Millionaire Interview 320

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 April.

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)?

My spouse and I are both 50 and have been together for about 16 years.

It’s the second marriage for us both.

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

We each have a child from a previous marriage – 24 and 25, both living on their own and contributing positively to society.

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

We live in a midsize metro area in the southeast region of the U.S.

What is your current net worth?

$2.16 million (investments and home).

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?

• Brokerage (Betterment & Vanguard) – 716k
• IRAs/401ks – 638k
• Roth IRAs/Roth 401ks – 206k
• HSA Account – 82k
• Vested stock with my employer – 38k
• Cash – 96k
• Home (Fully paid off) – 384k

We have no debt and pay off our credit cards monthly.

EARN

What is your job?

I’m at the VP level in a mid-sized media company, with locations in different parts of the country.

I’m primarily responsible for running a location in the Southeast.

I’m responsible for revenue performance for my location, although the toughest/best part of my job is managing a team of just under 100 people.

What is your annual income?

My base is 240k, and I’m eligible for an annual cash bonus as well as an annual stock grant that pays out over 36 months (ie golden handcuffs.) In total, the bonus averages around 120k/year, but ranges between 80-150k, depending on our annual performance.

My spouse runs a small business from our home, which generates an additional 50-60k in income for approximately 15 hours of work per week.

In 2022, we expect to earn 450k before taxes.

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 think our story is unique in one particular way – we built the vast majority of our net worth in just the last seven years.

Prior to that, we did some things right, a lot of things wrong, and got lucky a decent amount of the time. One constant for both of us has been a lot of hard work and hustling every buck along the way.

I began working part-time jobs in college – doing everything from mowing lawns to being a radio DJ. I was able to pay for my tuition and cost of living, although it was a frugal existence. No Spring Break destination vacations – in fact, that week was when I could earn more money because my classmates were all taking off work.

By the time I graduated with a journalism degree, I was working three part-time jobs and running my own lawn service.

My first full-time job out of college was actually a pay cut from what I was earning per week in college. Such is life in journalism. That first job paid $6.50/hr, which when adjusted for inflation, equates to about 25k annually in today’s dollars. This was an early lesson in living frugally – more on that later.

After beginning my career as an entry-level journalist, I received a couple of small promotions and then had the opportunity to move into management at my location, while still being active in the editorial and gathering process of the news. At the time, it was the best of both worlds for me, as I enjoyed leading people but still wanted to be on the front lines.

After marrying in college, my first wife and I divorced in our mid-20’s. For the next 8 years my wealth-building took a backseat, as I was a single-earner still responsible for supporting my child. I took on roommates to defray the mortgage and focused what money I did have on paying down debt from the divorce.

About fourteen years into my career, I was earning in the mid-60’s and was running out of steam to continue the hybrid roles. Around the time I met my second wife, I decided to move solely into management, which began a series of jobs and moves that took us through six cities in about a dozen years.

While each move improved my resume and paid better, the downside was my spouse had to reset her career and re-invent herself in each new city. That created more stress on the new marriage, our kids and our finances.

Prior to 2015, our combined earnings only reached six-figures in two years. So how did we end up crossing the 2-million dollar mark six years later? Two things – we discovered the FIRE movement and not long afterward I landed an unexpected opportunity in a much larger city. The new job came with a great boss and a comp package that was more than double what I was making – going from 95k to 230k.

My boss took me under his wing, giving me exposure to his role, which prepared me for an opportunity to move into the business side of our company at a new location four years ago. That move brought my total comp package to what it is today.

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

Don’t do what I did! I stayed with my first company for over a decade, and while I received some nice increases, in hindsight I cost myself a small fortune by not exploring opportunities with other companies.

What did I do right? I built up a strong network of contacts through the years – people who trusted me and my work. When I decided to start seeking opportunities, many of those people opened doors for me that I normally could not have gotten through based solely on my resume.

What’s your work-life balance look like?

This is something I’ve been very deliberate about – making more time for life outside of work.

Most weeks, I’m working less than 45 hours, and can get away with only checking e-mail once or twice in the evening to make sure there are no fires to put out.

I use all of my vacation time, every year, and encourage my direct reports to do the same. I believe we’re all better workers when we have a balance between work and life.

My wife’s business takes 10 to 15 hours of work per week, all of which can be done from her laptop. Her work/life balance is great, allowing her to focus more on her health and wellness during the day when most folks are working.

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 other sources besides my wife’s small business.

My jobs have never allowed for moonlighting and by the time I got turned on to real estate, we were moving too often to invest in rental properties for our comfort level.

SAVE

What is your annual spending?

We’ve tracked spending via Mint for the past three years. Not counting for taxes, our annual spend now averages out to about 80k, yet we feel like we live a life of luxury.

We look for opportunities to save money, but don’t count pennies anymore.

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

Annually:

Travel – 20k.

This is our big splurge – we love to travel.

From a weekend getaway in our region to an overseas trip, sign us up. Long before we ever broke six figures in income, we used our vacation time to explore state and national parks and interesting places.

For us, great travel doesn’t just mean 5-star hotels and luxurious meals (although we’ve done some of that too) – it’s really about creating experiences that become lifetime memories and seeing different cultures and how they live. Some of our best memories with our kids were family trips where we’d camp for 6 days and hike through scenic mountains and forests.

Home Insurance/taxes/upkeep/utilities – 12k.

We do the majority of our home maintenance – mow the lawn, minor repairs, painting, remodel jobs, etc. This has saved us big money over the many houses we’ve owned, and usually gives us instant equity even in the real estate dips.

We decided to pay off our house in 2021, after years of reading about the pros and cons. For us, it was an instant psychological boost and we’re so glad we did it.

Groceries/Dining out – 15k.

While we don’t splurge on meals out, we buy a lot of organic and fresh food to prepare at home.

I would have freaked out about this number ten years ago, but we now view this as investing in our future health.

The results have been worth it – we’ve lost weight, feel better, are more active, and take no medications nor have underlying health issues.

Health/Fitness/Well-being – 6k.

This is a similar story to the groceries paragraph above. This spending covers gym memberships, personal training, supplements, massage, etc.

Like the food, this category has gone up in recent years, but has been worth every penny. We used personal trainers to help build a workout regimen, and since then have developed our own plans and workout on our own.

Moving forward, I see this expense around 4k.

Heath/Life Insurance/Medical – 5k.

We have insurance through my employer that’s average, but we rarely need to use it (aside from one major medical event.)

We max out our HSA plan each year, using it as an investment vehicle and holding onto our medical receipts for when we retire.

Entertainment – 2k.

We don’t spend a lot of money on the typical entertainment.

Aside from travel, we utilize our local park system for entertainment and exercise.

Between us, we read close to 100 books a year, but get them all from the local library.

Pets – 3k.

Our pups are our fur-children.

They’re healthy, but good food and an occasional teeth cleaning adds up.

Shopping/Clothing/Misc – 5k.

Cars/Insurance/Fuel/Maintenance – 6k.

We have two cars and both are paid off.

We tend to buy affordable/reliable cars and SUVs, and then drive them for 8 to 10 years each.

Gifts/Donations – 10k.

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

We do not use a budget currently but did use one several years ago in order to right-size our finances.

I mentioned above that I had early training in frugality, and when I met my second wife, we had similar backgrounds with spending. The problem was, we didn’t have a 30,000-feet perspective on spending and how it relates to our overall finances. And we didn’t approach it as a team – I tended to handle all the bills and finance while she did the majority of the household spending, but our priorities weren’t aligned.

About nine years ago, thanks to a wake-up call connected to a job loss, we decided to get serious about a budget. We’d resisted it before, thinking that the limits a budget imposed would take the fun out of life, but the result ended up having the opposite effect.

We implemented a Dave Ramsey-style cash budget – which was like boot camp for our spending habits. We did this for about 1.5 years, which made us much more aware of what we needed vs impulse purchasing.

Around the same time, I discovered the FIRE movement, MMM, Mad Fientist, Frugalwoods and eventually ESI. We went all-in on FIRE along with a healthy dose of minimalism. As a result, we became more focused on our greater desires of financial independence and early retirement and our spending decisions got easier.

We also found that we wanted less – especially the material possessions our friends were chasing.

Once we developed the mental muscles to spend more wisely, we didn’t need the monthly budget.

These days, we give each other a heads-up if we want to buy something over $150, and for any big purchase we always take a couple of days to think it over first. We ask ourselves – “Is this something we want to own in 5 to 10 years, and if so, will we still be using it?” – which helps us buy better quality but also avoid cluttering up the house with things we don’t need.

We sit down together quarterly and review spending to make sure we’re on track.

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

Now we save around 60% of our gross income, but our after-tax saving is much higher.

Prior to each new year we set a savings goal, which includes all investments, 401ks and matching, HSA and matching, house principal paydown, etc. We’ve grown that number each year, starting with around 100k in 2016, then over 200k in 2020 and last year we hit 310k (we paid off our house that year with a large lump sum.) In 2022, we are on track to save at least 270k.

Historically, our saving wasn’t nearly that impressive. We’d save for a car down payment or a trip, but aside from 401k minimums and occasional IRA deductions, we saved and invested very little prior to 2015. It was only in 2013 that we saved enough for an emergency fund.

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

Despite the mistakes I/we made along the way, the one consistent thing we’ve done right is avoiding lifestyle inflation. We live on what we used to make ten years ago. We don’t aspire to own luxury cars, boats, or second homes. We live in a nice but modest home (3b/2b) that we bought because it’s close to my work and we knew we could add equity to it.

The second thing that’s worked for us is having a greater goal to aim for – not just a dollar amount, but the desire for financial independence and the freedom to spend our time how we wish. Once we both bought into that mindset, along with the desire to own less, the temptations of “keeping up with the Jones” just melted away. And as a result, we came to appreciate more the “luxuries” we already had. This has resulted in a much happier and grateful way of living for both of us.

The other tip that worked was setting our investments to auto-withdraw monthly (and now twice a month.) This has allowed us to invest huge sums of money that we never would have dreamed possible ten years ago. I only wish I’d started it much earlier.

What’s your best tip for spending less money?

Have a greater goal for your life beyond your daily desires.

Envision what your money could earn you if you put it to work.

Do your best to tune out the marketing to “buy more”.

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

Vacations, travel, exploring.

A close second is a good meal out to eat. We do these about twice a month. We don’t pay attention to the prices and order what we want. Limiting it to a few times a month keeps the experience fresh.

INVEST

What is your investment philosophy/plan?

Like many, we knew very little about investing in our 20’s and 30’s, and as a result were intimidated by it. I used Edward Jones to run IRAs in my 20’s and 30’s. I shifted to Personal Capital around ten years ago, and while I found it to be a step in the right direction, the more I learned from other FIRE experts the more I realized how much others were profiting off my money.

Reading JL Collins, I learned more about index fund investing than I had from any other source. From that point forward I’ve been mostly in index funds, keeping it simple and low cost.

What has been your best investment?

I don’t have any single-stock hits or Amazon-style stories to share.

My one best move was following JL’s The Simple Path to Wealth – and not panicking in market downturns.

When the market dips, I look to increase my position by buying low. So far, so good.

I’d also echo what other millionaires have said – investing in my marriage/choosing a great partner and investing countless hours of research into FI blogs and books.

What has been your worst investment?

Not investing sooner is #1 by far.

My other biggest mistake was during the Great Recession. My biggest asset was a 401k worth around 30k. The employer-matching was made up entirely of company stock, which took a massive hit in the downturn.

I left the company shortly thereafter, and when it came time to move the money to an IRA, I sold the company stock for about 20% of what it was worth the year before.

Since then, their stock not only recovered but is twice the value of the high point when I had it.

What’s been your overall return?

I wish I’d tracked this better through the years, but the best I can estimate is around 7 to 8%.

How often do you monitor/review your portfolio?

I check the dashboard a couple times per week.

My investing is so simplified now I mostly focus my energy on looking for opportunities to buy more and to keep an 80/20 allocation between equities and bonds.

NET WORTH

How did you accumulate your net worth?

Aside from a 20k inheritance in 2013 (which helped us top off our first emergency fund), the majority of our net worth has come through earning and investing in the last 7 years.

Because we knew we had a lot of ground to make up to reach our goals, we became intensely focused on saving/investing more and more each year.

It helped that since 2014 my career earnings doubled, tripled and then quadrupled…and that my wife has had continued success with starting successful small businesses along the way.

Our work ethic was our biggest strength throughout – we had a big hole to fill but found that a bigger shovel helped offset earlier mistakes.

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?

Overall, it’s Saving (or in the early years, practicing extreme frugality.)

In the last 7 years, Earning takes the top spot.

We could save more now, but don’t need to flex the frugality muscles as much as we did before.

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

Marrying young, having a child and then divorcing in my mid-20’s greatly impacted wealth building. My wife had a similar experience.

The result was that when we got together, we focused more on month-to-month finances instead of long-term financial planning.

The good news is that we avoided large amounts of short-term or revolving credit card debt, so when we did wake up to FIRE, we weren’t under a mountain of debt to pay off.

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

We save a large amount of what we earn, maximize our tax efficiency, and keep some dry powder for market downturns.

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

This has evolved through our FIRE journey.

We initially considered living on around 50k in early retirement but have found that an annual spend of 80k gives us a feeling of luxury without sacrifice.

Due to this, we’re aiming for a net-worth of 2.5 million, with at least 2-million invested.

My wife will continue her business for at least a few years after I retire.

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

We officially hit our first million on my 47th birthday – no joke! I’d been watching our net worth daily in the days before and the timing worked out that when I woke up that morning, we’d crossed the million mark. Best birthday present ever.

We crossed the 2-million threshold 2.3 years later – thanks to a big savings shovel and a hot market.

What’s changed for us since becoming millionaires? It’s brought clarity into what we want to accomplish and how to get there.

Also, we worry less and practice gratefulness more. When we decide to take a big vacation or need to cover an unexpected expense, we don’t fret about it because we’re hitting all our goals.

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

Not saving and investing when we were young.

I think back to purchases I made – a motorcycle, a new truck, new furniture – and what that money could be now if I’d put it in the most basic investment. Ugh!

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

I have three things that rise to the top:

• One is to research what truly brings you happiness and gives your life meaning – then focusing your earning/spending/saving around that. My wife and I do this regularly and have done it with our kids as well. When we list out the top ten, we find very few of them are what most people spend their money on. For us, it’s freedom, time with those you love, experiences, etc. Once we were able to focus on achieving those things that brought us true happiness/meaning, the temptation for other spending melted away.
• The second is to align your goals with your partner. I see this shared a lot in the millionaire stories, and we have certainly lived it. The more aligned we became in our goals, the more progress we made and less strife we had.
• The third is to avoid going with the herd. When we talk to neighbors and friends who are making even more than we do and are still complaining about not having enough yet building new pools and buying new luxury cars, we know we are on the right track. Being different is something we aspire to.

FUTURE

What are your plans for the future regarding lifestyle?

I plan to retire from my career in 2024.

My wife will maintain her small business for a few more years, as she can do it from anywhere and it’s a good hedge for us if/when a market downturn occurs after I retire.

What are your retirement plans?

Using investment income and her small business, we plan to live on/around 80k/year.

Studies have shown this is the optimal number for “money buying happiness” and we’ve road-tested that in the past several years and found it to be true for us.

I have a very small pension from a previous employer that will pay me $350/month when I turn 65…which by then might pay for one trip to the grocery store.

As for our plans…we will travel North America in an RV for a year or two, then find a region of the US where we want to settle, at least for a few years. Traveling, hiking, caring for ourselves and the people we love are all top priorities in retirement.

The ESI site has been instrumental in helping prepare us for the unexpected challenges of retirement – we have hobbies and goals ready for the post-career life. While I’ve enjoyed my career, I don’t expect to miss it. As I mentioned earlier, the biggest challenge of my job is managing people, and after 30 years I will be ready to leave that stress in the rear-view mirror.

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

I have the same concerns about healthcare as others have shared, but we are actively working to provide plenty of air cover in that area. I expect to have a minimum of 120k in our HSA to help offset high deductibles. We’ve put our health first these past few years and are in the best shape of our lives. Because we’ve experienced a medical emergency with a sticker price in the mid 200’s, we will always have health insurance to cover the unexpected.

I’m in the peak earning years of my career, my bosses like me, and if I don’t retire I would likely double my annual income 3 to 5 years from now. A lot of people would think I’m crazy to walk away from that earning potential. We’ve given it a lot of thought and keep coming back to the same conclusion – we have more than enough to live as we desire. We truly feel rich right now.

The thing we value most is our time – and we’re not willing to trade that for a couple million dollars more in the bank account.

MISCELLANEOUS

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

I learned some of the basics from my parents and by learning from my own mistakes.

Frugality was an early lesson – but the rest of the ESI equation didn’t truly click until I was over 40.

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

I am fortunate to have parents that served as strong role models. They both re-invented their careers in their late 30’s or early 40’s by going back to school for undergrad or advanced degrees. Seeing them attend night school when I was in middle and high school made me realize the advantage I had to earn my degree at a young age.

They were open about finances – especially their mistakes – so I was able to learn what to avoid. And they’ve continued with good advice through the years.

In 2013, my dad sent me a link to a Mr. Money Mustache article – and down the FIRE rabbit hole we went. Even though he doesn’t adhere to the FIRE movement, by sending me that article he changed the course of our lives.

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?

• “The Simple Path to Wealth” by JL Collins. After reading his blog for a few years, I devoured the book and got a copy for my daughter. I recommend it all the time, especially to younger people who like me were intimidated by investing.
• “Atomic Habits” by James Clear: By the time I read it, I’d figured out solid habits already, but it’s great if you’re struggling with how to get started in good habits.
• “Lifespan: Why We Age—and Why We Don’t Have To” by David Sinclair: Not a finance book, but it helped us re-focus our finances to put health and longevity first. We want to live a longer and more active retirement, and this book tells you how to do that.

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

Yes, we have some local charities that we give to, as well as volunteer our time and serve on boards.

Before retirement, we plan to establish a Donor Advised Fund through which to give charitably.

Volunteering in retirement is a big part of our plans.

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 hope that one of the best inheritances our kids will have received from us is the money/life knowledge we’ve shared with them, especially as they’ve entered adulthood.

They both already auto-deduct money from their checking accounts for savings/investments, so I’m confident they’ll be just fine.

With that said, we do plan to leave some of what’s left after we pass to our children and/or grandchildren, nieces/nephews, etc. We want to make sure it’s not just lump sums, which we believe could hurt more than it helps.