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 October.
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 am currently 57 (born 1963) and my wife is 55 (born 1965).
We just celebrated our 32nd wedding anniversary (married since 1988).
Do you have kids/family (if so, how old are they)?
Yes, we have 2 grown children who are out of the house and contributing in their own unique ways to the world.
Our son is currently 29 (born in 1991) and our daughter is 27 (born in 1993).
What area of the country do you live in (and urban or rural)?
We have lived in the same suburban area of a midwestern metro area since we were married.
What is your current net worth?
Our current net worth is around $1.1M (excluding my forthcoming pension and wife’s small business).
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?
Main assets include:
- $640K in my 401(k)
- $310K in our real estate
- $140K in our Roth IRAs
- $50K in cash
Our only debt is $57K left on our primary residence mortgage.
EARN
What is your job?
I am a mid-level manager with the Department of Defense (DoD).
I had spent 4 years in the USAF doing aircraft maintenance before I transitioned into a civilian position.
My wife has owned and operated her own small business for just over 5 years.
What is your annual income?
Currently, our annual income is around $140K.
This consists of my $110K salary plus my wife’s $30K small business revenue.
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 first real job in 1980 paid me $3800 for the year.
While in the USAF from 1981-1985 I made between $6-9K per year.
When I left the USAF and became a civilian for the DoD, my income increased to $22K in 1986.
The 1990s saw an average income of $45K.
The first 10 years of the 2000s was an average of $72K, and the last 10 years, an average of $100K.
The rise in income can be attributed to getting a secure position, working diligently, and riding the federal pay scale, which provides within grade increase on a regular basis and usually an annual cost of living adjustment (COLA).
What tips do you have for others who want to grow their career-related income?
My biggest regret, and best tip, is to nurture work relationships and to remain in touch with former co-workers as you progress in your career.
I think there would have been many more opportunities if I had stayed in touch with people and built a stronger network.
What’s your work-life balance look like?
My work-life balance has been very good overall. Working for the government has allowed me fairly set hours and predictable travel. I was able to be home for breakfast and dinner with the family unless out of town on business travel.
Lately, since I have been full-time teleworking, my work-life balance has improved even more as daily commuting time has been eliminated.
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?
Right now the only sources of income are my salary and my wife’s business revenue.
When I retire, I will receive a life-long pension of around $4K per month.
SAVE
What is your annual spending?
Our annual spending is currently around $75K per year.
This includes every expenditure as tracked in Quicken.
What are the main categories (expenses) this spending breaks into?
Over the last 3 years our average spending looks like this:
- Savings – 30% (pay yourself first, right?)
- Income Taxes – 18%
- Misc – 17%
- Shelter – 11%
- Auto – 7%
- Food – 6%
- Giving – 5%
- Medical – 4%
- Recreation – 2%
Do you have a budget? If so, how do you implement it?
We really don’t have a budget per se. I don’t like that term and prefer “spending plan”. We know what we generally spend in each area, and I monitor spending weekly / monthly to make sure we maintain a positive cash flow.
A helpful tip that has worked for our marriage is that we each get some money every week to spend however we want. This has eliminated most of the “why did you buy that?” discussions that were typical early in our marriage.
What percentage of your gross income do you save and how has that changed over time?
Currently, we’re saving at least 30% which is the most we have ever saved. I attribute this to making the most we ever have and to being empty nesters.
I’m contributing the maximum to both my 401(k) and Roth IRA.
What’s your best tip for saving (accumulating) money?
My best tip for saving money is to categorize it just like any other category in your spending plan. This technique is commonly known as “pay yourself first.”
If you plan to save what is left over, you probably will not save much when compared to prioritizing your savings and actually paying yourself first.
What’s your best tip for spending less money?
The ability to distinguish between genuine needs and wants.
For example, I NEED some form of transportation. My 2010 Toyota Camry does the job just fine. Of course I WANT something newer and nicer, like a 2020 Toyota Avalon, but that would cost more and thus reduce money going to more important things.
What is your favorite thing to spend money on/your secret splurge?
I love to spend / invest in personal educational pursuits that have a direct bearing on quality of life.
For example, I just invested in a dividend stock investing course. As a result I bought some positions that met my new dividend stock investing criteria. It’s been enjoyable receiving regular dividend payments within my Roth IRA.
Another recent example is my investment in the Millionaire Money Mentor Forum here with ESI. 🙂
INVEST
What is your investment philosophy/plan?
My investment philosophy and plan is to keep it simple. Only invest in things you understand.
I’ve only ever held a few investments after making sure I understood what they were. All investments have been held within my 401(k) and Roth IRA.
What has been your best investment?
My best investment has clearly been my career which includes a 401(k) benefit.
This is especially true when one considers the matching funds for my 401(k) contributions.
What has been your worst investment?
Investing too conservatively when younger.
I started my 401(k) by investing in the Government Securities option which just didn’t grow like the equity options I could have invested in.
What’s been your overall return?
Over the past 10 years, my 401(k) has returned an average of 7% and my Roth IRA has had a return of about 6%.
How often do you monitor/review your portfolio?
I take a look at Personal Capital and eMoney at least once a week to see how things are progressing.
I also reconcile every monthly / quarterly / annual statement for each account.
NET WORTH
How did you accumulate your net worth?
Started early by investing in a 401(k) and Roth IRA as soon as employed, bought real estate (house) as soon as prudent, and stayed away from consumer debt, which I define as borrowing money to purchase anything that declines in value.
We have also always purchased used vehicles and kept them for long periods of time.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
I would say “save” since we have been fairly frugal and built our net worth on a very average income over the past 30 years.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
The stock market losses in 2008 and 2018 were not fun. I have probably invested more conservatively because of those experiences.
It is worth noting that over time the markets have always recovered.
What are you currently doing to maintain/grow your net worth?
Re-looking at asset allocation as we consider moving into retirement.
Distribution of assets looks to be a whole different game than accumulating them.
As stated above, I’ve also started dividend stock investing and really enjoy the process and rewards.
Do you have a target net worth you are trying to attain?
Not really.
Ever since my mid-20s I’ve had the goal to become a millionaire. Now that I’ve reached that goal, I’m fairly satisfied.
Going forward, I just want to minimize taxes and live life to its fullest without focusing on money so much.
It seems like I’m transitioning to where time is becoming more important than money.
How old were you when you made your first million and have you had any significant behavior shifts since then?
Excluding my pension benefit, I achieved a net worth of a million dollars in 2018 at age 55.
The downturn in the markets later that year reduced my net worth slightly, but it has since recovered.
I have recently shifted my investments to a more conservative stance in preparation for retirement.
What money mistakes have you made along the way that others can learn from?
I would have invested more aggressively when younger.
When I started investing in my 401(k), it was in the conservative government securities fund instead of the stock market alternatives. Based on a historical perspective, I believe I would have become a millionaire much sooner had I invested more aggressively.
What advice do you have for ESI Money readers on how to become wealthy?
The same advice found on the ESI Money blog which is:
- EARN and increase those earnings
- SAVE by paying yourself first
- INVEST in knowledge and then in whatever investment vehicles you understand
FUTURE
What are your plans for the future regarding lifestyle?
I plan to retire in a few months at the end of my 57th year of life and just over 39 years of service.
My wife and I are investigating where we will live and what we will be doing in retirement.
I feel strongly that this should be the best time in life, where we have our health and the resources to do what we choose to do.
Regardless of where we choose to live, and what we do, my pension and our investments should allow for a comfortable lifestyle. My wife now has the option to continue with her business or move on to something else.
What are your retirement plans?
Certainly moving from an accumulation phase to a distribution phase regarding finances.
The biggest challenge for me seems to be finding ways to contribute to the world once retired.
I’ve been communicating with friends who are already retired about what their life looks like post-retirement. Most of them have told me they don’t know how they found time to work before retiring!
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Not really. I just want to maintain my health and live the best life possible.
I also am seeking ways to give back to society in my retirement years.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
I was fortunate to have a mentor in my early 20s who taught me practical Biblical financial principles. At the time I met him I was paying on a new $8K auto loan and starting to accumulate credit card debt. With my mentor, I set a goal to be debt free within a few months. Thanks to the teaching of my mentor, and applying what he taught me, I was able to achieve that goal by focusing on debt repayment as a priority.
Ever since then I have continued to study and learn about personal finance. I’ve also had the opportunity to share with others by leading several different financial studies over the years.
Who inspired you to excel in life? Who are your heroes?
I think growing up poor incentivized me to pursue wealth and become a millionaire.
My heroes are those who have learned the important lessons of life and are passing those important principles on to others. People like the late Zig Ziglar and Jim Rohn come to mind.
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?
Yes, I really like some of the same books as recommended by the ESI Money blog.
The Millionaire Next Door was very motivating and instructional for me. Now I am the millionaire next door!
Also, The Richest Man in Babylon was enjoyable since I love fiction that teaches sound principles.
Finally, The Automatic Millionaire is great because it teaches one of the most important steps to reaching financial goals…automating what you can so you take the emotional decision making out of the picture.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Yes, we have given around 10% of our income to church and missionaries over our married years.
Currently, we are shifting most of our giving to my wife’s parents since they have very little income in retirement. They live in a foreign country which has no real “safety net” like the United States.
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 some kind of an inheritance to our heirs but are just starting to think through what that looks like beyond our immediate two children. We have already helped our son and daughter by providing them with 0% loans for major purchases (cars, etc.) and launched them into the world with bachelor degrees and no debt.
We would like to leave an inheritance to any future grandchildren (none yet) to help them realize their educational, business, real estate or investment desires.
Our primary reason for this desire / plan is found in an old Hebrew Bible passage. Proverbs 13.22a says, “A good man leaves an inheritance to his children’s children…”
Thank you for sharing your story with ESI readers like myself 🙂 I think you made an excellent point when you said to nurture work relationships and to remain in touch with former co-workers as you progress in your career. I have realized that your network is like your net worth, and it’s important to avoid burning bridges. Your philosophy on how to invest also mirrors my philosophy – to not invest in what’s sexy or hot, but to invest in what’s simple yet proven. I’m a big believer in dollar cost averaging and investing simply in the S&P 500 or indices of the like. Thank you for sharing your journey and advice.
Cheers,
Fiona
You are most welcome. Yep, network maintenance is a lesson I learned a little late but hopefully others will heed the advice. Thank you for your comments.
What will you do for health insurance when you retire? Does the DoD provide that to retirees?
Speaking as a gov’t employee, we can continue paying for our FEHB at the same costs till we have to switch to Medicare at 65 y/o. One of the excellent benefits of being a Federal employee.
If a government employee retires early, can that individual continue to cover dependents at the same costs as when employed or is the coverage only for the retiree?
It depends. In this particular case, the MI230 has reached his “MRA” (minimum retirement age) and has 30+ years of service therefore he can continue with health insurance coverage uninterrupted (including covering children – although his are presumably not eligible for coverage since they’re over the age of 26). All that said, MI230 isn’t technically retiring “early.” You’ll get different outcomes on your health insurance question depending upon what you mean by “early retirement.”
Joe, thanks for your reply. When I asked about retiring “early”, I meant retiring before one is eligible for Medicare. In that sense, MI230 is certainly planning to retire early.
Yes, retirees carry their Federal Employee Health Benefits (FEHB) into retirement with the same premiums…only post tax versus pre-tax.
Wow . . . what a deal.
This was a great interview and more in line with what “most” people can do if diligent about their saving and spending and they make good choices or even better, avoid bad and costly decisions. I speak for myself only when I say this but I don’t find the interviews of the really big earners very interesting with some few exceptions.
Yet another interview where the value of the pension is not included in the millionaires net worth but that pension is the equivalent of ((78.7 – 57) * 48k) = $1.04 million.
Not too shabby right and that’s based on the median age which if MI230 continues in his wise ways may be much, much more.
Thank you for your service.
I think it’s hard to include a pension in a net worth calculation because the true value is largely determined by the length of a life which no one can say for sure with any accuracy. As the good book says, “no one is promised tomorrow.”
I agree. Otherwise we’d all include Social Security, right?
One way to value it is to find a comparable annuity and determine the lump sum needed to buy that annuity. Then maybe discount that lump sum a bit sine annuities are generally rip-offs.
My point was it should not be included in net worth IMO.
Agree, I think we are talking about the difference between assets and income streams which are apples and oranges when it comes to net worth.
ESI, I’m not advocating that it should be and there have been many other conversations about whether or not pensions or social security should be included in net worth. I was more making the point that not including it in net worth does not make it NOT worthy of discussion.
It is more guaranteed than keeping wealth built on the back of investing in the market. As is social security. Most of us invest for the long haul right?
As for length of life, if you have it for as long as you live whenever that happens to occur, is the long term value important? I could easily say rephrase and say that $48k a year is not pennies.
I have no problem discussing anything.
There’s just no “right” answer, so we’d be here a while if we got into it. Plus, as you say, we’ve been over that issue quite a bit.
Hi ESI,
Taking you up on your willingness to discuss anything. Even NW can have significant variability in terms of actual disposable wealth due to taxes. If I look at my own holdings, I have some in Roth and Traditional. Those in the Roth account should be valued higher than those in pre-tax accounts. And in my taxable account, I have some that have appreciated 2x, 3x or even more and others that are barely positive (I’ve tax loss harvested all my losers). So those that have appreciated a lot are worth less than my cash and lower gainers since at some point, I will sell and have to pay lots in capital gains taxes while not in others. And the impact of all of this will vary depending on your tax bracket.
Sorry about the digression. Just wanted to make a point that even comparing NW isn’t necessarily exactly apples to apples.
I agree with this sentiment and was merely offering a method to quantify a pension cash stream so that some type of reasonable comparison can be made between those with pensions and those without. IMO, many folks use NW as a means to determine if/when they can retire and what cash streams they might expect using something like the 4% rule. Hence a lump sum “NW equivalent” for a pension or other fixed cash stream is useful, IMO.
Kevin, I totally agree with you on the importance of the pension in determining the overall financial health of one’s situation and it should definitely not be overlooked. My wife and I are both blessed to have solid pensions from former employers and they will be very helpful in maintaining our net worth by not having to tap assets for expenses that these passive income streams will cover.
Our objective is to fund our retirement solely on passive income streams so that our investments can continue to grow for the long term. We are working toward the goal of a 0% safe withdrawal rate. Our future retirement income will come from pensions, SS, deferred compensation, and dividends/interest.
I don’t put SS as a net worth item, but a cash flow item at whatever point I will take it. We have a plan to spend X and SS is an approx number as income in my spreadsheet. But not as a lump sum amount in Net Worth. My wife has a pension and it has a dollar amount and an amount it will pay out per month, so I do include that number in our net worth. Yes, if we both die, it won’t matter anyway.
Paper Tiger, Very true 🙂
Thank you for your kind words. I agree that my story is more in line with what the “average” person can do. That’s one of the reasons I wanted to share.
I agree with that sentiment also. I was MI43 a few years ago. I have had some pretty average wages and my wife has only been a teacher for 10 years. We have continued to scrimp and save. We are just year younger than you. So it seems we are in a similar place in life. Finally looking to check out of full time work next year.
Some great wisdom here! I also regret not nurturing those business contacts and relationships. Being an introvert/lone wolf will only take you so far. When time travel is invented, I’m going back to tell my younger self to focus on networking and take more risks, d*mmit!
Now that I have retired and figured out the money angle, there is so much to learn about giving back and helping others. The transition is challenging, ie, changing a mindset that has been in place for 30 years to relaxing and focusing on living the best life for the back nine. Time really is more important than money!
Best of luck to you and thank you for an insightful read!
Thank you for your kind words. Being an introvert is a curse sometimes 🙂 I have emphasized this to my son who is just starting his career. Hopefully he will listen and heed.
I agree time really is more important than money. A wise man recently told me “you can make more money, you can improve your health by exercising, but you can’t get any more time”
Since you have a pension for your service, are you still eligible for social security?
Yes, I receive a social security “annuity supplement” until age 62. I can then start taking social security or postpone taking it just like everyone else.
Cool, thanks for the reply.
When you started to work for DOD were you in CSRS and later convert to FERS which became effective Jan 1 1987 or were new employees put into FERS in 1986?
At 18 was 3 yrs Army. In 1990 worked for VA for 7 yrs. Got 10 yr Fed Pension. Would not have left federal employment if started earlier and been in CSRS. 41 yrs 11 mons equal 80% pension with COLA, 55% spousal benefit, health insurance and grateful to bypass Medicare/Social Security. Have many fed employee colleagues that went that route or retired at 55 with 75% retirement. They have a 401K but no matching.
I just missed CSRS by about a year so I started as FERS in late 1985.
Thank you for your service.
I’m curious if you are looking at Long-Term Care Insurance for you and your wife as you retire? In your current financial situation, I would not recommend self-insuring as one bad health situation for either of you could really compromise your long-term financial plan. You are at a good age where you can probably get a reasonable plan for the two of you with the proper amount of coverage. I’m not sure if you have any military benefits that might address this but just something to think about.
Thank for the question. We are wrestling with this decision currently. We are leaning toward not getting it but are open to additional advice. I think this is one of the toughest questions to answer at this age/stage of life.
My MIL is now in memory care at $8,400 a month. Her LTHI was around $200 a month and was ramping up to $500 a month. We paid the premiums for 20 years. We got our money back in like 9 months. If you can pay for $7,000 a month, you don’t need it, if you can’t, it’s worth the money. Women will probably need it more than the man. At our MIL facility, its like 10:1 women over men.
Good data point, thanks for sharing.
I love how you put Savings into “Expenses” – honestly brilliant. We should all do that. It seems like a great way for most people to instantly see savings compared to the rest of your expenses and be able to make the appropriate adjustments to the other buckets to ensure that the Savings bucket is where they want it to be. Love it!
Thanks! Fortunately I was taught early in life to “pay myself first” which means savings is just at the top of my “expenses.”
The staying in touch with your coworkers is so vastly underestimated. I’m starting to finally understand the saying it’s not what you know, it’s who you know. But then I got disappointed when I knew really important people but my life didn’t get any better.
Then I finally understood what that meant. Who you know isn’t about keeping in contact with people because you want something from them down the road. Keeping in contact is staying in touch because you just want to be friends. If good things happen, then great. If nothing happens, then that’s great too.
The most underrated tip ever.
I used to have a boss who always said, “It’s not what you know and it’s not who you know; it’s who knows you that really matters most.”
I found this to be very true. If you have really made a positive impression on someone, they will be hunting you down when opportunities arise.
“It seems like I’m transitioning to where time is becoming more important than money.”
This is a great point and I’ve heard it said that you can always make more money but you can’t make more time.
I just retired a week ago, one of the many reasons being time. Time to do those things that I could not do when working. Time to invest in others. Time to give back.
I also agree with your distinction between NEED and WANT.
Great interview! Thanks for your service.
Thanks for your kind and wise words.
Thanks for sharing. I do think consistency is great in one’s career but I also think willingness to move around and take chances can have great reward, it certainly has for me. With 5 major moves over 25 years each move has brought significant income growth although I currently hope to retire in my current role.
I also really like that you invest in yourself that is huge. Networking and making connections at work is also very important as someone else mentioned, who knows you, who keeps you in mind for opportunities, that is a very critical success component, especially if you want to sit on boards or consult in retirement.
As for including pension in net worth my wife’s pension has a contribution amount that I include in our net worth numbers but honestly its a small percentage of total net worth.
I saw a calculation used above as an estimate of pension value that was (estimated life x annual pension) I use the 4% rule to determine approximate value of a pension, although there are of course reasons why this estimate is high, there is no residual to leave as inheritance for one. I have several family members with pensions and I like to say if you were to have a savings and no pension it would need to be (yearly pension amount/.04) in order to draw that pension amount for the rest of your life.
I am hoping even with significant savings we will live mostly off of my wife’s pension and let our assets grow. She will also get significant health benefits based on left over sick time.
For what its worth I have small kids and I include their significant 529 plans (which I funded) in our net worth. That is money I would have otherwise had to pay so until I pay it I think of it as an asset.
Between the pension, the investments your lifestyle requirements should be fully covered. If I’m understanding correctly, you only spend $50k as a 1/3rd went into savings which wouldn’t need to continue at retirement?
Charlie, we actually spend about $72K per year ($6K/mo) and the 30% savings was from the $110K salary. Since retiring in Feb, the spending looks about the same and the official pension estimate is $4500/mo so we’ll need about $1500/mo from other sources (wife’s biz, savings, investments, etc.).
Thanks for sharing. These are wise words:
“The ability to distinguish between genuine needs and wants.
For example, I NEED some form of transportation. My 2010 Toyota Camry does the job just fine. Of course I WANT something newer and nicer, like a 2020 Toyota Avalon, but that would cost more and thus reduce money going to more important things.”
The goal of advertising is to confuse our needs and wants and boy have Americans fallen for it.
We NEED an automobile that gets us from point A to point B safely and gets good gas mileage. But we WANT that Mercedes that make us look rich and our friends jealous.
We NEED a home in a safe neighborhood with a good school district. But we WANT that mansion with 7 bedrooms (and 10 bathrooms!) to keep up with the Joneses.
We get into serious trouble when we use debt – especially credit cards – to fund the difference between our needs and wants.
Great interview!
You are welcome. Thanks so much for the kind words and great commentary on needs versus wants.
You are welcome. Thanks so much for the kind words and great commentary on needs versus wants.