you and your wife the best of luck with having kids.
Thanks so much Laurie! My Dad really does have a great nurse by his side, and he has often said that he wouldn’t have been motivated to carve out his career to build a family-life with my Mom.
Actually, I’m 57 and my wife is 58 and we’ve been married 25 years., every one of them good. When we get the question, ‘do you have kids?’ our lighthearted response is ‘not yet, but still trying!’:-)
That is a great interview and nice to see such a lovely dynamic between father and son.
I should do one of these with my Dad however he’s quite reticent to share any of his numbers beyond telling me.
-Mike
Mike H, thank you! Feeling you on your Dad’s reluctance to discuss numbers beyond sharing with you. Would love to read your story. I actually ‘sold’ my Dad on participating by saying that it was something we could do together, and that maybe others would enjoy the insights and patient PF lessons he taught me.
Always enjoy your comments and shares, Mike H!
This was such an awesome interview! You can see how much the son respects and loves his dad. I also think there are quite a few gold nuggets of wisdom in there for us all. I hate that the dad has dementia now. I know that does remind the son of what his father taught him all along, of preparing for the future financially in that way. So now his mom has nothing to worry about in that aspect and can fully focus on his dad.
Thanks, Ember! Wishing you well on your PF blogger journey!
I’m sorry to hear about your father. Hopefully, with everyone in the family helping out, you can make his last few years as fun and peaceful as possible.
Thanks for your good thoughts, Lance. Your point (making his remaining time fun and peaceful as possible) is great, and we all have to keep reminding ourselves to make that the focus.
I love these millionaire interviews – family edition is even more interesting!
It’s awesome that these two gentlemen can have chats about money and compare and contrast numbers.
Thanks for sharing ESI
I am very sorry to hear about your Dad. He will benefit from having a close loving family. This was an excellent interview. I went back and read it again. Toastmasters is an excellent idea which I will share with my children. You are absolutely right in that there is never a good or easy time to start saving and investing….just start and keep it up! That’s what we have done. Do you have any books you would recommend that were beneficial to you? I find it very telling that people whom are self made generally live lifestyles unlike the “rich and famous”. All around me I see people spending and spending money which they really do not have and with no thought to retirement. I wish that our schools would teach investing and what the saved and invested dollar can do. Parents are spending and not educating their children. I was fortunate that my Father was in the stock market and because I was interested he taught me a little….I read to learn more.
Thanks for this interview. Enjoyed it.
Lenore, thank you so much for your kind words. You are right about him benefitting from the family he and his wife created, and it points out to me that not all ‘investment returns’ are the financial kind.
Your Father sounds like a great guy, and encouraged your interest in investing. I see the same thing you do, with people spending and making financial decisions that are based on ‘feelings’ and ‘gratification’. I’m unsure that schools are the right place for teaching children about money; public school teachers work 10 months a year, and their retirement pensions-and-benefits don’t encourage mastery of the PF subject.:-)
ESI has an excellent list of the only PF books anyone needs to read. If I could add one to it, “Yes, You Can Still Retire Comfortably” by Ben Stein and Phil Demuth is excellent. It blueprints four separate long-term strategies, applicable for people in different life-stages. They make the point that one doesn’t have to go ‘all-in’ on a good investment idea, and if any or all strategies seem worthwhile then one can diversify into them.
This was a terrific interview and one of the ones I enjoyed the most. I think I enjoyed it so much because this relationship between father and son reminded me of my own relationship with my Dad. I lost my Dad and best friend in 2014 but the lessons he taught me live on and will be passed down to my daughter as she and I continue to grow our relationship through the coming years.
To MI16 and his family, know that I have just said a prayer for you guys and hope that the good Lord lightens your load and gives your Dad many good days ahead.
Paper Tiger, thank you for your thoughts and prayers. Both you and I are beneficiaries of Dads that were generous with their hard-won wisdom. Wishing your daughter to enjoy that same benefit from sharing with you!
Thanks for sharing and sorry to hear about your father. Life does come fast and hard. I have a young uncle (60s) who developed early onset dementia in the last year. It has been quite difficult for my father, his wife and his daughter (not to mention the rest of us). To me these unexpected situations are also part of why finding financial independence is important, so that you can spend time with your loved ones while we have the time.
Thanks, DDD. Hope ESI doesn’t mind my sharing that he also has a relative with this cruel affliction. As the benefits of a Western lifestyle result in an extended lifespan, a great many of us will increasingly be impacted. My Dad still struggles with the idea that he might ever be a burden, financial or otherwise.
Really agree with your point that FI can buy us some freedom, to spend time as we wish. Your note about spending it with loved ones while we can reminds me of all the time I squandered in the past. Thanks again.
So nice to read an article that highlights both father, and son. Interesting how the father was willing to take time to TALK and SHARE his views about how to handle money matters at such a young age: From the first piggy bank to a more intense investments strategy…….it’s all starts with a spark of a TRUE leader (your dad).
My hats off to you for taking the time to share this information with us……Informative, engaging and interesting – – – again, nice job!!!
Keep working to build that NW —- and keep loving your dad.
All the best!!!!
Razorback14, thank you! My Father really has been a leader, especially by example. All of his four children have benefitted from the folks’ parenting greatly, and we have all followed different paths because of our different interests. As you say, with all of us they were willing to TALK and SHARE. I will follow your guidance and keeping building NW and loving my Dad.:-) Much appreciated!
Interesting “pair” interview. I find it interesting how conservative they both are. Keeping money in CD’s is not something you typically hear from millionaires.
Sad to hear about the father getting dementia. That’s life I suppose. Always ups and downs.
Thanks, Mr. Tako. I enjoy your blog, too, and think my worklife was not unlike yours in that I was very happy to ‘escape’.
Our current conservative approach is not for everyone, and is mainly a function of the fact that we no longer have work cashflows to rebuild potential losses, and that we cannot make unemotional investing decisions when markets and conditions don’t correlate. From our view, it is a lot easier to lose a dollar of NW than to gain a dollar. Thanks for your comment!
Mr. Tako, My mother is a multi millionaire who never NEVER understood stocks much less invested in them. My mom was a CD , real estate and I-bond investor though she never sees herself as an investor. BTW, she made little more than minimum wage all of her life and hit the first million mark net worth at about 65. I have made mine off of real estate and the stock market both funds and individual picks. I never bought a bond or CD. There are lots of ways to make a million.
Thanks for the comment, David. fyi, Mr. Tako is a multi-millionaire and has quite a story himself you can see at his website by clicking his handle and hitting ‘About’. I would love to read the story of your Mom, she sounds like a very formidable person and you are proof of her parenting skills.
If you (or Mr. Tako, or anyone) is interested in contributing to ESI’s series, you can drop him an e-mail at esimoneyblog (at) gmail.com. As you say, there are ‘a lot of ways to make a million’ and am hoping to hear yours someday!
Thx. I may contct esi.
I’m having a hard time grasping how a CFO of a publicly traded company is only worth $3mm? That’s what some CFOs make in one year. I don’t mean anything negative, But just curious did the father not save very much? It seems he got the “E” down, for sure!
Sean, in the follow-up, he said his Dad made 250K, plus bonus and stock options. He also said he was paid “like” a F500 CFO but was not one as far as I understand from the post.
This is arguably the best Millionaire interview I’ve read on ESI, not that there was any bad about the prior ones.
You and your dad have a great dynamic. Sorry to hear about the dementia, but glad he is surrounded by loved ones.
What a nice thing to say! Thanks, Working Optional! I really like this series, and the other series on ESI Money. As I said in the interview, talking about PF and NW in real life rarely results in a win-win for both parties. But I like to read how people did it, are doing it, their challenges and strategies, and get great insight from them. In real life, most people are not tuned into PF at all, let alone to the level observed in the PF blogging community. Thanks again!
Nice read. Thanks for sharing.
My Dad is 79 and I’ve started managing his $1M+ portfolio since last year when he and my Mum both suffered heart attacks 3 days apart. Almost all of it is in 3-5 year CDs, so rather easy to manage.
I am 51, the only child of my parents, retired from a C-suite role at 45 with a net worth of around $4M. 2 kids aged 26 and 23, done with University. My wife stopped working when my kids started school. I recently bought $2M life insurance so as to be sure there will be legacy funds left over for our future grandkids (in case my wife or I get sick or deplete our funds).
Biggest challenges for me are 1) how to provide compassionate care for my aging parents and 2) how to pace myself to enjoy life, yet outlive my funds. With $5M in the joint kitty and grown kids, I find it weird this still keeps me up at night. Yet it does!
I would LOVE to do a “Help a Reader: Can I Retire?” post on you. I’m sure the readers could help give you some peace of mind regarding retirement.
Email me if you are interested.
We should have $5M when we retire and will have a hard time spending $200K a year with a 4% withdrawl rate. We are currently spending about $100K a year and plan on having a $50K travel budget. Even in our first few years, we won’t have time to do massive travel, so the money will just keep growing.
Jeff B., you are a beast! I think I remember your story (are you from the Northwest?). Anyway, always enjoy your comments, thanks.
No, we are in Houston, but plan to spend summers up in the Northwest once we are retired. Or anywhere that isn’t Houston and has cooler weather. The wife and I had a conversation about buying a house in Lake Tahoe once we hit $10M in investments.
Cool. I live one hour from Tahoe. The nice homes are either eight-figure palaces owned by Silicon Valley elite, or VRBO with one-week partiers who make things tough on the residents. We’ve been once in six years, and won’t go again.
Tons of lakes and lakefront properties (and oceanfront) in Washington. You are in the catbird seat!
Thanks for the comment ‘Also Retired.’ A wise friend from a wealthy family once shared his insight with me: “No matter how much money you ever have, you will always have ‘money-problems’!” So you are right to be a bit worried, but I hope you don’t lose too much sleep with the great preparation you’ve done for your family.
Would love to read your story, especially how you and your wife ‘enjoy life’ six years into this chapter. And I admire your care and concern for your folks; they have also planned well. Their planning, and yours, will be a great example for your young adult children, too. Nicely played!
My wife and I are living well. In the past 12 months, my wife and I have taken 6 vacations of 2+ weeks each. Our kids live with us – we’re a close family plus it helps them save. My 26 year old daughter just made her first $100,000 solo investment this week, so I’m certainly proud of her. We look at it collectively as family wealth. As the Patek Philippe watch slogan goes, we’re merely ‘looking after it for the next generation’. As for the concern for our parents, it’s much influenced by how we observed our folks dealing with their parents and I know full well that my kids are watching us the same way. So how we care for our folks is most likely to come a full circle in due course …..
Thank for the great interview once again! It was really cool to be able to read the thoughts of M16 and see the things that he learned from his father. It really highlights the importance of teaching children as they grow about these things.
Very kind words, athoughtforyourpennies, thank you!
You talk about calculating your growth in NW is due to savings vs. investment returns. Do you have any tips for how to simplify that calculation? Is there a spreadsheet model that you use?
I don’t think calculating “saved” vs. “investment earnings” would be easy at all. How do you differentiate between investment earnings (a form of income) that are plowed back into new investments vs. savings that are plowed into new investments? I think the only way I could reasonably do this would be to have very detailed records on what I earn from my job or other non-investment activities and what I spend, take the difference as my “savings,” and compare my cumulative “savings” to my net worth. Since I don’t budget / track expenses, I can’t do that calculation.
Also, I’m not following this statement: “For real estate, the retired mortgage balance is all you need to know.” I bought some property in 2010 with 20% down, it’s earned a bunch of income since then, and I’ve refinanced and pulled out cash (equivalent to well over the original purchase price), so the amount of the mortgage that’s been paid off is a useless metric. Even without those complications, I don’t see the relevance of that number. Can you explain?
I have our investments go into a MM account first before purchasing an ETF or mutual fund. Vanguard does a good job of tracking new money purchasing/buying vs the money growing as an investment. So if were to buy $500,000 of ETFs and your balance is $1.5M, you would see that $500K of the $1.5M is saved and the other $1M is investment growth.
I also learned from my father the importance of ESI. The lessons have served me well and I have taught my son the same importance of ESI.
My dad pass away from Lung Cancer, but I was fortunate to have an additional 2 years after he was diagnosed to spend with him.
Mr. W, thanks for sharing your family history. Sorry for your loss, and am happy that you got to spend some good time with him; one thing that my siblings and I are really appreciating now, is that we are not leaving anything unsaid. That extra two years you got with your Dad was good fortune indeed, as you said. Keeping good thoughts for both you, and your son!
Great question, Tabitha! ESI made a post on this subject that is very comprehensive, and you might enjoy. Quicken was the tool that made his calculation much easier.
My Savings Rate and Other Insights into My Financials – ESI Money https://esimoney.com/savings-rate-insights-financials/
For myself, for many years I had savings/investments in many institutions so a spreadsheet made it simple. For Savings/CDs, the annual statement from your bank/institution showing additions in contributions and interest. Add up the contributions. For mutual fund and brokerage holdings, the online account information will calculate this. Again, note the total contributions. For real estate, the retired mortgage balance is all you need to know.
Add these up, and divide by total Net Worth. In early years, you may be surprised how great the percentage of NW is actually from savings. As time goes by and the base for returns grows, the ratio will even out. I’ve mentioned this calculation elsewhere, but am unaware of anyone actually doing it. The value is to demonstrate how much effort/time is expended to Invest (enthusiasts believe they are great at it, until they actually do the calculation) compared to the effort/time expended to Earn and Save more.
What a beautiful, practical post. This is one I can relate to: achievable goals, thoughtful analysis, “teachable moments,” and realistic retirement income (most people are not computer programmers, consultants, professionals who can continue to work on their own terms, landlords with substantial real estate interests purchased at fire-sale prices, etc.). It gives a true sense of what certain net worths can deliver in retirement. Well done, M16!
Great handle, Sloan!;-) Like you, I appreciate and am grateful to my PF mentors who shared information and strategies that are actionable. In addition to my Dad (who was an accountant and finance professional for years while building the skills to move up), my high-school History teacher included lessons about how to buy a car, the difference in 1/4% interest rate on a 30-year mortgage, and the power of compounding for savings and investment. In my mid-30s, a senior colleague noticed my interest in PF and revealed that he was a ‘millionaire-next-door’. He shared a great deal of experience with me, and saved me from learning ‘the hard way’ regarding the squandering of time. Thanks for your comment!
Thank you for the compliment, M16. My maternal grandfather’s name was Sloan. I use it to honor him, although I never knew him (he died shortly after I was born, at a relatively young age). He was a mason of the first rank. Many of his buildings are still standing, from residences to schools – all in the Midwest. He worked extraordinarily hard, without complaint, often walking miles to and from the construction sites. No doubt I inherited his industry, dedication and reliability (I haven’t missed a day of work in decades). More than you wanted to know, to be sure! Your appreciation for your dad and mentors is something I share – and characteristic of those striving for FI, at least from the posts I have read. I am grateful for those who share their stories and who offer encouragement to the many millionaires in training. It’s a beautiful gift. Thank you, kindly!
This may be the best interview of them all, and I dare say I’ve read them all between the two sites over the years, all of which are very good.
Seriously thinking about printing this one out and hanging it by my desk for a few months as a reminder.
Thanks for your great example and update.
Very kind words, Dub. I enjoy your PF blog, as well, and the thoughts and lessons from you and your wife. I like this series, too, and even if the steps-and-stories are similar it is still a good ‘reminder’ and I have some by my desk, too. My favorite is a picture of 50 Cent, with his phrase “I Get Money!” Motivation is where we find it! That is one of the reasons I enjoy ESI Money and all PF blogs and the community of bloggers, posters and readers, because we all have our heads pointed in the same direction. Thanks, and see you further down the path!
Great Interview! Thanks for sharing. Good to hear 2 parallel perspectives!
One questions, How much of your dad’s wealth will you get to inherit?
I remember reading the original interview and I thoroughly enjoyed it then, but even more so this time around. I am reading it through a different lens this time around with the difference being that I am now a dad to two incredible little boys. I have a wonderful relationship with my own dad, but he does not share my same enthusiasm for personal finance, nor has he applied many of the concepts. Your interview is incredibly inspiring and motivating to me to one day create the type of relationship you have with your dad and to bring my sons up and teach them these principles.
There is so much wisdom contained in yours and your father’s words. Thank you so much for sharing your story. I wish the very best for your dad and for your family as a whole! Sending positive vibes your way!
Thanks for the kind words, Cody. Whatever ‘wisdom’ you take from my Father’s (and my) words, we are just like everybody else in the game and trying to figure it out as we go. Whatever we have done, we know we are standing on the shoulders of those who came before.
Your sons are lucky to have a Father like yourself, one who is motivated to make the most of the time/money equation we all try to solve. As you noted, not everybody finds PF a compelling subject. It takes decades to see results, but you have your sons off to a great start! Thanks for the good vibes, returning them your way too!
Enjoy all your articles very much. One thing which I miss in most FI articles is how do people deal with the biggest elephant in the room when retiring early – healthcare insurance. I know you posted your choices, but almost nobody else says anything about that. Doe they all get the health insurance from the previous employers? This is my biggest dilemma. I have enough saved, but when I look at ACA and other avail programs, and knowing that premiums raise every year, not sure what to do.
Thanks again for all your advice.
Thanks, George! re: health insurance in retirement, ESI has a great post from early this summer on this very subject, here… https://esimoney.com/picking-right-early-retirement-health-insurance-reviewing-options/
Thanks, Jay. I read this article, just wish other interviewees would explore this subject more to see if there are other viable options.
I would even suggest, that this is so important, that it should be one of the standard questions ESI asks millionaires in the interview.
Most millionaires I interview are still employed and get their insurance through their jobs…
Interesting…I must be missing something. I thought that most interviewees retired early, e.g. few days ago Father & Son…
Those two are retired, but they are the exception to to rule.
You can read them all here:
https://esimoney.com/category/millionaires/
I appreciate your effort.
I’m sorry to hear about your father. Thanks for sharing your story. I’m sure this will be a piece you treasure. I was particularly struck by the following observation and advice – it’s something I intend to continue doing.
“My father had an excellent career, and his background as a Division 1 college athlete and time in military service provided a good foundation. He learned, and then demonstrated, the ability to work hard as part of a team. And his individual performance produced good results for his teams. While every action and effort may not have a quantifiable value, the sum total of those actions over time will produce results and value that can be quantified. The value he demonstrated helped a great deal in determining his future opportunities.
So, get good at something, good enough where it is a fact (not opinion) that you are good. Then apply those principles for excellence in work and investing.”
Thanks, Matt, the observation you noted also is something I have thought about many times, since my Father shared it with me. And actually, the reason we did it together is that he had just learned of his diagnosis. It was a way for us to spend some time together talking about a subject that is pretty intimate with a lot of judgment attached. We spent half a day, and then a few follow-up exchanges. That is a lot of time together, and it was a way for me to say “thanks, you taught me a lot by both lesson and example.” Really appreciate your words, Matt.
Great article and advice M16! It’s funny we share a lot of common mentality, i have a customized poster hung up in front of me with a quote i wrote myself: “Embracing challenges and overcoming debacles on my path to success, where i can do what i want, when i want, where i want, with whom i want, and as much as i want!” I am so sorry to hear about your dad, fortunately he has a son and a loving family that really cares about him watching over him in the last years! Thanks again!
Thanks for the kind words, AZBruins! I like your sign, a lot! Wish you well on your ‘path to success’ and I share your concept of freedom!
Excellent alternative view, especially in regard to risk. At the 2-3 million mark, I would also go 100% CDs with a little money market cash, one year’s worth, using my favorite credit union, TwinStar. At my current level, however, age 51, it’s 100% equities (S&P 500) while building formidable cash protection sans credit cards. New lands there, but I like it. I’ve also noted that ‘bragging’ element, to critique it often mistaken as a poorer man’s lament. I don’t think so. Humans are pretty much what they always were, inherently irrational and often vain as hell as the opportunity arises. Recently I thought a true god of wisdom would need an infinite number of eyes and all space and time–whereas I’ve got a couple decades, maybe, limited resources, knowing all too well tomorrow is promised to no one. I need rational views, alternate visions, and little more. So thank you for the glimpse, a truly legitimate eye-opener, and the best to you and yours.