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…
How old are you (and spouse if applicable, plus how long you’ve been married)?
46 & divorced.
In a serious relationship that will be my second (and final!) marriage.
Do you have kids/family (if so, how old are they)?
Two kids, one just became a teenager and the other a pre-teen.
My girl friend has one as well who’s almost in college.
What area of the country do you live in (and urban or rural)?
Live and work in the Northeast.
It’s an expensive, high traffic area, and I’m fortunate to have a reasonable commute and close proximity to my ex for the kids.
What is your current net worth?
Current net worth is about $1.6 million.
I tend to look at net worth more on an after-tax basis though, projecting out capital gains and effective tax rate in retirement, and that brings it down to about $1.3 million.
I’m in rebuilding mode, as the divorce really messed with the plan & cut my assets in half in the last couple years.
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?
My assets are all investments and look like this:
- Roth IRA – $540k
- Pretax IRA/401k – $330k
- Brokerage account – $700k, about a third of which is held in company stock of a prior company. I’ve been slowly liquidating this as it’s appreciated significantly, trying to do so in a way that minimizes capital gains taxes. It’s a good company and stock, but I’m too over-exposed to one company.
- Deferred comp plan in company stock – $35k
In addition to the above, I have unvested equity which hopefully adds another $5m plus to the retirement plan, but I’m not counting that as an asset yet as there’s still several years of service required to fully vest.
Own my house, but not really a net asset – with a 3.5% mortgage, I put as little down as possible when I bought. I’m confident over the time I plan to live there, I’ll beat that return in the market. If I sold it today, after selling costs, I’d net basically zero cash.
I don’t count the kids’ 529 plans in the above, since that’s committed to their education, but there’s over $110k for each child at this point. I expect to have a full four years at any in-state college fully funded in their 529s in the next year or two.
What is your job?
I work in a senior level accounting role for a large company.
What is your annual income?
With divorce comes alimony & child support, so I think about my annual income net of that, and the net is about $450k a year.
The unvested equity is the big unknown. It’s doing well, and ultimately will be the real key to whether I can retire at 53 or 57.
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?
Money was really tight growing up. My parents divorced when I was 5. I mostly lived with my mother, and we struggled for awhile. She took extra shifts/overtime to make ends meet, and eventually that helped her get ahead. She’s actually been able to retire with a comfortable nest egg, which I never would’ve thought possible 25 years ago.
The basic needs were always met, but there wasn’t much extra. I know she was under a ton of money stress for a long time, but did her best to keep it from me. Still, some vivid memories of mine growing up were drinking powdered milk, and being teased for having fake Air Jordans.
That shaped my work ethic – I was determined that money wouldn’t be the same issue for me or my kids. As early as age 7, I started doing little jobs to help my father with his businesses (he was an accountant and owned a small grocery store). I was a weekend cashier and would help sort checks for him, and do the math on the adding machine.
I started delivering papers at 12, and between that and other after-school jobs, I was able to save some for college on my own. I chose an excellent out of state school, knowing it would mean some debt, but the long term return would be there if I worked hard. Worked full time all summer each year of college as well.
First job out of college was for a large public accounting firm at $36k. I had $30k of student loans to dig my way out of, so I knew aggressive budgeting and pushing my career ahead were keys to getting out of debt.
I worked really hard, too hard probably, my first 5-7 years, but doing so set things up for long term success. I wasn’t afraid to take on new or unusual assignments, and was willing to relocate multiple times to further my career. A couple opportunistic projects gave me specialized accounting knowledge I knew would pop on a resume.
What tips do you have for others who want to grow their career-related income?
I think early on in a career, it’s so critical to do things that will stand out on a resume long term.
If you don’t take that weird project when it’s offered, someone else will, and they may be the ones who beat you out for a better job down the road. I’ve heard some iteration of this phrase all the time, but never said it myself: “That’s not part of my job description.” That mindset helped me develop some critical knowledge that led to me getting two high profile roles down the road.
Another key for me has been working long-term at each stop in my career, for extremely high quality companies. I’ve had four employers in my 25 year career, the first paid off in terms of experience, and the last three, both in experience and compensation. I’ve been right about the companies I’ve joined, and right about the jobs I turned down. There’s hidden value in getting those decisions right.
What’s your work-life balance look like?
As good as it’s ever been, thankfully.
I learned at age 21 I had a scathing hatred for a long commute. Since then, I’ve always ensured a commute of 30 minutes or less, even if it meant higher rent or mortgage – that’s a quality of life trade-off that’s important to me.
Weekends and late nights were constant my first 6-7 years, but now are mostly a thing of the past.
I work close to 50 hours a week, and a rare weekend morning, but have the best work-life balance I’ve ever had, which has helped me make sure there’s quality time with my kids as they grow up.
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 sources of income other than work & investing.
I’m rebuilding post-divorce and focused on getting the investment portfolio to a good place. I’ve been in real estate some in the past, and will likely pick that back up again in a couple years, because there’s opportunity there for a patient, long-term investor like me.
What is your annual spending?
Annual spending is around $180k a year.
What are the main categories (expenses) this spending breaks into?
The main categories are as follows:
- Children private school/extracurriculars/529 contrib: $50k
- Mortgage/house costs: $50k
- Child support: $25k
- Vacations: $25k
- Groceries/lunches/dining out: $10k
- Car costs: $10k (one car payment for my gf, gas, insurance, upkeep on two cars)
Obviously a ton of costs in the kids’ education. I work with them on the importance of budgeting and managing their own life, but want to give them every educational opportunity to get ahead.
Do you have a budget? If so, how do you implement it?
Always have had a budget, but nowadays I don’t track it to the dollar.
My ex didn’t pay attention to the money, and my girlfriend doesn’t either, so it’s me managing it 100%, which I’m ok with.
My budget used to be very granular when I was in debt. I’d say post the last recession, I became less detailed about it, and more focused on it being directionally in line.
I have a budget with a target amount as excess (savings) as I enter each year and usually have ended in the ballpark of that. I’m reasonably good at identifying credit card deals, buying things in bulk or on sale, etc., but not as vigilant about it as I was right out of college.
What percentage of your gross income do you save and how has that changed over time?
Purely on gross income, I save about 15%, but alimony and taxes are fairly uncontrollable costs, so I focus more on how I’m doing with respect to the net take home. My net take home after tax and alimony/support is about $280k, and I’m saving about $100k of that, so it’s closer to a third of the net.
Ever since I got out of student loan debt, I’ve always had the mindset of trying to save most of my increases. So for example, if I got a 10% raise, I’d try to save most of it, and the rest could go into a lifestyle upgrade. In years where I got big promotions, this helped immensely.
In fact, one of my big promotions was in 2008 when the recession was hitting, so my income went from $200k to $300k a year, and because it was in the midst of a recession, I basically saved the entire excess the first 2-3 years, which really jumpstarted the savings process.
What is your favorite thing to spend money on/your secret splurge?
I place more value on experiences than on tangible goods, so vacations are really important. I’ll try to budget at times on vacation, but I’m willing to spend more on a memorable vacation. A few nice weekend trips each year in addition to the week-long ones, so travel is easily my biggest splurge.
Tangible big purchases are rare. Economical car, don’t wear expensive clothes, and I tend to make things like smartphone or TV last as long as possible before replacing/upgrading.
I have this phrase I use that it has to “meet the value proposition”. Is it important enough to spend on it and take away from savings that could fuel early retirement? Will I really enjoy it for a meaningful period of time? I ask myself these types of questions before committing to big purchases.
What is your investment philosophy/plan?
Nowadays, it’s really simple and easy. I learned I can’t beat or time the market, so I try to approximate the market as best I can with a diversified portfolio. I own three individual stocks today, all of which I’ve owned at least 5 years, and the rest is all in low-cost mutual funds.
I have a tracking spreadsheet so I can monitor my allocations and make sure they’re in line with the plan, and easily rebalance every 4 months or so.
Right now I’m about 75% stocks (25% large cap, 25% international, 25% small/mid-cap), 25% bonds, but a little nervous about that allocation since we’re long in the growth cycle at this point. Overall I’m in about 15 mutual funds.
What has been your best investment?
The three public companies I’ve worked for have been my best investments. I could tell when I joined each that all had great potential to beat the market, so those investments each have paid off dramatically.
Other than that, the last ten years, I’ve only bought individual stocks when I’m confident price is out of line with fundamentals. Apple in 2013 at a split-adjusted $61 a share, for example. It’s quadrupled since I bought it 6 years ago.
I learned the stock market on my own. My mother never invested, and my father (an accountant, no less!) has always spoken negatively about the risk in the stock market.
I started investing before college with a small IRA, and learned my current strategy all on my own, with plenty of mistakes along the way. The biggest things I learned: 1) I don’t have the right mental state for short-term investing, and 2) I don’t like the volatility of individual stocks.
I learned that the right way for me to invest mentally is to have a long-term allocation plan, buy low cost mutual funds to achieve that plan, rebalance a few times a year. And I trust that process to work over the long-term.
What has been your worst investment?
Honestly, worst investment by far was a marriage without a prenup. There will never be another financial decision in my life that’ll cost more money than that.
Going forward, the only two things that’ll control my ability to retire are my ability to earn and the economy. Set the emotion aside a sec, and marriage is a long-term contract. Signing a long-term contract without an appropriate set of termination provisions would be a bad move for any business, and it turned out to be the dumbest move I ever made financially.
If we’re sticking to investments, then it’s the tech bubble in the late 90s. I had all $30k in my brokerage account invested in individual tech stocks. JDS Uniphase, Cisco, Qualcomm, etc…
When the dip happened, emotion kept me from selling timely, and I turned that $30k into $8k. Might have been the best thing that happened to me though, because I was still only in my mid-20s, with plenty of earning years left, and I learned a valuable lesson about diversification & index funds.
I’ve been almost exclusively invested in Vanguard funds since.
What’s been your overall return?
My tracking spreadsheets go back 15 years. I’ve averaged about 12% return over that time.
Basically approximated the market with an aggressive portfolio (it’s more conservative now), plus some outsized gains in the company stock I’ve held over that time.
How often do you monitor/review your portfolio?
I’ll check my stock app daily, and I update my spreadsheet with actual data at least once a month.
I also do a lot of portfolio modeling, and have built a detailed future saving/spending model so I can run a bunch of scenarios. I model expected returns and can easily estimate where my portfolio can be at age 90 and age 100 under all sorts of different scenarios.
How did you accumulate your net worth?
I think it’s been a combination of all three parts of the ESI model. Certainly I’ve earned extremely well, particularly in the last ten years. I think the choices I made early on in my career to specialize in complex accounting areas really paid off. Specialized experience is such a game changer – I sought out advice from others in my first company and learned that was such an important thing to set up for success.
A little luck at times helped too – I was fortunate in terms of timing of promotions and joining new companies. I had well timed equity grants that paid off well in the long run.
In terms of saving, I think the early aggressiveness in paying off debt was huge. My student loans were at 8%, and I HATED the interest on those loans. Never have had any credit card debt and never will. The last 15 years, my philosophy has been that the only good debt is a sub 5% mortgage, because I have zero doubt I can beat that in the market long term.
As for investing, the early learning in my 20s (when I knew I had my prime earning years in front of me) paid off dramatically for me. Having a long term plan to mirror the market in a low cost portfolio has worked for 15+ years.
I also focused on making things tax friendly. Back in a lighter year for me in terms of compensation income, I converted my $100k IRA to a Roth, and paid the tax on conversion. I won’t be touching that money for another 20-30 years, and when I do, it’ll all be tax free, which is great peace of mind in retirement.
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?
There’s no doubt it’s Earn.
I think I’ve done reasonably well at the other two, but I’m really proud of how I managed my career.
I took on projects that would pay off long term and enhance my skills, and I had an extremely strong work ethic early on in my career that paid off in terms of promotions and high-visibility projects.
I remember when I started my career, I was told by someone to aspire to double compensation every 5 years, and that stuck with me.
Here’s how I did against that:
- Start: $36,000
- 5 years: $66,000
- 10 years: $121,000
- 15 years: $302,000
- 20 years: $790,000
Right now I’m a little below the 20 year number, but that’s because my equity hasn’t started to vest. There’s a decent shot for one final double at the 28 year mark or so.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Three big road bumps along the way:
- First, the tech crash 20 years ago. I lost most of my brokerage account, and saw my 401k cut in half. Way overexposed in tech, which was so unbelievably dumb. Massively stressed me out at the time, but I at least knew I had plenty of time to earn it back, and I learned from it.
- Second, the recession of 2008. I went back and looked at my 2008 spreadsheet. Started the year with $263k in assets, saved $48k, and ended the year with $192k in assets. OUCH! Ironically, this one didn’t stress me out as much, because I knew I was saving heavily, and it was therefore also a buying opportunity. Saved $70k in 2009 by cutting back a bit, and the portfolio was $360k by the end of 2009. The key takeaway – a recession is not at all an issue when you’re in the prime earning part of your career, it’s actually an opportunity.
- Third, the divorce. Divorce laws suck. There’s no one size fits all, and some divorce attorneys are masters at preying on emotion to pad their own wallets. I had a good attorney, and quickly approached it as just another business transaction. My ex didn’t. With my financial offer, it should have been done in a month, but it took over a year, and in the end, 15% of our assets went to the attorneys. I can’t stress how much that sucks. Like I said, emotions aside, and marriage is a contract just like any other. Without the right exit provisions up front, it creates real risk to controlling your own financial destiny.
What are you currently doing to maintain/grow your net worth?
Earning is still the number one key for me. Also continuing my investment plan and identifying opportunities to optimize my portfolio.
There are really only two things I can control right now, one is earning as much as possible, and two is to keep identifying opportunities to best execute the investment plan.
For example, my company allows for after-tax contributions to the 401k, and the plan also permits rollovers of after-tax contributions at any time. I learned to max out my after-tax contributions each year, and then roll them into a Roth IRA. Bingo – eternal tax-free growth for those amounts!
So even though I can’t contribute to a Roth, via the rollover, I’m getting about $30k a year added into my Roth, which is a way better place for that money than an after-tax brokerage account.
Do you have a target net worth you are trying to attain?
My target is 35 times what I project to spend in year 1 of retirement, so it’s a moving target.
I know I’m working at least 6 more years due to alimony/child support, so no defined target number yet.
I’d like to be able to thoroughly enjoy retirement with a high degree of certainty I won’t have to cut back spending dramatically. I play with spending scenarios and compare them to my current spending, and things are on track.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I always had a goal when I was young that I would hit $1m by the time I was 40. I made it, just barely, and was 39 when I first hit the mark.
Some great earning years got me up to about $3m, but the divorce cut me back to where I am now.
Frustrating to be in the same financial place I was 6-7 years ago, but I control the plan at this point, and retirement at 55 is still a viable goal.
What money mistakes have you made along the way that others can learn from?
The biggest money mistakes I’ve made besides the marriage were sloppy investment choices when I was younger. Being overexposed to one industry is way too risky for the return involved, and I used to buy individual stocks without doing enough research on the actual results of the company.
The rare individual stocks I buy now, I do the right level of homework to make sure I know the prospects. Otherwise, it’s just mutual funds – easier and lower stress.
What advice do you have for ESI Money readers on how to become wealthy?
In addition to earning, I think learning about finance, investing, and ways to make your money work for you most effectively. It comes natural to me, but I think a lot of people don’t take advantage of little ways to get better financial results with minimal effort. It doesn’t take a lot of knowledge to make a big difference.
Some simple examples:
- A simple financial portfolio will do basically as well as an advisor, without paying 1% or so in fees that eat into returns. I manage my mother’s $900k portfolio with about 4 hours of effort each year, and it approximates the market. Easily saves her $5-10k of advisor fees.
- My state now allows you to use 529 plans for private school. So I put money into the 529 this year that I’ll take out next year to pay for private school. It took me 15 minutes to set this up, and I’ll save $1,200 in taxes next year.
- While I was married, my ex didn’t have an IRA, so I would max out her IRA each year and convert it to a Roth, even though we made too much to contribute to a Roth. That backdoor Roth was a great strategy for tax free gains.
- I eat at Panera a lot. Last Christmas, I bought myself $500 worth of Panera gift cards and got $100 in bonus gift cards during the holidays for doing so. Added them all to my own Panera account, so every time I eat there this year, it’s 16.7% off. Took maybe 5 minutes of effort for $100 of value.
There are a lot of examples like this out there with a little bit of research.
What are your plans for the future regarding lifestyle?
My goal right now is to retire somewhere between 53 and 57. Exact time is still a moving target.
No plans to change lifestyle between now and then – simply execute against the “earn, save, invest” plans.
What are your retirement plans?
I plan to move to a nicer climate for retirement – no interest in snow anymore.
I enjoy traveling, hiking, being active, and there’s a lot of places I haven’t seen yet. I’d like to really ramp that up in retirement.
I expect I’ll probably end up semi-retired. Unlikely I’ll want a full time job beyond then, but a part-time teaching job, or maybe some project consulting or tax return work.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Health care cost is the obvious one. I have some preliminary ideas on it, but I expect to really start to focus on that more once I turn 50. I want to make sure my projections in retirement are accurate and conservative in terms of healthcare costs, so it’s not a surprise when I pull the trigger.
I worry about a recession early into retirement as well. I know I could always go back to work if required, but that’s the one thing that I think could just make things a little more concerning in retirement.
I think with the size of the portfolio I’m aiming for, it’ll be a little easier to manage. I think you can go into each year with an idea of what’s realistic to spend, and reassess that in future years if the money feels a little light at any point.
How did you learn about finances and at what age did it “click”?
I learned about money very young, and I think I had a good handle on earning/budgeting/saving by the time I was 13.
With our money challenges, I bought the material things I wanted with my own money. And made sure to try to save some as well.
I actually made my first IRA contribution at age 16 with some extra money I had at the time.
Who inspired you to excel in life? Who are your heroes?
My work ethic was instilled in me at a young age simply by seeing what both of my parents did.
My father was a workaholic by choice, and my mother worked a lot out of necessity, because she and I didn’t have any money post-divorce.
I learned the good part of working hard from him, and I learned from my mother the importance of working to survive, but also finding quality time. She and I had some important routines to ensure quality time. Even when we still had little money, she would find a way to take me to the Monday half-price pizza place nearby every few weeks.
I think seeing the way they each approached work helped me find the right balance between career and personal life. I learned I needed to work hard to get ahead, but I’ve never wanted to end up working so much I miss out on other important things in life.
Like playing one-on-one with my son or baking cookies with my daughter this weekend.
My first boss was a great role model too – he worked hard when it was required, but he really lived it up when there was time to do so. I like to think I’ve done the same.
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’ve read The Snowball and Warren Buffett: The Life, Lessons & Rules for Success. Both were excellent books, but I don’t really read too many financial books.
When I read a book, it’s with the intent to turn my brain off.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Giving to charity has ebbed and flowed.
I’ve given large sums to my alma mater in the past, and nowadays give to a few charities, but it only amounts to a few grand a year.
With the divorce, I haven’t been giving as much because of the need to rebuild.
My girlfriend is active with a local animal shelter, and I’d like to be more active with charity when I get to retirement.
I’ve thought about donating time to help with tax advice or financial advice in some way.
My retirement spending does factor in an estimate of $10k a year to charities, so I’m baking it in for now.
Right now there’s just not enough time between work and time with family.
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 haven’t thought much about this, because I’m active, healthy and plan to live a LONG time. I do have a will to protect everyone, and I expect to leave an inheritance for my kids.
Having said that, I’m really trying to make sure they understand not to count on it, and they understand that it’s on them to own their own outcomes. It’s not easy to teach them that living in a wealthy area and sending them to private school, so I try to teach them what I can around finance.
I’ve set up small investment portfolios for each of them with an eye towards letting them manage the money themselves soon, so they can learn saving and investing in a controlled environment.