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 August.
My questions are in bold italics and his responses follow in black.
Let’s get started with some background provided by the interviewee…
BACKGROUND
I wanted to add a little background as I think it’s important to our story.
I am originally from Chicago, my parents divorced when I was 2. My dad went to jail for 5 years for drug related reasons and my mom, brother, and I moved in with my grandparents. My mom is an alcoholic and has never had a job for as long as I can remember.
When I was 13, I got in trouble for smoking and selling marijuana. My dad since out of jail moved to Monterey, California where he had a long time friend that helped him get back on his feet. My dad completely turned his life around and we all agreed it would make sense for me to go live with my dad at this point. Now, even though my dad turned his life around, we were more like roommates than anything else, but I have to give my dad credit for doing the best he knew how. My dad became a landscaper and was able to afford us a decent life. I think he was making about $50k/yr, which for Monterey is not much.
Thankfully, my dad had a couple of good friends that were the ultimate influencers in my life that really inspired me to become more. One man in particular was a very successful financial advisor. He is my godfather and has always been a good influence on me.
When I was 18, I moved out on my own and have received zero financial assistance since then. I went to California State University, Monterey Bay and received a 4 year business degree. I paid my way through school loan free while caddying at Pebble Beach. I graduated in 2009 and began working as a financial advisor because I saw what a wonderful life my godfather had, and wanted it for myself.
Neither me nor my wife have ever received a penny of assistance since we’ve been on our own. We also haven’t had any stock options or huge windfalls, which is typical for the Bay Area. 100% of our net worth is from making smart decisions, saving as much as possible, and investing the difference, the old-fashioned way.
OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 33 and my wife is 34.
We have been married for 4 years, together for 7.
Do you have kids/family (if so, how old are they)?
We have a 4 month old daughter.
She was born April 9th during the peak fear of COVID which made for interesting times.
What area of the country do you live in (and urban or rural)?
We live in the Bay Area.
What is your current net worth?
Current net worth is $1.26M.
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?
- Brokerage Account: $650k
- Me 401k: $170k
- Me ROTH: $20k
- Me RSUs: $90k (post tax valuation)
- Wife ROTH: $25k
- Wife IRA: $73k
- Wife 401k: $10k (she switched jobs recently and rolled old 401k)
- Condo: $1.05M
Assets: $2.088M
- Mortgage: $818k
- Wife student loans: $10k
Debt: $828k
Net worth: $1.26M
EARN
What is your job?
I am a financial advisor and my wife is an occupational therapist.
What is your annual income?
I will make about $275k this year and my wife makes $95k.
This year due to COVID and my wife’s maternity leave, my wife will likely make ~$40-50k but we are hoping for it to get back to $95k by 2021.
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?
I first started as a caddy at Pebble Beach in high school. I was 17 when I got the job and worked weekends. I’d make about $200 a day. I caddied all through college and made about $30k/yr while going to school full time.
My school was only about $12k/yr and I lived with roommates which made my rent $600/mo. I lived very frugally while still enjoying life as much as possible.
I graduated in 2009 which timed perfectly with the financial crisis. Caddying all but completely dried up, which is probably the best thing that ever happened to me. You can easily make $75k being a full-time caddy, and this was my plan. I had to find new work, so I asked my godfather for advice. He suggested I apply for the company he worked for and said he would put in a good word for me, but I was otherwise on my own. I got an offer and started at $45k.
Here is a timeline of my income since then:
- 2009: $30k (a little caddying, a little as a financial advisor)
- 2010: $45k most of the year spent as a trainee
- 2011: $45k full-fledged financial advisor but having little success. Towards the end of this year I was called in to my managers office to get let go as I was falling behind my goals. I basically told him I wasn’t going to accept this and asked if there was any other role in the company I would be a good fit for. He made an introduction to the manager of a financial center financial advisor, a new program being rolled out by the company.
- 2012: $40k I was unemployed for about 3 months while waiting for the transition to the financial center. I ultimately decided I wanted to move away from sleepy but beautiful Monterey to the Bay Area for better opportunity. I started my new role in the Bay Area late 2012.
- 2013: $95k I am finding a lot of success and doing very well in my new role, but this is a salaried job.
- 2014: $60k I decide to go back to 100% commission and try to build my own book of business again, this time with much more experience under my belt. I knew I was more or less at my ceiling in my current role.
- 2015: $100k having a lot more success the 2nd time around.
- 2016: $140k
- 2017: $170k
- 2018: $200k
- 2019: $230k
- 2020: ~$275-300k the thing I love about my job is there are no company politics or promotions. I make more money by having more clients that I have to find myself. If I want a raise, I have to work harder.
My wife took a much more stable path, she went to UCSD and then went to a small school in Arizona to get her Masters in Occupational Therapy.
Her first job out of college she was making $75k and just now is up to $95k from the standard COL raises.
I am incredibly thankful for my wife, because the only reason I decided to go back to 100% commission was due to the stability of her job. We could handle me failing again. While we weren’t married at the time, we were living together and knew we wanted to spend the rest of our lives together.
What tips do you have for others who want to grow their career-related income?
I just never took no for an answer. Even when I was getting fired for underperformance, I simply wouldn’t let it happen. I learned from all my failures and kept striving for success.
I also think it’s incredibly important to pick a career that has high income earning potential, if that’s your goal. I am definitely not the smartest guy in my office, but I am for sure the hardest working. My world is surrounded by people with huge egos that went to Harvard Business School and the likes, so I’ve always felt like an underdog that had to work 3x harder.
Also, I dropped everything and moved to a city I knew no one in simply to try and make more money.
What’s your work-life balance look like?
Now, it’s pretty good.
As a financial advisor I am essentially my own boss. The first 5 or so years it was miserable.
Wife’s work-life balance is exactly how she wants it. She loves her job helping older people and clocks in at 7 am and clocks out at 3 pm. On a stress-adjusted basis, my wife earns far more than I do!
My wife would probably do her job for free as it brings her much enjoyment. She’s been offered promotions countless times to become the director of rehab in a big facility, but simply wants to continue working with patients and bettering their lives.
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?
Just our brokerage account which is set to earn about $25k in dividends this year, all is reinvested, though.
I do not include this in any of our income numbers.
SAVE
What is your annual spending?
We used to be incredibly frugal. As our income has increased we’ve been a little more relaxed on spending.
We still watch what we spend, but not nearly as closely. When we go out to restaurants, we still don’t order the most expensive item on the menu.
I’d say we spend right around $8-9k/mo, which for the Bay Area is relatively small.
What are the main categories (expenses) this spending breaks into?
- Mortgage (interest only) + HOA: $3,000
- Wife student loans: $500
- Food and entertainment: $2,000
- Everything else, the occasional trip, household expenses, pleasure shopping: $2,500
Do you have a budget? If so, how do you implement it?
We do not have a budget.
We trust each other to spend when needed and to not spend when not needed. I used to question how many clothes my wife got delivered to the house, but care much less these days 😛
My wife really is a wonderful financial partner and I fully trust her in this department.
What percentage of your gross income do you save and how has that changed over time?
We used to target 50%. We no longer have a target but guess it’s still right around there.
We probably save around $10k/mo including 401k. I only contribute 5% to my 401k, which my company matches 100%. My wife only contributes 2% as that is the max her company matches.
I much prefer the bulk of our assets to be in a taxable account which is contrary to the popular belief. This is for several reasons, mainly due to flexibility and investment options.
What’s your best tip for saving money?
I have gone from extreme frugal to relaxed consumer over the years.
My best tip for saving money is to find passion in life outside of possessions.
I have been obsessed with being a millionaire since an early age, I think largely due to my upbringing and wanting more from life. I never really had a plan, but figured if I saved as much as I could, I’d eventually get there.
What is your favorite thing to spend money on/your secret splurge?
For my wife, it’s definitely clothes! Now that we have a 4 month old daughter, she and her mommy are the most fashionable pair ever!!
For me…as corny as it sounds, I love spending money on stocks. I buy individual companies in our brokerage account and on the 15th of every month I take whatever is left over in our checking account after paying all credit cards and bills, combine that with the dividend income that accumulated throughout the month, and make a stock purchase.
This is incredibly fun for me and I research companies daily figuring out what my big 15th of the month purchase will be. This purchase is normally around $6-10k every month. I guess there’s worse addictions out there.
INVEST
What is your investment philosophy/plan?
I think it’s important to know that we are swinging for the fences.
Every financial decision we make is definitely on the riskier side, but a calculated decision as I fully believe we can easily be an 8-figure+ family at some point in the future.
In IRA/ROTH/401k 100% of the money is in S&P500 index funds. This is our fallback plan in case I royally mess up our brokerage account.
Within our brokerage account, I buy individual companies that pay and raise dividends. Examples would be GIS, MMM, MO, JNJ, DIS, NKE, SBUX, TGT, etc. We currently have about 40 different holdings, and I try not to add too many new holdings at this point and rather build out the ones we currently have. I very rarely make any sells, I think it’s been 2 years since I’ve sold something.
My intermediate term goal is to build our forward 12 month dividend income to $100k which would make us financially independent. We are currently at about $25k.
Another interesting thing I do in my brokerage account, and one of the main reasons I only do the match in our 401ks in favor of building out our brokerage account, is I sell puts on companies I want to own, on margin. I have a couple of very strict rules with this, I only sell puts on an amount that I can save over the course of a year. So if we save $120k, I will be willing to have $120k in puts outstanding. This is so I can pay off any exercised puts in a reasonable time without paying margin.
I invest the premium received immediately. Most of the time these puts go unexercised. Even during the height of the recent COVID drop I did not have a single put exercised and they’ve all since recovered. (I’d be lying if I didn’t say I was sweating bullets on March 23rd).
I write all puts as long as possible, usually a year or two out. Primary goal is I’d love to be put the shares to continue to build out my portfolio at cheaper prices, but plan B of just keeping the premiums doesn’t suck either.
An example of a put I wrote recently: I sold an ESS January 2021 $220 strike put and received $23 premium. I immediately received $2300 in my account in which I will combine with our monthly savings and dividend income and make an investment on the 15th. I would love to buy 100 shares of ESS at $197/share in January 2021, but worst case is I keep the $2,300.
For example, right now our brokerage account is worth $650k and I have $690k invested in individual stocks, $250k in outstanding put strike with maturities ranging from Jan 2021 to Jan 2022, and $40k of collected but unearned premium which is invested, thus $690k invested. I am charged 0% margin interest to do this and essentially have $940k equivalent invested on $650k balance.
I want to stress the fact that this is an increased risk/volatility path I am taking. I would recommend 99% of people to just invest in the S&P500 and to not sell puts on margin.
What has been your best investment?
Our best investment by far has been our condo. I was renting a room in the condo in 2015 with the owner of the condo in the other room. One day he told me he was giving me a 30 day notice that I had to leave. Perplexed, I asked why and he said he was fixing to sell the condo. I asked him to give me a couple of days to see if I could swing putting in an offer before he puts it on the market.
At the time, I had about $70k in a brokerage account and my income in 2015 was only $100k and only $70k the year before that. My wife and I weren’t married at the time. I knew the condo was worth about $720k so there were no easy paths to make this happen, either through down payment or even qualifying for the loan.
I talked to my then girlfriend at the time and we decided if we could make it work, we would buy it together. She had no money for down payment as she was aggressively paying down the $100k in student loans she had accumulated, but I had a bit of down payment and she had the income we’d need to qualify for the loan. My wife and I took the owner out for dinner to negotiate. I told him the following:
I think your condo is worth about $720k, the unit was built in the 70s and never once upgraded, the bathroom and kitchen are in rather rough shape. I think it would take about $40k to redo both bathrooms and kitchen (Bay Area is very expensive, basic remodels). Let’s save you 5% by not using real estate agents, and you won’t lose 3-4 months of me paying $2500/mo rent while you fix the place up and sell it. Given all that, I think $660k is a fair price for both of us, we will pay a lawyer $3k to whip up a purchase contract.
After thinking about it for a couple of seconds he stood up, shook my hand, and said we have a deal. I put 10% down and essentially wiped out whatever money I had in my brokerage account.
We have since refinanced 2 times, pulling cash out both times, which is why we now owe $818k instead of the original $600k. All the cash has gone directly into our brokerage account. Our loan is 10 year interest only at 2.5% and I invest what would have been principle payments into the brokerage account. I figure every dollar in our condo is earning 2.5%, which is not an acceptable return when I am aiming for an 8-figure net worth.
What has been your worst investment?
Hard to say, my investment strategy as a whole may be the right answer, this year.
By nature, dividend paying companies are more value oriented. I am having a pretty tough year performance wise as IVE is down 12% YTD and IVW is up 17% YTD.
I do believe value will be fine long-term, but it’s not fun seeing the Nasdaq rip to new highs while my portfolio is staying rather stagnant.
What’s been your overall return?
I have dramatically outperformed the SP500 since I started investing around 2013.
The main reason for this is the leverage I employ through writing puts on margin on companies I want to own.
I have earned an average 16% annually since 2013.
How often do you monitor/review your portfolio?
Well, given that my profession is in the markets and that I have a deep passion for managing my portfolio and researching companies, the answer to this is 8-10 hours a day, I’d say.
NET WORTH
How did you accumulate your net worth?
Like I said earlier, 100% of our net worth is from focusing on my career, spending less than we make, and investing the difference.
We’ve had zero windfalls, which is something I am proud of.
I’d say the 2 biggest decisions I’ve made so far was buying our condo and giving up my ~$100k salaried job to try and make it again on the commission side. Both of these decisions were incredibly difficult to make and put us in a very strained financial position at the time they were made, but have ultimately been the deciding factors in where we are today.
The other thing is the financial engineering I try to employ whether it be doing cash out refinances on an interest only loan, or selling puts on margin.
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?
Honestly, I’d say all 3 have been an equally important factor to make us hit the millionaire mark at age 32.
If I had to pick one, I’d say Earn has been the most important for us. But, as shown, it’s really powerful when you can focus on all 3.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I kind of touched on this throughout the interview, but being unsuccessful for the first couple years of my career, and then taking the risk after finding success to going back to 100% commission.
What are you currently doing to maintain/grow your net worth?
I continue to try and grow my business, although I am relatively happy with where I am at today.
There are many advisors in my office that make $1M+ a year, but I am OK at $300k and will take growth naturally and with clients I want to work with.
We will continue to save and invest ~$10k/mo into our brokerage account.
Do you have a target net worth you are trying to attain?
I struggle with this but minimally $5M before retiring, which I think should happen sometime around 40 years old.
However, I am setting ourselves up to live solely off the dividends, so I suspect our net worth to continue to grow in perpetuity as dividends are only one aspect of returns from a company.
One fun thing I love doing is using a compound interest calculator. If my wife and I take our current $1.26M net worth, we do not save another penny the rest of our lives, but work until the normal 65, and our wealth compounds at 10% a year, we will be worth $26M by 65 years old. That’s without saving another penny.
I do see us being worth 10s of millions at some point in our lives, simply because the wealth generating machine we’ve already built is a powerful force in and of itself and we still have many years to continue adding to this machine.
How old were you when you made your first million and have you had any significant behavior shifts since then?
We were 32. It felt cool as I track my net worth daily and it has always been a huge goal of mine.
The main behavior shift is we don’t watch spending nearly as much as we used to as net worth and income continue to increase at an acceptable pace.
If we target to save 50% of our income, and our income continues to grow, that allows us to naturally inflate our lifestyles while still saving more an a yearly basis.
Important to note, I saved 50% of my income even when I only made $45k fresh out of college.
What money mistakes have you made along the way that others can learn from?
I think for the first couple years of my career I focused too much on being frugal and saving and not enough on growing my income.
What advice do you have for ESI Money readers on how to become wealthy?
There’s lots of way to become wealthy. One of the reasons I want to share my story is because my wife and I did it the old-fashioned way – brick by boring brick.
I come from the poverty ghettos of Chicago. My father and mother are both druggies and alcoholics. My dad passed away when I was 25 from liver failure and my mom is essentially a walking corpse at this point.
I am very proud of the life we’ve built now as a 33 and 34 year old. My daughter was born a millionaire, and we have more or less guaranteed our financial success. It has taken years of sacrifice and hard work, but I truly believe anyone can achieve financial independence with the right attitude and knowledge.
Start with saving $50 a month, this will train your mind and you will slowly find ways to save more, earn more, and invest more.
Also, I moved to the Bay Area knowing not a soul for the sole reason of there being more opportunity to grow my income. Not everyone can or will want to do this, but try to think outside the box.
FUTURE
What are your plans for the future regarding lifestyle?
The beginning of this journey for me had the end goal of retiring early.
Now that I have built a successful business that I enjoy doing, I no longer feel the dire urge to retire early, but I still want us to be financially independent as soon as possible.
What are your retirement plans?
My goal is for us to hit $5-10M in net worth as soon as possible, I currently think this will happen around 40 years old, or in 7 years. This will give us roughly $150-250k in dividends annually, which is enough to support a middle class life style in the Bay Area.
I have dreams of possibly hitting $100M in net worth one day, even if it’s when I’m 60+. If we play our cards right, I don’t see why we can’t get there eventually.
Everyone laughed when I said I wanted to be a millionaire by 35, we did it at 32. Everyone is laughing when I say I want $5M by 40, I’m fairly confident we will make it.
I don’t even tell people I think we can hit $100M by 60-70 years old because 99.9% of the population simply doesn’t understand that kind of wealth or what it takes to get there, but I truly believe it’s in our cards.
Neither me nor my wife have ever sailed before, but it’s both of our dreams to buy a boat around 40-45 and sail the world. If it doesn’t happen exactly like that, I imagine we will find ourselves traveling the world one way or another.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Nothing yet! Just making sure my wife and I choose happiness everyday, as money won’t make that choice for us.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
Definitely seeing my godfather live in a big house with a nice car.
Having grown up in poverty, this was my “ah-hah” moment where I realized there was more to life.
I’d say around 16 years old is when I started mentally preparing myself that I wanted to be successful financially. Every decision I’ve made since then has been to stay on this path.
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 tell everyone that is serious about bettering their financial lives to go read every Berkshire Hathaway annual letter.
Other than that, I’m not much of a book reader. I just pour over annual reports and financial statements from companies all day long.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
This is a tough one. The easy answer is no we do not.
The long answer is we have a very giving heart and plan to donate a significant amount of our wealth when/before we die.
It’s potentially just a selfish way for us to rationalize our decision, but our belief is compounding our wealth will have a greater impact for society down the road than it will today.
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 plan to leave enough for our daughter and any potential future children to never have to worry about money, but still have to find their own way in life.
Depending on where our wealth ends up when we die, we plan to leave our daughter $3-5M and donate the rest to charity, preferably before we die.
Bernd Doss says
From Rags to Riches. Truly, and perhaps the best millionaire interview in this series. I congratulate you and your spouse on the achievements you have made..Many set goals, few achieve those goals, which in many cases are goals that have been modified over short periods of time. Good luck in reaching your next vision.
MI210 says
Thank you very much for your kind words!
cl4046 says
I agree, this was the best and very informative as well
Laurie says
This is a great interview. So inspiring. How wonderful that you were able to see another way forward through your godfather. I love that you are flexible thinking about your future plans, too. Life changes so much (as we all know from this year) and you and your wife have given yourselves a lot of options. Best of luck to you.
MI210 says
Thank you for reading and commenting. You are absolutely right that I am so blessed to have had a good role model in my life. I am now officially mentoring about 20 people and hope to give back through that. Not everyone has a positive influence in their life.
Kevin says
This was a very interesting and inspirational interview. I like the approach of taking calculated risks with the selling of puts backed up by savings. Congratulations on being able to excel after coming from a broken family environment, not many do.
Your Godfather did a stellar job influencing you. Also, just an observation but given your Godfather was a good friend of your Dad, perhaps the apple didn’t fall too far from the tree and your Dad was just one of the less than lucky ones. Incarceration in the US results in systemic discrimination after the fact so he didn’t just do well to turn his life around after that, he did very well to do so. Just one mans opinion 🙂
This was a great interview. Some luck involved as there always is in success stories when risks are taken but hitting millionaire status at 32 with your back ground is rare for people who come from much, much better backgrounds than you. I can’t imagine the stress of having those puts in March of this year. B*lls of steel my friend ✌
Do you mind me asking what kind of work you do? Like, what is the difference between the job role you had initially as a financial advisor and what you do now and the kind of clients you work with. What kind of credentials are required for what you do now?
You should rightly be proud of what you have done. Be sure to maintain some humility along the way because the stars have to align mightily for you to hit some of your more lofty goals. Most of us are hoping to hit the low to mid single digit millions by retirement 😊
MI210 says
Thank you for the kind comments and thoughtful questions.
You are absolutely correct that my dad and his best friend since they were 18 years old deserve a LOT of credit in my story. After rereading, I’m not sure if I gave them enough credit. I am very proud of my dad for turning his life around given the extreme lows he hit.
Not much has changed in my job. I actually have the exact same role with the same company that I had first time around. The big difference is during the ~18 months I spent in a financial center my clientele was focused on the mass affluent, people with less than $250k. Now the minimum I can accept as a client is $250k and my average client has roughly $1-2M with me.
As expected, I am fully licensed. Series 7, 66, insurance license, NMLS, and many industry certifications. Due to this, I have to remain anonymous during this interview.
I believe my wife and I have remained humble. I am in awe every day of where I’ve come from. If I sit and think back on life, it honestly feels like I’ve lived 2 or 3 completely separate lives so far.
Mid to single digits is my goal as well, I just think with a bit more luck and hard work I can add a 0 to the end of it 😉
Kevin says
Awesome, thanks so much for responding 😊
Grumpy Medusa says
Wow, what an incredible story. I would love to hear a follow up with the chap given the current economic environment.
MrFireby2023 says
I love that you write cash covered puts on stocks you want to own. I’ve been doing this myself fro the past three years and it works so well!
MI210 says
Awesome! As long as you know the risks intimately i think it’s a great way to continue to build out your wealth.
Here’s to our continued success and keep those premiums flowing 😉 I’ve personally been like a kid in a candy shop as most of this year has seen a VIX of 30+
Grumpy Medusa says
I’d love to learn more about this technique. Any source of information you recommend?
Eliza531 says
Congratulations! You could have gone a completely different way and appreciate how you gave your dad a second chance as well. And how you give your spouse credit, too! Enjoy!
MI210 says
Thank you!!
Ed (M151) says
Great interview! I appreciate seeing the build from nothing to wealth without windfalls and simply by focusing on career! I wish I’d had it figured out as early as you did. You’ve done it young, and you’re right – you’ll likely have significant wealth later in life. Enjoy the benefits of the early effort.
MI210 says
Thank you very much. I can thank my godfather for introducing me to finance at any early age. Time is certainly on our side.
TimR says
Congratulations on your hard work paying off—an impressive story. I do worry about your investment diversification and your ability to continue beating the market over decades, though. I think you mentioned you began investing in 2013. The whole US market has done very well over this time period. How do you think your portfolio will perform during market down turns? What if international stocks outpace the US market over the next decade? You have built a nice nest egg so far and I wonder if you have thought about diversifying a bit more for the long term? As a financial professional, maybe you will be one of the few who is able to consistently beat the market. As a non-pro, I just stick to well-diversified index fund investing and stay the course. Good luck!
MI210 says
Hi Tim,
Great questions and comments. I would advise everyone (including my clients) to be more diversified. This is a classic case of do as I say not as I do.
I do think its important to note that between the 40 companies I own, its a bona-fide ETF. The reason I choose individual companies as 1) I find it enjoyable to research them. 2) the premiums on puts are slightly better for individual company vs ETF.
If you look at my performance on strict equity basis, I am about performing exactly what the market is. The sole reason for my out performance is the leverage employed through writing puts on margin.
MI-94 says
Great story, very inspirational. I would love to see how this story progresses for the next 20 years – very well I predict. You are doing well beating the market. It will be interesting to see how your S&P500 index funds stack up against active trading over the long haul. If you beat the market for 10 years, I want to sign you up as my advisor. Easy to do in the short term, hard over the long haul. Never was able to beat the market myself. Having your 401k as as a less risky back up to your investing is a great approach. Like that. My only advice is start giving a bit to charity – You will be surprised the benefits and increased happiness it brings. As your child gets a bit older worthy opportunities will likely present themselves. Take advantage when they do. Also you have a lot to offer young folks in the form of inspiration/coaching – give that out, someday some one will be writing this same story but you will be the one that put someone onto a path of success like your godfather did for you. KEEP IT UP! GREAT STORY!
MI210 says
Thank you for the kind words! One thing I probably should have touched on more in the interview, I dont really actively trade. I am 100% buy and hold. The puts I sell are the closest thing to trading, but I do them with the hope ill be put the shares and hold them for many years to come.
Couple things. I would NEVER manage a clients assets the way I manage my own. Very few people have the risk tolerance I have. I also wouldn’t say my stock selection is the reason for my out performance. My stocks themselves perform roughly in line with the market, its the puts I sell on margin that push me over the edge.
MI-119 says
Very nice interview. And the ambition reminds me of my lofty goals.
I am 15 years ahead of you, currently about 20 years into my career. I too don’t discuss with anyone a potential 9 figure NW one day. We had a similar income around your age. Fast-forward 15 years and we are sitting right around a $20M NW. FYI what helped us along the way is 1- continued, steady household income growth to about $1.4M annually at this time, 2- business ownership and commercial real estate together generating about $3M/year revenues with the added advantage of appreciation and tax depreciation 3- aggressive investments as you’re doing (I don’t do individual stocks, but have done sector and 2x leveraged funds with several up over 50% YTD) 4- fortune of living in LCOLA. 20 years to full retirement age so I’ll see how much compounding I can get in the meantime. Of course the compounding doesn’t have to stop of at retirement so it’s good to focus on (semi-)passive compounding income in preparation for retirement that can continue in retirement.
I have always and still do tithe. On the road to my own security, I want to help plenty along the way. Also a few 5 figure checks made annually makes for some of the best tax deductions available in my tax bracket.
A lot of the things you said resonated with me but I had more support in my early years (and even now), so I wish you far more success! My biggest advice to you is to just always to remember to remain a family man above all else…my biggest motivator for focusing on passive.
MI210 says
Thank you so much for the comment and happy to hear your trajectory started in my position. I can only hope to achieve your level of success. At least I believe I’m on the correct path so far. Much work is left to be done!
I knew the comment about donations would stir the pot. Quite honestly, it’s something we want to get started sooner rather than later. I didn’t mean to say we wouldn’t donate until we die.
I don’t see any reason our income can’t slowly gravitate towards the levels you’re speaking about. We just need to keep the motivation and energy levels high.
Thanks again for the comment and best of luck on the 9 figures. I don’t see any reason why you can’t make it and I hope to meet you there one day 🙂
MI210 says
Thank you so much for the comment and happy to hear your trajectory started in my position. I can only hope to achieve your level of success. At least I believe I’m on the correct path so far. Much work is left to be done!
I knew the comment about donations would stir the pot. Quite honestly, it’s something we want to get started sooner rather than later. I didn’t mean to say we wouldn’t donate until we die.
I don’t see any reason our income can’t slowly gravitate towards the levels you’re speaking about. We just need to keep the motivation and energy levels high.
Thanks again for the comment and best of luck on the 9 figures. I don’t see any reason why you can’t make it and I hope to meet you there one day 🙂
Victor Azevedo Rodrigues says
Im from Brazil and i really enjoyed your interview. What about your mom? She has the pension of your dad?
MI210 says
Hello Victor,
My dad had no pension to speak of. He remarried in his later years and his new wife is getting his social security.
Sadly my dad died worth less than the day he was born, in debt.
Have a great day
Millionaire73 says
Really enjoyed so many parts of this interview and congratulations on all your success so far especially overcoming all the obstacles and challenges along the way as unbelievably impressive. You are well on your way to your goal of 8 digits as well.
Bet you have some great stories from you caddy days at Pebble Beach and curious if you are part of John’s/ESI Money millionaire mentors as you would really enjoy it given your areas of interest and background.
On an aside, as you probably wrote this interview a few months ago can imagine IWE being up 12% this month has put a smile on your face give your value “lean” mentioned above.
M73
https://esimoney.com/millionaire-interview-73/
MI210 says
Hello and thank you for your kind words! I sure hope 8 figures is in our story at some point 😉
Caddying at Pebble Beach was an absolute DREAM job that I kind of just stumbled into as a high schooler. Tons of great stories. Pebble is the reason I stayed in the area and went to school at cal state Monterey Bay.
Very astute observation on your behalf. On November 13th I was up $120K in the month of November alone. In 13 days. That was the first moment my wealth sent chills through my body. I had made 3x my starting salary in 13 days. Amazing. I certainly hope the value trade continues!!
MI210 says
I just read your interview, as well. Amazing story and I hope to follow in your foot steps! It looks like you guys have really found the sweet balance in life to truly “have it all”. Congratulations and a phenomenal goal to strive towards.
Millionaire73 says
Thanks as much appreciated and was able to get to $10M before just turning 49 and $11.5 before 50 (which I recently turned) as it is definitely easier to make money when you have money and the first million is definitely the hardest.
https://esimoney.com/the-first-million-is-the-hardest/
Balance is pretty important to me and probably “leave some on the table” but one of the few folks that knows my situation (I am stealth wealth) said via email “I always thought you did a great job of keeping your family and relationships healthy despite personal success, while I have seen other friends/clients have serious challenges” and he manages a 2B family office in CA so is in circles with a lot of folks with a lot of $ and that meant a lot to me. What is that saying “Happy wife, Happy Life” 🙂
I would look into joining the Millionaire Mentor Members (free) now that your article has published as you will enjoy it.
Apex says
Great and inspiring interview. You have come so far from such difficult beginnings. I am truly inspired by your tenacity and determination.
I am also ecstatic to find someone else who sells options. It is something very few engage in and most who do, do it at a surface level. Maybe sell a few covered calls or something but that is about it. Finding someone who has an option selling and premium maximization strategy is rare.
I too sell puts and calls as a strategy to provide alpha. I have been doing it for 6 months. I have learned a lot in that time period but have a lot more to learn so I am eager to pick your brain on the option selling strategy. First I am doing this in IRA accounts so I cannot employ the margin strategy you are but I do understand it and may consider doing so in a standard brokerage account eventually as my real estate business frees up cash to trade in a taxable brokerage account (although with the volume of trading I am currently doing which is over 500 trades in 6 months I worry about the tax reporting nightmare that could be in a taxable account).
So on to the questions.
1. I will start with what I just finished with about taxes. Since you are trading in a taxable brokerage account, how straight forward does your brokerage reporting make reporting these put sales for tax reporting purposes?
2. You said you sell these options with the hopes that you will eventually get the stock put to you and you will buy it at the extreme out of the money strike prices you sell the options at. If that is the case then why were you sweating bullets when you were close to having those puts triggered in March? If they had triggered you would have bought at low prices and be up a considerable amount since then would you not? So why the angst over almost triggering the puts? If you say it is because it was on margin, didn’t you say you only sell enough that you know you can save that much in the next year so the margin cost would be minimal over the short run anyway? This whole question is about understanding the true motivation for your put selling. You said it was to hopefully buy but it sounds like it might actually be more likely about collecting the premium. I don’t care what your motivation is I am trying to understand my own. I personally vacillate back and forth between wanting to get some of my options assigned and wanting some to expire worthless too so it seems to be a constant battle to decide what I really want to happen.
3. How do you come up with your list of stocks that you are interested in considering selling puts on?
4. When it comes to actually selling a put how do you then decide from your list of candidates which stocks to actually sell puts on? Is it primarily based on the strength you feel in the quality of the underlying company and stock should it get put to you or is it the the implied volatility of the options that leads to higher premiums? I suspect it is a bit of both, but which is the driving force, the long term stability of the stock or the premium you can get selling the puts?
5. You said you sell primarily long expiration puts and likely leaps. Why do you choose options with expirations so far into the future instead of shorter term options that you can sell repeatedly? Do you find that long term options are less likely to get assigned and that is what you prefer? Do you find that long term options are more profitable from a premium standpoint even when considering that short term options likely pay higher premiums if you can sell the same option 12 times in a year instead of just once for a one year option? Is it mostly a time management issue rather than a profit maximization strategy?
6. I didn’t see any mention of selling calls. Is there a reason you don’t sell calls on stocks you hold in your portfolio using the same strategy here? Are you considerably more worried about the calls getting exercised and requiring you to sell stock incurring capital gains and missing out on future capital gains?
7. Do you ever roll options rather than let them get assigned and if so how do you decide the conditions under which you will roll. Namely how far in the money is too far to make it worth even bothering to roll and then how far out and potentially down in strike do you want to roll that option to maximize your overall profit potential? I know these will be different for every stock in every condition but I am generally interested in your thought process along rolls if you do them.
I am eager to hear your responses to how you approach these issues.
Thanks.
MI210 says
Thank you for the comment. A lot to dive into, apologies if I miss something.
1. The put premium is all taxed as short term capital gains. I was a little bummed to find this out as most of my puts are longer than a year held. The tax reporting isn’t a huge nightmare for me. I don’t trade them, I hold them. I only buy them back if I’ve earned ~85%+ of the premium. Most of them I hold until maturity. I only have 20-30 a year that I report on.
2. Great question and way to put me on the spot! Yes, I want to be put the shares. However, I wasn’t prepared to be put all $250k at once. The reason for my most recent cash out refinance was to shore up my cash position and prepare for a significant amount of puts to be exercised. I wasn’t put a single option. Being put half of them wouldve been fine. Being put all of them would have been uncomfortable given the market dropping 10%+ a DAY. I was staring down the barrel of a gun and held my ground. In hindsight I do wish some of them were exercised early. However, I’m also happy that the market snapped back. My hope is for my puts to be exercised, but I never planned for them all to be exercised at once which is what it looked like was going to have happen in March. Somehow, not a single one was.
3. I may have come off too muchbas a trader. Im not. Im a buy and hold investor. I research companies based on fundamentals and then sell puts at the money for the furthest out expiration available.
4. See #3. Although I will mention the premium is the last consideration I have. I think the moment you start chasing premium is the moment you’re in trouble. My absolute favorite companies to sell puts on are companies like KO and JNJ. The premium is quite low, but thats fine with me. Its on margin and its free money.
5. I go with the longest date possible because I am immediately investing the premium. There is too much short to chop and uncertainty. I treat my puts like an investment, not a trade.
6. I dont see calls because I’m not really an options trader. I do not believe anyone has the ability to time the market and selling calls is a great way to realize gains and get chopped up in a position. I only sell puts as a way to build my portfolio out quicker. Im essentially investing the portfolio the me of 2 years from now would have.
7. I have never rolled an option. Again, I am mostly happy when I get put shares. I was just a little nervous when it was looking like all $300k would get put at the same time.
I’m sorry these answers may not have been exciting as what you’re looking for. It seems like you’re trying to be more active in your approach. I am 100% a long term buy and hold investor and just use selling puts on margin as a way of building my portfolio out faster.
Thanks again for the comment.
Apex says
Thanks for the responses. I think I have a better sense of your overall strategy now. You may not think this makes much difference but all these answers help me see other people’s strategies and helps me refine mine so I really appreciate your time here. Even if you do something quite a bit different than I do, there are things I can learn and incorporate into my strategy by understanding how others approach these types of trades.
I do have a few follow ups.
1. My biggest thing I would like to understand is around how you pick the stocks to do this with. You didn’t really address this in your answer to #3. You don’t open the WSJ and close your eyes and land on a stock. So you have a mechanism to pick these.
You said you like to buy dividend stocks and most of the ones you mention are dividend stocks, is that where you start with to consider doing this on? (I actually do a lot of my option selling that way so I am curious where your list of stocks comes from) Are you selling puts on stocks you already hold in your portfolio and wouldn’t mind picking up more cheaper or are you mostly selling on stocks you don’t hold but would like to hold. And again, I would be curious how you decide which stocks you want to hold and at which lower price you want to hold them. Is there a financial analysis going on here or just a general sense of I feel good about these particular stocks.
2. How do you decide how far out to sell your put.
3. How do you decide how far out of the money to sell the put at. Does premium affect the decision of how far out of the money or is it purely based on a price that you feel is a great price to own at so you would be fine if it gets put to you?
To follow up on these more specifically:
4. How far out is your typical put sell? 6 months, 12 months, 18 months.
5. How far out of the money is your typical sale in relation to the price of the stock. For instance if you have a stock currently priced at $100 are you usually selling puts at 90, 80, 60? What is the typical price discount you are selling a put at.
6. And given that discount what is the typical premium you can get on that option given its time frame. I know this changes drastically based on the stock but on the ones you trade what is typical. For instance, if you sell a 80 put on a $100 stock 6 months out what does that typically garner you in premium? a 70 put 12 months out, what does that garner, etc?
Thank you again for your time answering these.
MI210 says
1. I have a basket of about 150 stocks that I watch, they’re all dividend growth companies. Within the 150 companies that I would be happy to own based on fundamentals, I normally pick my entry point based on technicals. If a wonderful company is down towards its 52w low on no real news, I usually use that as my entry point. I also look at my portfolio and if I am light on a particular sector, I may buy something regardless of the technicals just to fill the void. A great example is my 15th of the month purchase in October was AVGO, which was at all time highs at the time I bought it. I just had a lack of exposure to this space and wanted to begin building out a position. This is more of an art than a science in my portfolio. I don’t pretend to think I have above average stock selection, I just try to make sure I remain somewhat diversified and then ~80% of my entry points are based on technicals, usually the only technical I use is 52w low.
2. I always pick whatever expiration the furthest out is available. If it’s a somewhat smaller cap stock ($5-20B) it may only have a 6 month out put available. Some puts already have 2023 expirations available and I have written a few of these. Answer is – furthest out available for the underlying stock.
3. I’d say 80% of the time I go at the money. On some of the longer dated ones, I may go 5-10% above the current strike price just to increase my premium/increase my chances of being put the shares. I almost never in the money.
4. Most are at least 12 months out, but I don’t really track this. I just take the longest dated one available at the time of sale.
5. On a $100 stock, I’m normally setting the put strike at 100, 105, 110. This will usually be determined based on recent price action. If stock has been relatively weak I will lean more towards the 110, especially if the put is 18+ months.
6. You’re right, this varies dramatically. Stocks with larger dividends will usually have higher premiums (since stocks go down by the dividend amount). On a $100 stock, if I were to write a 2022 I’d expect around $8-10 for the $100 strike. On 2023 I’d guess it’s probably around $12-13. Again, mileage will vary dramatically here.
I’ve been doing this for the better part of 5 years now so I have it down pretty good for what works for me.
Apex says
Thanks, that was very helpful. I think I understand your strategy very well now. Interesting strategy and one I need to think about as possibly incorporating part of it into mine.
You said the following:
” I almost never in the money.”
But you list examples of selling strikes at 105 and 110 on a 100 stock. Those are in the money. Did you mean almost never out of the money either at the money or in the money? Out of the money puts will collect far less premium so you seem to be trying to capture some of the expected increase in the value of the stock as well as some time decay by selling slightly in the money puts on beaten down stocks.
Basically from what I can tell you are trying to wait until the stock has already been beaten down and then sell a put that is at that beaten down price or maybe a little above it presuming that the stock will likely recover some and you will just collect a nice premium. If it doesn’t recover then you will end up purchasing it at that low price maybe 1 year later and have collected a nice premium along the way.
Does that pretty much sum up what you are doing?
MI210 says
I think you’re thinking of calls. Puts are in the money when the strike is lower than the current stock price. A put is out of the money when the strike is above the current stock price. The opposite is true for calls.
Your summation sounds pretty on point with what I am doing!
Nice convo we had, thanks again.
MI210 says
Wait im all messed up on semantics. Youre right! Lol
Apex says
That is too funny. Derivatives always take some thinking about to make sure you have the direction right. I thought about it three different times before I posted it to make sure I had it right and then after I read your first response I thought crap, I still got it wrong. 🙂 I was relieved to read your second post so I didn’t have to think through it a fourth time.
Your strategy of when to enter and what type of stocks to consider is similar to mine.
So I am curious if you are willing to list the stocks in your 150 consideration list. Every time someone lists such stocks I always think well I am going to have the same list and most of them are, but I am always pleasantly surprised to find a number of stocks I hadn’t even considered. Some I still wouldn’t consider and others I look at and think, hmmm, I should think about that stock.
Apex says
One further question on the use of margin,
What percent of your margin do you use to ensure you don’t get a margin call if the market has a large pull back. If you use it all you are at a pretty high risk of a margin call. So what percent are you willing to use of your available margin?
MI210 says
This was more of an issue when I first started out. My rules for margin are linked to my savings, not a % of my account. As I mentioned in my post, I have about $125-150k a year worth of puts. Right now I have about $260k in puts that’s spread out through 2023. As my account continues to grow, this will naturally lower the amount on a % basis that I have in margin.
That being said, when my account was smaller the most margin I would have was 50%.
Apex says
50% is the margin limit so that would be 100% margin. Did you go to 100% margin?
Phillip says
“Finding someone who has an option selling and premium maximization strategy is rare.”
FYI. Big ERN (earlyretirementnow.com) has a 4 part series on options trading which includes some of his strategies. Go on to his website and use his website search to find them. Too much work and thinking for me but they are interesting reads.
The Millennial Money Woman says
This was such a great interview and story behind the success. Honestly, this just proves again that you can from any background – and can still become wealthy. It all comes down to maintaining a growth mindset. And it sounds like you did just that – you started practicing healthy mindset habits at just 16, knowing that one day you would want to become a millionaire. Not only that – but you actually exceeded your goal in becoming a millionaire, instead of 35 you hit that goal early. Incredible.
I think in the end it just comes down to how badly you want to achieve something. Clearly, you were hungry enough – and continue to be hungry – where your goals will become a reality.
A very inspiring journey. Thank you for sharing.
The Millennial Money Woman
MI210 says
This is all very true! I know our country isn’t perfect, but I am thankful everyday for the economy we have in place to allow someone like me to jump social classes. I am also not ignorant to the fact that we have a LONG way to go to on the education front for people to start heading down the right path. There needs to be significantly more personal finance classes in high school. I am lucky that I have a somewhat addictive personality and became absolutely addicted to becoming wealthy at an early age – I was voted most likely to become a millionaire in our class yearbook in high school, hah!
Sadly, my brother believes the system is rigged and that the stock market is a casino. He will unfortunately work until he’s likely 65 or 70, have only his 401k and SSI however small they will be, and complain the rest of his life that the system is rigged. He 100% believes I am lucky, I moved to CA he stayed in Chicago and he thinks I live some charmed life that is one in a million. I have spent SO much time trying to convince him otherwise and to just start investing a couple hundred a month. He doesn’t know all the countless hours I have spent researching personal finance, not to mention it’s my career. All the countless PB&Js I ate in my early 20s, not because I was broke, but because I was trying to save as much as I could. Those PB&Js are the reason I was able to have $70k down payment for my condo which is now worth $400k more than I bought it for. It a cascade of events that play out over decades.
Sorry for my rambling, I am extremely passionate about the system the US economy has built and I 100% believe anyone can jump socioeconomic classes with a LOT of hard work.
Thanks for the comment.
Tom Burlis says
I love the PB&J reference!
It sounds so simple, yet deferral of immediate gratification is fundamental to what so many on this site have accomplished.
Joey A says
THIS:
“The beginning of this journey for me had the end goal of retiring early.
Now that I have built a successful business that I enjoy doing, I no longer feel the dire urge to retire early, but I still want us to be financially independent as soon as possible……”
This exact thing is happening to me and making me realize this is fairly common and another reason why it is so rare to fully walk away and retire. I don’t think I know a single person who fully walked away without doing some sort of business (website, book, consulting, side hustle)
MI210 says
Hey Joey.
It’s true. I will quote good ole Warren buffett..we should all tap dance to work everyday and then it no longer feels like work!
Alex says
Hi there,
Great post. And huge congrats on your progress. I think you will be able to eclipse your wildest dreams to be completely honest. I really liked your comment somewhere above about feeling like a kid in a candy store when VIX shot up this year – I worked for a few funds specializing in vol trading. I was wondering if you are interested in connecting? Would love to ask you about your main job – interested to learn about +/- of it. No hidden intention in learning your true identity; more interested in the job:). Let me know please. My email – [email protected].
Thanks
Kevin says
Hi there. Congrats. Quick question – which platform/broker do you use to sell options on margin and reinvest right away? Just talked to Interactive brokers and they said that you need to wait till expo to use premium.
Thanks in advance.