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…
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 65 and my wife just turned 67.
We both married late and have been married for 24 years.
Do you have kids/family (if so, how old are they)?
We have one daughter who is 19 and is currently attending an out of state university.
What area of the country do you live in (and urban or rural)?
We reside on the west side of Los Angeles.
What is your current net worth?
Our current net worth is roughly $5.7 million.
Our investment portfolio is currently $3.8 million.
Our home is worth $2 million, and we owe $200,000 on our mortgage.
Our cars are paid off and that adds an additional $50,000+ in net worth.
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?
Our principal assets are our stock market investments and our home.
Our investment portfolio is comprised of 3 IRAs (value: $2.3 million), two Deferred Annuities (value: $700,000), two taxable brokerage accounts plus checking (value: $550,000), two Roth IRA’s (value: $150,0000). and a 529 account for our daughter (value: $100,000).
What is your job?
I worked at a large media company in various Sales & Marketing roles starting as an Account Executive.
Although talented, I never rose above “middle management” given the politics of my organization.
I worked for the same firm for 28 years and retired 9 years ago when I was 56.
What is your annual income?
My position was “job eliminated” nine years ago. At that time, my base salary was approximately $150,000 and I consistently received annual bonuses in the $40-50,000 range. (I never made more than $200,000 in any given year).
My wife worked in various roles never making more than $75,000 in any given year.
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 job after receiving my MBA was in 1977 as an Assistant Account Executive for an Advertising Agency. It was one of the lowest starting salaries for my graduating MBA class as advertising generally paid far less than nearly all over industries.
I stayed in the advertising business for 3.5 years and when I lost my job due to our agency losing our account (through no fault of my own) I decided to switch careers and go to work in the cable television field. My starting salary as an “Account Executive” at my new company was a modest $28,000.
Over 28 years it was increased annually for about 20 years until I hit the salary range “cap” for the role I held at my company (Director level, one level below Vice President) for my last 14 years of employment. I was promoted just twice: from Account Executive to Account Manager and then from Account Manager to Director.
What tips do you have for others who want to grow their career-related income?
It is rare today to stay at the same company for essentially one’s entire career. I was able to grow my income from being one of the “top performers” at my level, however it was frustrating as I never was promoted to Vice President and I was passed over a handful of times.
Although I stayed at the same company, I would advise someone starting their career today to work hard, constantly network, and not be afraid to move from one company to another.
What’s your work-life balance look like?
While working, my work-life balance was quite good.
Although my key role was sales related, it was a good fit and I was rarely stressed over my role and/or performance.
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 had no additional sources of income during my career except for two modest inheritances from two distant relatives (approximately $25,000 apiece), and my parents (whom will be discussed later in this piece).
What is your annual spending?
I have religiously tracked household spending for over 30+ years!
When I got married 24 years ago, I told my wife I do not care what you spend if you track your spending in my “budget book.”
For the last three years (2017, 2018 and 2019) our annual spending (not counting taxes) was $166,000, $182,000, and $198,000, respectively.
Our spending increased substantially in 2019 as our daughter started college at an out of state university and we did some additional international travel.
What are the main categories (expenses) these spending breaks into?
Travel (domestic and international) is by far and away our “splurge.”
We fly business class when we travel internationally. In 2019 we spent approximately $44,000 on travel.
Our other large annual expense is our daughter’s education which runs about $50,000 per year, most of which is funded from her 529 account.
Do you have a budget? If so, how do you implement it?
We have never had a budget as we always “maxed out” our 401k and lived below our means while we were both working.
If we were on the path to “overspending” by tracking our expenses, we could have easily cut to hit a number. We have always lived within our means, so this was never necessary.
What percentage of your gross income do you save and how has that changed over time?
Maxing out my 401k was our annual savings goal for every year I worked at my former company, along with adding $5,000 annually to my daughter’s 529 account were our two savings objectives. My wife did not have a 401k.
Our household income over the last 10 years while I was working ranged between $225,000-$275,000. We saved anywhere from $18,000-$25,000 plus $5,000 for our daughter’s 529 account so our savings rate was commonly around 10% of our income, not counting my company’s 401k match.
What’s your best tip for saving (accumulating) money?
I started saving 10% of my salary at age 28. The “Power of Compounding” is magical when you start early. This is by far and away the best tip I can give to anyone starting their career.
The second tip, and it is complementary to the Power of Compounding tip is to always “Live Below Your Means” so you can save consistently and early!
What’s your best tip for spending less money?
My wife and I have always purchased “mid-priced cars” new and then drive them for 10-12 years.
What is your favorite thing to spend money on/your secret splurge?
As mentioned previously, travelling.
And when we travel international, using a Business Class Consolidator (or occasionally our “miles”) to fly Business Class.
What is your investment philosophy/plan?
While working I invested in mutual funds through my company’s 401k plan keeping a mindful focus on expense ratios. I was always 90% invested in “equities” with a very small allocation to “bonds”.
Now that I am retired, I have become a more traditional 60% equities and 40% bonds investor.
I have also migrated many of my positions to very low-cost index-oriented ETFs.
What has been your best investment?
There have been two:
- In the 90’s I took a key focus on Fidelity’s Latin America mutual fund in my portfolio. I read about how the 90’s was a “coming of age” for South America and this investment did exceptionally well. I seem to recall that my $100,000 investment on this mutual fund tripled to over $300,000 in about 10 years.
- We purchased our home in 1996 in Los Angeles and it has more than tripled in value in 24 years.
What has been your worst investment?
Only one bad investment. In the 90’s I received what I thought was a “hot stock tip” and invested $2,000 in a tech start-up. It went bankrupt six months later and I lost my $2,000.
I learned a valuable less: do not invest in “hot stock tips.”
What’s been your overall return?
The 80’s and 90’s were very kind to equities until the dot.com bust in the early 2000’s so I was able to generate terrific year over year gains averaging 10-15% per year through-out the 80’s and 90’s.
Even though I lost 30% of my portfolio in the dot com bust, my portfolio was back to where it was before the crash by YE 2004.
Even after factoring in the two major stock bear markets (dot.com crash 00-02, financial crisis 08-09) I believe my portfolio has averaged 10%+ in investment gain (not counting my annual incremental stock purchasing through-out my career).
How often do you monitor/review your portfolio?
Monthly, however I rarely make trades except for rebalancing or tax harvesting in my taxable accounts.
How did you accumulate your net worth?
My success in accumulating a net worth well more than $5 million is due to the following key factors:
- Consistently having money put into my 401k every two weeks for 28 years.
- Being gainfully employed at the same company for 28 years and enjoying a company match.
- Never trying to “time” the market.
- Watching investment expenses; never paying anyone 1% a year to manage “my money.”
- Making a terrific home investment in Los Angeles in 1996.
Note: I did inherit $600,000 when my parents passed 8 years ago, however I was already a multi-millionaire. Inheriting this sum provided a “cushion” however it was not the principal driver in my financial success.
It is also worth noting that in my last 5 or 6 years of working, the gains in our investment portfolio exceeded our salaries and bonuses. It was very satisfying to make $275,000 in gross income and in the same year seeing your portfolio increase $250,000+ for a combined income of $500,000+.
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 it is a “tie” between “Save” and “Invest.”
As mentioned previously, I never made a lot of money at my job, I was just a conscientious saver from age 28.
Equally important was that I never did anything with my investments either after the dotcom bust in the early 2000’s or the financial crisis of 2008-09. I just “hung on” and continued my payroll 401K investing as if nothing happened. Doing this I was able to bounce back quickly from the losses I encountered.
Bottomline: I never “earned” a lot; however, I did “save” early and consistently, and finally I did “invest” wisely for the long term.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I honestly cannot think of any road bumps other than the dotcom crash and financial crisis of 2008-09.
What are you currently doing to maintain/grow your net worth?
In addition to company matching my 401k investing (in part), I also benefitted from a pension (until it was frozen a few years before I left my company).
I was offered the option of receiving a lump sum (about $900,000), or a monthly fixed pension ($5,000) at age 65. I opted for the monthly pension so I can sleep better at night knowing that when we turn 70, between Social Security and my Pension we will be able to cover are annual “basic” expenses.
When my wife takes her Social Security at age 70, our combined annual income Social Security income will be $65,000. Having $125,000 in “guaranteed” annual income during retirement ($60,000 pension plus $65,000+ in Social Security) allows us to have a “higher than typical” retiree investment allocation in equities, ranging from 60-65% of our overall portfolio.
This is especially important now with bond income so historically low, and likely to continue to be low for the next 2-3 years.
I feel very good at the decision to annuitize my lump sum pension (“joint life” with my wife receiving 50% should I pass first).
To assist me in maintaining and growing my investment portfolio I subscribe to an excellent Fidelity newsletter (cost $169 per year) and have been a Morningstar “Premium” subscriber for over 10 years. Morningstar provides great tools on their website including a “Portfolio Evaluator.”
Additionally, I became a “Life Member” of the non-profit group, the American Association of Individual Investors (AAII) in my mid 40’s. AAII publishes a monthly magazine (no advertising) called the AAII Journal. It is excellent!
Additionally, every few years I will hire a Financial Advisor for a few hours to check for investing “blind spots” (never spending more than $500) in my portfolio.
I have found that this “recipe” (Fidelity Newsletter, Morningstar, AAII and an occasional outsider’s review of my portfolio) has given me confidence to continue to self-manage my multi-million dollar investment portfolio.
Do you have a target net worth you are trying to attain?
No. My wife and I are looking to enjoy life and travel as much as we want to over the next, hopeful, several years.
I am fine if our net worth recedes during our retirement.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I started tracking my net worth in 2000 and at that point (I was 45) my net worth was $1.3 million.
My best guess is I likely became a millionaire around age 42.
What money mistakes have you made along the way that others can learn from?
I wish I had not sold my condominium when I purchased my home in 1996 as my old condo has more than quadrupled in value since 1996 and would have provided outstanding rental income.
What advice do you have for ESI Money readers on how to become wealthy?
- Start Investing early and regularly
- Do not try to time the market
- Live below your means
- Pay off ALL your credit cards in full each month
- Purchase a home and try not to move frequently (big benefit as we “stretched” ourselves when we purchased our home in 1996 and have never felt the urge to move).
What are your plans for the future regarding lifestyle?
My early saving and stock market investing acumen allowed me to comfortably retire at age 56 when my former corporate position was “job eliminated.”
What are your retirement plans?
I am an active volunteer at two non-profits, including being in a leadership and Board role with one non-profit.
I play golf twice and week and frequently do bike rides.
My wife and I also both enjoy snow skiing.
My wife continues to work part time because she loves her part time work.
Should our daughter decide to permanently live out of state when she finishes college we will likely relocate.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
We are fortunate and have no problem areas at this stage of our retirement.
With our home’s sizable equity, we have decided to “self-insure” for long term care should that be needed for either (or both) of us.
Thinking long term, since our home is on five levels, we will need to move at some point to likely a single floor home.
How did you learn about finances and at what age did it “click”?
I am completely “self-taught” about investing.
When I started at my corporate role in 1982 and learned that the company offered a partial match on retirement savings, I intuitively knew I had to take advantage of this. A little bit of “money smarts” coupled with some “good luck” at making this early decision to invest part of my paycheck each week has paid off in ways I could not have imagined at age 28.
Who inspired you to excel in life? Who are your heroes?
My mind is honestly blank on this one….
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 have quite a library on money books! Here are a few of my favorites:
The Millionaire Next Door (isn’t this one on most people’s list?)
The Only Investment Guide You’ll Ever Need (Andrew Tobias)
Money for Life (Steve Vernon)
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Once our daughter finishes school I anticipate stepping it up in this arena. Currently we have no direct giving strategy and instead make donations to a wide number of charities.
Our current percentage is modest, and we do anticipate this growing.
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 have just one heir, our daughter. We do have a will and a trust however plan to update this when our daughter finishes her schooling, which will likely include post graduate work.
My wife and I will need to discuss how to split up our assets between charities and our daughter.