Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
This interview took place in December.
My questions are in bold italics and 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 42 and my wife is 40.
We have been married for 11 years.
Do you have kids/family (if so, how old are they)?
We have two kids (8 & 6 y/o).
What area of the country do you live in (and urban or rural)?
We live in a town outside a larger city in the southeast part of the country.
What is your current net worth?
Around $4.9 million (depending on how the market closes daily and how you value some other assets — more on that below).
I won’t consider myself at the $5 million mark until I hit that with investable assets only.
All my figures listed will be on the low end for items without a daily close price (i.e. equities).
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?
In large part it is stocks/mutual funds/etfs in taxable and retirement accounts.
We own our home; but my wife and I believe it’s more of a function that should be comfortable but our home is not a McMansion.
I am starting to think about getting into residential real estate investing (buy/hold & rent).
I own some crypto (like $2000 and have committed to a max out of pocket spend of $7500) but it’s not much and enough if there was an exponential gain I would see it but if it all collapsed I wouldn’t care.
Here’s our breakdown:
- Taxable Accounts: $1.9m largely in Vanguard & Fidelity funds plus a few individual tech companies from purchases a long time ago. And a good chunk in B shares of Berkshire Hathaway – I am a fan of Warren. This amount also includes our 6 month emergency fund – that bucket of money is largely fixed but 15% is in a S&P 500 fund. I am comfortable with that exposure and foresee increasing it to 25% over the next several years.
- Retirement Accounts (IRAs, low cost deferred variable annuity): $2.1m Vanguard & Fidelity funds mainly.
- 529s: Each kid has about the same and I have a small amount ($40k) in my name too: $450k
- HSAs: $30k and we fully max this out annually and don’t withdraw from it since it’s a great supplement to retirement or if we have a big medical expense later in life that’s unforeseen.
- Checking: $170k. This is an anomaly at the moment — will get this down to $20k via investing and a couple purchases planned over the short term. I try to keep about 2.5 months worth of cash (transfer the surplus monthly if any) in checking which handles unforeseen/emergency/splurge items without touching our regular investment accounts. Recently with this account I got a new (for me) car ($16k net out of pocket after trade – but we try to never spend more than $35k out the door on a car) and we replaced our washer dryer ($1.5k). This tactic allows cash to keep flowing to other buckets with minimal disruption.
- Home: Estimated value $650k & owe $400k. No plans to pay off since it’s a 30 yr fixed (just refinanced several months ago at 2.5%!) Where we live this gets you a good home, not a palace but not a starter home. We are in a low/medium cost of living town — depends on who you ask. People from California/New York think it’s cheap, those who grew up locally think it’s expensive. I’m in the middle somewhere.
- Jewelry / Watches (mine): $150k. Wife doesn’t wear any of it (doesn’t care for it). These were gifts largely and I have several nice watches that I rotate in/out. No smartwatch for me!
- No cash value life insurance — we hold all term at about $2.2m each over a few policies each laddered against our kids aging up thru early adulthood.
Aside from the above mortgage, the only other debt is my wife’s medical school loan debt of about $27k; we routinely debate paying it off but at 2.875% it’s hard to do so. So total debt is this and the above listed mortgage.
EARN
What is your job?
I’m a healthcare executive — mid to senior level.
My wife is a physician.
What is your annual income?
Over the past several years we were in the $500k – $600k range (bonus caused the range), but that all changed in 2021. My wife decided to leave the large institution and open her own practice. So no income is likely until mid 2022 for her and then it will be gradual but by 2023 it should be in the range of “regular physician income” if all goes to plan and she’s in a specialty that pays in the mid/upper range.
Good news is she carries little debt (& very little our personal money is invested in here too) as part of her practice so once the final loan is paid in the next several months then it should be a nice lift off.
I left my big company job for a startup and am in the low 200s with good performance bonus and equity options. None have been paid yet; but fingers are crossed.
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?
First job was at a big box store making $7/hr in 1998.
Worked on/off in college, mainly odd jobs but it was fun (life was simpler with less money).
Starting out as a professional in the early 2000s my salary was in the mid 40’s and gradually stepped up over the years.
Hit 100k/yr in 2011, then hit 200k in 2016, and crossed 300k in 2019 but then had a job change so my current role I could make $500k in 2022 or we could go belly up.
One thing of note: I did sell/broker a lot of insurance in the late 2000’s either while working another w2 job or in graduate school (paid my tuition net of scholarships with this money) – which is not reflective in the income above. I never spent those dollars (except for taxes, tuition, and costs of doing business) and saved and invested most of it (about $500k over 5 years).
A side hustle when you are young, unmarried, and kidless can add up over the years! It’s a great way to accelerate your later in life net worth figure if not retire early.
My wife during residency and fellowship made the usual amount ($55k) per year. Once she left training she made between $125k (during her part time years when the kids were younger) and $250k (during her full time years when the kids were older).
The good news is that while she was part time I was making less too and as she went full time I made more too — but our lifestyle largely stayed the same. The only major increase was getting a nanny and in fact our home today is less expensive than the home we had earlier on — both good homes just the previous one was a bit more but not a McMansion again.
What tips do you have for others who want to grow their career-related income?
Pick a growing field which pays at least $55k for new grads.
Don’t come out of college with more than $25k in loans in total (loans should be no more than 50% of your starting salary in my opinion), go to your “good” state school or find a good private school who will give you money. I did attend a couple “Ivy League Equivalent” schools. Those names help if you can access them and the networks they bring help too — but it is specific to your line of work. For a physician not a big deal in terms of name – if you want to be a high status banker, attorney, etc. then it matters.
If college isn’t for you the trades are great; especially if you have some business savvy and can run your own shop. Learn the business from someone older then branch off. If you are willing to hustle and grind I think you can earn a comfortable living.
Lifestyle creep is what causes a lot of money problems — do you really need a second car, boat, or other things? Believe me in my line of work I deal with a lot of physicians who make $300k – $1m annually. Many have complained about needing more money – it’s lifestyle creep once you learn more that is driving it and their lack of ESI principles.
What’s your work-life balance look like?
Currently it is good. I work from home so have some control with the kids and getting stuff done.
Wife is always working – it’s ok I want her to succeed and envision working for her longer term.
We used to have a full time nanny between C19 and job changes (our commute times plummeted; since I mainly work from home) and now we don’t so that saves a lot of money (we paid our nannies via a W2 so it is a noticeable amount — about $80k gross income freed up).
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 sit on a few expert networks within my field. My best year was $50k in 2017; but most years it is $5k – $10k.
I used to want to grow it, but now I like this amount since the demands on my time are less (kids are older too).
I always refer to it as my beer money; most of this gets spent on things from Amazon/Walmart for the family. Nothing fancy but feels nice to use it for that versus saving it – mental thing.
SAVE
What is your annual spending?
I calculated this earlier in the year at about $7k-$8k / month most months and a couple months we hit $11k due to one time annual bills (i.e. auto insurance).
We live good; but nothing opulent (most of my clothes are from TJ Maxx or Costco type stores, my kids wear hand me downs from a relative & Old Navy, and my wife shops at Walmart) for context.
I do spend good money on footwear, not to look trendy but to be comfortable all day long. You won’t see me in Ferragamo or any other designer name; but I have found a few brands online that aren’t cheap but look great and comfortable!
What are the main categories (expenses) this spending breaks into?
- Mortgage (w/ Taxes & Insurance) – $2200mo
- Food – $1400 (we stopped eating out a lot during C19 and now prefer cooking at home more)
- Utilities: $500
- Misc (kids activities, stuff that comes up): $1000
- Gas – $100 (1 car is electric)
- Insurances (life, disability): $1200 – we both carry true own occ disability insurance due to how specialized we are trained in what we do.
- No car payments – only pay cash and buy used (we have good cars but never new usually 2-4 years old with 20k-40k miles max spend $35k (have broke this rule only once so far) and I always get a pre purchase inspection to avoid surprises.)
Do you have a budget? If so, how do you implement it?
No formal budget – I usually grind at all bills (i.e. shopping car insurance every couple years) and as long as the major items hold firm (mortgage, food, etc) our surplus income can accommodate a splurge here and there (currently upgrading the laundry room).
What percentage of your gross income do you save and how has that changed over time?
Max out 401k & HSA & with current income have about $1000/mo leftover for savings.
What’s your best tip for saving (accumulating) money?
Start early, did I say start early?
Aside from starting early, don’t buy bond funds until you are in your mid 30s at least (assuming you are healthy), save enough where it is hurting (i.e. you can’t get something else you want), make sure your partner is similar in mindset, low cost funds (hence my Vanguard / Fidelity), don’t use any financial advisor that charges greater than 80bps, and everything (almost everything like 99.9%) in life is negotiable.
I always ask for a discount (got a $300 golf driver for $50 one time, I can get a new set of tires on every car I buy from the dealer (remember I buy used), avoid using a realtor to buy a home done this 2x and saved $50k, etc), don’t be scared to enter the market no one knows the best time just jump in and hold for the long term.
What’s your best tip for spending less money?
You don’t need everything you want.
I used to buy more stuff and learned that consumption not only costs more but eats into leisure time.
I work out more, cook at home more (cheaper and healthier and I learned more). Unless you’re homeless and starving you can shave a few bucks off. And yes, I make my coffee at home and polish my own shoes (only for a big job interview/meeting do I pay the airport shoe polisher fee).
Most of your friends also want to save money unless you hang with the 1% so it’s easy to do things that are inexpensive.
Experience spending is way better than on goods but there are exceptions like I enjoy using my Big Green Egg which isn’t cheap but keeps me out of the restaurant a lot.
What is your favorite thing to spend money on/your secret splurge?
I usually am buying some toy/gadget but I also sell ones I don’t use. Not saying I come out ahead, but I don’t let crap sit in my house.
Possessions are transitory, if you want it later buy it again unless it’s rare (like a Picasso) just get rid of it.
INVEST
What is your investment philosophy/plan?
Save early, safe often, use low costs funds, don’t use those expensive advisors. They make it sound so cheap but that 1% you’re giving them annually will cost you hundreds of thousands over your lifetime!
If you need advice, pay for it by the hour when you have less money.
Reinvest dividends/interest.
And while I am 42 my profile is set for someone 10 years younger than me. I am ok with that risk since I age down but the quality of investments is still high – no penny stocks or stock picking per se going on here.
What has been your best investment?
Aside from my wife who keeps me grounded it was saving the entire $500k from my insurance days as mentioned above and getting a quality education.
And lastly learn to be nice and grateful – this lesson came to me only in the past several years. Kindness works, jerks don’t.
What has been your worst investment?
$5000 bet on etoys in 1999 – whoops!
But it was a learning lesson to not pick one idea wonders with no track record wait for them to mature a bit then invest.
What’s been your overall return?
Past two years (2020 and 2021) about 25% since I had some cash on the side from late 2019 when Trump and China were iffy. I forgot to reinvest it in early 2020 and then in April 2020 I took the plunge with about $400k – that amount alone has doubled.
Prior to that I averaged about 9% year (some years up and some down). I am slanted a bit toward tech so I ride those waves more than some.
Once you hit a critical mass that is meaningful for you, getting 7-8% is more than enough since the portfolio spits off enough without too much risk.
I still have pockets of my portfolio that are more aggressive; I am fairly sure none of it will go to zero, it will just have wild swings.
How often do you monitor/review your portfolio?
Login 4x week just to make sure I haven’t been hacked and if it was a wild swing day (up or down) to see what that does to the total amount I really don’t get into account specifics on a regular basis.
About 2/3 of our money is with a low cost advisor (Vanguard in-house team) and he is in control.
Of the 1/3 I have I maybe make 5-10 trades a year in total.
NET WORTH
How did you accumulate your net worth?
Mine is a combination of things – I saved a lot through regular work, had a good side hustle in my 20’s, and made good money.
This all is exponentially compounded by my wife.
Also, my folks did give me some money so far (but had they not my net worth would be about 15% less – that amount is in a separate account – the amount is reflective more from how long it’s been invested vs the amount itself).
There is no home run for most of us, you need to work multiple angles to get this right.
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?
Mine is save and invest since it compounds fast. I am at a point where my portfolio spits off more return than my income annually.
You want to get to that point by age 45 to really benefit from a FIRE perspective.
My close friends always call me “cheap.” No one knows how much I have but they all know I live below my means.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I hit $1m a while back (2008 ish) and at the time I wasn’t focused on the number so it was more like, “Oh, I hit the number, let’s now move on.”
What are you currently doing to maintain/grow your net worth?
Same as I have been, ESI all day long baby!
And add some different investments mentioned above like real estate.
My focus is on growing my taxable holdings to about double to current levels so I can then take more control of what I do for income.
Retirement I feel good since I have a good base and as long as the market holds in the long run I should be fine; plus I will have my taxable balance to supplement.
Do you have a target net worth you are trying to attain?
At about $8m total I would feel good. I know I will hit it it’s just a matter of how soon.
I would like to hit $10m by 50 – unsure if that will happen. I think $8m will however happen in the next 8 years.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I hit $1m in my late 20s.
Aside from being a little looser with some spending nothing really changed. I might have spent an extra $100 or $200 month as a result of this.
What money mistakes have you made along the way that others can learn from?
I should have invested more in tech – I had some but I was too prudent.
If you feel bullish on something and understand it then do it.
I have purchased a small amount of META verse related stocks as part of this lesson learned.
What advice do you have for ESI Money readers on how to become wealthy?
Keep it simple, rinse and repeat, and avoid salesmen (investments and insurance and especially realtors)!
I do meet with financial advisors occasionally if they solicit me. I would work with one; but I find many to be a little “douchey”.
With realtors if you must purchase through one deal with the listing agent yourself and ask for an immediate 2-3% off purchase price since they aren’t splitting commissions with another agent – most can serve in a dual capacity. On a $400k home that’s $8k – $12k off the top before negotiating price — don’t fall for the you’re not paying the commission or it only makes a $25 difference in your payment line it’s still money and it adds up!
Mortgages too are very negotiable. I found in life people get so emotional during the home buying process you have a lot of options just need to be aware.
Also, work on having a FICO of 740+; great credit has a lot of collateral benefits in life that most aren’t aware. After 740 there isn’t a benefit to going higher unless you want it.
FUTURE
What are your plans for the future regarding lifestyle?
As long as one of us works our lifestyle can hold well.
I would like to have the ability and latitude to do what I want when I want as I age.
I plan to leave formal W2 work hopefully in the next 10 years.
I would like to have some rental real estate income, work for my wife, and utilize investment income.
What are your retirement plans?
I have a ways here, but retirement to me is having a home and then perhaps renting an apartment in a new city for 4-6 weeks and exploring it and that region.
For example I would like to rent an apartment in Helsinki for 6 weeks and then travel around that part of the world while there.
Then come back home for 8 months and repeat in a new city. Hoping that will start in my late 50s.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Cost of healthcare!
I am a Republican but I hope there is a way to pay to access Medicare before you are 65.
Our retirement projections show that I can retire at 65 with more than enough income to meet our needs (social security included) with a 88% likelihood which my advisor says it’s as good as it gets.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
Around when I was 18 or 19 years old – my dad gave me the book “The Millionaire Next Door” then I went on to read about stocks/bonds/etc.
The combination of this really allowed me to have this all click.
Who inspired you to excel in life? Who are your heroes?
My parents since they were immigrants taught me you have to work hard and grind at things to make it work.
Now it’s my kids – I have to instill the same message in them.
Recently I was logged into an account and my 8 y/o said wow daddy that’s a lot of money. I told him that you have to work for it and not spend on little things, that’s how it grows.
It helps that they see me watch CNBC – which they can’t read the ticker they know you have to save and invest to grow.
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?
Aside from that don’t invest in fads or things you don’t understand. Start out with a bland S&P 500 fund, get your feet wet and then get elaborate.
Your portfolio is like your wardrobe – you need underwear on before you put on pants. Build the staples and then accessorize as you feel fit but do it because you want it and not because of FOMO!
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I am not good here. Mainly since I haven’t found an organization I really believe in.
I am very generous to the kids of our friends/neighbors when doing fundraising stuff for school but that’s only $1000 a year.
I think this will take time.
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
I would like to leave each kid some money to make life more easy/comfortable or to start up/acquire a business that speeds them up.
I need to think about this more as we all age, but I am sure some money will be left for a cause (or two) just don’t know who that is.
We are not religious so I don’t see anything going to that avenue.
Patti Melancon says
Great job! One thing to remember is that ROTH IRAs are king. If you have Traditional IRAs/401ks, there will be a time when you have to pay the tax on all of those through RMD. You may want to consider that in your 50s of slowly converting those amounts to ROTH IRA each year so that you are mostly done before taking Soc Sec.
Do the conversions when your income is down so you are at a lower tax bracket when you do the conversion and pay less tax.
Good luck!
Mary says
Really enjoyed this interview and the wardrobe analogy for your portfolio. Never thought of it that way before, but it makes perfect sense.
Will Barrow says
A good summary and some hard work along the way.
One wry observations: we are all Republicans until we might not get access to universal benefits!
JCI says
First, congrats on saving such a large amount at such a young age. At this level of net worth, what is your thought process in keeping term life insurance? It’s not really needed unless your plan is to give away a windfall to your kids (or to charity). Is it because the premiums are minimal and wouldn’t impact you either way? Just curious.
MI - 296 says
Well done. It truly is in the mix of right steps. I have had friends who “made it big” by being an early employee at a start up that took off, but those home runs are as much luck as anything else. Your path of working side gigs, saving early, and creating multiple paths is very tangible and something that most can do. Congratulations to you and your family on your accomplishments thus far.
MI283 says
Hats off to you and your wife! You both have done very well. I thoroughly enjoyed your interview. I’m very excited that you invest in individual stocks. After all, you are young, you can handle the volatility, and overtime some of those stocks will generate outsized returns for you. I too enjoy investing in tech, metaverse, saas, cyber security, fintech, etc. You mentioned that you are considering buy/hold/rent real estate. Take a look at syndicated RE. Nice returns, very passive, and much less of a hassle. Well thanks again for the insight and much more success to ya!!