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 December.
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 52. My wife is 51.
We’ve been married for 26 years.
Do you have kids/family (if so, how old are they)?
Three sons ages 21, 19, and 16.
What area of the country do you live in (and urban or rural)?
What is your current net worth?
Just a note on “net worth.” This has never been a goal of ours. Our focus has always been on saving for specific goals (i.e. retirement, house down-payment, college for kids, etc …)
Those goals have changed through the years, but the net effect has been wealth accumulation.
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?
- Retirement Accounts (mix of 401K/Roth IRA/IRA all in index funds): $2,600K
- Brokerage Accounts (mostly index funds, some stocks): $225K
- Home Equity (net of mortgage): $300K
- Other Savings: $75K
Not included in net worth:
- College Savings (529s): $280K
- Pension from employer: $2,300 / month @ 65
Only debt is mortgage of $115K recently refinanced at 2.65% for 15 years.
What is your job?
Director of Product Management. I like to think my role bridges the gap between the engineers and the customers (i.e. the market).
I help identify what products and technologies our company should be investing in to grow in the future. I have a masters in Engineering and an MBA.
My wife also has an engineering masters and worked as an engineer for 10 years. She has been managing the household for the last 20 years.
What is your annual income?
$200K + 20% bonus potential.
My wife also worked from 1990 – 2000.
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 started my career as a co-op student in college. My full-time career began as an engineer doing product design work and making $35K in 1990.
After a few years I moved into a business development role working with customers.
I have always had a plan of the next job I wanted and typically made the effort to network in the organization to get the role I wanted. I have had the ability with my employer to change jobs every 3 – 5 years and have frequently moved between engineering leadership positions and business leadership positions.
After I received my MBA in 2000, I started to take manager level positions and was making $80K in 2000. For the last 20 years, the responsibility of my roles has continued to expand and correspondingly so has my compensation. I calculated my salary annual growth rate for this interview and I have averaged about 5.5%.
What tips do you have for others who want to grow their career-related income?
For someone just getting started at college, I would highly recommend co-oping (cooperative education). Not only do you get to test drive some different jobs to find out what you like while in college, you get to earn money when you are not in school. Both my wife and I co-oped and were able to graduate college without debt.
I believe one key to my career has been education. Upon being hired full-time, my wife and I started masters programs in engineering at night. These degrees were paid for by our employers! It was grueling at the time, but I believe put us on a higher growth path for our careers.
Additionally, I completed an MBA program in 2000, also paid for by my employer, and this put me on a business management path.
I would also recommend being willing to move and get experience throughout the company. I moved 4 times to different states throughout my career, and this flexibility and the added experience broadened my horizons.
What’s your work-life balance look like?
It has been difficult for some of my roles through the years (i.e. 60+ hour weeks, weekends and high stress), but my current role is more manageable.
My role is global, so I tend to have meetings throughout the day (i.e. early in the morning for Europe and at night for Asia). But I can manage my time and I rarely work on weekends.
Having my wife at home with the kids for the last 20 years has helped my career and stress tremendously.
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 don’t have any sources of income outside of my job.
However, one thing that my wife and I have done throughout our marriage is to learn how to do home maintenance, home remodeling and car repairs. I know this isn’t for everyone, but we are both pretty handy and enjoy learning. Additionally, it gives a great deal of pride to see your work done at a fraction of what it would have cost a contractor.
What is your annual spending?
About $95K per year.
What are the main categories (expenses) this spending breaks into?
- Groceries/Restaurants: $17,000
- Insurance (car, house, life, umbrella): $10,500
- Mortgage: $10,000
- Healthcare (premiums, out-of-pocket, including dental and vision): $9,300
- Utilities (gas, water, electric, phone, security, internet, TV subscriptions): $9,000
- Charity: $7,500
- Home Maintenance/Improvement: $6,000
- Entertainment (pool, gym, concerts, shows): $5,000
- Property Taxes: $4,500
- Gifts: $4,000
- Car Maintenance /Gas: $3,600
- Vacation: $3,000
- Misc: $2,500
- Clothing: $2,400
Do you have a budget? If so, how do you implement it?
My wife and I have tried different budgeting methods early in our marriage, but we have always been able to control our spending without it.
I suppose it is because we always “paid ourselves first” and automated our savings. That way we knew what was left could be spent.
We have always flowed most of our expenses through a credit card to get cash back credits and pay it off monthly. We used to monitor our CC spending during the month to know that we weren’t going over our allotted spending.
What percentage of your gross income do you save and how has that changed over time?
We’ve always saved at least 20% of gross salary and I think the last 5 years or so as my salary increased we have been saving 30% of gross.
What’s your best tip for saving (accumulating) money?
Savings has probably been our strongest area within ESI. Both my wife and I come from modest backgrounds. One of my parents is an immigrant and both of my wife’s parents are immigrants, so their desires were quite humble and they had very strong work ethics.
Our parents on both sides typically paid for everything in cash including homes and cars…hard to believe but true. This required that they had discipline to save for goals and this habit was certainly inherited by my wife and me.
We automate much of our savings through contributing to a 401K and by transferring a portion of our paycheck to a savings accounts (for non-retirement goals). One trick we used early on was when we would get a raise, we wouldn’t spend the increase because we were already used to the spending level. Instead we would increase our 401K contributions. Once we reached our desired savings level (15% toward retirement), then we took the additional raises to our paycheck for spending or savings for other goals.
Also, we never overbought on our house…this can really become a money pit. Most real estate agents and mortgage brokers are not for your best interests financially. Most want to sell you the biggest house and largest mortgage.
We decided early on that we wanted our mortgage payment to never exceed our typical rent payment (~$1000 / month). So depending on how much equity we had and the interest rates at the time, this dictated the budget for the house/mortgage. We have always been able to find nice mid-range houses in very good neighborhoods with this rule. This may not work in all housing markets, but it has in the mid-west.
Additionally, expensive houses also typically drive higher property taxes, insurance, maintenance, utilities and consumer pressure from living in an upscale neighborhood.
What’s your best tip for spending less money?
We typically consult with each other on any purchase over a few hundred dollars.
I spend a lot of time researching options for expensive purchases to ensure I am buying what I want quality-wise and that it is a good deal. So the length of time required to research a spend is usually proportionate to the amount being spent.
My wife and I have always cooked at home so we don’t go to restaurants very often, only once or twice a month.
We do most home maintenance and improvements ourselves and this provides a lot of savings.
What is your favorite thing to spend money on/your secret splurge?
We like to travel and try to take a family vacation every year.
Typically we like to go to an East Coast beach and have been to many States up and down the East coast. We have taken two large vacations with the family (Europe and Hawaii), but those were special trips that we saved for years before planning.
What is your investment philosophy/plan?
Our investment philosophy has evolved over time as we learned more about the markets and products available.
We originally started with loaded and managed mutual funds and we also owned individual stocks. We have moved to index funds for nearly all of our investments to lower fees. We are clearly long-term, buy and hold investors.
A very powerful tool that we started after the dot-com crash was to specify a desired asset allocation (e.g. 75% stocks and 25% bonds) and then rebalance when that allocation is out of balance (i.e. > 5%). This takes all of the emotion out of it and forces you to buy low and sell high.
I can provide a poignant example of the value of this philosophy. When the housing crash occurred in 2009, we were already utilizing the rebalance strategy. I was in a water cooler discussion with a colleague at work who was 55. He offered up that he had just sold all of his stock investments after the drop because he could not afford for the market to go any lower. I was doing the exact opposite without any emotion. Actually I was quite happy, I was getting stocks on sale!
This demonstrates that you have to take the emotions out of investing (greed/fear) and stick to a plan. Our asset allocation has gotten more conservative over time (currently 55% stocks/45% bonds), but we always rebalance to that allocation without emotion. This strategy has been successful in 2020 with the highly volatile market.
What has been your best investment?
Our educations were probably our best investments which allowed for good paying careers.
I also believe finding a financially compatible spouse is critical. My wife and I were engaged for 4 years and really knew each other’s habits, including financial, before we were married.
I would recommend anyone who is getting married to discuss finances beforehand. Commitment to career and savings cannot be achieved without both spouses in agreement.
What has been your worst investment?
In my 20s, a friend convinced me to start a business with him. It was both a money and time drain!
My wife and I committed $8K to the business and countless hours.
The business never took off and we were out our investment in time and our $8K.
What’s been your overall return?
Retirement savings has grown at about 9%.
How often do you monitor/review your portfolio?
Early on we used Quicken to manage all of our investments. We still use Quicken for the bank accounts and to track spending, but I set up an Excel spreadsheet to track all of our investments 15 years ago.
I established the Excel spreadsheet to project the value of our investments based on 3%, 5%, 7% and 9% returns and with and without annual savings. We then established goals for college savings ($100K per child in 529s) and retirement ($2.5M, more on this below).
I then modeled different savings rates to see if the goals would be reached at the desired times (i.e. by 18 years of age for each child’s college savings and by 65 for retirement) using worst case scenarios. I have also added monitoring of my desired asset allocation and percentage of retirement savings that is tax free (i.e. in Roth IRAs or Roth 401Ks). I update this spreadsheet quarterly.
How did you accumulate your net worth?
Net worth is all through savings and investing.
I would say that I have always been well compensated for my position vs. my peers and my salary (Earn) certainly provided the money to save.
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?
First savings and then investing.
We found ways to save even when our salaries were much lower.
Then time and compound interest took over.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
We have always lived well below our means, so we really never faced any bumps in the road that had an appreciable impact.
What are you currently doing to maintain/grow your net worth?
Continuing to save until career transition (see below) and manage to desired asset allocation by rebalancing.
Do you have a target net worth you are trying to attain?
Our current goal is $3M.
Our original goal was to have $2.5M in retirement assets by 60 years old. This number was calculated by using the 4% rule and $100K desired annual income (e.g. $100K/0.04 = $2.5M).
As I have read a lot about the 4% rule on this site and others, I think a more conservative withdrawal rate would be safer. So we have been targeting $3M which would easily provide $100K of income at 3.3% withdrawal rate.
We are already above $2.6M and expect to hit $3M in the next two or three years through additional savings and appreciation.
How old were you when you made your first million and have you had any significant behavior shifts since then?
45 for $1M in retirement savings. 38 for $1M in total net worth (e.g. home, non-retirement savings, retirement savings).
No shifts in behavior. We didn’t even know about the date of reaching $1M in assets until we figured it out for this interview.
I think we celebrated the $1M in retirement savings with a cheap bottle of sparkling wine!
What money mistakes have you made along the way that others can learn from?
Early on in our 20s, we did not follow a disciplined rebalance strategy nor even had a desired asset allocation.
Right before the dot-com bubble burst (early 2000), I was thinking that market values were pretty high with some of our technology fund investments and my wife told me to sell off some. Of course, my greed and not knowing where to move the money, prevented me from selling! That is why I think the asset allocation / rebalance strategy is so powerful; it takes the fear/greed emotions out of investing.
What advice do you have for ESI Money readers on how to become wealthy?
Start early! Compound interest is amazing. But if you didn’t start early, then start today.
Take advantage of any free money from your employer (e.g. 401K matches and college tuition).
Pay yourself first…only allow yourself to spend what is left over after saving.
If you are reading this, you are doing the first thing and that is to take an interest in your finances. Following the ESI model is an easy concept, but hard to do in practice because it requires discipline. It is the same as any other goal in life (e.g. exercise, weight loss, eating better, quitting smoking), you need a plan and discipline.
Once you get started and your actions become habit, then it really becomes much easier. Then compound interest kicks in and it becomes even easier.
What are your plans for the future regarding lifestyle?
My plan is to transition into non-profit work in the next two years as a way to do something with more meaning.
I hope to do this for a salary, although I know I will take a significant pay cut. So I expect our annual savings will drop to nearly zero and our wealth growth will be only through appreciation.
My wife is also considering to go back to work part-time as our kids all enter college.
My hope is to work in a non-profit for compensation until I am 60 and then fully “retire.” If the non-profit work doesn’t pan out, then I may retire before 60.
What are your retirement plans?
We will probably stay in the area where we live, since we like the city.
We plan to live for short stints of a month here and there in various cities, probably in the south during the winters.
We will volunteer some of our time to charities we are involved in.
We do plan to travel, maybe even in an RV to see the US.
We also have many interests (> 3.5 recommended!) including tennis, walking, hiking, reading and music that will more than fill our time!
From a financial perspective we are close to achieving our $3M goal, and we still expect to work 6 or 7 years. Then we will take about $100K from our retirement savings only for 5 years or so. Then we would start to take the pension and SS which should contribute around $50K from 65ish on.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
The biggest concern is funding health care.
That is one reason I plan to stay employed until 60, to reduce the amount of time before Medicare.
How did you learn about finances and at what age did it “click”?
My wife and I were both interested in finances early in our marriage. We subscribed to Kiplingers and Money magazine in our 20s and listened to local radio shows about investing through the years.
We also read many books on personal finance and investing.
We have always talked a lot about our savings goals and our investments.
We still continue to read magazines and books on retirement and investing, many of them recommended from this site.
Who inspired you to excel in life? Who are your heroes?
I can’t think of any specific heroes, but we both learned a strong work ethic and frugality from our parents.
I attribute these traits from our parents being immigrants and coming from meager backgrounds. They truly understood the value of having a job and saving money for hard times.
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?
Reading the Millionaire Next Door was quite inspiring because we were already saving heavily and saw ourselves reflected in the stories. I would say that book gave a blueprint of what was possible.
From an investing standpoint, A Random Walk Down Wall Street was also very impactful. It helped me understand the landscape of approaches to investing and solidified our direction on low cost index funds/asset allocation/rebalancing.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
We do give to charity because of our faith and our desire to share our blessings.
Our cash donations are about 3% of gross, but we also donate used goods and our time.
My wife is very active in volunteering at school, at church and other activities for our kids. I am also active in a social services charity.
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?
I am sure there will be inheritance due to the conservativeness of our plan, but it is not something we have as a goal.