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 July.
My questions are in bold italics and their responses follow in black.
Let’s get started…
How old are you (and spouse if applicable, plus how long you’ve been married)?
I’m 39, my wife is 40.
We’ve been married for 12 years.
Do you have kids/family (if so, how old are they)?
Yes, we have two kids, ages 5 and 8.
What area of the country do you live in (and urban or rural)?
We live in the United States.
Specifically, we’re in the high cost of living Northern Virginia area just outside of Washington DC.
What is your current net worth?
Just above $2.4M all-in.
That includes the rough value of our primary residence (minus 10% to cover selling costs), mortgage, all financial accounts, and the value of our rental property business accounts.
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?
The majority of our net worth is tied up in retirement accounts – 401k, Roth, and HSA.
I included our primary residence and deducted the mortgage from the total.
What’s not included is a relatively recent business venture hosting short term rental guests at a vacation house nearby.
What is your job?
I’m a director of business development at a large defense contractor.
I grew up as an engineer and moved through various roles until I found this position and have advanced rapidly in recent years. The job entails tracking new business opportunities, coordinating with customers, competitors, teammates, and the internal organization to grow the business.
My job has been a little crazy over the past year. My part of the company was sold to a venture capital firm then merged with another defense contractor. Having worked with a publicly traded company for nearly 15 years, life in private equity over that past couple months has been a little different.
I assume we’ll go public in a couple years and I’ve heard from friends that the year or so before that happens, work will get pretty crazy with cost cutting measures. I have never worried about my job safety before so I don’t look forward to that. I expect I will continue to perform at a high level, though, so should be ok!
My wife is a physician practicing academic medicine which means she’s underpaid relative to her peers but has a relatively normal 9-to-5 schedule most of the year.
What is your annual income?
Our combined income is almost $450k/year including bonuses which aren’t guaranteed.
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 software engineer making $60k/year in the Midwest which was a ton of money.
It grew steadily over time while I was there as I performed well and was promoted to a more senior engineering position. I spent several months on-assignment with our customer and turned around a major program that was failing to a major success which is still going strong today.
After that success, I was chosen for management roles still at the organization’s ‘home base’ in the Midwest. We moved to the DC area after my wife finished her medical training and I took assignments in the larger organization which enabled my salary to grow rapidly to where it is today.
My wife took roughly the standard medical route – med school (pay $$$), residency (earn $), fellowship ($+), physician ($$). In academic medicine, her salary will increase slowly as she moves up the professorial ranks.
What tips do you have for others who want to grow their career-related income?
The old adage ‘it’s not what you know, it’s who you know’ is about 80% correct. You have to be competent and good at what you do first and foremost – those are table stakes. Once you have that down, it’s all about who you know.
I built my career by networking and collaborating with everyone in the company that I could. This also includes going up the chain to schedule meetings with company leadership and ask for mentoring to build the relationship.
When new opportunities arise in the organization, it’s those relationships that help leaders know who you are and bring you into the fold.
What’s your work-life balance look like?
It’s pretty great.
In the business development role, it’s mostly about collaborating with other companies, customers, and the internal organization in order to align the organization to win new work. There are few near-term deliverables, no customer breathing down your neck because something went wrong, it’s great.
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?
About 18 months ago we purchased a vacation home about two hours away from our primary residence. The original intent was to try listing it on AirBnB and VRBO to see how it would do when we weren’t using it. It took off like gangbusters and is now rented nearly every day of the year. It earns another ~$50k+/year not including the mortgage paydown.
We’ve looked at purchasing a second property but with COVID, everyone is snapping up properties in the area as fast as they’re put on the market and prices are through the roof. We’re waiting on things to cool down before we get another one but we definitely will!
I think this short term rental investment may be something unique that your readers will be interested in. I purchased the home in a resort community that has a lot of residential properties as well as investment homes. The seller also owned a couple short term rental properties in the area and part of the sale agreement was that he’d help me get started with my venture. That help was critical in getting me started! I had wanted to buy rental property for about 15 years but there was always something holding be back. Having a helping hand push me forward was critical!
I list the house on several short term rental platforms (e.g., AirBnB and VRBO) and manage the property myself. I have a reliable handyman that lives a couple minutes away from the house and a cleaning company owned by a couple that also has several short term rentals in the resort who have also been super helpful to answer questions and get me started. 90% of the rental guests are wonderful and a huge lesson learned was with increased nightly prices come better guests. In the early days, I priced the house pretty low in order to fill it up and ended up with a house full of young adults that didn’t respect the house and caused a lot of stress. Now I have people paying for summer weeks that are three times what my mortgage costs and they are significantly less trouble.
One challenge of being remote is taking care of maintenance on the house. For something easy that guests inform me about, my handyman can usually take care of it quickly. When a platform on the stairs rots out, it’s bit more of a challenge to find downtime in the schedule, coordinate with the handyman and get it taken care of. For the money, though, it’s been a fantastic investment.
What is your annual spending?
In 2020 we spent about $100k as a family.
What are the main categories (expenses) this spending breaks into?
Living in a high COL area, our largest expense is the mortgage.
With two little kids and two working parents, our second largest expense is daycare.
Those two are roughly equal but both are dropping after a recent refi and our oldest kiddo almost able to take care of himself before/after school (or us being home due to COVID) and our youngest starting Kindergarten in the fall. These two dwarf all other expenses.
Do you have a budget? If so, how do you implement it?
No, I’ve always been frugal and my wife isn’t much of a spender either.
We’ve always earned significantly more than we’ve spent and never took the time to make a budget.
What percentage of your gross income do you save and how has that changed over time?
Good question. This is hard to do the math on – we max out 401ks (including Mega Backdoor Roth for me), Backdoor Roths for both of us, HSA, and 529s for both kids up to the limit for state tax deductions.
After that, we keep money separate to pay the joint bills and the rest goes to taxable investing, savings accounts, or whatever seems to make the most sense at the time. So all in, at least 50%.
What’s your best tip for saving (accumulating) money?
Earn more than you spend so that it takes care of itself.
What’s your best tip for spending less money?
Research the heck out of everything so you eventually can’t make a decision and don’t end up buying anything. 🙂
Also, I try to buy things used from Craigslist or Facebook Marketplace or borrow things from friends. It’s surprising how few things you actually need to buy new.
What is your favorite thing to spend money on/your secret splurge?
Whatever’s new at Costco.
Also, kid activities. It’s crazy how quickly I’ll spend $150 on swimming lessons but I won’t spend an extra $3 on cereal when it’s not on sale.
What is your investment philosophy/plan?
This is something I’m struggling with lately. I started my asset allocation after reading Paul Merriman’s slice and dice advice – the 8 fund portfolio allocated tax efficiently across the various account types.
That was fine when I didn’t have kids and had more time to keep it all balanced but now I’m investing new money in Fidelity Target Date Index Funds because it doesn’t require any thought and the fees are low enough that they don’t bother me.
What has been your best investment?
In recent memory, definitely the short term rental house.
I’m amazed at what folks pay to rent it for a week in the summer compared to what we bought it for. Don’t get me wrong, I spend a lot of time communicating with guests, we furnished it very nicely, and we stay there ourselves so we keep up on maintenance that other owners might not.
Anyway, we have a good product and people pay for it – it’s wonderful!
What has been your worst investment?
I bought a share of Gamestop at the height of the WallStreetBets fun.
I spent way too much time reading the subreddit and logging into their Discord server – it was just a fun ‘screw the man’ kind of thing so I bought a single share. I’ve lost a couple hundred bucks but nothing serious.
Otherwise, all of my other investments have been long term index funds buys and, over time, they’ve all been positive.
What’s been your overall return?
I have no idea.
I’ve dollar-cost-averaged most of my investments and they’re split across multiple brokers so it’s really hard to say without pulling it all together.
I’ve tracked Net Worth for a really long time but I’ve never pulled out contributions vs. earnings to calculate the return percentage.
How often do you monitor/review your portfolio?
I update net worth monthly but I don’t dig into returns. I use Fidelity for my primary and joint checking accounts so when I log in sometimes I see how other investments are doing and either say ‘neat!’ or “that’s no fun” but I don’t take action – I just let it sit there and do its thing.
How did you accumulate your net worth?
I’ve accumulated it steadily over time.
As my career has grown and the earnings along with it, I’ve just piled money into every advantaged account available.
Most recently I’ve been able to max out my Mega Backdoor Roth IRA which is amazing. It all goes into various index funds and it does its thing while I keep working and spending a smaller and smaller fraction of the income.
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’d say I’m decent at all three – a jack of all trades, master of none.
I’ve been lucky in my career to make connections with the right people who have looked out for me in times of change and transition and provide me with great opportunities.
Investing has been middle of the road, taking the index path and not really chasing the hot trends (although I do wish I could be in front of them!).
I’ve always been frugal and look for the best deal on everything so maybe Saving is my super power.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I’ve been very fortunate to not hit any road bumps along the way.
It’s been a very steady growth path of ‘staying the course’ as the Bogleheads would say.
What are you currently doing to maintain/grow your net worth?
I’ve been looking at picking up an additional short term rental house, probably in the same area as my existing property so I can use my existing cleaners and handyman.
This area has relatively normal property values but the rental prices are great!
Do you have a target net worth you are trying to attain?
Funny enough, I always thought that $2.4M was my number – at a 3% withdrawal rate, that would give enough money to pay our mortgage and enough spending for us to have fun. Kids’ activities are getting more expensive and it just doesn’t seem like as much as I thought it would.
A lot of our net worth is tied up in our primary residence and I don’t have as much in my taxable investment account as I probably should.
Lately I’ve been saving a lot in cash to take advantage of a 3% rate at Hatch instead of putting it in the investment account.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I was 35 when I first hit $1M.
I’ve had no behavior shifts – still chugging along!
What money mistakes have you made along the way that others can learn from?
I’ve been lucky to not make any significant mistakes along the way.
I’ve always been a bit of a money nerd and have spent a lot of time researching and then implementing a relatively basic, simple plan to earn a fair amount, save most of it, and invest the difference.
What advice do you have for ESI Money readers on how to become wealthy?
Follow the ESI model – it works!
Be sure to nurture your professional connections. Every career opportunity I’ve had has come from talking to peers and leadership to let them know what I’m looking for. When opportunities arise, decision makers should know your interests, what you’re good at, and that you’re interested in trying something new.
Also, don’t hesitate to ask for help. I reached out to about a dozen short term rental property owners in the area I wanted to invest before one agreed to meet up and talk about it. I ended up buying my property from him and it’s been a fantastic investment. While we don’t know the future and what will happen to us if we make certain decisions, we have the unique ability to talk to folks who have made those same decisions and learn their lessons ahead of time.
What are your plans for the future regarding lifestyle?
I had calculated my ‘number’ as $2.4M but now that I’m here it doesn’t seem like enough.
I mostly enjoy my job so I’m not in a hurry to retire just yet even though I’ve thought and talked about doing it for some time. I assume I’ll keep working at least the next five or so years.
As the kids get older, their activities get more and more expensive which gives me less confidence in that number. While I anticipate my wife will work longer than me, I don’t think we’ll make big changes in the near future.
What are your retirement plans?
I assume I’ll retire well before my wife – she really likes her job and I’m indifferent. I don’t dislike it by any means but I’m also not driven to work on it at as my passion.
I remember listening to a podcast or a Robert Kiyosaki book or something that talked about owning apartment buildings all over the place and keeping one unit vacant so you could live there whenever you wanted. That idea always appealed to me and influenced the purchase of the rental house. Now the goal is to own multiple vacation rentals at various locales so we can visit our beach house, mountain house, lake house, or whichever sounds the best at the time!
With two small kids, though, I assume I’ll keep working for some time. Their activities are getting more expensive by the year so having an income seems pretty wonderful to help take care of those expenses!
Are there any issues in retirement that concern you? If so, how are you planning to address them?
My biggest concern is that I’ve always been a saver so I think transitioning to making withdrawals will be hard for me. I’m sure I’ll overcome that, though.
Similarly, I’ve always had a job with income much greater than my expenses. When I transition to no-employment, I think that will be challenging.
How did you learn about finances and at what age did it “click”?
I remember my step-mother making a comment when I was young (12ish?) that they paid off their credit cards each month and that was interesting to me for some reason and has always stuck with me. I also remember digging into FatWallet Finance starting when I was in college, reading a lot about the various deals and real estate investing strategies.
When I graduated from college and started my career there was a boom in those now-famous financial blogs like Get Rich Slowly, MyMoneyBlog, and other great ones I still read today. I learned a lot from those early blogs and reading them reinforced good behavior as I started to earn a real salary.
Who inspired you to excel in life? Who are your heroes?
I don’t really have any great inspirations. I just try to do a good job!
I do really like Ben Franklin as a historical figure. I appreciate his wit!
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?
Jonathan Clements How to Think About Money is a good, short primer that I recommend to friends.
Otherwise, I mostly just read blogs.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
My wife donates cash to several charities she believes in.
We also donate a significant amount of used clothing from the kids and ourselves to Goodwill.
We track it all with ItsDeductible – it’s a hassle but the tax savings are worth it.
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 don’t have a specific plan right now as to what we want to leave behind.
I think taking care of ourselves financially and paying for a good chunk of their college to get them started on good financial footing is enough – no need to specifically plan for more at the end of our lives!