Millionaire Interview 249

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 January.

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)?

My wife and I are both 34.

We’ve been together for about 9 years and married for 4.5.

Do you have kids/family (if so, how old are they)?

We do not have any kids yet, but it’s a priority for 2021!

What area of the country do you live in (and urban or rural)?

We live in a small suburban town in the northeast after recently relocating from the SF Bay area for my job.

What is your current net worth?

As of January 2021, our net worth is $1.66 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?

Our net worth is almost entirely composed of stocks and ETFs invested across Roth IRAs, traditional IRAs, and brokerage accounts.

A small percentage (<5%) is invested in cryptocurrency directly, and an additional small percentage is liquid held across a few checking accounts.

We are renting while we learn the area and look to buy a house, and we have about $30k in debt for a recent car purchased at a very attractive financing rate.

EARN

What is your job?

I am an Operations executive (VP level) at a small to medium skincare brand.

My wife works in healthcare as a radiological technician.

What is your annual income?

My annual income is about $150k, with a 20% annual bonus.

My wife is currently unemployed due to our recent move, but her income has been consistently around $50k depending on her actual hours worked.

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 began my job search in 2008, just in time for the financial crisis to grip the country. Luckily, I was still able to land an entry level engineering job (earning $40k) working at a contract manufacturer of skincare products.

I was surprised to find how much I enjoyed the job! I had always enjoyed learning new things, and the world of personal care was completely new to me. It was incredibly satisfying to learn the process to make complicated water and oil emulsions, and even more so to learn how to fix batches that didn’t turn out correctly.

Within a few months I was given a 10% raise (44k) by my department head, despite the company’s (and the world’s) financial situation. I was honestly shocked. He said he wanted to demonstrate their appreciation of my hard work, and that he knew with the rate I was learning I would have a lot of other options available to me. This move certainly made an impression on me, and although merit increases were frozen for nearly two years immediately after this, I stayed loyal to the company.

By the end of 2010, I had gained quite a bit of expertise around manufacturing, and as a result I was promoted to my first supervisory role (55k). This was probably the hardest role I’ve had to this day – I was 24 and was supervising twenty direct reports 2-3x my age, all of whom were at least a bit skeptical of me. I learned incredible lessons about managing a team – how people are motivated by different things, how to earn your team’s respect, and how to deal with problem employees. After one year, I was given a raise to $60k, and then to $65k the following year, largely based on meeting the department’s targets.

In 2013, I was hungry for a new experience – I wanted a job that would allow me to travel. I tapped my network and found a large skincare brand on the west coast was hiring a chemical engineer (with no direct reports). I got the job at a $80k +5% bonus starting salary, which was roughly a wash with the large increase in cost of living.

I picked up a junior engineer ‘mentee’ along the way and earned roughly 5% raises each year. I was just a hair below $100k in 2017, when I had a lucky break – a surprise departure above me gave me an opportunity to manage my department. This brought me to 110k + 10% bonus, and half a year later, another surprise departure led to me folding a related department into mine. I was leading a team of 11 professionals earning 130k, and then 140k the following year.

I also started doing some small consulting jobs – there was no shortage of personal care startups in the bay area who needed help developing products or scaling up their manufacturing to meet their growing demand. I didn’t charge too much and always gave tons of free advice. I earned about 15k/year consulting, but more importantly I broadened my network considerably.

Based on a word-of-mouth recommendation, I was contacted by my current company with a compelling offer to manage their operation. The salary increase was marginal, but the cost of living reduction was considerable, and I have an equity share in the company’s success.

What tips do you have for others who want to grow their career-related income?

Unlike many of the millionaire interviews I’ve read – I wasn’t naturally an overachiever, or even a particularly hard worker. However, I love learning and understanding how things work (and as a result, how things often fail). My recommendation is to develop some expertise in your field by digging deeper than most people will for the ‘why’. Become the person who your company ‘can’t afford to lose’ simply based on your knowledge and perspective. Once you’re that person, see if you can leverage that knowledge for some side income.

When something goes wrong, keep your cool and focus on finding a solution. Avoid the natural reaction to figure out who screwed up, or to defend yourself. If you become known as the person who can cut through the chaos and find a fix, you will be given opportunities as they arise.

Perhaps the simplest piece of advice – be likable! Try to give more than you take. Help people and take no credit. Put others’ successes (and especially your direct reports) on display. Ultimately the person deciding whether you get ‘average’ or ‘outstanding’ on your performance review is a warm-blooded human that responds to emotion. Make the emotions associated with you positive ones.

What’s your work-life balance look like?

My work-life balance is pretty good.

I was traveling internationally about 25% of the time in my last job, but in my current job it will be much less.

With the pandemic raging, I’m remote more days than not.

As a result, I end up working more total hours, but it’s on my terms and in shorter bursts, which is better for me and my wife.

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 was doing a bit of consulting for the last few years, but I’ve put that on hold while I get my bearings at my new job. I will probably resume taking a few jobs here and there next year and I aim to earn about $15-20k yearly.

I also dabble in some other money-making activities, like reselling, as a hobby. The profit earned doesn’t really justify the time I spend, but I enjoy the game. I’ve always been a deal-hunter, and I got really interested in credit card rewards several years ago. I resell merchandise and gift cards (buying at a discount and selling at a lesser discount), primarily to earn ‘points,’ but a small profit tends to accumulate as well. Over the last three years I’ve spent about 400k on gift cards and merchandise (earning 1-5x points or cashback on the spend) and earned about 20k in profit.

SAVE

What is your annual spending?

Outside of the spending for reselling, my wife and I spend about $40k/year on the household, and $5-$10k each on individual discretionary spend.

What are the main categories (expenses) this spending breaks into?

For the household spending annually, averaged over the last three years (as COVID has altered some of this spend as of late):

• Rent, utilities, car insurance, etc – $26k
• Groceries – $4k
• Food & Dining Out – $4k
• Household Shopping & Gifts for others – $3.5k
• Travel & Entertainment – $4k (hugely subsidized by points)

Do you have a budget? If so, how do you implement it?

We don’t have a household budget, but I track and categorize all our transactions using Tiller to review monthly and yearly trends. I update my wife on directional changes that stand out, but we have never had to course correct.

On the personal side, I’m relatively frugal and naturally don’t spend much. My wife likes to shop, but she’s adopted a lot of my restraint, and she’s learned to use cashback portals on her own purchases which helps to stretch her buck.

We combined finances a few years before we got married but we struggled a bit to find what would work right for us. I had trouble not commenting on personal purchases my wife would make, and she didn’t like feeling judged or feeling like she couldn’t buy what she wanted. It became obvious we would need to have a household account and separate personal accounts.

We tried several systems – each getting a % of our incomes via direct deposit, each getting a flat monthly amount, but she often found it difficult to plan for large future expenses (like a girl’s trip away) with the ‘drip deposits’ of a bi-weekly or monthly deposit.

We ultimately settled on a lump sum ($10k) into her personal account at the start of the year, and she manages her own monthly spending budget. Since I tend to spend much less, I don’t take any money out of my paycheck and I just keep track of my personal purchases on a spreadsheet.

What percentage of your gross income do you save and how has that changed over time?

Our spending has not changed very much since found our stride towards the end of 2014. As a result, our savings percentage has gone up considerably as our incomes have grown.

We have averaged between 60-65% savings rate of net income (does not include any payroll deductions) over the last few years which I started visualizing in a “household P&L.”

Compared to gross income, 401k contributions count towards savings and help offset taxes and other deductions but not fully. Our savings rate would likely dip into the mid to high 50% range.

What’s your best tip for saving (accumulating) money?

Track your spending!

There really is no other way than to find some way to visualize how you are spending your money. If you don’t know how much money you are spending per month, and where that money is going, you’ll never be able to adjust your habits.

What’s your best tip for spending less money?

Try to extend the latent period between want and buy. Almost everyone goes through the same process before buying something. You get the idea, through a perceived need, an ad, a friend’s recommendation, watching youtube, etc. You do some research to determine what product to buy, you read some reviews. And then you buy the product.

The difference is savers have a much longer period between the initial idea and the final purchase. It can manifest in different ways – some people spend an agonizing amount of time researching, others have natural ways of distracting themselves. Spenders, on the other hand, go from want directly to buy. But nearly everyone, once the train gets moving, completes the purchase at some point.

Purchasing products is the adult equivalent to the marshmallow test. Figure what you can do to wait a little bit longer before eating the marshmallow and you will naturally spend less.

Plenty of other good ideas out there work on the same principle. For example: ‘write the item you want to buy down, and if in 30 days you still want it, buy it’ or ‘keep a list of your purchases and review it after a period of time to see if purchase X was worth it or not’.

What is your favorite thing to spend money on/your secret splurge?

I love this question because I read every interview hoping for a new idea for a personal splurge, but everyone says travel! I like travel as much as the next person, but I would not call it a ‘secret splurge.’

Looking over my personal purchases, it’s clear I like splurging on coffee related stuff for the home – high quality beans, different brewer types, and a roaster. I love the ritual of making coffee.

On a larger scale, I splurge on cars. I love the excitement of shifting gears, or of diving into corners and feeling the sideways forces. I’m not buying lambos or anything, but I tend to buy cars with MSRPs in the 50-60k range. I buy used, though, aggressively deal hunt, and keep them forever.

INVEST

What is your investment philosophy/plan?

My investment plan has evolved a lot in the last ~10 years. I started out uneducated and tried my hand at stock picking. I did OK but would have been better just indexing.

After a few years I found bogleheads and ETFs and I followed a 3-fund portfolio but continued to stock pick in my Roth IRA. My index funds did significantly better than my stock picking, because I had no strategy regarding research or bet sizing.

In recent times, we have a base in ETFs, but about 50% of our invested NW is in individual stocks. Most have a long-term hold bias, but there are some current trends as well. My wife picks all her own stocks in her Roth and picking companies she interacts with (i.e. Lulu, Netflix, Paypal) has had really solid returns as well.

What has been your best investment?

My best investment was in Shopify around $100, which I still hold today.

My best ‘investment’ was into our marriage, which has far surpassed how important any personal investment (schooling or otherwise) has been. Picking the right partner has been the single most important decision of my life.

What has been your worst investment?

There have been a lot!

When I was in college, I bought into a website called “Studio Traffic” which required you to buy in for some amount of money, then browse advertisements through a browser window each day. Each day you did this, you accrued 1% of your investment. In one year, you would earn 365% of your investment! And the bigger your initial investment, the more money you would make.

Looking back, it was clearly a ponzi scheme, but a friend had recommended it to me and had received actual checks (as early adopters tend to in ponzi schemes), plus the advertising angle convinced me there was an actual revenue stream.

One day they closed up shop and totally disappeared and my $800 was gone.

What’s been your overall return?

This is hard to calculate, but I’d guess we are running hot – 10%+/year and a big ahead of the stock market in the last decade.

Better to be lucky than good.

How often do you monitor/review your portfolio?

I check every day on my phone using Jstock, which syncs to the cloud and can be used on my phone and desktop.

I don’t make changes often and while I sometimes trim winners, I don’t actively rebalance towards any specific target weights.

NET WORTH

How did you accumulate your net worth?

Our net worth is largely earned through saving and has rapidly accelerated in the last few years. In some ways this maps to our income increasing, and in others it maps to strong stock market growth.

I always read that ‘the first million is the hardest to make,’ and looking at the graph of our net worth it’s clear that this is just the work of growing incomes and compound interest.

I’m sure if I zoomed in, the first $100k would be harder than the 2nd, too.

We don’t spend much more today than we did when we first combined finances, but my income has nearly doubled since then.

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 think it would be a toss-up between save and invest.

I think our savings percentage is pretty high, but we have also been really aggressive about getting our savings into investments ASAP.

What road bumps did you face along the way to becoming a millionaire and how did you handle them?

It has been a long game. There have been some tough years, like 2018, where our net worth growth stalled because the market was flat or worse.

There have been some places where I’ve made bad decisions. I sold some stocks I expected to get hammered in March 2020, only to see the market charge higher.

I just treat everything as a learning experience, and I’ll try to do better next time.

What are you currently doing to maintain/grow your net worth?

Working and continuing to invest!

I have a couple of other irons in the fire with future consulting opportunities which I hope to parlay into board seats with some small equity slivers in startup companies.

I also am reading a lot about real estate investing, as the acceleration potential from the leverage is exciting.

Do you have a target net worth you are trying to attain?

One of the ways I initially got my wife on board with saving was to say we could retire by 40.

The assumption was we could get to $1 million and use geographical arbitrage to our advantage to make the early years stretch while compound interest gave us a hand.

I thought it was our reality then, but it’s not anymore. Either way, it was a great long-term goal to give us something to rally around.

These days, we want to have kids, so I’ll probably keep working for a while, without a target number in mind.

How old were you when you made your first million and have you had any significant behavior shifts since then?

I had just turned 33. We haven’t had any change in behavior at all.

Sometimes we like to just say it to each other – ‘we’re millionaires!’ because it reinforces 1) we’re safe, we’re secure and 2) we did it, we set a goal and we accomplished it together.

When we set the goal all those years ago, I never would have guessed that #2 would be so powerful.

What money mistakes have you made along the way that others can learn from?

Sometimes I have been too sensitive to what people think.

For example, beginning of March 2020, I bought stock in Zoom. But several people I trusted said “video conferencing will be commoditized any day now, there’s nothing special about Zoom,” and I sold early for a 25% profit.

Since then, I started keeping an investment journal. It’s really brief, but I jot ideas down, and when I make a purchase, I put some comments down about why I’m investing. I read through my previous purchases once a month or so and think “has anything changed?” I only take action if something changes my original thesis.

What advice do you have for ESI Money readers on how to become wealthy?

Pick the right partner. Talk about money with them long before you get married. Set goals together, have fun along the way, and celebrate your successes.

Talk to friends about money. Talk (abstractly if you have to) about salaries with colleagues. You never know where good ideas or valuable information will come from.

Understand where you add value at work and lean into that. Don’t overestimate how important you are, and don’t get complacent. Immediate dollars aren’t everything – don’t leave a good boss for a marginal pay increase.

FUTURE

What are your plans for the future regarding lifestyle?

My goal is to grow and gain the next set of valuable skills in my current job, then reassess. The company is likely to be sold in a few years and depending how that works out (and whether we have kids, and if so, how many), we will figure out our next steps.

If we have a successful exit, it’s likely I will have a next ‘hired gun’ type of assignment offered so we will have a decision point about continuing to work and potential relocation.

What are your retirement plans?

I have no idea what to expect in retirement. If we don’t have kids, I do expect we’ll try living in another country ‘travelling slowly.’ If we do have kids, I will probably pursue a soft retirement, consulting or working part time.

I’m looking forward to diving back into physical fitness, and I could easily see myself spending hours gardening or woodworking.

Are there any issues in retirement that concern you? If so, how are you planning to address them?

Of course, healthcare.

There are a few ways to mitigate the risks and the costs, but we’re not at the point where we really need to figure this out. I’ve toyed with working part time at a company that’s known to offer benefits to part-timers, self-funding, health sharing, etc.

But the world is ever changing, and retirement is several years in the future for us.

MISCELLANEOUS

How did you learn about finances and at what age did it “click”?

I learned about finances late, I think.

After 1-2 years at my first job, I had <5k in the bank. Once I ran the numbers, I think after my 2nd W2, I was like “wait, where did the 80k I made go?” I realized that I was living life the same way I did in college – if I had >$1k in my bank account I did whatever I want, and if I had <$1k I stopped doing anything. It was a good solution in college when I had a $10/hr part time job, but it did not make sense in the real world.

At 24, I opened my Roth and maxed it out and started contributing to my company’s 401k to capture the match. It wasn’t until I started reading about retiring early and the 4% rule (around 25) that I really put a plan in motion.

Who inspired you to excel in life? Who are your heroes?

My parents have been tremendous forces for good in my life.

They instilled patience and goal setting in me at a really young age.

My sister is a few years older than I am, and I learned so much from her watching her navigate through life a few steps ahead of me.

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?

Here are a few that come to mind:

• The Millionaire Next Door – I fell like this should be required reading in high school. It is such a great introduction into general concepts and life decisions that point you in the right direction.
• The Power of Habit – Not exactly a money book, but a really enjoyable read. Learning about some of the psychology of my own choices and how I can be manipulated has been very important to me
• The Slight Edge – More of a general self-help book than a money book. I like the idea that every decision is a slight one, but the aggregate of your decisions point either towards improvement or deterioration. I also like the ‘penny doubled everyday’ and the ‘water hyacinth’ parables.

Do you give to charity? Why or why not? If you do, what percent of time/money do you give?

We don’t give to charity, currently.

Philanthropy is important to us and we plan to give freely of our time and money in retirement.

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?

No heirs at the moment, and I have a hard time answering this question.

Hopefully we have a long time to figure it out! I am not against leaving an inheritance if we have kids, but the specifics are hard to determine without knowing more about our future.