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 want to start off by saying my life is a hot mess.
I don’t think I’m anywhere near as organized or intentional as other people that have been interviewed.
So hopefully this interview inspires someone else because I feel anyone can do a better job than me if they make better decisions.
Both me and my spouse are 35.
We have been married 10 years.
Do you have kids/family (if so, how old are they)?
Two children, both under 4.
What area of the country do you live in (and urban or rural)?
Kansas City area.
What is your current net worth?
$1.03M. Just crossed the mark.
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?
Assets:
- IRA/401k/ROTH: 640k
- 529 Plans: 41k
- Brokerage: 80k
- Property: 350k Primary residence
- Rental Properties: 846k
- Cash: 45k
Total: 2M
Debt:
- 657k in rental mortgages
- 266k primary mortgage
- 60k Various Lines of Credit
Total: 983k
EARN
What is your job?
I’m an Entry Level Manager in manufacturing with no direct reports.
My spouse is a Manufacturing Specialist with no direct reports.
What is your annual income?
- Current Job Income: 115k
- Spouse: 85k
- Rentals: 10-40k (have been reinvesting everything so I haven’t kept track)
- Trade lines: 1k per month
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?
First big boy job out of college was a coordinator in a manufacturing plant earning $20 per hour a little over 10 years ago.
I have worked in manufacturing plants for the last 10 years until 2017 when I got an office job. I never made six figures until last year.
Spouse was the same and worked entry level jobs out of college and still doesn’t make six figures but now also has an office job.
What tips do you have for others who want to grow their career-related income?
SWITCH COMPANIES: I never got any major raises until I changed companies. That is where the income growth came from for both of us.
The last company I worked at I noticed a constant problem. The culture was so cut throat getting ahead was not happening unless people transferred to another location within the company. If you are a rock star at work it won’t be recognized if you also work with a bunch of other rock stars and budgets are tight.
When we switched companies we both received 40-50% raises each time. I’m on my 4th company, wife is on her 3rd.
What’s your work-life balance look like?
It’s ok right now as I don’t mind working until 6 pm. But since children entered the picture it has been difficult to complete the work needed and take care of the kids every night. Honestly I should probably be working on the weekends to keep up with my work.
Lately my rentals are taking a mental toll on me because I bought too many in too short of a time period and I’m stupid.
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
I didn’t start hustling until 2015 when my first child was born. I started driving for Uber after the child went to bed. I saved everything from that to build their 529. I continued until the 2nd came along and did the same but just ran out of energy to continue.
I got into rentals the year after that. I have since jumped in with both feet as a buy and hold investor. Current outlook is when the mortgages are paid off it will replace my current day job income.
I have bought about 5 houses way below market or with lots of upside. When I get done doing light rehab on them I have significant equity created.
Real life example:
- 4br 2ba house
- Bought for 120 (401k loan as down payment)
- Rehab 25k: funds from cashflow and credit cards
- Value after I got done: 210k
- Rent: $1,500
- Refinanced out 80% of 210k
I received my down payment money back, paid back the renovations, and another 20k to do things with, and have a cash flowing rental.
Second income source is selling trade lines. They honestly keep us in the black some months.
My advice to younger readers is to so SOMETHING on the side at night or weekends to generate income even if it’s working on your own career.
It’s scary to think how much time I wasted watching TV or playing video games which added no value to my life.
SAVE
What is your annual spending?
Probably 90k. I hardly keep track anymore. Which is a bad thing.
What are the main categories (expenses) this spending breaks into?
Life has become so hectic and expensive with the children and daycare that I just try to keep a positive cashflow these days. But sometimes go negative.
Estimate:
- Mortgage: 2000
- Daycare: 2000
- Transportation: 500
- Food: 700
- Medical: 500
- Utilities: 600
- Money that I have no idea where it’s going: 1,000?
Money is flowing out so fast these days I’m just trying to fill the funnel faster than it’s running out.
Do you have a budget? If so, how do you implement it?
I used to have a budget when it was just me and the wife. It was VERY effective. Now we just try not to spend too much.
One major success we had was when it was just the two of us. We would have “Frugal February”. We would each get $50 cash for the week. That would have to cover food, gas, anything else we wanted. This allowed us to finally use up food sitting in the pantry. It always drove me nuts when food was in the freezer or pantry yet grocery shopping kept bringing in more.
I really recommend everyone clear out their pantry and freezers and get creative with food they already have.
What percentage of your gross income do you save and how has that changed over time?
We started out saving 10-15% out of college strictly in our 401k’s in 2008. That was just lack of knowledge at the time. We didn’t start bumping it up to 15-20% until 2011.
In 2012 we started bumping it up to 50%+. 2012-2015 is when we did most of the heavy lifting. It was the most we were making at the time with the least amount of expenses.
Currently saving 35%.
Always maxed out our 401ks since 2012 as well as IRA’s then some more into brokerage and cash savings.
What is your favorite thing to spend money on/your secret splurge?
Eating out.
Now it’s becoming more frequent because the children are screaming for food when I pick them up after work. My 2 year old can’t even wait 10 minutes for a home cooked meal before he has a nuclear meltdown.
I myself like burgers and Chinese food.
INVEST
What is your investment philosophy/plan?
I throw everything into index funds with a little bit of single stocks that hardly performed well.
I still do a direct stock purchase plan. Many companies allow you to buy stock directly from them for free in amounts as small as $25. I think Robinhood is a lot more user friendly these days and $0 in fees to boot. I’m still stuck buying individual stocks like my great grandma.
Recently it has been real estate. I have purchased 10 this year. Yeah I know, it’s dumb. I won’t argue with you there.
I am now trying to stick with undervalued properties. But I am still maxing out retirement vehicles with index funds.
I am a big fan of covered calls and have been using those the last few years in my brokerage account. I will sell low risk out of the money calls to generate additional income in retirement.
What has been your best investment?
Getting better jobs. That has been the foundation in order to build everything else. I couldn’t have saved a large portion of my income or invested in real estate if I didn’t have a good foundation which is my job.
What has been your worst investment?
Most recently, two old houses. They will take 10k in structural work that I don’t really want to do but will need to get done if I ever plan to sell them.
What’s been your overall return?
Unknown. I checked my net worth since 2011 and it’s currently going up between 80-150k per year despite my poor choices and spending habits.
How often do you monitor/review your portfolio?
I check daily but mostly to monitor any possible fraudulent charges.
NET WORTH
How did you accumulate your net worth?
I started with $0 back in 2007.
We always contributed to our 401k plans and Roths IRA’s. We actually didn’t start maxing them out until 2012.
Then when started making a little more we started investing outside our retirement plans.
Our Rule: Invest the max you can then figure out how to live on what’s left over. Never let your foot off the gas just to increase your lifestyle.
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?
Savings hands down. I never earned a lot or hit 10 baggers with my stock picks.
Keeping costs low. We never had a car payment and to this day have never paid for than 9k for a car. (This also keeps maintenance and insurance costs low.)
I truly believe a lack of car payments and high costs that come with them would be what helped out the most in the beginning to build a strong foundation. I never spent more than 10% of my income on a vehicle. Our most expensive car we bought last year for 10k. We commute 30+ miles each day for work so we absolutely destroy the value of any car we drive.
We would not have gotten to a million for many more years if we had nice cars with payments.
Second would be keeping housing costs as low as possible. This saves on HVAC, Utilities, taxes, maintenance, it just stacks up.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Market downturns and large expenses like medical bills.
I self-manage all my rentals which obviously is a headache sometimes. But I would be lazy if I said I didn’t want to deal with tenants. I can do it most of the management with text messages these days.
I have taken about 60k out of IRAs to invest in real estate and might have to take another 50k out in the future. But the net worth keeps marching upwards none the less.
What are you currently doing to maintain/grow your net worth?
Maxing out retirement vehicles and finding under priced real estate that raises our net worth by 20k just by buying it.
Do you have a target net worth you are trying to attain?
When I was solely investing in equities it was a little over 2M for a very basic 50k a year lifestyle.
Now that I spend so much on children and other things I am shooting for 3M to 5M.
How old were you when you made your first million and have you had any significant behavior shifts since then?
35. Two years ahead of schedule.
What money mistakes have you made along the way that others can learn from?
Not understanding the impact that real estate has on your ability to save and build wealth.
My wife after 10 years of marriage finally actually apologized for not letting us own and live on one side of duplex when we were in our 20’s. Yes, we kept our housing costs low and invested a lot, but it could have come so much faster had we got into real estate and dropped our housing costs to negative.
What advice do you have for ESI Money readers on how to become wealthy?
My advice is from a middle income lens. I never made a lot of money and still don’t.
Our financial life feels like a unorganized mess compared to other people that have been interviewed. But we still managed to hit our goals so I know others can do the same because they can easily do it better than me.
I don’t feel qualified to give much advice here but I’ll do my best.
- Sacrifice where others won’t. (Mine has been cars and housing)
- Invest as much as you can until you feel broke. (I still feel broke every week)
- Once costs are as low as possible, increase your income as much as you can.
Profit x Time = Wealth
FUTURE
What are your plans for the future regarding lifestyle?
I’m searching for 150k in passive income from investments and real estate so we can retire early. We should hit that fairly easily by age 50 as we are already at 50-70k between real estate, dividends, and W9. As long as we hold down jobs it should be ok.
What are your retirement plans?
I want to slow travel the US, eat out often, go on lots of hikes, get back into auto racing, and help others realize their financial goals.
Financially It will feel great to tip generously and help others.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Medical costs. I know they are going nowhere but up.
My plan to address them is more of a blunt instrument of having a higher income. Earn as much as I can so that the costs can be absorbed. If I am bringing in 120k a year and medical costs 30k-50k then I should be ok.
$100k of income a year with a few million in liquid assets should be able to weather most storms.
MISCELLANEOUS
How did you learn about finances and at what age did it click?
Two major milestones:
I was watching Youtube in 2007 and saw a Dave Ramsey video of him on stage. It showed him with a chain wrapped around him and he talked about getting out of debt and the visual and audible sound of that chain hitting the ground was impactful to me.
That inspired me to learn more and stopped me from financing a new car like all the other new college graduates around me.
Obviously I’m not following the program but it inspired me to learn more and the difference between performing assets vs non-performing assets and how bad it is financially to finance vehicles when you are not making 100k+.
The second milestone was in 2011 when I found Mr Money Mustache & Financial Samurai which has morphed into the FIRE movement. I was a very early adopter of that idea and it helped us tremendously and I didn’t even try very hard.
Who inspired you to excel in life? Who are your heroes?
I have looked up to Mr Money Mustache since 2012. He gave a voice to what I was thinking at times.
I never thought I excelled in life. I’m just a regular guy working a factory job that’s working towards providing for my family and seeking maximum happiness in life.
Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?
I have never read a money book but did listen to The Millionaire Next Door audiobook.
It has been exclusively blogs like ESI, Financial Samurai, Root of Good, Mr Money Mustache. And a whole lot of Youtube videos. (I highly recommend ESI Money for some reason.)
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
My giving is my rentals. We provide housing to people that are single parents, have been homeless, bankrupt, and in tough spots that need a hand. I have found they are grateful to live in such a nice place. Assisted housing has an under supply of homes and waiting list that is years long.
I open up most of my places to people in need. But only 25% are currently filled in section 8.
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?
Me and my wife plan to have a pretty specific trust. If everything works out the money will provide them free educations, and only payout if they hit certain milestones along the way and after college.
CO Sarah says
Almost a million dollars in debt, that part takes my breath away. I couldn’t sleep at night. Leveraged investing of any type just isn’t my cup of tea.
I would focus hard on trimming the debt so you and your family are downturn resilient. That’s a pretty tight rope you’re walking on, the four of you. There’s not a lot of budgetary breathing room for a vacant or trashed rental or a job loss.
Kudos on the side hustle and hard work and hitting $1m net worth in your 30s.
“Get rich slowly” isn’t such a bad thing, though, friend.
Robert - Stop Ironing Shirts says
Thanks for sharing your story.
The biggest thing that jumps out to me when I read this is just how much you’re working at this point. Two likely stressful jobs and doing BRRR rentals on the side. You already have $640k in IRAs at 35, that alone if left alone in index funds guarantees multimillionaire status in early retirement. This is before you look at the incremental gains you’ll pickup every few years on the rentals with debt decreasing and rents increasing. You are winning the game and winning it big.
Lookup some of the concepts around Coast FI or Slow FI – Time is going to be the biggest factor in growing the net worth from $1mil to $3mil, not necessarily active work. Its an idea I wish I understood at 33 when our net worth first hit $1mil. Realistically most of our net worth is still a result of the first $500,000 or so we got into IRAs and let time and investment gains work for us. I’d be tempted to slow down the active work for one or both of you and keep picking up a rental every couple years and make sure you enjoy life today.
– MI 35
Colby @ That Charles Life says
I have to say this was a joy to read. Very humble and humorous. As the previous commenter said, not sure I could handle that much debt either, but fortune favors the bold. Hope it all works out for you.
gene says
I grew up in the real estate world. An entrepreneurial family friend used leverage to build up a real estate portfolio of 30 homes. Then a recession hit and he lost them all.
I agree with CO Sarah. Slow down, trim the debt, make yourself recession proof.
Congrats on your achievements to date. Best of luck!
Another Reader says
As someone that has invested in real estate for over 25 years, I could not agree more. I survived the Great Recession because of judicious use of leverage, other streams of income and meticulous management of every dollar. Many investors did not. I even bought several properties for 65-70 percent of pre-recession values because I had the cash.
These folks should run the numbers for a situation where one or both of the job incomes disappear for awhile, rental occupancy drops 20 percent, and real estate values drop 50 percent from current values. If their portfolio would survive that stress test, then they may survive with their portfolio intact. If it wouldn’t, they should formulate a plan for jettisoning the weaker assets and generating cash to make it through some some very tough times.
Many paper asset investors will tell you that holding cash is inefficient. It is essential for success in real estate investing, particularly when job income is a critical part of the total income picture. These folks are in a position where piling up some cash will provide some protection when (not if) the market falls apart.
MI 170 says
Thank you for sharing – I saw some similarities in that we’ve both been exposed to Dave Ramsey and have taken some of his teachings to heart and succeeded without following the ‘Baby Steps’…I also commend you on your taste in blogs – I’ve gravitated to three out of the same four you listed. But I’ll also have to agree with the others commenting, de-risking a bit is probably the most wise course and will ensure that you able to grow your net worth into the $5 – $10M range long term. Kudos on your success resulting from an awesome work ethic!
Maverick says
Yeah, other than debt, you seem to know what you should be doing to build wealth. And don’t raid your IRAs. Myself, I passed on rentals and the headaches, choosing Vanguard REIT instead. At least no one can take your sense of humor away. After making some corrections you should be on a good trajectory at your age.
DaBears says
Keep up the great work! Love the interview.
Would you mind shedding some more light regarding your “charitable housing” and the end of the interview? Do you accept HUD vouchers? Are you still able to get typical market rents?
It’s a cool idea that we have thought of, but have yet to see anyone pull it off. It could be a real win-win for all involved.
Tyler says
I love this one – very honest and refreshing. Take some risks. I held rental property during the last recession too and it worked out. Make sure you have qualified tenants and enough liquidity to cover the bumps in the road. Kudos to you
Erik Eggland says
Thanks for sharing! This was a great read. I envy your work ethic and ability to hustle. May you enjoy much continued success.
I am intrigued by the concept of selling trade lines. Could you or anyone else recommend a reputable source for doing this? We have several credit cards that do nothing but occupy space in our wallets.
MI 162 says
I’m actually working on this at the moment. I have worked with 4 different companies now and they each have their pro and drawbacks.
When I find one that is stable and actually has enough volume to make it worth your while I would be comfortable sharing with you here is a few months.
We have made about 25k Net on trade lines so far this year but two cards out of 12 did end up getting shut down.
Paper Tiger (aka MI-27) says
“It always drove me nuts when food was in the freezer or pantry yet grocery shopping kept bringing in more. I really recommend everyone clear out their pantry and freezers and get creative with food they already have.”
This is probably the best tip I’ve received in quite some time. Now I need to show it to my wife and get her on board!
KO240 says
We all know that rental income without a management company is a huge time suck – especially when you get into the number of units you’ve purchased. Do you have a rule of thumb on location (i.e. how far you’ll drive and what type of neighborhoods) before you’ll look at a property? Kansas City has a lot of distressed property that you can pick up for small amounts but it typically involves rough areas of town or far-away locations. That’s both a risk (i.e. hard to off-load in a bad market) and an opportunity (i.e. a lot of investors avoid it). Agree with other comments on debt-load. We’ve been running a bull market for a while and you want to make sure the math works when the KC market eventually turns. Probably won’t be as big of a dip as the coasts but 2008-2009 the foreclosure concentration was much higher in the less desirable areas of town. I got away from multi-unit prior to the downturn and it would have clipped 30% equity from those units. More luck that skill but the cash was helpful when the market bottomed.
MI 162 says
Time suck, (suck a great phrase!) it absolutely can be and I’m currently going through it right now.
I currently have 30% vacancy (my most ever) because everyone decided to move out in November for some reason. I’m also fixing them up as they become vacant as needed. Even after all that the rest are cash flowing 1k positive Net for the month after vacancy costs and rehab costs. Once they are all filled back up In Jan and Feb the cash flow will go back up to 4k+
But once everything is stabilized It is truly very easy where a tenant calls or sends a text with an issue and I text them back my handyman/plumber/HVAC phone number to call. They deal with it and I get a bill when its done.
Jonathan says
“We all know that rental income without a manager is a huge time suck.”
A fairly common myth. Most of the time, it takes no time at all. I only have 3 single family units, but I deal with maybe 10 issues – of any kind – a year. Most can be solved with a couple of texts and a couple hundred dollars. We recently had a tenant turnover for the first time in 4 years. That was more involved, but we hired a tenant placement service for a very reasonable fee and it was totally painless and required no more than a couple hours of my time in total.
That said, low-income/Section 8 tenants are probably a lot more hassle…
Matt says
It’s interesting, there are a lot of takes that the amount of debt is bad in this case. I think it’s hard for us to fully conclude on whether or not it’s an acceptable amount of leverage. I think it depends on where the properties are (are they in hot rental markets, do they have strong appreciation potential) and the amount of cash flow being generated from all of the properties. Also depends on the interest rate – if they’re low enough interest rates, I think it’s better to leverage the properties and let the cash work it’s magic elsewhere.
It’d be good to build up a better cash stockpile though. The great recession was brutal for housing, but I don’t think housing is in the same kind of bubble it was back then either. We may be long in this economic cycle, but I think it’s highly unlikely we’ll see the same kind of correction on housing that we did 10 years ago. $45k in cash isn’t much protection when you have 10 rental properties. Double that would be a lot more comfortable.
I do think one urgent priority for you is organization. You really need a tighter handle on inflows and outflows, for your personal budget and for each of your rental properties, one by one. That’s the only way to feel like you’re in control of your financial situation when you’ve expanded your rental portfolio so quickly.
Ed says
Whoa, stop beating yourself up, you are doing great and are more motivated and successful than most of the population double you age. Kids are a game changer, both financially and psychologically as you now have those little people that are completely reliant on you and that pressure is real. I agree with the others that it is not a race to the finish line and you have plenty of time with a great lead, 1M in assets is awesome, however as others pointed out, 1M in debt is precarious.
Suggest slowing the roll, perhaps throw some money at your primary mortgage and pay it down, I know some hate that idea, however it is peace of mind and as Ramsey says, banks can only foreclose on a house with a mortgage.
Take some time to adjust to the kid factor, both financially and time wise. Spend your time wisely and make time for the stuff that counts, they grow up fast. If PITA rentals are taking time away from what really matters, re-evaluate.
Hang in there your on the right path.
MI 162 says
Thank you everyone for the comments so far.
I decided to be completely open as I could to give a full picture of whats going on.
I don’t see enough middle income people represented on these interviews so I wanted to share because I have worked hard at this since 2011/12 When I was making 45k a year and putting $150 a paycheck into my brokerage account wondering how I was ever going to get anywhere.
I honestly didn’t even do that good of a job so I know others in my shoes can do it too and probably pass me with a little more effort or lower expenses.
I appreciate everyone’s thoughts on the real estate debt and I have went through many mental exercises as well as real world exercises about it as well.
I did a risk assessment and created every possible scenario that I could think of that would create a risk to the real estate business.
I then created a counter measure for every one of those I could think of.
Short of North Korea Choosing KC as their first missile test target I couldn’t find a scenario where the portfolio would be taken out.
It was a real eye opener that if the housing market dropped in half, or if I had large amounts of vacancy, or a unit gets severely damaged, or a job loss. (or all of the above) That they would still cash flow and I could still pay everything just fine.
(feel free to throw out some scenarios that you think I might have missed)
I look forward to giving updates and reporting on my future disasters.
Mindy says
I wish I was more helpful, but I wanted to say thank you for being honest and representing the middle income people! I am younger, but I have a similar wild money/job lifestyle as you at the moment. My job isn’t high income and it’s hard for my field to make the amounts I see and it can be hard for to rise that high unless I take on many side hustles and all.
MI-119 says
Tackle that debt with a vengeance. In the next recession (as in prior), real estate debt leverage becomes a big problem.
3 years ago I built a commercial property for $3.7M, borrowing $2.3M. I’m not primarily in the real estate or construction business. By the end of 2020 it should be paid off in full before considering the next project.
MI-109 says
As a middle income millionaire (military career), I am impressed at how fast you have built up your net worth. It took us into our fifties to reach that goal. Best of luck as you go forward.
Krista says
Great interview! This one resonated with me because I feel disorganized so often compared to the other Millionaire interviews! This just goes to show that if you spend less than you make, in the simplest of terms, you can become a millionaire! Thanks for the transparency!
Stef says
One of the most honest Millionaire stories I have ever read, and I loved it. Thank you for sharing your story and your struggles, but thank you for being so kind as to rent to single parents, etc. I always wanted to give back in that way because I was the poor kid with a single mom, and we lived in a few crappy places.
Thank you for being so generous!
Greg meyer says
What company do you use for your tradelines. I started selling those last year and made about 500 a month. Do you have any tips or tricks. Barclays only lets you sell a total of 24 for a lifetime. I am not sure about the other banks I am selling. I hit that max with one of my cards in under a year.