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 and this post is part 2 of the interview.
If you missed part 1, you can find it at Millionaire Interview 321.
My questions are in bold italics and their responses follow in black.
Let’s get started…
What is your investment philosophy/plan?
We have a Bogleheads “three fund portfolio” of (mostly) index fund ETF’s, at an allocation of around 60% equities and 40% fixed income. The 40% fixed income (which includes our settlement annuity) works out to be 8-10 years of spending for us, which aligns well with how long stocks have taken to recover their value after crashes which makes it safe enough for us.
We also have the ability to “lean out” our spending to stretch that time if needed. Any new investments are going into equities, so our overall AA is likely to increase over time.
I got very lucky in setting this philosophy. About 15-20 years ago, I worked with another engineer that strongly encouraged all of us “young guys” to use index funds for retirement savings, since the funds were very inexpensive (just required a computer to buy whatever was on the associated stock index) and he said that index funds consistently beat active stock selection (less fees) over long time periods.
I was surprised to hear that, but given the lessons I learned earlier in my career (i.e. about things “everyone knows” not always being true) I was willing to look at it. I ultimately learned that he was right, which just floored me! From that point forward I began putting all my retirement savings in a single S&P 500 index fund in my 401(k) plan. (Keep in mind that I knew nothing else about investing at that point, so “asset allocation” was a phrase without meaning for me.)
After I got my windfall from the insurance settlement, I decided to learn more about investing at which point I realized that I was doing it (mostly) right all along – just needed to dial back the risk a bit by diversifying into other index funds like international and bonds.
One last piece of our investing philosophy is to buy and hold. That’s something else that the engineer/ told us guys – that for index investing to work, we needed to not panic and sell when the market crashed. The ability to not panic and sell during crashes has been huge for us.
For example, in 2008 – back when they thought the next Great Depression was right around the corner – we decided that it was too late to “get out” and just left our investments on autopilot.
Later on, during the 2020 COVID crash, we similarly let our investments go without selling (other than tax-loss harvesting, which is something else I learned about through my post-windfall investing education). In fact, we actually rebalanced about $100K of our bond portfolio into stocks at the end of March 2020, which seemed like throwing money into a furnace at the time – but it was ultimately a good decision.
What has been your best investment?
Since our investment approach just involves boring index funds, we don’t really have a single financial investment that has done better than the overall market. We’ve had great returns over these last few years thanks to Mr. Market, and we’re happy just getting the market average.
One good financial, non-stock-related investment I have made is the loans I took to pay for college. Pursuing an engineering degree was a huge risk for me. I was the first member of my family to ever attend college, and unfortunately I was unable to get any financial support from my parents which drove me to take on significant student debt to make that happen. I also had to navigate the maze of college admissions without significant adult help, and also in the absence of the Internet which was just not around at that time.
My stress levels were quite high as I approached junior and senior year of college, as my loans started to mount and as I pondered the reality of finding a job. But one of the “bright sides” of growing up without much money is that you sort of get used to a baseline amount of financial stress and risk in your life. After all, it’s not like you have any choice in the matter, especially as a teenager without a significant income. Life goes on, and you just need to deal with it – warts and all.
In my case I was able to put that stress aside and focus my efforts on the things I could control – like interview skills, company research, and of course keeping my grades up. Ultimately that effort paid off in the end once I found my first engineering job – and the rest is history.
In terms of non-financial investments, I think the time we invested in raising our kids well has been very valuable. We set expectations high for them since they were both little, and they both have risen to those expectations.
For example, the girls have always had chores to do around the house, even when they were as young as two years old. As they got older we gave them larger chores, including routine yardwork. We have also set strict rules around the house around “on line” screen time and bedtimes, and the kids were among the last of their peers to get a cell phone.
We also have tried not to be “helicopter parents” as they have gotten older, thereby making our kids take the initiative to solve their own problems. Only rarely have my wife and I needed to intervene on our kids’ behalf to solve issues.
As a result, what we see is that our kids are not bothered by work and are quite self sufficient. They get their homework and daily chores done without us having to pester them to do so, since for them it has always been expected. This has benefitted them as they got older.
For example, my oldest did well on her high school varsity sports teams, as she took coaching better than many of her peers for whom being told what to do by another adult was a foreign experience. Another example is how many of my oldest daughter’s peers are having problems managing time at her college, largely because they don’t have others pushing them to get work done. She’s been able to stay on top of things and done quite well so far.
My youngest is similar. In her case we never really had to push her to do work during the weird “virtual school” COVID period, and she actually found and took some on-line classes in computer coding that she was interested in doing.
What has been your worst investment?
Our worst investment was in a tech stock that was recommended to my wife through her 403(b) “financial advisor” who regularly visited the school at which my wife worked. This was before we learned about index funds, or really knew anything about investing at all. At the time we assumed that the financial advisor knew what he was doing, so we followed his recommendation and put all of my wife’s 403(b) plan into that stock.
Unfortunately this was in 1998 or 1999, so basically right before the big tech bubble burst. She ended up losing nearly all of her money, which luckily wasn’t a life changing amount of money or anything at the time. But that loss still stung. I guess the “silver lining” there was that we learned to not trust financial advisors from that point forward.
What’s been your overall return?
Overall our return has been around 8% or so.
Unfortunately I don’t really have good records for the earlier part of my career, so I’ve just estimated for that period based on how much I know that we added (percentage of salary) and identifying what CAGR I needed to get the amounts I had until my records began.
How often do you monitor/review your portfolio?
I look at our investments about twice a month, corresponding to when my wife and I get paid. While we automatically transfer a fixed amount after each paycheck to our brokerage account at Fidelity, since we use ETF’s there is no way (yet!) for Fidelity to automatically just buy the ETF’s using that money. As a result I need to go in and do it manually, typically a few days after we get paid.
For our paycheck that comes at the end of each month, I update a monthly investment tracking spreadsheet to identify our total liquid net worth and monthly expenses. I then chart the monthly expenses (annualized) against our intended “safe withdrawal rate” of 3.5% in early retirement, which helps me visually track our progress to FI. In most months our SWR amount exceeds our monthly spend, which is reassuring to see.
How did you accumulate your net worth?
About half of my net worth came from savings and investment growth. The other $1MM came from a medical malpractice settlement and associated investment growth.
There’s a lot to talk about regarding the insurance settlement. The settlement was from a medical procedure that I had done a few years ago. It was a pretty common medical procedure for people my age, and it is typically done on an outpatient basis with a recovery time of less than 1 week.
In my case, my procedure turned out to be more complicated than it initially appeared. The correct thing to do in my case would have been to abandon the procedure and send me to a specialist to get the work done. However, my surgeon decided to plow ahead anyway despite the complications – and ended up doing a significant amount of damage in the process. She also did not seek timely follow-up care, despite signs of significant issues – including significant levels of pain – early in my recovery.
Ultimately I decided to abandon this surgeon and seek out a specialist on my own. This surgeon did an exploratory procedure and, once he realized the gravity of the situation, got my consent to do some major corrective surgery to repair the damage. Overall, I was out of work for several months due to the corrective procedure, and I later needed some minor “tune ups” after the corrective procedure to address issues that were common to the corrective procedure.
While I’m OK now, I still have a medical condition that I will need to monitor and stay on prescription medication for the rest of my life. My current doctor tells me that the chance of additional complications is likely very low due to the elapsed time since the corrective procedure took place.
Tell us more about the medical malpractice process.
I decided to hire a lawyer once I had recovered from my initial corrective surgery. My expectations for financial recovery were pretty low – all I knew is that someone needed to be “made to pay” for the pain my family and I went through thanks to this surgeon’s error.
The medical malpractice lawyers in our area tend to charge about the same (i.e. percentage of settlement), so we decided to go with a well-known one in our area. One benefit of this is that the lawyers at the well-known firm have seen many cases before, so they had handled cases similar to mine before and knew exactly how to handle it.
Overall, it took about 2 years from the time we first met the lawyer to the time the case was settled. There was an initial 6 month period where the lawyers did their own “due diligence” to make sure they actually had a case. They then notified the surgeon that we were preparing to sue, and then we waited for 1 year (as required by my state) in order to allow the opposing counsel time to assess the situation and negotiate a settlement.
In reality, we received no response from the opposing counsel during that time. My sense was that, while the intent of the law was good, in practice this works out to be just an opportunity to further delay a rightful settlement.
Once we filed a lawsuit, our state required the case to be reviewed by a committee of doctors to confirm that the case was valid. However, we never reached that point because the opposing counsel basically “threw in the towel” and settled for the surgeon’s policy limits as soon as we filed suit – which was a complete shock to us! Apparently they thought the case was so solid that further negotiations would have been pointless.
I was also told by my lawyer that my lack of urgency on negotiating helped put us into a stronger negotiating position for the settlement. (I will say that our lawyer emphasized this very early with us – i.e. that this would take time, so don’t expect any recovery for many years. But like I said, I didn’t really know what to expect for a settlement. I was after revenge, not money.)
Once we agreed on a settlement, my lawyer set me up with a financial planner and an annuity salesman (both unaffiliated with the law firm, but I’m sure there were referral fees involved) to discuss what to do with the settlement. It should be noted that this type of legal settlement was considered “tax free.” Also, if I wanted to take a portion of this in an annuity, the proceeds of the annuity would also have been tax free – which is why he set up contacts with the annuity person.
Overall I remember feeling completely overwhelmed with all of the financial details once we determined the settlement amount. The financial planner just seemed to make things sound very complex, and was generally not following the index-fund-based approach I had used up until then. He seemed to just assume we would leave our money with him like everyone else does. Also the follow-up answers to my questions just seemed very vague, and – worst of all – he charged an asset-under-management fee of around 2%.
While the annuity salesman was easier to deal with, I felt like they kept “dumbing things down” by constantly trying to over-hype the idea that I would get “more money back” by getting an annuity – as if I did not know about the idea of investment growth or the time value of money. He also kept hyping up the tax benefits of the settlement annuity, which I wasn’t entirely following. However, it seemed like a secure way of putting money away, and we put a lot of value on being good stewards of what was a life-changing amount of money for us.
As I discussed above, I tend to immediately challenge people when they present me with an idea that “everyone does” or “we all know.” As a result, I directed our lawyer to skip the financial planner and transfer most of the money to me directly. We also, reluctantly, decided to transfer a portion of the settlement to an annuity as a college fund for our children.
Overall I am satisfied with the decision we made, although I do wish in retrospect that we had skipped out on the annuity as I don’t think the loss of liquidity we took was worth whatever minor investment return improvement we may have gotten. But we could have done much worse with the financial planner!
Once we got the balance of the insurance settlement, we set up a Vanguard account and put our money in their default “core” position. I then began reading up on how to invest, and realized that my instinct was correct on the financial planner – this wasn’t as hard as he made it sound. I initially signed up with a Vanguard PAS advisor to identify a good asset allocation, but eventually dropped them after about a year once I finally felt comfortable managing the additional money.
I have been managing my family’s wealth on my own ever since.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
I think the thing we did best with was “Save” and selected that via process of elimination.
Our investment approach has been pretty boring with only market returns from index funds, so I can’t really say that “Invest” was a strength (other than not doing stupid things with our money, of course!).
We have always had a relatively high income relative to others in our family, which helped us save of course. That said, I would treat this as a “contributing factor” in our overall wealth building and not a root cause.
I do think that a big factor in savings is just patience. We have never been the kind of people to make rash decisions with our investments.
We have been through the 2008 financial crisis, the 2020 COVID stock market drop, and various other minor stock market corrections along the way, and have never been tempted to sell. Our view has always been that, by the time something like that happens, there’s really nothing much you can do about it so we just keep our investments as they are. This willingness to allow our investments to ride when everyone else in the market is losing their minds has been integral to our investment growth.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Not a “road bump” per se, but I think our family’s decision to keep my wife home with our kids definitely slowed us down on the way to becoming a millionaire. That said, we knew that was the downside when we made that decision and accepted that consequence, and ultimately we continue to be satisfied with that decision.
Also, I think that in retrospect the decision to annuitize a portion of my malpractice settlement was a mistake. I could have easily invested that money in low-risk investments and would likely have achieved a similar return, but without the loss of liquidity associated with the annuity.
That said, I think the “silver lining” there was that it could have been much worse if we had decided to invest with the financial advisor! This is just one of those cases where we didn’t know what we didn’t know, so it prompted me to learn more about investing which on balance is a good thing.
What are you currently doing to maintain/grow your net worth?
Since my wife and I are in a high tax bracket in a high-tax state, we are maxing out all of our available tax-deferred accounts, I routinely max out my 401K pre-tax contribution, which is now increased thanks to the “catch up” contributions for which we are now eligible! As a public school teacher my wife is also eligible to contribute to both a 403(b) and a 457 plan, so we max that out to the extent that she can. Now that she is part time, she is maxing out her 457 plan and then adding as much to her 403(b) plan as she can while still maintaining a paycheck above $0.
One other thing we are doing is dialing back on our efforts at work. While we used to both pursue our careers pretty hard, we found that we were both getting very burned out – especially during the pandemic when our workload and hours increased dramatically. Dialing back our efforts by switching to part-time work and (in my case) to a job for which less is expected of me helps make it possible for us to continue to remain employed without further burning out.
If we had stayed on our current path, I feel like we would have just suddenly quit our jobs which would obviously not be helpful to growing our wealth! By slowing down, we can still grow our wealth – albeit more slowly than before – for a longer period of time.
Do you have a target net worth you are trying to attain?
Our original goal was to hit a liquid net worth of $2.5MM, as we thought this would be enough to support our expenses (using the 4% rule) once our kids leave the next, in combination with our expected social security checks.
We met that goal some time ago, but have continued to work and earn money as the opportunity cost of doing so in the current job market seems low.
It seemed wasteful to us to deliberately not take a job in one of the best job markets ever, especially since many of the things we’d like to do in retirement (i.e. travel) is tough to do with kids still at home.
How old were you when you made your first million and have you had any significant behavior shifts since then?
We hit our first million in my early 40’s, when we received the malpractice settlement. I was pretty close to hitting that number before that happened, but the settlement threw us over the top.
We didn’t celebrate this or anything – it was just a number. In fact, we have deliberately avoided sharing any information about our net worth to neighbors, friends, or relatives as we would expect things to be very awkward at that point. We are practitioners of the “stealth wealth” approach, in that we live an upper-middle-class lifestyle but have significantly more invested than many of our peers.
I don’t think our spending habits changed at all once this happened. Part of this is just how my wife and I have always handled money.
She and I both grew up in families that were solidly lower-middle-class, meaning that money was always tight but we handled that by limiting our unnecessary spending and finding less expensive things to do. Those kinds of spending habits just stuck with us through adulthood. Conspicuous consumption was just not anything I ever experienced when I was younger, and it seemed pointless to do it now. We’re just happy with whatever we have.
What money mistakes have you made along the way that others can learn from?
Overall I wish I had learned more about investing much earlier in my life. I just didn’t pay attention to it much until after I got my settlement, which seems silly in retrospect given how easy it is but I suspect many others are the same.
Thankfully I still did the right things (i.e. contributed enough to retirement accounts, used index funds, etc.) although the risks I took on thanks to a 100/0 asset allocation was probably a bad idea in retrospect. I have been trying to work in some financial lessons for my kids to encourage them to learn more about it, but to them it’s not a real priority yet – as it wasn’t for me when I was that age.
The other mistake I made was assuming that, by continuing to perform at work, I would remain employed for as long as I wanted. I no longer believe this is the case. As I now try to impress upon the younger engineers I work with, your ability to remain employed is not entirely up to you. The employer gets a vote, and they can (and frequently do) value your performance very differently even if you are out there doing great things. You simply cannot assume employers will always be rational actors.
The problem gets even worse as you get older, as the company can save tons of money (at least in the short term) by hiring younger and cheaper staff. Had I more fully understood that, I would probably have saved even more when I was younger to give myself options in my 50’s. In my case, having that malpractice settlement helped give me options now that I would have had if I saved more when I was younger.
What advice do you have for ESI Money readers on how to become wealthy?
First of all, don’t think that getting a malpractice settlement is the ticket to wealth. LOL.
While this event led to a significant wealth boost for me, it was an absolutely terrifying thing to experience for me or for my family. If I could do things over again, I would have gladly foregone that settlement if it meant not having to go through the medical issues I needed to deal with in the meantime, and especially if it meant that my family did not have to see me in the hospital and barely hanging on for a few days there. It’s just not worth it, no matter what the amount of money is.
Second, I think it’s really important to pay attention to having a good work-life balance. I remember my initial reaction to realizing that I needed a medical procedure (i.e. the minor one, not the major corrective one) was relief that it would mean time off from work. In retrospect I now realize just how awful and unhealthy that is. I mean, if your job is so intense and stressful that you’d rather be in the hospital rather than working, that’s a sign that something is badly, badly wrong in your work-life balance.
While slowing down and pacing yourself may initially mean reducing the rate at which you grow richer, you will eventually burn out which will drop your rate of income to zero. I think it’s better to pace yourself and grow your wealth more slowly, but at a sustainable pace that you can maintain for a longer term.
What are your plans for the future regarding lifestyle?
My wife and I plan to leave full-time work no later than when my oldest graduates high school.
At the moment, my wife seems to like her job and hours, so her current plan is to keep working until then.
On the other hand, I am seriously considering leaving full-time work before then. While my current remote role pays well for the hours, I just don’t feel very energized by the work anymore and I just hate having to get up and do it each day. I am finding that the value I place on my free time is much, much higher than it has ever been.
What are your retirement plans?
When my oldest graduates and starts college, we plan to sell our current home and move to a lower-cost and warmer state, probably Florida. While we like where we live now, the taxes here are quite high and – other than our jobs and our daughter’s school, we have no real strong ties to this area so we feel it is an opportune time to move.
After moving to Florida, we plan to just explore the area for at least a year while we establish Florida residency. My understanding is that it may be possible to establish Florida residency without physically having to move there for a fixed period (i.e. through a mail forwarding service, etc), but we think it would be safer to just do it the normal way. Besides, we have spent long periods of time in that area and love it – including in the summer – so we’re looking forward to seeing what it is like to actually live there.
Once we establish Florida residency, our plan is to slow travel for a few years. I’ve gone to lots of places (both domestically and internationally) but my wife has never been able to join me, so we’re both looking forward to being able to explore the world at our own pace. There are several locations in Europe that we want to explore, as well as some locations in Asia and Latin America – as well as within the US. Once we get that “travel bug” out of our system, we’ll pick somewhere to settle down for a longer period.
In addition to traveling, I would like to learn more about software development, especially cloud-based software development. I’ve always done this as a hobby, but due to a demanding work schedule I just haven’t been able to put as much time into it as I would have liked.
That said, I was able to get an additional college degree in computer science through an accredited on-line program, so I’m hoping to build onto that degree with some hands-on experience. It is possible that that could eventually turn into an actual job, but I’m not counting on it – great if it happens, but for me it’s all about learning something new.
My wife and I also both hope to be able to volunteer once we settle down. We have noticed that public schools often don’t have strong after-school STEM programs, so I can definitely see a scenario where we start and lead a program at a nearby school. My wife also hopes to continue to tutor kids, either on a volunteer basis or (if the demand exists) on a paid basis.
I’ve also taken an interest in financial topics, so I can see a scenario where I volunteer to help others with doing simple tax returns or teaching financial literacy to interested folks – basically teaching them the things that I really, really which someone had taught me when I was younger.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
I am a little concerned about ensuring we have enough to live on after we leave work. I have tried to address those concerns by reviewing, and re-reviewing, our expenses and using every single on-line calculator I can find to confirm we will be successful. But even after all of that, I still feel like I’m taking a big step into the unknown.
I think I will likely still keep a close eye on our spending initially, and also keep in touch with my professional contacts to enable me to work as a part-time engineering consultant if needed for the first few years of retirement. Going back to work would not be my favorite choice, but more of a backup option in case things go poorly financially early on.
I’m also concerned about potentially not having enough to do in retirement. I have been working since I was a teenager, so I fully expect it to be difficult initially when I suddenly have a lot more time on my hands without work to fill it. I’ve tried to fix that by making plans on what to do during that time, and also doing some prep work (i.e. getting the CS degree) to help ensure that those plans were successful.
Finally, I am a bit concerned about how to explain all this to family and friends. Like I said earlier, we practice “stealth wealth” and generally stay away from questions about our finances. Those questions will likely be hard to avoid if our neighbors suddenly see both of us home all day!
My plan to address this is to basically just tell people that I am a consultant that works from home – which is actually true right now, but will no longer be true when I quit my job. I doubt this will be an issue, since once people hear what I do for a living they don’t know enough about my industry to really ask any followup questions.
For my current neighbors, I will likely just not tell anyone that I left work as they are already used to seeing me walking around the neighborhood in the middle of the day, and they know why.
How did you learn about finances and at what age did it “click”?
For us I think the knowledge came in phases.
We learned the basics of simple budgeting around when we both graduated college, simply because we needed to do that to keep on top of the bills with my student loans. This also forced us to “live below our means” since we sort of started out with a lot of student loan debt initially.
For investing, I learned from a colleague at one of my employers with prior experience with stocks. He advised my peers and I to invest in broad-market index funds, since he said that no one have ever consistently beat the index (net of fees) over the long term, and that since there was no stock pickers to pay for the index funds would naturally carry less fees. I accepted what he told me after doing some research on my own, and ultimately things worked out well.
The principles of investing finally “clicked” for me once we received the malpractice settlement. Since my “gut feel” was to mistrust the financial advisor my attorney recommended, I began reading up on how to invest and ultimately realized a) that it wasn’t as complicated as I thought, and b) I could probably do it just as well as the financial advisor but for a much lower cost (i.e. free other than the fund costs).
Who inspired you to excel in life? Who are your heroes?
I have a few people that inspired me to be who I am now. At my very first job at a fast-food restaurant as a teenager, one of the existing employees (a retiree) gave me good advice to always try to make myself useful. She also showed me the value of always being willing to take on any task, especially those that were important but that others avoided.
I used this advice throughout my career, and I can say that it has been integral to my career success. In addition to providing at least some job security, it also works well from a leadership perspective as most people put a lot of respect in leaders that are willing to “get their hands dirty” when needed. I’ve always been able to do that and received the respect of my teams when I did so.
The other person who inspired me was one of the first managers I had after graduating college. Anytime he asked me a question, he would challenge me to provide data to support every response I gave him. At first I absolutely hated it, especially as a new engineer that already knew everything (ha ha). But through his questioning of everything I did, he made me realize that so many things that “everyone knows” are not actually true at all, and he also showed us the huge amount of opportunity just waiting for us to find those things and exploit them.
I had a lot of career success stories that all started with me just wondering whether something that “everyone knew” was true, which meant rolling up my sleeves and “doing the math” and verifying statements that I heard. I often would find out that this “common knowledge” was actually wrong, and once I learned what was actually true I was able to solve some long-standing problems (and / or propose and implement some cost savings or other improvement opportunities) and get the attention of senior-level staff while doing so. I wouldn’t have had the career success that I did without his advice.
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?
When we first got the malpractice settlement, the first book I read was “The Simple Path to Wealth” by J. L. Collins. I found this to be an easy but informative read, and the way that he explained basic investing topics just made things very easy for me to follow. I would definitely recommend that book for people just starting out, who (like me at the time) just wanted to “get to the point” and arm themselves with enough basic investment knowledge to steer themselves away from the most common investing failures.
After reading that book, I wanted to learn more about the details of investing. This is when I picked up and read the other book that I recommend to people, “The Bogleheads’ Guide to Investing.” This went into a lot more detail on how each portion of the market worked, and provided a lot more detailed information on the power of investing using simple index funds. That said, the book is written in a way that people like me at the time – with little to no prior investing experience – could follow along with the explanations. It also helped reinforce to me that investing could be done without having to rely on an expensive financial advisor. I also recommend this to people that want to go beyond just the basics.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Yes. We volunteer our time at my daughter’s school as much as we can.
We also routinely donate to the arts program at my daughter’s school, which has just been decimated by COVID since lots of kids dropped art and band classes during the pandemic. It will take years for these programs to rebuild, so we want to make sure that the programs can continue despite all of the closures and the other poor policy decisions that were made during that period.
We have also started sponsoring kids anonymously through the school. For example, every year we work with a local elementary school’s principal to buy Christmas gifts for a family in need. We have found this to be a lot of fun, especially now that our kids are older and aren’t as impressed with toys and such.
We also sponsor a student each year to attend the annual marching band trip to Disney World, which is important for me as I never had those opportunities when I was younger due to lack of money.
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
We have decided to give our kids a “down payment” on their inheritance by paying for most of their college education. We did require our oldest to take on the maximum Stafford loan amounts each year (between $5-8K a year, depending on the year) to make sure she had “skin in the game” and align our interests and hers.
I will say that both of our kids are very responsible and probably don’t need that kind of incentive, but at the same time we also saw so many kids when we were in college eventually flunk out – and one thing that they all had in common was a complete absence of any financial stake in the outcome. While I realize that correlation is not causation, it was a strong enough correlation for us to think we needed to ward it off. If she can graduate in 4 years, we may go ahead and pay off the balance of her loans when she graduates depending on how the market performs. Her sister will get the same deal when she goes to college.
Other than that, we intend to leave any wealth that we don’t spend to our kids. It may be nothing, or it may be a lot, but they’ll get whatever is left. Our priority is to first spend our wealth on ourselves, with the understanding that it is unlikely that we would ever spend it all.