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 August.
My questions are in bold italics and their 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’m 37 and my wife is 36.
We’ve been married nine years.
Do you have kids/family (if so, how old are they)?
We have three kids: 6, 4, and 1 (two girls and one boy).
Life is crazy, especially during COVID, and I have learned to embrace the chaos.
I really enjoy our kids, and they are certainly worth all the craziness that comes with them.
What area of the country do you live in (and urban or rural)?
Suburbs of Seattle, Washington.
What is your current net worth?
Total is $2.675 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 $2.675 million net worth consists of:
- Backdoor Roth IRAs: $77k (index funds: 70/30 domestic/international)
- 401ks: $605k (index funds: 70/30 domestic/international)
- Cash in accounts: $138k (waiting to deploy some into a business investment this month and some earmarked for upcoming quarterly tax payment)
- Home equity: $1.356 million (home valued at $1.8 million, mortgage debt of $444k)
- Vehicles: $110k (newish and high quality, no debt)
- Cash currently available to me in my law firm: $30k
- Value of my interest in performing promissory notes that I’ve purchased: $105k
- 529 accounts: $77k
- Jewelry and watches: $27k
- Value of my equity interest in my law firm: $150k. I have significantly more in my column in A/R and WIP, but to collect it requires me to keep working and keep the lights on at the firm (which involves paying overhead which eats up some of the A/R). If I were to leave the firm, I would receive at least three months of collection, so $150k value makes sense for this purpose.
Beyond the mortgage, we have no debt.
EARN
What is your job?
I’m a partner attorney at a small and highly specialized/niche firm (seven attorneys, twelve staff members), and my wife stays at home with the kids working just enough at my firm to fully fund a 401k.
I’ve been an attorney for about twelve years and an equity partner attorney for five years. Due to my law firm’s specialization, we can do a lot of work that the mega firms do at much lower rates which works out really well for us. Our work really ebbs and flows with certain aspects of the economy, so there can be stressful periods when work is coming in fast and other periods where the phone isn’t ringing. I feel significant pressure to keep the associate/non-partner attorneys and paralegals busy with work.
For the most part, I really like my job and it has afforded my family a wonderful life. I work fairly regular hours, eat breakfast and dinner with my family, and I check-out from work on most weekends.
This was not possible when I was grinding my way up the totem pole as a young attorney coming out of law school during the economic recession and working long hours. The hard work and relationships that I built as a younger attorney paid-off, and I’ve setup my life in a way that I really enjoy.
We have a great group of young associate attorneys that can handle most of the work that I push down, and my role now is primarily to bring in work, manage clients, prepare strategy, oversee workflow, and interact with opposing counsel. I really enjoy being a partner attorney compared to my younger associate attorney days of being handed big projects close to deadlines, having no control over my schedule, and having little control over case strategy.
I started at a big international law firm and as a newbie lawyer was part of the mass attorney layoffs during the economic recession. I was lucky to hook-in with the smaller firm that I’m with now. Nearly all of the attorneys that I met at the big firm are long gone from law firm practice. Being an attorney at a large firm is a very tough life because it’s very difficult to generate work and you are expected to give everything to the firm from a time perspective.
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?
Over the past five years as an equity partner: $600-$750k/year depending on normal fluctuations with the firm’s collections, plus an additional about $50k in side business income (discussed below).
The major increase in my income over the past five years has been life changing money and accounts for nearly all of our net worth. I still have the scars of the financial recession, and while not likely economically optimized, I intend to payoff the remaining balance of our mortgage within the next four years. That peace of mind will be invaluable to me.
1st year attorney at a large firm: $145k/yr plus bonus, I didn’t last long at the firm due to the economic recession (discussed above). The big firm that let me go later tried to hire me back after I created a bit of a name for myself (I passed).
1st-2nd year attorney at small firm: $70k, big hit to the income, but I was single with no kids and just wanted experience and an opportunity to prove myself after being left for dead by big law.
3rd-6th year attorney: incrementally moved my income up to $160k/year by showing my worth to the firm, going beyond what was asked, and showing that I understood the big picture (i.e. do the highest quality work, bring in work, and collect on fees). During this time period, I put my head down, kept expenses low, paid off $120k+ in student loans in about six years, got married, and had a well-timed starter home purchase. We purchased our starter house as the financial recession ended, and used that equity and savings to purchase our current big house in a great school district a few years ago.
5.5 year to present (equity partner): $500-$750k/year plus side business investment income (about $50k/year) (discussed above). We started having kids right around this time, and the timing could not have worked out better. Providing the life that we want for our kids has been pretty expensive (bigger house in a great school district, activities and lessons, and my wife stopped work after kid #2). Our current house is amazing for the kids, and being able to send the kids to public schools is a huge savings versus throwing money at private schools.
What tips do you have for others who want to grow their career-related income?
This quote always stood out to me from the great TV show Mad Men: “This is America. Pick a job and become the person who does it.” That has defined my career. In my state, I do a type of legal work that few do, and I’ve built a reputation and network that creates work for me without my having to kill myself or market to bring it in.
You don’t need a degree from an Ivy League law school to do well or make a lot of money as an attorney, at least outside of the major markets (NY, SF, LA). I purposefully choose my law school in a place where I wanted to live, built a network in law school and while practicing law, and that network typically provides me with all the work I can handle.
The early years of my career were defined by working my butt off to learn and become an expert. I also looked around and saw that the attorneys who seemed to have the best lives and control within their firms were the attorneys that controlled work flow.
I realized fairly early that the goal is not to become the best legal memo writer in the country. That’s a fast track to finding a new job as a 7th year attorney who gets passed over for a partnership slot. I needed to be taking potential referral sources to lunch and drinks, demonstrate that I know my stuff, send work to others who will send work back, and taking other actionable steps to build a book of business. I approached this very methodically and consider it one of my best skills. I very carefully guard my reputation in the legal community.
I try to exercise a lot of emotional intelligence at work in managing employees, and we have a very positive workplace. No one wants to work with jerks, and people want to send work to people that they like.
As an owner of my firm who works with hundreds of business owners in my work, it helps to make yourself a revenue generator rather than an expense to your company. It’s always easier to justify paying someone more when they help to drive revenue.
What’s your work-life balance look like?
Excellent. I would trade off more time with my young kids for less money if I had to, but I’ve been maintaining a delicate balance where my income has remained high, and I don’t feel like I miss anything with my kids. A big case or turn in the economy can certainly throw things out of whack, but I’ve had more experience with that now and have better ways of dealing with it.
I’m not going back to grinding out long hours. I don’t want to be the dad from the “Cat’s in the Cradle” song.
Lots of lawyers’ kids get hooked on drugs—that is extremely common in my field. I suspect it has to do with the lawyer parent providing a big lifestyle and never being around. Lawyers tend to be workaholics with massive levels of stress. I’ve steered away from that the best that I can, and making an extra few bucks isn’t going to tempt me to spend more time at work.
I’ve had renewed focus on health since COVID started. I ramped up my exercise to every day, eat a plant heavy diet with fish and some chicken, and take supplements that really help (vitamin D, fish oil, NMN and TMG—Dr. Sinclair’s book “Longevity” is fantastic as is the Huberman Lab podcast, both have really made my life better), and I guard my sleep time (when my kids allow me to have it). My energy level and overall feeling of wellbeing have never been better.
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?
Through my work, I come across assets that I can purchase for below market prices, like certain performing promissory notes. Armed with more liquidity these days and able to take a bit more risk, I’ve been growing this side of my portfolio with a lot of success. I’m a big fan of this type of investment because it takes almost no time, and I just collect checks.
With young kids and managing a busy law practice, I don’t have time to manage real estate or undertake anything that isn’t truly passive. I try to spend a little time each month thinking about new passive income opportunities, and often there are opportunities right in front of my face that have significant value. I have identified some good opportunities lately and have more funds available to deploy, so I intend to make this a bigger focus in the years ahead to grow this into a sustained income source.
SAVE
What is your annual spending? What are the main categories (expenses) this spending breaks into?
Saving and investing about $220k/year, consisting of:
- 401k contributions consist of $19,500 each plus $11k match each (that I fund through the firm): $61k/year
- Annual backdoor Roth IRAs of $6k each: $12k/year
- Mortgage pay down: at least $100k/year
- Other investments (buying promissory notes or other opportunities that come along): $30k
- 529 accounts: $14,400/year ($400/month per kid in target date index funds)
Once the mortgage is paid off, or if there is a meaningful and sustained drop in the stock market, I intend to switch the mortgage pay down funds to a taxable stock account. I also intend to get a HELOC when they are more available so that I can have a low emergency funds balance.
House improvements were a huge expense over the past two years. We put at least $200k into renovating, improving, furnishing, and decorating our house after moving in. We love the finished product, and it has been worth it with the house looking great and fitting our family really well. The major upswing in house values has helped as well. This expense has reduced to a much lower number now that the house is in great shape, and all that is required are occasional fixes and improvements.
We spend a fair amount on help around the house (biweekly house cleaner, bug guy, weekly landscapers, pool guy, and babysitters that we use for dates or if my wife needs a break). This has been a huge value add in my life, freeing me up on weekends to spend time with the kids and get things done that I can’t do while focusing on work during the week.
Our mortgage is $2,500/month (5/5 adjustable loan at 2.75%). I refinanced in early 2020 and intend to pay off the mortgage before it adjusts in 2025. I did this with our starter house, and it provided me with a good incentive and a mental five-year deadline to pay off the mortgage. We don’t have any other debt.
We have young kids and don’t spend a ton on vacations because we are either visiting family or only staying places a few nights. Anyone with kids will tell you: it’s not a vacation with young kids, it’s a trip. My wife and I are typically able to go on a vacation by ourselves once a year.
My wife and I don’t spare expenses when we go out. We eat at great places, get great seats at shows and concerts (before COVID and I’m hoping things don’t get shutdown again), etc. For us, it’s quality over quantity with most things in life.
Our kids are in lots of clubs, sports, and one is in preschool, so they are not cheap, but it’s not bad.
Do you have a budget? If so, how do you implement it?
No, we don’t.
After saving and investing about $220k/year, paying our mortgage and associated housing costs, and paying basic living costs, there is typically some money left.
We have been throwing the extra money at the end of the year at the mortgage and treat ourselves to nice dinners, some fun house stuff, etc.
What percentage of your gross income do you save and how has that changed over time?
About $220k, discussed above.
That has certainly grown exponentially with my income. Until I became a partner, I would put enough into my 401k to get the full match and steadily ramped it up to fully funding both of our 401ks.
Fully funding our 401ks became possible after paying off my law student loans of about $120k.
My wife was a great saver when she was working and came into our marriage with no debt and a nice sized 401k for her age (completely invested in bonds which I helped her to fix).
What’s your best tip for saving (accumulating) money?
For me it has been debt elimination, living below my means, and growing my earnings as high as I can without sacrificing the lifestyle that I want.
What’s your best tip for spending less money?
I’ve certainly had some lifestyle creep, but realistically, we can afford to live a much bigger lifestyle than we do. I’ve always tried to live below my means.
For people planning to have kids, I would do everything you can to eliminate debts and build your income as high as possible beforehand. Having a solid financial situation has really helped with what I can imagine would otherwise be a big source of stress because everything gets much harder once kids come along.
What is your favorite thing to spend money on/your secret splurge?
I like doing things with my kids that I didn’t get to experience as a kid due to the cost (nice seats to sports games, amusement parks, lunch at restaurants, little weekend trips, etc.).
We usually have a great time bonding, and I enjoy the experiences too.
INVEST
What is your investment philosophy/plan?
70/30 domestic/international index funds. I buy the whole market and have no need for bonds at my age.
I accumulated more than I want of a small cap value index fund in my 401k by listening to too many Paul Merriman podcasts when I was younger, so there is a fair amount of that in my 401k. I adjusted my contributions so that will become a progressively smaller part of my portfolio because I don’t want to care if growth is beating value or vice versa.
What has been your best investment?
I purchased a couple promissory notes that paid off quickly and made 3-4 times my money within a year.
Otherwise, all of our stock market investments are indexed, so I take what the market gives me.
What has been your worst investment?
Years ago, I had a friend take a micro-cap company public and I put about $5k into it during the IPO.
A couple years later, I sold my shares for a few hundred dollars and a tax write-off.
I haven’t purchased an individual stock since and consider it a lesson that has paid off many times over.
What’s been your overall return?
Whatever the market provides through index funds, plus promissory notes and other nontraditional assets that have exponentially larger returns (often 3-4 times my investment).
How often do you monitor/review your portfolio?
I check about once a week during good times and never during bad times.
I am solidly a buy and hold investor and I don’t panic sell, but I still don’t want to see massive paper losses.
NET WORTH
How did you accumulate your net worth?
I really focused on getting rid of debt and growing my earnings by becoming an expert in my field with a sizeable network.
I totally tune out chatter about individual stocks and trendy investments. I don’t have time to learn about NFTs, Dogecoin, etc. nor do I have the risk tolerance for wild pricing rollercoaster rides.
The stock market returns about 10%/year on average which doubles my money every seven years. That’s just fine with me.
I do dabble with my alternative investments in promissory notes, but those are situations where I have expertise that others don’t and can see value that isn’t obvious, which creates a big return for me.
I also recommend finding a great accountant, and even better, complimenting that with a great tax attorney. Once you reach a certain income threshold, tax efficiency is a huge deal. I’ve saved hundreds of thousands of dollars working with tax professionals.
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?
Earning for sure. I’ve been working since I was a little kid (started little businesses as a kid to rake leaves, and I’ve consistently worked real jobs since the day it was legal for me to do so at age 14). I enjoy the feeling of working hard and seeing the results.
Becoming a partner attorney and tripling my earnings has supercharged my ability to build wealth. The timing was great because we had a tiny mortgage on our first house and my student loans were paid off. We saved like crazy and put a huge down payment into our current bigger house.
Being able to save and invest over $220k/year has put us in a great position where I anticipate massively reducing my work age or even retiring around age 50 if I want to do so.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Nothing was easy. Getting into law school, getting through law school with top grades, preparing for the bar exam, learning my craft as a young attorney working long hours, and paying off $120k of law school loans after losing my first job were incredibly stressful. Looking back, those were formative years that were absolutely worth it and set me up well.
As far as other road bumps, in my 20’s I played around with options trading for a little while with a few thousand dollars. I lost a lot, then gained a lot back. I basically broke even and learned that I don’t have the stomach for massive price swings and that it was a lot of work staring at a computer screen for returns that could be wiped out overnight. Trading options also distracted me from building my career and focusing on work that actually paid consistent amounts.
What are you currently doing to maintain/grow your net worth?
Putting my head down and keeping things going as they are.
I feel like I’m in a rare sweet spot as an attorney, and I want to maintain this income level and work-life balance as long as I can. I recognize that things change with law firms all the time, and I don’t want to kill myself starting fresh and proving myself at a new firm.
Paying off my mortgage, fully funding the 529 accounts, and having great alternative investments setup are my backstop if my firm were to blow up.
Do you have a target net worth you are trying to attain?
House paid off, 529s funded to $150k/kid, and $3.4 million in savings. $3.4 million kicks out $100k at a 3% withdrawal rate.
Once our kids are out of the house and with us having no debt at that point, we should have no problem living on $100k. Our savings are nearly entirely in tax exempt accounts, so I will need to figure out how to pull money from retirement accounts at an early age if I decide to scale things back and work part time or retire early.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I believe I was 34.
The massive bull market, increase in house value, and major earnings increase caused a major net worth accumulation over the past three years.
What money mistakes have you made along the way that others can learn from?
I would learn stress/anxiety management earlier because it impacted everything, including my ability to earn money and advance my career. Life is short and being stressed all the time is a bad way to go through life.
Eating better and exercising every day have been huge for me, and I generally feel at peace, or if I feel stress, it is a good thing that drives me to perform better in a pressure situation.
Focusing on health and stress reduction also seem more important as our net worth grows, and I foresee a date when I can work much less and enjoy more of what we have built. It’s important to me to be healthy and active into the later years of life, otherwise, what was the point of accumulating the savings?
What advice do you have for ESI Money readers on how to become wealthy?
Find a profession with high earnings that you find interesting and suits your skillset, find a niche, work your butt off, network, keep your eyes open for opportunities, and keep a long-term focus on your career.
For me, the long term career focus kept me from leaving my small firm for a $50k raise as an associate attorney would likely have cost me millions of dollars in future earnings because the odds of me making partner as a lateral associate were extremely low. Becoming a partner at a big law firm generally takes 10-12 years, and there are multiple levels of partners with the most senior partners often earning much more than the younger partners who work the most.
I feel like I’ve skipped over a lot of that with my work situation and my compensation is directly tied to the value that I bring to my firm in the form of originating work and collecting fees.
FUTURE
What are your plans for the future regarding lifestyle?
I anticipate working at my current pace until our house is paid off, 529s are funded to $150k/kid, and $3.4 million in savings. These are the numbers in my head, and I feel comfortable with them.
Once I’m at that level, I may scale back or try something new altogether with legal work more as a hobby or to support my alternative investments. One positive to come out of COVID has been that I can do nearly all of my work remotely from anywhere. I suspect this trend will continue and accelerate, and if so, I may be able to continue practicing law in a reduced form for a long time (maybe from a beach house).
What are your retirement plans?
Scaling back or retiring to me would involve more and longer trips and travel without the massive stress associated with trying to get all of my cases organized and not worrying about things going crazy while I’m gone.
I’ve gotten better at delegating and checking-out more on trips, but there are very few lawyers who can truly relax and unwind on vacation. Most lawyers I know keep answering emails through their entire trip.
The weather where I live can get nasty during certain times of the year, so I also love the idea of being migratory to some degree or just living somewhere where it is 70 degrees and sunny all day every day (San Diego, Santa Barbara, etc.).
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Boredom and being without purpose.
I’m very go-go-go, and sitting by the pool all day or putting around a golf course won’t work for me. I will need to really focus on what comes next before I consider truly retiring.
Just scaling back with the type of work that I do and focusing more on my alternative investments sounds pretty great. I like my work for the most part, it’s just that sometimes there is too much of it.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
I have great parents who taught me to be self-sufficient and work hard. I’ve always been pretty motivated by money and the fun experiences, freedom, and security that it can bring.
Having my income rise to a nice level has made me feel more responsibility to be smart about using the money and growing our net worth while still enjoying life.
Stumbling across the Bogleheads forum was extremely helpful to me and happened just at the right time as we started to accumulate our net worth. I immersed myself in learning from the posts of the many good people on that website and have since moved on to other blogs and websites, discussed below.
Who inspired you to excel in life? Who are your heroes?
I had a hard time answering this because I’ve learned a lot from many different people.
Certainly, it was helpful to become friends with high achievers in law school and getting to know their small habits that paved the way to success.
I wouldn’t say I have any heroes.
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 read every night on my Kindle before bed, but money books don’t help me calm down for sleep, so I stopped reading finance and economics books once they began to get repetitive with their information.
I spend a lot of time with podcasts, and on the finance side, I particularly enjoy: Animal Spirits, the Goldman Sachs podcast, Planet Money, the Indicator, and the White Coat Investor.
I find blogs and email newsletters more helpful and timely these days than books, and other than the ESI Money page, I really enjoy: the White Coat Investor, Physician on Fire, Ben Carlson, Howard Marks, and the Finance Buff.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Yes, about $3k-$4k/year.
I do some pro bono work every year, and before we had all these kids, I used to mentor and tutor at-risk kids that were identified as having academic potential.
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?
At the moment, they get everything in our will.
This could change because we are relatively young and still growing our net worth. Once our house is paid off, I intend to meet with one of my estate planning lawyer friends to implement a trust that will hold all of our assets.
Annie says
Congrats on a well designed life. “I used to mentor and tutor at-risk kids that were identified as having academic potential”…this sounds very interesting volunteer work for me. Would you be willing to share your experience on this volunteer gig and more about the organization?
MI 282 says
Sure! I work with some local non-profits, but I recommend taking a look at Boys Hope Girls Hope if they are in your area. They have a national presence, and I have worked with them–they do great work for kids that are working hard to improve their situation.
Annie says
Thanks for the info. I will look them up as I have experience and interest in this area.
Dan@RichLifeHabits says
Thanks for sharing! sounds like you were very intentional with who you wanted to become and focused all your actions into becoming that person. To me, you sound like the perfect example of Think and Grow Rich. Your income has allowed you to have the lifestyle you want. Your hard work and intentionality early in your career are things that I will try to implement in my life.
Question: Would you have considered paying higher tax accountant fees while you were early in your career? Now that you are a high-income earner, you can afford those higher fees to get the best tax advice. Would you have switched to this same accountant before you started making higher income, knowing that at some point you would be where you are today?
Thanks!
MI 282 says
Thank you! I used TurboTax while a W2 employee and that was perfectly sufficient for my needs at the time. Once I owned a part of my law firm and later my own side business, a good accountant became invaluable. There is just too much to know on the tax side and many great ways to be more tax efficient when you are a business owner.
MI-94 says
I like your 3% number on your $3.4M shedding $100k/yr, that is very conservative and easily sustainable.
Have you factored in taxes you will need to pay on that $100k/yr withdrawal? Roth is nontaxable of course, but 401k withdrawals are taxed at regular income rates.
Based on your current spending, will whatever is left on the $100k/yr after taxes be enough?
Great job on high earnings and a great work life balance at a relatively young age – your kids are lucky to be raised in what sounds like a great household!
MI 282 says
Thanks! Honestly, the number is more art than science at this point in my life (i.e. $100k/year sounds like “enough” with no debt and less kid expenses). With three little kids, I expect that my budget now will be very different than when they are out of the house and our mortgage is paid off when I would realistically consider partially or completely living off savings. I anticipate that I will do a much more detailed analysis of this issue as it becomes closer to reality.
MI-94 says
Again – congrats and some amazing success at a young age. You are entering the best years of your life with those little ones. Those were my favorite years.
Slightly older dad of high school age teens advice. I am about 13 years ahead of you on age and age of my kids. I am quicken fanatic and know my spending well in various categories, including those that theoretically go away when the kids are gone. I am a bit OCD on this topic and that approach only works for the truly nutty folks like me. Quicken is likely too much hassle for most, but I would recommend you get a good macro level handle on your actual spending to set a realistic goal for your income needed post work. Having done this math for my smaller 2 kid family, my gut says that your $3.4M is a bit low. If it is, better to find out now and work toward the real number earlier. With your extremely high earnings it is both easy to not worry at all about spending (which is great spot to be), but also very easy to accumulate more faster with some minor changes (if warranted). Your kids are really young, a few small changes now may mean financial freedom/flexibility sooner, or ability to do even more charitable giving/help to your own kids when the time comes. Kids expenses rise from here and peak in early teen years especially if you they are doing sports and extracurricular stuff, then of course there is college. The demands of your time away from work and at your kids activities also goes up as they get into mores stuff. With your earnings you could be in a really great spot in 10 years when your oldest is 16 and really maximize enjoying those years. That is one item I am most thankful for – As my kids got really involved in youth sports and then high school sports, we have worked ourselves into a spot in our careers where we can volunteer a bunch, be really involved, never miss a game and also feel good we have already hit our $NW goal. Spending time away from work and earning/career building does not feel like an opportunity costs to be involved and enjoy the kids activities. We still work, but it is optional now, so no stress missing some work for kids stuff. You are practically there now – but with kids 6 and under you are in a great spot to position yourself for some really enjoyable years with your family with your earnings. Best of luck!
MI 282 says
Thank you, and I really appreciate the great advice from someone a bit further down the road! I’ve been pushing hard on the income side since I drafted this interview and should be on track to really increase savings this year. You are right, and I should also be considering the expense side in more detail. I’ve noticed that our older kids are starting to begin to need us a bit less throughout the day (it has felt very nonstop at times over the past six years), and with the benefit of a little more free time on weekends in the months ahead, I will be able to better evaluate where we are and where we’re going with our savings. Thanks again!
Jamath says
Great interview. I’m in a similar boat, i.e. high income earner, large family, live in high cost of living area, most assets in tax deferred retirement accounts, etc. I’m curious how you came up with $100k in living expenses upon early retirement? I have 4 kids and live in NJ. Between property taxes, home insurance, utilities, we’re looking at $35k. Health insurance on the exchange may cost us $25k. Not to mention $12-15k in groceries, transportation, child activities, entertainment, travel, etc. Congrats again on your success! Also interested in how you find opportunities with promissory notes?
MI 282 says
Thank you and congrats to you as well! The $100k amount is very rough and more of a mental number, but you are right, it would need to be carefully rooted in reality before I would actually consider living on savings. You are correct that there is a lot to take into account, including the funds needed to fill any new free time. With little kids and work that I currently find rewarding, any form of retiring early won’t be happening in the near future. Knowing myself, I will almost certainly always work in some form or fashion, likely in a scaled down way once we determine that we are in good financial shape for me to do so. With regard to the promissory notes, I bump into those opportunities in my line of work.
Charity Shamer says
Where’s the charity? Dude makes $800K/yr and gives away between 0.4% and 0.5%. That’s pathetic.
I’m becoming disenchanted with the interviewees. So many of them make tremendous $$, have large net worths, and yet they either don’t see the need around them, or they see it and choose to ignore it. Take a trip to downtown Seattle if you need inspiration!
When your making three quarters of a million a year, it’s not too much to ask to give $50K to charity.
I agree with ESI’s sentiment that if a person wants to become rich, they should do what others did to become rich. Unfortunately, these interviews risk teaching people that part of that path to wealth is being a scrooge.
MI-94 says
Keep in mind that this individual between state, federal and property taxes is also giving over 40% of that $800k of income they earned to taxes. Based on your comment I am assuming you give more of your income as percentage than this individual, which is admirable. This reminds me a of a good Thomas Sowell quote. ““I have never understood why it is “greed” to want to keep the money you have earned but not greed to want to take somebody else’s money.”
Sara says
Agree. I am in the 39-40% tax bracket too. My salary looks big but in reality after taxes it is not that much. We work very hard to earn this salary. I have worked 60 hour weeks for a decade now. Please don’t judge people
Charity Encourager says
This topic does warrant more discussion. I have a few issues with your comment and the likely thought process behind it.
1. If you are in the 40% tax bracket, that only applies to the top end of your earnings. It’s very unlikely you are paying 40% of all your income. After deductions/credits/etc, I’d guess your actual tax burden is probably in the 20-30% range.
2. If you are in the 40% tax bracket on the highest part of your income, even if you reduce your take home by 40% (which likely isn’t an accurate accounting of your real tax burden- see #1 above), it still is a very large salary. Certainly more than 95% of all humans in history.
3. Some very quick research shows that approximately 2/3 of federal taxes go towards 3 items: Medicare/Medicaid (25%), Social Security (23%) and defense (16%). You personally benefit (or will eventually benefit) from all 3 of those items. Only 8% of federal spending is “safety net programs”. While I know that there is outrageous waste associated with federal spending, I do not think taxes=charity.
4. At a minimum, we can probably all agree that an efficient private charitable organization (be selective in the charity you choose) is more efficient than the federal gov’t at helping people.
5. Charity is tax deductible! If you are concerned about a 40% tax bracket, just remember that for every $1.00 you give to charity, it only costs you $0.60 after the tax deduction. All the more reason to be generous.
6. The “I work hard for the money” argument. I used to believe this excuse myself, but it is the hardest argument to justify. This might be a good excuse to limit charity to the guy down the street that refuses to work and relies solely on welfare. However, take a look at the millions of people living in extreme poverty in the world. Many spend their entire life working tirelessly just to keep their family ALIVE. Do you honestly think you work harder than someone who is fighting for their life and the life of their families on a daily basis? Maybe, but I doubt it. “I work hard for my money”, while true, is not relevant and seems to me to be an excuse for inaction.
Anyone reading ESI and living in the West has already won what Warren Buffet refers to as the Ovarian Lottery. I strongly believe that everyone has a moral duty to help the incredible number of people in this world that cannot help themselves, through no fault of their own.
anon says
As a counter to this point, many people including myself focus on creating financial security for their family first via a home, funding retirement and college savings for their kids, then give a substantial amount of money and time later in life.
ESI says
“then give a substantial amount of money and time later in life.”
I have NEVER seen this happen.
Not to say that it doesn’t, but I have never seen it.
Giving is like running. You start with a jog, then build up to longer and longer distances. Eventually you are running a marathon.
I’ve never seen a person go from sitting in a lounge chair to running a marathon. Likewise I’ve never seen a low/non-giver go from almost nothing to giving a substantial amount of time or money.
Charity Encourager says
I like the marathon analogy.
The wealth accumulation phase generally lines up with raising children. Our actions/inactions set a very clear example to our children. Is charity important to our family? Or to we treat charity like table scraps? I get mine, and maybe someday I’ll help you.
The other problem I see with the “my financial security first” argument is that the typical person making that argument spends large sums on money on eating out, travel, nice cars, large homes, clothes, etc. These are all fine, but if you really believe the “financial security first argument” in your heart, you should forgo those discretionary items too.
MI?? says
Just a thought, but perhaps you’ve never seen it happen, because the dead person who bequeathes their net worth to their chosen charities are no longer alive to brag about it? There are people who die everyday and leave large sums of money to charitable causes and those charities had no idea the money was coming their way. IMO, this is one of those slippery slope arguments that we should try to avoid, because everyone will define things like “what is enough”, what type of donations are actually charity, what is considered moral, etc differently.
For the record, do I donate/give money, yes. Could I give more? Sure, I could always give more… we ALL could give more, right?
ESI says
First, just because I have never seen it doesn’t mean it’s never been done. I’m sure it has, but it’s rare. The exception to something does not disprove the general rule.
Second, I don’t care what people do with their money — it’s their money. I just wish they would be honest with themselves and us and say, “I don’t want to give and so I don’t.”
Third, there is some thinking that giving after you’re dead is not “real” giving because there’s no sacrifice. People are dying and hurting now and the best you can do is give in 30 years when you pass? I personally don’t agree with this line of thinking (I think both giving now and later should be done), but it’s worth mentioning.
Freedom Lover says
So I think you’re mixing FICA (payroll) taxes and federal income taxes. He pays 28% in federal income taxes (to your point, its progressive rates), but that doesn’t fund social security and medicare. That comes from payroll tax which is an additional 8.55% (6.2 SS + 2.35 medicare). That’s on top of 28% effective federal tax rate. Not to mention probably $12k in property tax on a $1.8m home and $10k in sales tax on $100k in spending. Sales tax in Seattle is 10.25%.
When all is said and done, the man probably pays $325k, minimum, to public coffers. He’s phased out of most tax credits and doesn’t seem to have a lot of deductions. He probably hits the SALT limit of $10k and doesn’t give to charity so maybe his total deduction is the standard one.
He has worked hard and sacrificed time in his early years to have the life he has now. $325,000 in taxes per year is a lot.
M says
I would be interested to understand the basis of your argument that one has a moral duty? That presupposes an absolute good (i.e. God) that I don’t disagree with, but I’m curious as to your justification for the moral appeal for widespread charity.
Charity Encourager says
I’m certainly no authority on “absolute” good. In its most simplistic form, morality is acting with good behavior vs. bad behavior. Saving lives is certainly good behavior by any traditional definition of morality. For all of history, people have done things that contribute to the greater good. Without it, we’d still be living in caves.
Maybe charity shouldn’t be widespread, as you state. I’d question whether donating $$ to a non-profit museum is truly charity. People are certain to benefit from that donation, but there is a spectrum of good, and that example falls far to one side of the spectrum. But that’s a separate discussion.
Consider this: Is buying a BMW bad behavior? In a vacuum it certainly isn’t. However, for the extra $10-$20K you spent on that vehicle, is it good behavior to forego saving the lives of a handful of the most vulnerable people alive today? I would argue no.
The Bible offers many good examples, and whether a person is religious or not, these passages offer clear guidance/warnings to all: Matthew 25:34-46 and Luke 12:48.
MI 282 says
That’s fair. My end-of-year charitable giving amount has been for the same amounts to the same charities for as long as I can remember (including back when it was a more meaningful portion of my earnings). We also donate to charities through my firm, and I will look at increasing my charitable giving on a more relative basis.
Charity Encourager says
First, I apologize for the harshness of my initial comment. ESI is a civil site, and my post wasn’t very civil.
I commend your charitable nature, both personally and professionally. Keep it up!
That said, I would challenge you to look at your incredible success and the needs of the less fortunate in your area, this country and around the world. Even if you take a 40% cut to your income for taxes (which probably is not your actual tax rate), I hope we all would agree that taking home nearly $500K/yr warrants a larger charitable donation.
Good luck!
MI 282 says
No problem at all, and I understood the intention behind the comment and agree that it’s time to reevaluate.
TimR says
Reading these interviews, I too have been surprised I have not seen more charitable giving. I think I understand why, though. Many millionaires do not plan on giving their children a big inheritance. When they pass away, the bulk of their estate will be donated. This reflects the transition in the US from workers retiring with a guaranteed pension with regular income they can count on through retirement to individuals needing to save a large chunk of money that will need to last if they live to be 70, 80, even 90 years old. It’s easier to donate $20K+ annually if you know you cannot run out of money in retirement. In my case, I donate a small amount of money annually, but I plan on the majority of my savings being donated when I pass away. If my wife and I pass away in our 80s, millions of dollars will be donated. If one of us lives well into our 90s, then it may be a much smaller amount. I don’t think it makes sense to donate large amounts of money when you’re younger if it could jeopardize your ability to support yourself if you end up living to a very old age.
M264 says
Excellent interview; thanks for sharing.
You advised – “Nearly all of the attorneys that I met at the big firm are long gone from law firm practice.”
Are they no longer practicing law? What are they doing now for work?
Did you have to buy in to your firm as a partner?
MI 282 says
From keeping in touch and Linkedin, the attorneys that I worked with at the larger firm primarily became corporate counsel for companies of various sizes. Like any job, this can be a very good career path if you find a good fit. Others went to work for government entities (city attorneys, state assistant attorney generals, etc.), some decided to stay home with kids, and some attorneys switched careers entirely.
With regard to your other question, I had a very small buy-in of the value of the hard assets of the firm. I was fortunate with timing of a partner retirement and my book of business becoming very valuable to the firm to the point where it became obvious that they needed to make me an equity partner.
Tom says
I have to imagine you hit $3.4M relatively quickly… in the next 5 years.
Given your savings rate and a favorable market return I bet you hit $5M in 5 years.
Cheers to your success. Seems like you hit the jackpot with a legal profession that affords you work-life balance while maintaining significant income.
David @ Filled With Money says
Very impressive story, thank you for sharing.
May I ask how old you were when you graduated law school/started your building wealth journey?
MI 282 says
Thanks! I went straight through undergrad and law school, so I was 25 when I started working as an attorney.
Kat says
MI 282 Thanks for sharing your story! Wondering if you would say more regarding how you were able to find Promissory Notes to purchase?