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…
OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I’m 37 and my wife is 31.
We’ve been married six years, been together 10.
Do you have kids/family (if so, how old are they)?
We have a three year old and another one due in a few weeks!
What area of the country do you live in (and urban or rural)?
We live in the suburban Midwest, minutes from a large city.
What is your current net worth?
We’re currently at $1.1 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?
This is broken down as follows:
- Taxable Accounts: $385,000
- Roth IRAs: $115,000
- 401k and 457b: $350,000
- Fully vested company stock options: $60,000
Aside from my wife’s stock options, the rest of our investments are split 80/20 stocks/bonds using total US market index funds. We try to hold all our bonds in our Roths and tax deferred accounts.
We own our home, which is currently valued at $230,000
We have no debt, cars and house are paid off.
Not included in our net worth is my pension, which I will cliff vest in less than 7 years from now. It’s linked to CPI and includes health insurance benefits.
I value it at roughly $1.2 million.
It’s well funded; according to this and other factors, it is likely I will be able to depend on it if I stick around that long.
EARN
What is your job?
I work full time as police officer in a low-level supervisory role on a large metropolitan agency, currently in more of an administrative/analytical function.
My wife is an engineer, working part time.
What is your annual income?
I make about $90K a year, and my wife makes $60K.
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?
My current career is a story of increasing my hourly wage while deliberately decreasing my hours worked. My agency considers us salary employees, but for practical purposes we’re hourly. We’re required to work 40 hours, and anything beyond that is overtime.
We also have collective bargaining through a quasi-union like entity. This is a mixed bag as this insures we have regularly stepped salary increased linked to seniority, but has all but eliminated performance-based compensation outside obtaining overtime.
I started out at just under $40K almost 13 years ago, and within three years my salary was up to about $60K. This was purely due to early seniority salary increases that taper off after first few years. At about this time I volunteered for a tactical unit, which was a corollary duty. The overtime associated with this assignment increased my annual pay between $10-15K.
Shortly after making it on to the tactical team, I became a Detective in a unit assigned with the apprehension of murder and robbery subjects. This also increased my salary by another $10-15K a year due to overtime. This was great money, but I was working 70-100 hours a week; both of my roles with my agency were subject to frequent call outs and irregular hours. It was not unusual for me to be called into work due to some emergency incident at five in the morning, then go to my normal job, and then work late on a case until three the next morning.
I worked both positions a few years, and then had the opportunity to go to the full-time element of our tactical unit. Though I lost my detective related overtime, this was quickly replaced by tactical related overtime as our workload was increased due to more frequent violent incidents in our city.
After a few years on the full-time tactical element I was promoted, which increased my annual salary by about $8K. Though the number of incidents remained steady, we were able to develop new systems and practices that gave me the opportunity to work less overtime. I reduced my hours, but my annual pay still hovered around the $85-90K a year due to the promotion related salary increase.
I was then given a major leadership position on our tactical team, which I reluctantly accepted as it again increased my mandatory overtime. I was very reluctant to do this because before taking the leadership position I was working 50-70 hours a week, with a highly irregular unpredictable schedule, and knew I was approaching burnout.
I felt a duty to take the position because of my rank; there were no other eligible people in our unit to take it. Though the position could have been left open, this would have caused major systemic issues during tactical incidents that would have increased the risks to all parties involved. I held the position for about a year, during which I made almost $100K due to increased overtime, and quickly got to burnout.
When a few more coworkers were promoted and then became eligible to take my position (our agency has little control over promotions, as they are conducted by a third party in order to insure diversity and inclusion), I transitioned off the tactical unit and moved to my current administrative function.
During my last few years on the tactical unit, our union like entity negotiated for salary increases, so by the time I left I was making a base salary of $85K. The other $5K which leads to my current $90K income comes from minimal overtime, as well some moonlighting I do which I’ll discuss in another section.
I was fortunate to have some GI bill left over after completing my undergrad; this leftover paid for a Masters in my field. I completed this while working on the full-time tactical unit, and the extra degree helped me get into my current administrative position. This position is primarily concerned with various types of crime analysis and budget tracking.
What tips do you have for others who want to grow their career-related income?
My career mobility and subsequent opportunities have been greater than my peers. I attribute this partially to luck, but also to frontloading large amounts of work early in my career.
Volunteering for challenging assignments, then working hard at them as well as seeking out field related education helped me build a good reputation which continues to open other doors.
What’s your work-life balance look like?
Right now it’s pretty good. After working so much earlier in my career, I’ve tried to keep things more reasonable and focus on family time. Having accumulated a decent net worth gives me confidence that our family is relatively financially secure, and I have little motivation to work long hours again just to add more to the pot.
For the last couple years I’ve rarely worked more than 40 hours a week. While I was on call for the tactical unit and detective team I was tied to my phone, and required to immediately respond to calls, texts, and emails at all hours with little respite. This has now made me very disciplined about refusing to check my phone outside of work hours since this is no longer required.
I’ve also been abundantly clear with my superiors that I will be unreachable unless the city is literally on fire (which has only happened once so far!). I’m proud that I’ve been able to stick to that.
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
I moonlight doing executive protection (this is legally allowed in our jurisdiction, and actually encouraged by our City to try and make up for the lower than normal staffing of our agency). An associate asked me to help his company with this because of my tactical experience and reputation.
This is a pretty minimal commitment of which I’m highly compensated for, at least when compared to my normal overtime rate. The few hours I put in a month easily make up the other $5K annually, even with taxes taken out. Many of the other cops who work part-time for this company make an additional $20-30K doing protection work on top of their day jobs, but they earn this by working much more than me.
My priority is to spend time with my family, so I have little desire to work at that pace again. I’m also not tempted to try and earn this extra income because our current financial position is relatively secure, and we’re at a place where additional money is not worth the time. Frankly I do this side gig because my current administrative position is boring compared to my previous positions; it’s nice to keep a toe in the water of the tactical world. If I leave my day job before I vest in my pension, I could see doing this more.
A few months ago, I also started receiving about $15K a year (tax free!?) from the Veterans Affairs (VA) for a service-connected disability. This amount of extra income has been surprising.
I’d ignored some medical issues that were a direct result of a military deployment to Afghanistan before I became a cop, largely because I was so busy with work and stupid bravado. When they finally refused to be ignored, I found that treatment would involve considerable expense.
Earlier this year I had the time to navigate the byzantine bureaucracy that is the VA and applied for benefits which would cover this treatment. I assumed the compensation would be less than a quarter of what I ended up receiving and didn’t consider it much since I was just trying to get the VA to pick up the tab on medical care. I believe this amount will be reduced in the next few years, as hopefully treatment will mitigate my health issues.
I’m told that they won’t ever completely go away, so it’s likely that when I’m reevaluated, I’ll still receive some reduced compensation. For this reason, I do not factor this extra income into our normal budgeting.
SAVE
What is your annual spending?
We spend about $43K a year.
What are the main categories (expenses) this spending breaks into?
Last year this roughly broke down as follows:
- $12,000 for full time day care.
- $7000 for everyday expenses, such as restaurants, fuel, clothes, classes, and gifts.
- $5000 for medical expenses
- $4500 for groceries.
- $3900 for bills; property taxes, HOA, utilities, insurance, etc.
- $3000 for hobbies
- $2500 Home projects/improvements
- $2000 for pet related expenses; food, toys, and medical care
- $1100 for child related expenses; activities, clothes, gifts, accoutrements, etc.
- $1000 for entertainment/date night
- $700 for vacation; actually spent $2000 but used credit card rewards to cover the other $1300
We save about $2400 a year for possible bigger home related expenses, such as appliances or windows. We invest everything else.
Do you have a budget? If so, how do you implement it?
We do have a budget. We use YNAB; We each input our separate incomes, then we each divide them into various separate and combined categories.
For example, we have combined categories for things like groceries, daycare, and bills, but keep separate hobby and spending money categories. This seems to work well for us, as we don’t have disputes over what either of us spend, and it keeps us motivated to try and save as much as of our individual income as we can.
My wife goes through our budget every month, and updates a spreadsheet that shows our individual incomes, expenses, and savings. We then calculate our savings rates, and budget our income for next month’s categories.
We’ve been doing this since before we got married, and we really like it. My wife does a phenomenal job staying on top of this, and I consider myself very fortunate that she loves crunching numbers.
What percentage of your gross income do you save and how has that changed over time?
We save about 70% of our gross income. This has decreased from about 80%.
Years ago, we got really caught up in saving as much money as possible. We both were natural savers, and aspects of the FIRE movement really resonated with us. We then started cutting as much as we could and were surprised that our quality of life stayed about the same.
I was highly motivated to at least obtain the capability to leave my job as soon as I could, as I was pretty stressed out with the relentless pace at work. I cut my spending even more to try to achieve this goal, but eventually realized I’d gone too far along that path. I then intentionally started adding spending back in on things that brought some lasting value in my life, such as some hobbies I really enjoy.
My wife didn’t have this problem, she’s always been the more reasonable one. Looking back, I’m glad we use our combined but separate system of budgeting. Though my journey down the financial depravation hole increased my stress, our system kept if from effecting our relationship.
What’s your best tip for saving money?
Find inexpensive ways to maintain a healthy self-esteem.
There’s so much written criticizing how we spend gobs of money trying to keep up with Joneses and impress people. Figure if there’s a lot of people doing something, there’s probably a reason for it, even if it’s not a positive one.
From what I’ve read on psychology, and according to my dime store analysis, this is just a natural extension of our basic human need for belonging. If your try to go completely against this tendency without an outlet, I think you’re trying to go against our nature as social animals. For me, trying to be a good husband and father, staying in shape, being good at my job, and trying to improve at a skill-based hobby seems to satisfy this need and not require much money.
What is your favorite thing to spend money on/your secret splurge?
Mountain bike related stuff.
I spend way too much time looking for the best accessories and researching gear beyond reason. Think I spent at least 10 hours just determining what pedals to buy.
INVEST
What is your investment philosophy/plan?
I invest solely in passive index funds.
I spent years reading up on various investment strategies and realized I just don’t care enough to take a more active role, nor do I feel like dedicating the time over the long term. I think I’m reasonably intelligent, but I don’t think I can beat the people who’ve built their lives around investing.
I’m happy to focus on what interests me while my investments keep pace with the overall market.
What has been your best investment?
VTSAX.
What has been your worst investment?
I used a robo-investor when I first started investing. I was dazzled by the automatic tax loss harvesting capabilities and didn’t realize how simple this was to do manually.
I paid the extra fees for years, basically for a shiny website.
What’s been your overall return?
About 12%.
How often do you monitor/review your portfolio?
I take a quick look at everything each month and do a rough review to make sure the allocation is where I want it.
NET WORTH
How did you accumulate your net worth?
I consistently saved a high percentage of my income.
I’ve never inherited anything or made any phenomenal investments. Just kept plugging every free dollar into index funds after paying off the house.
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?
My greatest strength is saving. I must be clear; I believe I’m a natural saver. Before I met my wife, I was not tracking my expenses, but I would notice that every month my bank accounts kept getting bigger without any effort on my part.
Much of my current financial success has been due to the snowball effect of this tendency to save. In my early 20’s I deployed to Afghanistan for over a year with the military as an enlisted man. I made about $45K that year (tax free-combat zone!), and while deployed only spent about $1K since my housing (or lack thereof) and food (ditto) were covered by the military.
When I returned stateside, I watched my peers use that money to put down payments on expensive cars and other toys. I bought a compact car and a cheap dirt bike, then figured I could live off the rest while going to college on the GI bill.
Though now I wish I had invested that money, this lump of cash helped me later on. After graduating college, I was hired by my current employer, and still had most of this cash left over. I kept saving basically on auto pilot. Luck lead me to buy my first house at a discount in ’09, and I even received a tax credit meant to stimulate the housing market.
A year after the house purchase I met my wife, who suggested I read some Dave Ramsey. By then I had over $60K just sitting in a savings account. I quickly put this cash toward paying off my house, and within a few more years of saving I paid off the rest of it. I spent those years reading as much as I could about investing; to try and figure out what I should do with all the extra money I seemed to have every month. At the same time my wife showed me the merits of tracking money, which helped me to intentionally save even more.
Looking back, much of the above was due to pure luck, and my natural tendency to save. Though there were multiple points along the way where it would have been greatly advantageous to start investing earlier, I think my lack of doing this was at least balanced out by my savings habit. I’m thankful that I met my wife who got me started down the investing road, and I’m very thankful she’s as much as a natural saver as me.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
After paying off the first house, I started saving up for the next one so I could buy it outright. I planned on buying it within 1-2 years.
At the time I was using the above mentioned robo-advisor, which recommended I save for such a relatively short-term goal by investing with them at roughly 50/50 stocks/bonds. I had about $40K in there when the market hit a dip, panicked, and sold. Between selling when the market was down, fees, and taxes, I lost nearly $10K. That $10K felt like a huge amount at the time. I kicked myself as the market went back up and learned important lessons about selling during downturns and my own psychology.
I now know that for me, such short-term goals should be kept in cash. The experience has also helped condition me to refrain from selling. This has helped during the most recent pandemic related market issues, which oddly gave me little stress.
What are you currently doing to maintain/grow your net worth?
We continue to save as much as we can while maintaining a lifestyle that makes us happy.
I’m currently researching safe withdrawal strategies, so we’ll be better prepared for the next phase of our life.
When kid #2 gets a bit older and we have some more mental bandwidth, we’d like to explore real estate as that seems interesting.
Do you have a target net worth you are trying to attain?
Target net worth seems to be a moving target dependent on child related expenses.
We’d like to have 29x annual expenses (not including our home value) +200K for purchasing a home in a higher cost of living area. We’d also like to have a rough picture of what after daycare expenses look like. We believe this will take a couple years once kid 1 starts public school.
That said, it is reassuring to know that if my employment atmosphere becomes untenable, our investments could cover our basic needs and still maintain a roughly equivalent standard of living with a 75% reduction in projected childcare expenses (I become a stay at home dad).
How old were you when you made your first million and have you had any significant behavior shifts since then?
Looking back, I was 36 when this occurred.
Because of the way we separately track our investments and house value, we didn’t even notice it until some months afterwards. When we did, it didn’t seem to have much impact as the amount itself seems arbitrary.
Since it’s been such a short amount of time, we haven’t made any behavior shifts outside thinking “hey, maybe I can do one of those ESI interviews, which hopefully will get more public servants to realize this is possible.”
What money mistakes have you made along the way that others can learn from?
Not investing sooner, and the above-mentioned sell order during a dip.
What advice do you have for ESI Money readers on how to become wealthy?
Challenge some of the assumptions of what society suggests is necessary for a “normal” life, and instead determine what actually makes you and your family happy.
Cut out most everything else and use that money to instead fund the ability to have a choice about what you do every day.
FUTURE
What are your plans for the future regarding lifestyle?
Our net worth should allow us to retire earlier than normal. Current conservative projections suggest that we should be able to leave paid work within the next three years, but I’m caught in a sort of golden handcuff scenario. At that point it will only be about four years until I vest in my pension, so it would make the most financial sense for me to keep working and have that redundant source of income available. It would be nice to have that buffer there, the option to inflate our lifestyle down the road, and to deal with unforeseen emergencies.
That said, my profession continues to become more volatile. As I discussed above, we could probably make some adjustments to our lifestyle and I could quit sooner than later.
For now, I’m ok with sticking around, as quitting at this moment feels like abandoning people I care about. We will continue to reevaluate the possibility of me leaving before I vest, but when I’m honest with my financially conservative tendencies, I think it’s likely I’ll end up staying until I can receive my pension.
What are your retirement plans?
We’d like to move to a higher cost of living area with greater access to outdoor activities.
Though my work is rewarding, I would like to transition to a less demanding lifestyle where I can focus on the kids and perhaps writing.
My wife and I would also like to become more involved in some of the non-profits we work with now.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
I wonder what I’ll do to derive purpose in my life. While sleeping in and spending lots of time in the mountains sounds amazing now, sites like this show how important having something beyond hobbies in retirement are.
I’ve wanted to write more for years and have always enjoyed the process when forced to write for work and school. I’m attempting to muster the discipline to start on this now.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
When I was 29, my wife introduced me to Dave Ramsey, and from there I started researching as much as I could from the internet and our library. I was highly motivated due to a work-related incident:
About a decade ago, a co-worker of mine was suspended for six months without pay because of a high-profile use of force incident. Evidence showed he was completely justified, and eventually both a civilian board of review and federal oversight exonerated him. He was given back pay, but that didn’t help him for the six months he went without a reliable source of income. I watched as he picked up odd jobs and worked at a department store so he could support his wife and kids. I quickly realized that I could easily be caught in a similar scenario and became extremely motivated to separate my financial security from my job.
Who inspired you to excel in life? Who are your heroes?
My father is a huge inspiration. He gave me a great framework for life by working hard, doing the right thing, and believing in what he does.
He clearly stated his priorities constantly when I was growing up, with family at the top of the list.
He also got me into snowboarding, and a lifetime addiction to adventure.
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?
JL Collins’ The Simple Path to Wealth; accurately sums up what I was able to piece together when I first started looking into this topic in a much more coherent format than I could ever produce. Wish I had found his material sooner.
The Snowball: Warren Buffett and the Business of Life; made it abundantly clear that I did not possess the motivation to become an active investor.
Zen and the Art of Motorcycle Maintenance; not a financial book, but I read this over and over when I was a kid. It planted the idea that focusing on quality in life could be better than having a lot of stuff.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Not in any great amount. My wife and I both volunteer for non-profits.
Once we are reasonably sure we have enough money to insure we are not a burden to our children in the future, we’d like to start.
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 discussing this. We have the standard contingencies in place if we die between now and our children reaching adult age, but we haven’t firmed up what happens afterwards.
Both of us had very little assistance from family for college and in life, and we think this helped us become more independent. We’re leaning towards donating everything but will probably wait and see what the world is like as our kids get older.
Jane says
I like the fact that he prioritizes spending time with the family. I think this is really important when the kids are growing up.
Also nice to see the hobbies he has do not require a lot of money.
Congrats to you and your family.
MI-219 says
Thanks!
willieg says
First – thank you for your service…both military and police. I’m not military nor is my family, but I believe we owe you and those like you a debt we can never fully replay.
I admire your understanding that a balance of life, $, needs vs wants, etc. It seems you are looking to retire early, which is great. I realize your robo adviser experience was negative, but you may be well served to pay a fee-based certified financial planner for advice on how to ensure you’ll have enough $ for a retirement that may start early. Using someone who is fee based will ensure you pay of a one time event and don’t get an ongoing monthly fee. This CFP will help to ensure you are not taking too much….or too little risk.
Thanks again for your service!
TF says
What a great story. Love to see your service both to the nation and now to your community. You said your pension includes healthcare benefits. This should weigh heavily on your decision to leave early or wait for the “golden handcuffs.” Healthcare costs are one of top concerns listed by almost every individual pondering FI. A study published in the American Journal of Public Health in 2019 found that 66.5% of bankruptcies in the U.S. were due to medical issues. Having free or subsidized health care for your family can mitigate the risks of medical bills that could easily wipe out your reserves.
The Millennial Money Woman says
My first thought after reading your article – specifically after seeing your age relative to your net worth – was “these guys must be earning more than $500,000 per year.”
You don’t know how happy I was to be proven wrong! It is INCREDIBLE to see how you two have worked together, hard, to build your net worth up to over $1MM and at such a young age and better yet – without earning $100,000’s.
I am truly impressed with you and your wife’s careful money management and being able to pay off and own your own home. Keep up the incredible work. You two will likely be deca-millionaires by the time you’re 65 or 70 if you keep saving and investing. Incredible work.
Cheers,
Fiona
Marco says
Congratulations – great story and example of becoming FI in your 30s without very high incomes and while serving the public! Your story gives me another one to highlight when speaking with military and first responders with our nonprofit, to include finding a work-life balance, avoiding overtime burnout and the example of your friend that went six months without pay while being investigated. Keep up the great work!
Steve says
As a person who has a defined benefit pension indexed to inflation (my wife does too!) and also a significant amount of equity investments, I would suggest that you find a way to hang on until that pension vests. We are six months into retirement at age 55 and will get paid at the end of every month for the rest of our lives. Our pensions will go up at the end of every year to reflect the current rate of inflation. The security this brings is priceless. Our portfolio is 100% in the stock market (aside from a cash emergency fund) because we consider our pensions to take the place of bonds and other risk free investments. This is a worry-free scenario in terms of finances in retirement. Now I just need to figure out what the hell I’m going to do with all the time. LOL!
MI-219 says
Thanks for the suggestion Steve. Too much free time sounds like a great problem to have!
I’ve thought about going to 100% equities because of the pension and the house being paid off, but my conservative nature keeps me at 80/20. Maybe I’ll be more comfortable with going to 100% once I start drawing that pension.
I’m guessing that my conservative nature will keep me working until I vest. I mostly keep the option open to leave for worst case scenarios. This past year a few of my co-worker’s houses have been shot up, with their families in them. Luckily no one was hit. Initial investigations show that they weren’t specifically targeted because of anything they had done, they were shot up because of where they worked.
If this trend increases, it’s nice to know I hopefully have some options.
Phillip says
I had debate with my “free” Fidelity advisor a couple weeks ago about going higher than 80/20. My argument was that I should be able to afford a 90/10 ratio as my 10% is sufficient to keep me from tapping my equity for 5+ years if need be (not counting dividends plus I’m still employed and saving). So if I kept this 10% in low risk assets like high yield savings and ultra short term bonds, I should boost my expected returns by going to 90/10 or higher. He responded that above 80/20, the risk profile based on the “efficiency frontier of stocks/bonds” show that the extra risk for the minor increase in gains isn’t worth it. I tried to find a good simple paper proving this finding but haven’t found one yet. That said, I do trust what he says about the academics behind the logic. So sticking with 80/20 as a max is a prudent thing to do.
Andrea says
Hey there quick question. I am a fidelity customer too. Is the “advisor” the priority group through the investor center that you get assigned to? Their picture is on my profile – or is it someone from the managed account team. I am finding neither are very good at advisement and I wonder if I am missing something.
Paper Tiger (aka MI-27) says
I love the comments from everyone on this. I am so tired of hearing the adage, “take 100 or 120 and subtract your age and that is the equity percentage you should have.” I know this may not be bad overall advice as a general rule but one size does not fit all.
I’ve historically been over 90% in equities for 35+ years but I did dial it back recently to about 80/20, not so much because of risk but because I am waiting for a correction and wanted some dry powder to reinvest when that happens. Because of our passive income streams, we do not anticipate having to draw down much of our savings to live on in retirement so I feel like that provides luxury to be able to stay more fully invested in equities for the long term.
I’m 63 and retired but my wife plans to work at least another 5 years so I definitely don’t feel the need to cut our equities stake anytime soon.
MI-21/RI23 says
Great post and congratulations on doing such a great job with your finances. One question, how is it possible to save 70% of your gross income?
MI-219 says
Thanks!
We save 70% using all of the boring FIRE techniques; living below our means, avoiding lifestyle inflation, prioritize DIY, not keeping up with the Joneses, etc..
More specifically, it could be narrowed down to:
1. No mortgage-house paid off
2. Live in a low cost of living area, with above average compensation(for the area)
3. With two small kids, a big night for us is ordering in chipoltle and watching netflix. So that doesn’t cost much.
4. We usually vacation withing driving distance, because it’s simpler with small kids. The minimal cost is offset by travel hacking.
5. Most meals are ate or prepped at home, and we shop at aldi.
6. Both our cars were bought used; they’re both priuses(prii?) so we have little related spending there due to high gas mileage, low maintenance and insurance costs.
7. My hobby of mountain biking is relatively low cost, my wife’s(sewing) probably saves us money.
8. We live in a nice neighborhood that is probably smack dab middle class. Mixed between blue and white collar, and most people think cops make half of what I do. So there’s very little pressure to buy lots of stuff to keep up.
EngratHome says
You are an inspiration! Congratulations on your success so far. I have a few members of my extended family who are also police officers – thanks for your service. I admire your process and priorities.
One item stood out to me that you may want to consider. Why put your bonds in the Roth? It is more tax efficient to put your higher return investments in that bucket since there are no taxes on the gains. Since you are young, the value of that move will compound for 25 years.
Thanks for your service both to the country and your community. Be safe.
MI-219 says
Thanks!
I’ll have to run the numbers again on the bonds. Thought I was being tax-efficient by keeping the bonds in the Roth to shield them from being taxed at standard income rate, and banking on equities being hit at the comparatively low capital gains rate in the taxable accounts. You could be right though. I’ll look into it again.
freddy smidlap says
it’s good to see a cop on a solid middle class income featured. i wish more “regular” people would write about their journey. i work in manufacturing support and many of my coworkers approach or exceed $100k from time to time and some do it regularly with overtime. i want them to know how to build that mountain of cash through compounding.
my wife and i never made that much salary and got to a similar spot. hooray for the little guy.
MI-219 says
Thanks Freddy. Love your blog; it’s been good to know I’m not the only person who isn’t an engineer or corporate executive that is trying to make this money thing work through math and long term thinking.
Andre says
How many total years of service required until vested in the DB pension plan?
My employer’s plan requires 8 years of service. A retiree can stay on the employer-subsidized health insurance and the employer will pay 50% (of the cost of an individual plan, currently about $3000 per year to the retiree; the retiree would have to pick up the additional cost for a family plan). Can only retain the retiree health insurance if actually retire from the job and start taking the monthly pension benefit; in other words cannot defer the pension benefit and retain the retiree health insurance. My plan is to retire at 60 y/o (pension benefit will be reduced by 10%, or 5% for each year younger than age 62).
SoonerNate says
When I read “ trying to improve at a skill-based hobby”, I knew you were a mountain biker. In nature, away from cars, cool people, AND physical fitness are great features for a hobby. The more you ride, the cheaper it gets (per mile)!
Congratulations on your financial success and best of luck in the future.
Btw, the best pedals are XTR, saved you 9 hours and 59 minutes!
MI-219 Wife says
Wife here. Excellent. Tell us all the good stuff. He spends 8hrs of that research talking my ear off about the quality vs financial impact of gear XD
Woody says
Ha! I just switched from Crank Brothers Candy 3s to XTRs a month ago after a decade on Candy’s. I totally agree, XTRs are the way to go. Similar to MI-219, cycling happens to be the one area where I go a little crazy when spending money. I also enjoy researching cycling gear as much as using it. Next question for the MTBers on ESI, what are you all riding? I’ve got a Niner Jet 9 RDO full suspension, a Niner Air 9 hard tail, and a Niner One 9 single speed. I also own a stable of various gravel/CX/road bikes. It is time to thin the herd.
Question for MI-219, I am similarly thinking of how to spend time in the mountains yet maintain a fairly LCOL after retirement. We are also suburban midwest, but we do have decent mountain biking and we have good friends and family where we live. Contemplating a month in the winter and a month in the summer renting a place in various locations in the Rockies in the upcoming years versus a full time move. To the question, why an actual full time move?
MI-219 says
I’m currently rolling Kona wah wah 2s. I’ve never had clipless; that James Wilson guy convinced me that flats were just fine for most of the riding I do. I enjoy DH and dirt jumps(I’m good at jumping, not so much at landing; flats make it easy to bail). Maybe someday I’ll get into other riding styles and will go the XTR route. I’ve got a trek roscoe 8, a hardtail with plus tires. After years on hardtails, I think I’m finally good enough to where full suspension will make a difference. Going to be quite the research process for that!
As to your question about the move; if I’m honest with myself I think it’s a similar decision progression as my sticking around for the pension. If you had asked me years ago what the likelihood of my staying in this profession for that long, I’d say 50/50. These days I’m probably 95/5 for staying, and would only leave before vesting if my family’s safety is threatened or things become opposed to my morals. It’s much the same with moving out of the Midwest. The allure of waking up in the mountains every morning still pulls at me, but as we become more embedded in our local community, moving feels less worth it. Like you, we’re close to family, friends, and great mountain biking. These days I’m around 70/30 for staying in the Midwest, at least until our kids are out of school. I imagine that ratio will lean even further towards staying as time goes by.
I like your idea of a two months of rentals out west split up over the year. I think you’d have close to the best of both worlds there. From what we saw on Purple’s guest post, you’d definitely come out ahead financially by doing that instead of doubling your housing cost by moving out there permanently. Plus you’d have greater variety and flexibility by being able to stay in different locations. Perhaps we’ll end up going that route.
Thinking ahead to staying here after I vest in the pension, I’m hopeful that the self driving electric car technology will continue to progress. If we drive in any direction for 4-8 hours from where we’re at now, we can get to some truly phenomenal mountain biking. Maybe in 7 years I’ll get whatever the current version of the cybertruck is, and we’ll be able to make the trips more regularly because the burden of driving will be lifted by the machines and the recurring cost will be minimal(though at current rates I think you’d come out ahead with building a nice used gas truck). Feels pretty pie in the sky, but who knows.
SoonerNate says
HT vs. FS. That’s a discussion that lasts months, years even. My next MTB will probably be have full squish. I’m leaning Santa Cruz Blur or Specialized Epic.
Agree with the idea to stay put, earn the full pension, and travel more. I used to get after my dad for staying in a low cost place (boring). Now I see that with adequate roads and an international airport 45 minutes away, low cost of living and travel is a good idea. There’s so many things to explore neared home. We have our parents and siblings within 20 minutes drive. We have a national park, military base and college.
Attitude of gratitude is an underrated secret to a having a good life.
SoonerNate says
“Next question for the MTBers on ESI, what are you all riding?”
Moots MootoX RSL with XTRs naturally. I’ve got a few other bikes but my Moots gets all the play.
MI-94 says
Index funds – The way to go in my opinion! As a guy who does not have the luxury of a pension outside of my own investments, I would encourage you to ride out 4 more years and get fully vested on your pension. The will fund a lot of snowboarding and bike parts in the future and reduce money worries.
MI-94 says
PS – I bought the first pedals the bike shop guy offered me for my mountain bike. E*thirteen flat plastic ones. They work great and not that expensive. My more picky son got some way more expensive ones. Honestly, I can’t tell the difference. https://www.bikeradar.com/reviews/components/pedals/ethirteen-base-flat-pedals-review/
MI177 says
Great job!
Fellow LEO here and previous MI 177. I was curious as to who your 457 Plan provider is.
We have the good fortune of having Fidelity because I had a voice in the matter and lastly, how much do you anticipate your monthly pension to be?
Consider 100% VTSAX since you have that pension and especially if it’ll cover your living expenses. I am and have been 100% VTSAX due to having two pensions, mine and my wife’s- she’s a teacher.
VTSAX and our high savings has had a dramatic effect on our net worth.
1M in 2017
2M in 2020
and we’re at 2.8M as of tonight’s closing.
100% VTSAX until the day my kids receive it. It’s like monopoly money at this point, and fortunately we don’t need it.
Consider it and remember JL Collins, “the market trends up and to the right over the long term”.
Great job on your financial accomplishments and stay safe!
MI 177
MI177
MI-219 says
Thanks! Good to hear from another LEO, it’s easy to think that I’m the only cop that’s gone down this path due to the lifestyle many of my coworkers lead. It’s nice to know I’m not alone. Your interview was inspiring; I look forward to getting to the point your currently at.
My department uses a locally based financial institution. It’s not great; we have a .15% management fee and there are no Vanguard funds. The only index fund is a S&P 500 with an .35% expense ratio! That’s where all of my money is in my 457, as not only is it the only index fund, but it has the lowest expense ratio as well. Though this provider isn’t great, I still fund this to the max as we still come out ahead by reducing our taxable income significantly. My wife also fully funds hers, which has better options. I’d love to have Fidelity, and have contemplated trying to get our department to switch to something better. I then learned there are political factors that are likely insurmountable which keep my department using this local institution. I’m sure one could imagine what those are.
I anticipate my monthly pension to be around $2600. I will cliff vest at 20, but will have to wait until I’m 52 to draw. My pension payments get locked in the day I retire, and are not adjusted for CPI until I’m able to draw. I’m therefore basing the above amount on a 3% inflation rate for 7 years. The healthcare that is tied to it will cover 50% of the premium, and is a mid-tiered high deductible plan with nationwide coverage. So overall, it’s not the most Cadillac of pensions out there, however it has been fully funded for decades, and it’s protected from being raided or restructured by state law. What it lacks in payments, it makes up for in the reassurance that it will likely be there decades from now.
I could stay past 20; my pension payments would increase 2% for every additional year served, and I’d have the additional benefit of reducing the time inflation would eat at my locked in rate. We also have a pretty decent drop program for those that stay for 35 years. That said, I don’t see myself staying past 20 unless some significant life events occur which put me in a position where I absolutely need the income. Since this interview, I was asked to help with the restructuring of another tactical unit; it’s a heck of a lot more fun than being in an office, but I’m back to night shift and rotating days off. I don’t see me wanting to do that past 20, especially if I have enough money to fund an enjoyable lifestyle with a decent buffer.
The 100% equities route is attractive, though after going through the numbers and reflecting on my personality I’ll probably stay 80/20. Playing around with portfolio visualizer and doing some back testing, I see that going to 100% would increase my annualized return by about .6%, but would also increase my annualized risk by at least 4%. Given, there’s a lot of issues with this type of simple analysis, and I’m just a cop with a few social science degrees so I’m sure I’m missing something. But besides the math aspect, when I factor in my emotional response and my personality, I feel like that 20% in bonds helps me to stay in the market when things go down. All in all, I’d rather have an ok portfolio that keeps me in the market rather than a high performing one that might scare me into pulling out at the worst time.
Thanks again!
josh mason says
It is a mistake to own bonds in a Roth IRA. Yes, you dont pay taxes today on the interest, its a small benefit at today’s minuscule interest rates.
What you give up is tax free appreciation of equities. The beauty of Roth IRAs is they are not taxable ever. if you have $100k that grows to $1m in a Roth, you will NEVER have to pay any taxes on the $900k gain. In a taxable account you will, same with 401k or traditional IRA.
Roth IRAs should have investments with highest long term appreciation.