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…
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 52 and my wife is 49.
We have been married for 26 years.
Do you have kids/family (if so, how old are they)?
We have two boys.
One is about to turn 21 and the other is 18.
What area of the country do you live in (and urban or rural)?
We live in a suburb in the northern mid-west.
What is your current net worth?
It has been relatively flat for the past year fluctuating between $1.5 and $1.6 million.
It peaked last November at $1.85 million.
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
The major parts making up our net worth would be a 401K, house, and crypto assets.
The only debt we have are a few hundred dollars on our credit cards and two car loans.
What is your job?
I am currently a senior level engineer in the aerospace industry.
What is your annual income?
I make a very good wage for my level of responsibilities. My base salary is $120,000 per year and I also get a performance bonus of $70-80,000 per year.
My wife has been a part time substitute teacher for many years making $6-8,000 per year. She was fortunate enough to be able to retire during the pandemic since I made enough to cover our expenses, etc.
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?
The starting salary for my first job was $37,000 with a small bonus of $1,000. This was in 1996.
Along the way I never really considered going into management. I was interested in what I was working on even though I could see people around me staying in their jobs for 2 years and then getting promoted and moving into higher, less technical positions. Looking back, I realize that I was a little afraid of losing the engineer part of myself if I accepted a management or non-engineering role.
I have always identified with being an engineer. I think this type of self identification is very common when people retire. Fortunately, I read ESI, and there has been a lot of great discussion about this topic giving me things to consider as retirement approaches.
Getting back to the topic, I have always looked around to see what other engineering opportunities were available. Companies like flexibility and if you are willing to uproot your family and move for the job opportunity, then getting promoted is easier. I did this early in my career and it allowed me to double my salary in 5 years and be making six figures within eight years. Eventually, I stopped looking around because we wanted to stay put while the kids were in grade school and I was making a great salary anyway.
What tips do you have for others who want to grow their career-related income?
Looking back, one regret I have is not building my network along the way. That can definitely open doors for you.
As I mentioned above, not wanting to take a management position has limited my income potential but also, there are a whole slew of additional headaches to consider as a manager that I just didn’t want to deal with.
Also, making sure to connect with co-workers and treat them with respect is extremely important. Always consider other coworker’s side and have empathy. I think this has helped me along the way. I get a lot of people that tell me, “You’re not the stereotypical engineer”. I’ll take that as a compliment.
‘Soft skills’ can be a huge determiner of who gets hired and promoted. I would say soft skills are just as important as brains.
Be a great communicator. The most impressive people in my organization are able to quickly assess a situation, make a judgement, and quickly lead the team to resolution.
Make sure you keep your boss in the loop. Don’t ever allow your boss to get blindsided in a meeting with their boss.
What’s your work-life balance look like?
My work-life balance is good.
Typically I work 45 hours per week and I have a lot of vacation time accumulated.
I’ve learned that having a strong relationship with your boss and he/she will be more flexible for approving vacation at the last minute. 🙂
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 mentioned crypto assets as part of my net worth. I have become very interested in the asset class, macro-economics, and how crypto has the potential to upend the world financial system.
I started dollar cost averaging into several ‘coins’ back in 2017. Now a significant majority of my crypto is in Ethereum which I am staking both at home as a business (love the write offs) and on an exchange.
Right now, I am earning a passive income from staking of about $1200/month. That amount is likely going to double in less than six months when the network goes through a major upgrade. That number will also go up as Ethereum becomes more valuable versus the U.S. dollar.
What is your annual spending?
Our annual household spending is between $60,000 and $72,000 per year.
Keep in mind, the mortgage was paid off several years ago.
That also doesn’t include college costs, or major home improvements, or car parts.
I mention car parts because I have always had at least one muscle car since I was 16 as a hobby.
What are the main categories (expenses) this spending breaks into?
- The highest category after paying off the house has become food. We easily spend $1,400 per month between my wife and myself and also help out the boys who are away at school.
- Car loans come in a close second at $1,125 per month. Unfortunately, we’re paying off two car loans right now. More on that below.
- House hold bills (utilities, subscriptions, etc.) are $800 per month.
- Insurance (car, home, etc.) comes in at $350.
- Real estate taxes are also $350 per month.
- Then we end up spending $1,000 to $2,000 on gasoline, clothes, dog and dog accessories, and miscellaneous things that just seem to come up. This is actually the biggest category but the situation has gotten easier to plan since the boys have graduated from high school. They were in a lot of activities in school and it seemed like there was a near constant surprise expense every month of several hundred dollars.
Do you have a budget? If so, how do you implement it?
Believe it not, based on how many miscellaneous items we have, we do have a budget. How well we manage it has ebbed and flowed over the years.
We are definitely frugal and spend on things that we feel bring value for a long period of time. When we have a change to the monthly expenses such as a kid going to college or suddenly the cost of groceries is 30% higher, my wife and I evaluate all the things that we spend money on outside of investments and put them in a spreadsheet.
We’ll very closely monitor our spending for a few months tracking every penny to make sure nothing is out of whack and then we back off tracking for a few months. It isn’t a perfect system but it does give us a good idea of what we are spending and if we are on track to meet any short or long term goals that we have set.
What percentage of your gross income do you save and how has that changed over time?
Most years since I have started my career, I have been able to save a large percentage of my income by way of 401K deductions. Generally, I have been able to save up to the maximum allowed per year by Uncle Sam.
I have always saved well above the company match amount. Who doesn’t like free money?
Also, I have put money into both a Roth IRA and a traditional IRA over the years. My wife started an IRA and 403b many years ago as well.
What’s your best tip for saving (accumulating) money?
Cars are a terrible investment 99.99% of the time. The best way to ‘get your money out of them’ is to drive them into the ground over a long time span.
We dislike car payments and that is why our payment listed above is so high for 2 cars. We’re actually doubling up on one of the payments in an effort to pay it off early.
Buying two cars was a necessary evil with multiple drivers and one kid out of state needing his own vehicle.
Aside from the car advice, making sure to pay myself first by taking money out of my paycheck for saving/investing, has really paid off. Once we got re-focused, it hasn’t taken that long time for our net worth to grow. See below.
What’s your best tip for spending less money?
We like to shop but have become disciplined enough to ask ourselves if we really need it, will we be using this long term, and is the cost worth the time that was required to make that amount of money.
Just being mindful of our spending has enabled us to spend less.
What is your favorite thing to spend money on/your secret splurge?
I would have to say that hot rodding cars is my passion.
I suppose if I were single I would spend a lot more on cars. I mean, do we really need furniture?
My wife keeps me in check, fortunately. She likes furniture.
What is your investment philosophy/plan?
As mentioned above, putting money into my 401K has always been a cornerstone of my investing. Within the 401K, everything is in some sort of mutual fund that tracks the broader market.
Outside of that, I have always had risker accounts that I buy and sell single stocks. My experience here has been mixed and honestly, it is much safer to stick with index funds. So these riskier assets are a much smaller percentage of my overall portfolio.
What has been your best investment?
Right before the pandemic hit, I moved $100,000 out of my 401K and put it into a brokerage account. That was a stroke of luck and I don’t ever advocate for trying to time the market.
Once the market dropped substantially, I started buying stocks over several months as the market moved back up. It wasn’t for the faint of heart to buy into the market when everyone was freaking out.
There was one day that I’ll never forget. REITs got hit really hard during the pandemic, so I had been watching a couple of my favorites. One dropped by more than 75% from the start of the pandemic and I decided to buy it. I went to a meeting and came back a few hours later it had dropped another 75% since I purchased it! Tens of thousands of dollars lost in a few hours. However, I didn’t freak out. Instead I left it there and my investment is now at 3X where I bought in. An iron stomach is required for something like that and it paid off.
Crypto currencies have been by far my best investment from a percentage gain in the shortest time. Again, you need a strong stomach to handle the volatility and be prepared to lose your investment. Never invest more than you can afford to lose in any investment.
What has been your worst investment?
Single stocks have been my worst investments. There have been a few that even went to zero. These were mostly risky small ‘bets’ that were long shots.
There is one penny stock in particular that I have owned for 15 years and still own. It is still hanging around but honestly I’ve sunk too much money into it.
What’s been your overall return?
That’s hard to put a number on it for year over year because it tends to move sideways for year and then it will jump considerably.
At the bottom of the pandemic, I was about $200,000 down in my 401K. By the time S&P came back and those stocks that I had been buying rocketed up, I was up by $250,000.
I would say though that most years I get a return of 8%.
How often do you monitor/review your portfolio?
I look at my 401K weekly.
Crypto I watch daily. That one is fun to watch because my portfolio can move by $50,000 in a few days.
My wife’s 403b and IRA are basically on autopilot. I check those one to two times per year.
How did you accumulate your net worth?
Dollar cost averaging into the markets and consistently putting money in the markets no matter what the market was doing has paid off.
At a certain point, a threshold was reached where my net worth appreciating by 8-10% in a year was significantly more than how much money I was contributing in a year. It snowballed from there.
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 feel strongly that the earn part is particularly important.
Without making a wage that allows someone the opportunity to save and invest, any savings or investment is going to be small and unless the person gets lucky with a particular investment, it will never grow to that threshold amount needed for financial freedom.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
As I mentioned above, I had some stocks that really tanked at one point. The biggest was when I made a job change in my 30’s, I had to roll my 401K into an IRA and I made some bad single stock purchases. I should have put them into a index fund and forgot about them. Instead, I lost a significant amount out of my retirement savings.
Realizing retirement was a long way off, I knew that I had time to recover so I started rebuilding slowly by putting money in my new employer’s 401K program. Even so, I probably would be retired now had I not had that set back.
What are you currently doing to maintain/grow your net worth?
The 401K is basically on auto pilot, although I have reduced some of my holding to leave some cash in a money market account. The focus for the near term is growing the crypto business. As it grows, the amount it generates will compound over time.
Also, when things settle down in the housing market, my wife and I will likely get a vacation home to rent out a few weeks a year as another passive income.
Do you have a target net worth you are trying to attain?
The minimum number to retire is 3 million.
However, in light of the recent issues with inflation and the fact that number hasn’t been evaluated by me in a few years, it is probably higher, like 4 million.
Basically, I want enough that it will generate enough cash that I don’t have to touch the principle and the principle keeps up with inflation.
However, with inflation so out of whack, I’d have to make like 20% on 4 million to keep up with inflation, pay the taxes, and maintain my current level of living standards. I definitely need to reassess what the real number is in the post pandemic world.
How old were you when you made your first million and have you had any significant behavior shifts since then?
Up until about the age of 38, my net worth was actually negative mostly because of the IRA incident mentioned above. Between car loans, the mortgage and having to basically start over in my 401K, I wasn’t doing too well.
However, my bonuses began to increase and I realized around the age of 40 that if we applied them to the mortgage, we could actually pay it off in 7 years.
That meant fewer vacations, no new furniture, no car parts, etc. My wife went along with it. Honestly, she didn’t like it and neither did I. We could have instead spent it and invested the rest of the money but I was a little gun shy with what had happened with the IRA mentioned above.
So we thought it was a good idea to play it safe and pay the house off in case I were to lose my job. This was around the time of the great financial crisis and having it paid off has given us peace of mind. We achieved our goal of paying the house off when I was about 47.
About a year later, we hit a positive net worth of a million dollars. There was some point during the time prior to paying off the house that our net worth had turned positive. That was a great feeling. Then paying off the house was even better.
Hitting a million $$ was, well, priceless.
What money mistakes have you made along the way that others can learn from?
Buying single stocks is far riskier than buying an index fund.
Be patient and don’t try to hit it out of the park by stock picking and trading. Dollar cost average into the market and wait.
What advice do you have for ESI Money readers on how to become wealthy?
Again, I think being patient, not trying to time the market, and being humble about your investments is the right strategy.
Don’t try to outsmart the market. Just ride the waves.
What are your plans for the future regarding lifestyle?
My current plan is to retire between 55 and 59 ½.
That is heavily dependent on the market, inflation, and what happens with crypto.
What are your retirement plans?
My wife and I will likely move to be close to one or hopefully both of our kids.
We’d like a bit more land with a great view. I’d like a nice sized outbuilding for a workshop. In addition to cars, I like to do metal working, build robots, wood working, etc.
We would like to travel some, mostly around the U.S. There are a lot of amazing places in this great country that are worth seeing.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Healthcare is probably the biggest one. We currently allocate the maximum amount to a health care savings account (HSA) that allows us to also invest the money so it grows over time. Although we don’t need to go to the doctor often, occasionally we need to spend it in the same year that we put it in but the tax benefits are still intact.
This fund will likely be enough money for basic health coverage in retirement assuming we can let it grow as we get into our 70’s and we don’t have major illnesses.
For major illnesses, we’re looking at some type of supplemental insurance but haven’t yet decided. There is a lot to consider.
Also, diet and exercise now while we are still young, we believe plays a major role in health care costs in retirement as well as quality of life. I’ve seen too many people that are in bad shape in their 60’s because they didn’t take care of themselves when they were younger.
How did you learn about finances and at what age did it “click”?
I’ve always been interested in stocks but things didn’t really click until I realized that I could pay my house off early.
That single event super charged my motivation to actively work on our net worth.
Who inspired you to excel in life? Who are your heroes?
My parents were always supportive of my interests and helped me find my own way. They did push college and I’m glad they did.
My wife is amazing. She has the ability to create anything and the gift of self reflection allowing her to change and improve.
My sons also inspire me. Both have an incredible work ethic, which helps drive me to continue 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?
The Millionaire Next Door – The book shows us that anyone can become a millionaire by being patient and investing over time. This is a lightbulb in the brain for most people.
The Richest Man in Babylon – I like the structure of the book, using parables to tell a story. I also like the fact that it was written like 100 years ago about a time that was 8000 years ago but the key tenets are still applicable today.
How Much Money Do I Need to Retire – This one is good because it provides calculations and scenarios that can be used to plug in numbers for your own situation.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
We do give some money. Honestly, not a lot. Maybe $200 per year.
We’re very selective about charity because often most of the donation goes to administrative costs. We prefer to give our time.
A CONSIDERABLE amount of our time has gone to helping teachers and the school system when our kids were attending. This is true especially for my wife who was spending up to 40 hours a week at times doing things for the school unpaid.
Now that the kids are finished with grade school, we need to find new things to contribute to.
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 entire wealth will go to our two kids, split as evenly as possible.
We don’t plan to make them wait until we are dead for all of it. We feel it is important to help them some along the way as the need arises. They are already very self sufficient and are not the kind of people to take advantage and just sluff off and live off their parents.
If we can help them out when they are young and when they need the money the most, we’ll help them.