Millionaire Interview 297

Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.

If you’d like to be considered for an interview, drop me a note and we can chat about specifics.

This interview took place in October.

My questions are in bold italics and 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 am 51 years of age and my wife is 54.

We have been married for almost 20 years.

Our anniversary is coming up on November 3rd, 2021. So exciting!

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

No children or pets.

Our attitude towards having kids was that if it happened, then great. If not, then that is fine too.

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

We are originally from the Seattle area.

My wife and I decided to retire in December 2018 and we then sold our house in April 2019.

Shortly thereafter we began traveling the country as full-time RVers. We own a 2013 class A Winnebago motorhome and also tow a car.

The two of us have visited every state in the continental U.S. except North Dakota and Rhode Island over the last 2+ years. It has been quite an adventure!

Both the RV and tow car are registered in South Dakota as we no longer have any physical ties to Washington state. This is one of three states that offer great tax incentives for full-time RVers (the other ones are Florida and Texas.)

We signed up for a mailing service and then switched our drivers’ licenses. Legally we considered to be residents of South Dakota even though we don’t spend any time there.

What is your current net worth?

Our net worth is $2.54 million.

90% is held in a variety of retirement funds and 10% is held in online savings, CDs and individual stocks.

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?

Here’s the breakdown as of September 30, 2021:

• Traditional IRAs – $627k
• ROTH IRAs – $449k
• Individual stocks (Microsoft) – $55k
• 401K – $145k
• Equity Indexed Annuities (EIA) – $822k
• Multi-year guaranteed annuity (MYGA) – $200k
• Online savings/checking/CDs – $237k

Notes: Our EIAs are pegged to the S&P 500 index. For one we split the gains 50/50 with the insurance company and the other we have a CAP of ~ 5.5%. If the index is negative then we don’t lose any money. The downside protection is fantastic and helps us to sleep well at night. So far both of these are doing quite well. The terms are 7 and 10 years.

Our MYGA pays an annual rate of 2.4% over a total of 4 years. This seems low but actually isn’t bad when you compare it to currently available CD rates.

The $55k in Microsoft stock that we currently own was purchased at a 10% discount through the employee purchase plan. My employee cost basis averaged out to $91/share and it’s currently sitting at $281/share. We believe in the company long term so this is probably the last thing that we will ever liquidate.

EARN

What is your job?

My wife worked as an electrical engineer prior to retirement. Her employer was the local power company. One of her primary duties was to help oversee the operation, maintenance and construction of the company’s high voltage substations.

I worked in treasury corporate finance, most recently at Microsoft. My role as a treasury manager involved daily cash positioning, executing wire settlements and compiling operational metrics among other duties.

What is your annual income?

After retirement we live off of funds that currently reside in both online savings and CD accounts. Our annual taxable income is simply the interest earned on these accounts.

The total interest earned is well below the current married filing jointly standard deduction ($24,800.00 as of 2020), so we do not pay any Federal Income Tax.

I’m not counting interest earned on our other long-term investments as we do not currently use those funds.

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?

Our starting salaries after we got married in 2001 were in the $15 to $18 per hour range. I had recently switched careers from Retail to Finance. This meant that I started low on the pay scale due to a lack of experience.

My wife was transitioning from Information Technology back to Engineering, so she started low on the scale as well.

I was promoted once at my first company and then transitioned over to the Treasury team. This ended up being a great move as Treasury is a very specialized niche within corporate finance organizations. These teams control all corporate funds and manage banking relationships.

I was promoted once at my first company, then left to accept a new treasury position at another company. When I left, I was making around $40k/year but then shot up to $62k/year at the new job.

I was there for 3.5 years and then did consulting work for a while. My salary went from $68k/year to around $80k.

I then went to Microsoft and stayed there for 5.5 years. When I left in December 2018 my salary + bonus was ~ $120k/year.

My wife worked for 2 separate engineering consulting companies over a period of 7 years. She then accepted a position as a Senior Engineer at the power company in 2007. She received 2 promotions over the next 11 years and was earning ~$150k/year in benefits and compensation when we retired in 2018.

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

Focus on promotions rather than lateral job moves. While a lateral move can seem momentarily enticing, it will rarely provide any meaningful boost to your income.

Making yourself indispensable is another good way to grow your income. By that I mean hone your skills to the point where you become the go-to expert for your team. This could be for either a particular task or for a client or managing an important company relationship. What it comes down to is finding ways to make your boss look good.

Also, never compromise your personal integrity for any reason. Once your reputation is damaged it will be almost impossible to restore it.

What’s your work-life balance look like?

It is awesome! 100% travel life experiences and 0% work. We are enormously blessed.

I like reading books and playing the guitar.

My wife has heartily welcomed every challenge that RV life has thrown at us. Her upcoming projects/goals include drawing, painting and learning to drive our manual transmission stick shift car.

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?

No side hustles to report.

Although my wife has developed into a skilled RV mechanic so perhaps that is an option down the line!

SAVE

What is your annual spending?

Our retirement plan allows for $4,000.00 in spending per month.

My wife and I have meticulously tracked our spending over the last 30 months and thus far are averaging a little under $3,700.00.

This translates to $44,400.00 in annual spending. Our travel lifestyle is not extravagant but we certainly do not want for anything.

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

Here are our top 5 monthly expenses:

• Maintenance/repair (RV & tow car): $602.00
• Groceries: $513.00
• Food (restaurants, etc.): $471.00
• Campgrounds: $463.00
• Gas (RV & tow car): $412.00

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

Just our monthly target spending of $4,000.00.

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

Early in our working years we only saved about 10% of our annual income.

This slowly increased over the years until we were saving over 60% of our annual income when we retired in 2018.

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

Keep the same standard of living after you receive either a promotion or pay raise.

In other words, save the extra money instead of blowing it on expensive cars or other material possessions.

What’s your best tip for spending less money?

Live within your means.

Also set a budget and stick to it.

Both of these sound like a cliché but they are 100% true in my estimation.

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

Travel!

In addition to currently traveling the United States in our RV, we have been on many international vacations over the years.

This includes Europe, S.E. Asia and even Bora Bora (our favorite!)

INVEST

What is your investment philosophy/plan?

Set it and forget it! Investing should be automatic and entirely devoid of emotion.

Please see below:

• We maxed out our Roth IRA contributions for years by dollar-cost averaging equal payments over a 12-month period of time.
• We also maxed out our company 401k plan contributions for years.

Both of these items really helped to grow our net worth over time.

What has been your best investment?

Index funds at Vanguard by a long shot!

Our Roth IRAs are invested there and we have also rolled over many 401k balances from former employers over the years.

You cannot beat the combination of incredibly low fees coupled with the power of compound interest. It is truly an unbeatable combination!

What has been your worst investment?

Buying individual JP Morgan stock.

We bought a limited number of shares back in 2010 and sold them at a loss about a year later. The decision to sell was partially motivated by increased brokerage fees.

We hate individual stock picking so this was definitely a mistake.

What’s been your overall return?

Our investment returns are around 13% annually.

How often do you monitor/review your portfolio?

We have a family financial date at the calendar end of every 90 days.

This involves logging into all of the various websites to get our updated balances, then recording this information on a spreadsheet.

NET WORTH

How did you accumulate your net worth?

100% saving and investing on our own.

In fact, when we were married, we actually had negative net worth due to my postgraduate student loans.

There were two things that greatly contributed to building our net worth:

Home ownership.

We bought a condo in Bellevue, WA a few years after we were married in 2003. Both of us had only been renters prior to this time, so making the decision to buy was a bit scary.

The property value rose after a while and we ended up taking out a second mortgage to pay off my student loans.

The condo was sold at a profit in 2007 and we used the proceeds to purchase a single-family home in Issaquah, WA in 2007.

Well, you can probably guess what happened after that: the massive housing crash in 2008 decimated our home value. We weathered the storm just fine though as our mortgage was affordable and both of us were fortunately able to keep our jobs during the devastating economic aftermath. We also paid extra towards our principal for years with the original intent of paying off our mortgage early.

Of course, this changed once we decided to retire early. The home was sold in 2019 for almost $250,000.00 more than we paid for it back in 2007. We received over double that amount after closing due to the aforementioned extra principal payments.

Pay ourselves first.

Neither of us have ever prioritized material things. Buying a new car every few years and/or purchasing frivolous items like expensive jewelry is a good way to keep yourself in the poorhouse. We have always valued experiences over things.

I drove a 1997 Nissan Maxima and my wife drove a 1999 Toyota Corolla for years. They were paid off a long time ago. It really is amazing how long your vehicle can last if basic maintenance is performed on a regular basis.

We also always paid ourselves first before dealing with the bills. That meant maxing out our 401k and IRA contributions, putting extra money towards our mortgage principal (and thereby reducing debt), putting any leftover funds into savings and even purchasing company stock at a discount when I was employed at Microsoft. All of these things really built momentum over time.

Slow and steady wins the race when it comes to investing!

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?

We would say Save simply because without doing this your net worth will never go anywhere.

Always, always, always save more than you spend each month. This simple step is absolutely critical.

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

The hardest thing was just sticking to our plan early on.

Both of our jobs were stressful and it really didn’t feel like we were getting anywhere financially.

Thank heavens we stuck to it!

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

The vast majority of our long-term funds are invested in either index funds at Vanguard or equity indexed annuities.

Both of these are performing well at the moment.

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

Our formal written retirement plan predicted that our net worth would peak at about $2.5mm in a few years.

Right now, we are trending above that number.

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

We were in our early to mid-40s. No major behavior shifts.

Our plan was to just keep going and things worked out better that we could have ever dreamed.

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

Not purchasing a larger home earlier in our marriage.

We bought a small condo in 2003 instead of thinking bigger. My wife had her eyes on a new developed housing community at the time called Issaquah Highlands (about 30 miles east of Seattle.) It was so new that only a few model homes had been built. The rest was floor plan blueprints and a bunch of dirt.

We drove over to take a look and I was of the unfortunate opinion that it was too risky and expensive.

Homes that sold for $300k back in 2003 are now worth over $1mm. My wife is the courageous one in this relationship and she was 100% correct!

We ended up buying a home in this community in 2007, but the profit would have been much higher if we started earlier.

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

• Pay yourself first.
• Always save more than you spend.
• Live within your means. If you get a promotion, save the extra money instead of spending it.
• Invest in low-cost index mutual funds at a reputable brokerage firm. We use Vanguard but there are others such as Charles Schwab.
• Don’t pay attention to what the stock market is doing. Put on blinders and keep going no matter what.
• Stick to the plan!

FUTURE

What are your plans for the future regarding lifestyle?

My wife and I are already retired so there will be no significant lifestyle changes in our future.

We do plan to increase our spending to $10,000.00 per month in 7.5 years (please see below.)

What are your retirement plans?

The original retirement plan was as follows:

• Travel the continental U.S. in an RV for 2 years.
• Move overseas and explore multiple countries over the next 8 years.
• Return to the U.S. after 10 years and reside in an area with a low cost of living.

The RVing part of this plan was extended for another 9 months due to COVID. Sadly, not a lot of countries are welcoming Americans right now without enforcing quarantine restrictions or other stringent requirements.

Our updated plan has us selling the RV in February 2022 and then moving to another country. Our original focus was on either South America or Southeast Asia. At the moment we are favoring either eastern Europe or Mexico as both of these offer generous VISA programs.

We plan to travel as nomads, spending 3 to 6 months in a particular country and then moving on.

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

One challenge will be to find meaningful activities once we return to the U.S full time. It will be important to remain mentally and physically engaged each day.

This is easier to do right now as we are actively traveling and engaged in a lot of fun things to do. A sedentary lifestyle is bad for your mental and physical health.

My father retired at the age of 65 and then developed dementia a few years later. The main problem was that he had no plans to remain active. Too many days were spent in front of the TV for hours on end. It was incredibly sad. We are determined not to repeat this mistake.

MISCELLANEOUS

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

Neither of our parents educated us about finances. My mother used to scream at my older sister and I about how little money we had and this created a lot of anxiety in my life.

Early in our marriage we didn’t really know what we were doing. Then we stumbled upon the Suze Orman show in 2003. This is when it “clicked” for the two of us.

Many people complain about Suze and her tactics, but I can honestly say that her program changed our lives. We learned about Roth IRAs, company 401k matches, Vanguard and many other important financial concepts. Her show stimulated my curiosity and it motivated me to do more research.

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

My wife comes from a relatively poor country in Asia. Life was very challenging for her as a young person. Her mother was uneducated but she always inspired her daughter to dream big and apply herself in school. This woman had an absolute heart of gold and she was definitely an inspirational hero.

For me it was one of my older sisters. She has now been married to her husband for over 50 years and they have built a wonderful and financially vibrant life together.

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?

Millionaire Teacher by Andrew Hallam. Fantastic introduction to how the stock market works. Also does a great job of explaining the power of compound interest over time.

Your Money Or Your Life by Vicki Robin. Pioneering book on the subject of FIRE (Financial Independence, Retire Early.) Simple concepts that are easy to understand and apply.

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

Not at the current time but perhaps we can explore this in the future.

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?

Our current Trust document calls for 50% of our net worth to go to a non-profit organization in Asia that rescues children from abuse and exploitation.

The remaining 50% will go to my wife’s younger brothers and sister in Asia.