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.
This interview took place in July.
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)?
I’m 52 and my wife is 50.
We’ve been married for just over 19 years.
Do you have kids/family (if so, how old are they)?
We have a 15 year old son.
What area of the country do you live in (and urban or rural)?
We live in a large Midwestern city.
What is your current net worth?
Our net worth is $3.6 million.
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
We are recently totally debt free! We’ve worked hard on achieving that, and we’re really proud of it.
Our net worth is split between real estate, 401Ks, and reserve funds.
We have about $2 million in paid-off real estate, which includes five duplexes. We live in one of the duplexes, but we still count the value of that house in our net worth since we collect rent on it ($2,875 monthly from the upper unit and $850 for the studio unit in the basement).
Now that we are debt free, our annual pre-tax income from the five duplexes, net of all expenses, is $120,000. That feels totally awesome. It took almost 20 years to buy and pay off these properties, but it’s really nice now.
- Personal residence: $575,000
- Rental Duplex #2: $365,000
- Rental Duplex #3: $365,000
- Rental Duplex #4: $350,000
- Rental Duplex #5: $350,000
We have about $1.35 million in our 401K retirement accounts, and the rest in cash reserves for us and the properties.
What is your job?
I recently retired as the founder and CEO of a large national nonprofit organization, and my wife is a tenured professor at a top public research university.
What is your annual income?
This year our income will be about $440,000 (annualized given my retirement).
I was making about $330,000 (based salary, bonus and deferred compensation), and my wife makes about $110,000.
Now that I’ve retired, I no longer have income from my job, so we plan to live on the rental income ($120,000 net of expenses before income taxes) along with my wife’s income.
My wife expects to retire in about six years, and then we will live on the rental income and our retirement assets as needed.
Our income is much higher now than it has been most of our lives. I would say it has averaged about $150,000-$200,000 per year over the course of our marriage.
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?
As a nonprofit executive, my income was much lower when I founded the organization 20 years ago. It grew steadily as my team and I were able to grow the nonprofit from a small operation in one state, to one that is now national in scale. When we got married 19 years ago, our combined income was about $75,000.
I’ve been an extraordinarily hard worker for my whole life. When I was a kid, my family was pretty poor, and everyone I knew worked very hard. My dad worked two full-time jobs to save up enough for him and my mom to buy our family’s first home. All of my siblings, and aunts and uncles, were hard workers.
So when I was about 10 years old, I made little hand-written business cards that said: “[My Name] Year Round Yard Care,” and I went around the neighborhood of our small town and knocked on doors and said I’d do any job they needed done, such as cleaning their basement, garage, cars, or any kind of yard work. I told them if they’d give me a chance, I’d do the work for an hour or two, and if they didn’t agree that I’d done an excellent job, they didn’t need to pay me at all. I got a lot of customers that way.
Soon, I had more work than I could handle. So as a budding capitalist (it’s a little ironic that I ended up founding and running a nonprofit!), I hired my friend to mow lawns with me. I’d charge the customer $7, pay my friend $5, and keep the $2 as profit.
When I was 14, I got a job at the local grocery store. I earned $3.35 an hour.
I’m still quite proud to say that by the time I finished high school in 1986, I had saved $10,000.
I worked and paid my way through college. My first job after college paid $18,500 (the offer was for $18,000, but I negotiated for an extra $500).
I went to graduate school and my first job after that paid $56,000.
When I started the nonprofit, I worked for free for nearly a year, and eventually began collecting a salary of $30,000.
What tips do you have for others who want to grow their career-related income?
Like many of the others you have interviewed here, I would say that it is really important to work hard, do an excellent job, and always aim to exceed expectations. The key, in my mind, is to assume that nobody owes you anything. A misplaced sense of entitlement is a killer. You’ve got to hustle and grind.
I also became good at making sure people noticed me and what I was contributing. That’s harder than it sounds. If you overdo it, you look like an egomaniac. You need to share credit, too. But you need to remember that most of the time no one else is looking out for your interests, so you have to strategically promote yourself to decision makers and other key influencers in your world. The best job security is making yourself so valuable that you seem indispensable.
I would also say that developing “emotional intelligence” is critical. I’ve met and worked with a lot of brilliant, intellectually gifted people. That’s a great asset, but you need to have the right kind of spirit, too. A good sense of humor, especially self-deprecating humor, goes a long way. I always strived to be a compassionate, fun, generous, good natured person, who also demanded excellence and set very high standards. If you can achieve that, it’s a powerful combination in my opinion.
As a CEO who hired, trained and developed thousands of people, I will say that the folks who did some or all of what I’m describing here were always the most successful.
The other saying that you often hear about making your boss’s job easier, or looking for ways to make your boss look good, really are true. When it comes time to select someone for an exciting or important project, or more importantly for a promotion or a big raise, it’s funny how bosses end up picking folks who have made the boss’s life easier!
What’s your work-life balance look like?
It’s great now that I’m retired! But it has been pretty crazy for much of the last 20 years.
Starting and growing a nonprofit is incredibly difficult. By the time I stepped away, it had a $30 million budget with more than 400 employees across the country. I was on the road a lot over those 20 years. I averaged about 50,000 miles flown for the last 15 years or so. That’s a lot of time away from home, usually in super stressful environments.
Meanwhile, my wife was working very hard in order to complete her Ph.D., get a good job and ultimately earn tenure.
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
We’ve earned a lot from the real estate, but literally every penny has gone into maintaining, upgrading and, especially, paying it off. As I indicated above, it now provides pre-tax net profit of about $120,000.
We essentially used the Dave Ramsey snowball method to pay the properties off. Once we paid one off, we then used all the profits from the paid for building to pay off the next. Rinse and repeat. By the end, you’re paying them off very fast.
If I kept working right now, we’d have that $120,000 annually to use to buy more properties. But we decided that we have enough now, and would rather slow down and enjoy life a bit more.
What is your annual spending?
We spend about $10,000 per month. We don’t include our state or federal taxes in our budget since they come directly out of our paychecks, but we pay at least 30% of our gross income in state, federal and Social Security taxes.
For at least 10 years, we have each maxed out our 401Ks. We also now save about $25,000 annually for our son’s college 529. Travel is really important to us, so set aside $2,000 a month for travel (which includes a month in Maine each summer, a ski trip, and other shorter trips as they come up).
What are the main categories (expenses) this spending breaks into?
Do you have a budget? If so, how do you implement it?
For much of our married life, we didn’t use a budget. We subscribed to the idea that if you automate all of your savings (like 401Ks, extra mortgage payments, college savings, student loans debt, etc.), then whatever is left over is ours to enjoy. This worked okay, but often resulted in shortfalls and some misalignment between my wife and me.
About five years ago, we switched to the Dave Ramsey “Every Dollar” budgeting app. My wife took the lead on doing this, even though we’d both agree she’s more of a spender, and I’m more of saver.
That decision was really critical. It helped us get aligned and have a much better line of sight to our savings and spending. Once we got more organized, we have been able to direct our money with much more discipline.
In the last 3.5 years, for example, we paid off nearly $700,000 in mortgage debt on our rental properties.
What percentage of your gross income do you save and how has that changed over time?
It has varied over time, but I would say it has averaged about 30%-40%.
What’s your best tip for saving money?
There are few simple steps to saving money.
One is to automate as much saving as possible. When we were first starting out, we automated almost all of our savings and debt reduction. When we got a raise, we used most of all of it to increase our 401K contributions until we reached the legal maximum. That’s a pretty painless way to increase your savings rate, but it requires you to pretty much maintain your lifestyle even as your income goes up.
But we also do other simple things to save. We bought our cars with cash and keep them for a long time (though, I’m about to buy a nice new car that we have saved up for). I’ve often noted that most of our tenants drive nicer, newer and more expensive cars than we do.
I also shop for many of the basic foods and household products at a Costco.
What is your favorite thing to spend money on/your secret splurge?
Our favorite thing to splurge on is travel.
We believe that experiences are much more valuable and enjoyable than physical stuff.
For 13 years now, we’ve spent a month in Maine each summer. We love it there, and both of us can do a lot of our work remotely. We set aside a very significant amount of money in our budget each month for travel and let it pile up so that we can do nice trips and always pay cash.
What is your investment philosophy/plan?
By far our best investment decision was buying rental properties. When we first moved to our city, we rented a duplex. After a while we thought, why not buy one of these and have the renter help us pay for it? We then refinanced it, and used the cash to buy the next one, and so on.
Real estate is clearly not for everyone, but it’s worked really well for us. We typically bought duplexes in neighborhoods we’d want to live in and that has helped us assess the market and rents pretty easily.
We often bought houses that had “good bones,” but needed paint, new appliances and fixtures. I’m pretty handy, so in the early years I did virtually everything myself. Eventually, I found a retired railroad worker who is very handy. He now takes care of all the units for me at $30 an hour. I still advertise and show the units myself, and collect the rent. I’ve been surprised by how easy it is.
Many (most?) financial advisors make owning real estate sound really hard and talk about backed up toilets at midnight, etc. But it’s been pretty easy for us. I would say I put in a grand total of 60-80 hours a year on it, though I’m pretty efficient.
I’ve noticed that many people look for a certain projected return (often really high) on their real estate investments. I think it’s imperative to model out your expected income and expenses. I’ve created more spreadsheets than I’d care to admit. But I would also say that ultimately, you need to avoid “analysis paralysis.”
Could we have found better deals that would have resulted in higher returns? Probably. But I think the most important aspect, by far, was that we moved forward and did it. If you buy real estate for the long haul, it will make you a lot of money because your renters end up buying the property for you. So, don’t obsess on the analysis. Do your math, be rational, make some offers, and get in the game.
With the rest of our investments we strictly go with Vanguard Index Funds. I’m persuaded by the research that shows that almost no investment professionals beat the market over a five year or longer period. We just automate it, put it in low-cost index funds and forget about it. We do the same with our son’s college fund.
What has been your best investment?
Definitely the rental properties.
Look at the duplex we live in: it produces more than $40,000 of income a year! We actually get paid to live in our house!
What has been your worst investment?
We once bought a four-plex in a tougher part of town, which was also further from where we live. It was more like an apartment complex and was much more hassle than our duplexes. After struggling with it for a couple of years we sold it and essentially broke even.
Our lesson was to stick with real estate closer to our home, in neighborhoods that we know and understand. You can often make a higher rate of return on real estate in more challenging areas, but I think we found that it just wasn’t worth it to us.
What’s been your overall return?
According to Vanguard, our personal rate of return on our non-real estate investments has been 8-9%.
I don’t know what the real estate would be exactly, but it’s a lot higher because we mostly acquired all of that property without using much of our own money.
How often do you monitor/review your portfolio?
About 13 years ago we decided to create a family balance sheet that listed all our assets and debts. We have updated that at least twice a year.
That was a great idea because it helped us see how our net worth was growing over time.
We’re both very high-performing, goal-oriented people, so this really helped motivate us.
We now do it about once a quarter.
How did you accumulate your net worth?
As I described above, about $2 million of our $3.6 million comes from our investment in five rental duplexes. The rest has been savings in our 401Ks and a cash reserve. For at least 10 years we have maxed our 401Ks out in low-cost Vanguard Index Funds.
We inherited $50,000 when my parents died, which we used as part of the down payment for our last duplex seven years ago.
My wife and I never expected to earn as much as we have. Neither of us ever primarily aimed to make a lot of money. I think there is some truth in the idea that if you find something you truly love and do it extraordinarily well, you will come out okay.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
I would say we’ve definitely ended up earning a lot, especially these past 5-7 years.
We also have done really well on our real estate investments.
We have been weaker on the saving vs. spending. As I mentioned, part of that was that we didn’t use a formal budget until relatively recently. But part of it was also that we didn’t want to live so frugally that we’d be miserable either. I think we have eventually found a balance that works for us.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Financially, we haven’t had many big bumps. But two years ago, at age 50, my doctor told me it was time to start getting routine colonoscopies. I wasn’t looking forward to it too much, but I also didn’t expect any problems since I felt fine. Well, I ended up discovering that I had colon cancer, stage 3A. I had major surgery and then six months of chemotherapy. I’m happy to report that I’m healthy today. I was very fortunate to have good health insurance and very supportive family and friends.
But coming face to face with your own mortality is scary. I decided to make some changes. I put a plan in motion to leave my job so that I could slow down my life a bit and aim for a healthier lifestyle. I’ve now lost 75 pounds and am at a healthy weight. I’m looking forward to a retirement that is focused on health, fun and sharing my hard-earned wisdom as a non-profit executive through some teaching and starting a small consulting practice.
What are you currently doing to maintain/grow your net worth?
My wife plans to work for about six more years, so we don’t anticipate needing to touch our 401K funds for at least that long, and probably longer.
That will give it some time to grow, hopefully.
Do you have a target net worth you are trying to attain?
Not really. Our rough, but reasonable, projections have us hitting at least $4 million by the time my wife is retired at age 56.
How old were you when you made your first million and have you had any significant behavior shifts since then?
It has amazed me how fast our wealth has snow-balled. We first hit $1 million in late 2012 when I was 44. We hit $2 million four years later, and $3 million about 2.5 years after that. If I had continued to work full-time, our wealth would have continued to grow very fast.
We probably look a lot like the proverbial “millionaires next door.” We live in a duplex and drive basic Hondas. I doubt many people would guess that we are multi-millionaires.
So when we hit $1 million, we were excited, but we literally didn’t change anything. It was the same for subsequent milestones: our behavior stayed constant. Now that I’m retired, I am treating myself to a nice, new, higher-end car!
What money mistakes have you made along the way that others can learn from?
I think the single biggest mistake that we made early on in our marriage is that we didn’t really have a plan or clear goal. Since we’re both really goal-oriented, that didn’t work as well for us.
Once we got focused on paying off the rental properties, and had a detailed spreadsheet that showed when each one would be paid off, we started to focus more.
It was around that time that my wife took the lead in setting up a detailed budget. Once we could see the effect of controlling our spending more clearly (like moving up the date that all the properties would be paid for), we were much more focused. That might not be the right thing for all couples, but it really worked for us. I think if we had done that earlier, we’d have gotten here faster.
What advice do you have for ESI Money readers on how to become wealthy?
I would summarize my advice as:
- Automate your savings and debt reduction through automatic payments.
- Invest in low-cost index funds.
- Consider using a budget, but in any case, live below your means.
- Consider the power of real estate.
What are your plans for the future regarding lifestyle?
As I mentioned above, I’ve just retired.
After my battle with cancer, I knew it was time to slow down, be more healthy and to enjoy my life more. It would have been a lot harder to do that if we were not in this financial position.
What are your retirement plans?
I’m planning to eventually do some teaching at the college and/or graduate level, as well as start a small consulting practice. I’d like to focus my future contributions on sharing the wisdom I’ve gained over my career. I don’t think I’ll do much more than 10-20 hours a week, and maybe not even that. The great news is that I can now do whatever I want and whatever makes me happy.
In six years or so when my wife retires, we’ll probably plan to spend a few months each winter someplace warmer than the upper midwest. I’d also love to be able to spend a few months in Maine each summer. I don’t know if all of that will work out or not, but we will probably do something like that.
We plan to organize our days by focusing on getting quite a bit of good exercise. We walk our dog every day at least once, and I enjoy lifting weights. My wife loves running and looks forward to getting back into tennis, as I do, with golf. We hike and ski (downhill and cross country) as a family every chance we get.
I’m also beginning to read much more for pleasure. My wife is a former English major in college, so she’s already helped me develop a long reading list!
Of course, we also expect to travel even more when we’re both retired.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Like most people who have done this interview, we are concerned about the cost of health care. We’re planning for it to cost us about $24,000 per year once we are both retired.
We’re also thinking about how to stay healthy so that we can enjoy an active life for many more years.
How did you learn about finances and at what age did it “click”?
I think the relationship between work, money, saving and getting things I want started when I was very young.
I remember fantasizing about this one beautiful North Face tent when I was about 12. It cost $235, even way back in 1980. I mentioned to my brother that I’d love to have such an awesome tent. He asked me why I didn’t just save up my money and buy it. He asked, “what are you spending your money on now anyway?” That got me thinking.
I decided to save that $235. At first I saved my allowance, but I soon realized it would take forever to save that much money without some more income. That’s when I started going around the neighborhood with those little business cards. I ended up saving that money, bought the tent, and I LOVED it. I had learned a good lesson about working, earning money, saving it, and enjoying it.
Soon, I was saving $500 increments and then buying 2.5 year CDs at the local bank. This was in the early 1980s when interest rates were in the neighborhood of 12-15%. When those CDs matured, I couldn’t believe how much they had grown and all I had to do was save and not spend my money!
I did that over and over throughout my teen years, and ended up with $10,000 by the time I graduated from high school. That little nest egg enabled me to go to college without any help from parents.
I would say those basic lessons helped me connect working, saving, investing and getting to have some of the key things I wanted.
Who inspired you to excel in life? Who are your heroes?
Though my parents never had much money, I learned about hard work from them. They both worked really hard, and my mom clipped coupons and scrimped and saved to raise five kids on a very low income. They desperately wanted their children to have better, easier, wealthier lives than they had.
I’m proud to say all of us went to college, became professionals and are doing very well financially. We owe a huge debt to our parents for that.
When I was in high school, my dad helped me get a job on a construction painting crew with him on the condition that I promise him I’d go to college and NOT be a painter. He was proud of his craft, but he wanted a better life for me. We could both see the toll such a hard physical job had taken on him.
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 read The Millionaire Next Door when I was younger, and I’ve been influenced by Dave Ramsey (mostly through his podcast).
I’m looking forward to learning and reading much more about these topics now that I’m retired.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
We do give quite a bit to charity. We feel we’ve been blessed, and sharing some of what we have seems like a good thing to do.
We are teaching our son to do the same. Ever since he was very young, we have taught him to have three envelopes for all his money: (1) Share; (2) Save; (3) Spend. We’re hoping to help him think about enjoying money, but also saving some and sharing some.
As his “share” envelope grows over time, we periodically prompt him to select a charity to give a donation. One time, we went to a homeless shelter together so that he could make the donation in person and get a bit of sense of how hard some people have it.
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?
We are still working on this. We have only one son, and we plan to save enough for him to go to college without taking on any debt. We’ll probably be in a position to help him with graduate school, should he choose that, or a down payment on a house (or both). So, we’ll be able to give him an incredible head start in life. But we worry that too much money, or even the expectation of it, could zap his motivation.
We may end up giving some additional amount to him when we die, but put a larger part in a trust for his children to go to college and buy houses. The remainder, if there is any, would likely go to charity.