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 May.
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’m 54, my husband is 57.
We’ve been married for almost 30 years.
Do you have kids/family (if so, how old are they)?
We have one child who is 25, fully off the family payroll, and in graduate school in another state.
What area of the country do you live in (and urban or rural)?
We live in a large city in the Southwest.
We live in a relatively central neighborhood in town, but the atmosphere is pretty suburban (single family homes, large distances to walk to a store or restaurants).
What is your current net worth?
Approximately 6 million. It was 6.5 million but the recent stock market drop reduced the total net worth.
This doesn’t include our home as that value varies and we have no intention of selling at this point.
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?
We have no debt. We paid off our mortgage early, more than 10 years ago and paid cash for both of our cars.
Our assets are made up of 3.5 million in various retirement accounts (current 401K and IRAs). These are mostly invested in low cost index funds (80% stocks, 20% bonds).
The remaining 2.5 million are mostly in similar index funds with 350K in individual stocks, 280K in Muni bonds, and about 200K in “cash” (CDs, checking, money market accounts).
Our home value is currently about 450K (per Zillow).
EARN
What is your job?
I work for a large technology company in a technical/science field.
I started my professional work with a small consulting firm right after graduating with a BS degree from a state college and then after about a year decided to return to graduate school for a more technical degree. I was able to get a significant fellowship that covered tuition and a monthly stipend and graduated with an MS after two years. The program also helped with finding an internship which was critical in later finding a job.
I was recruited to a job in a new city while still in graduate school and have ended up staying with this company for my entire career so far. I’ve remained an individual contributor as I’ve never been interested in people management.
My husband got an engineering degree from the same state school but we only met after he graduated. He has worked in various engineering positions (almost all individual level jobs) for his entire career and currently works in software for a large technology company.
What is your annual income?
Currently earning 150K base and I got 40K in bonuses last year, which is typical. We also receive RSUs which last year were valued at 20K (vesting over several years).
My husband earned 150K base with 5K bonus.
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?
My first job after my BS degree was 27K which was pretty good considering other jobs were offering more like 19K for lab work. However it included no benefits and after a year I decided to go back to graduate school.
My first professional job was 42K base salary and included benefits and potential bonuses and I’ve stayed with this employer since then, so I’ve had a more than 3X increase in salary over my time there. The growth was due to both normal raises and several promotions.
At my employer an increase in responsibilities/promotion also brings better bonuses and more stock as part of our pay structure. We used to also get stock options but those were discontinued – probably due to high stock price fluctuations making them not much of a recruiting tool.
What tips do you have for others who want to grow their career-related income?
For me what worked was sticking with the same employer so I got the benefit of increases in salary over time.
I also grew my salary by gaining professional certifications (some very tough exams) that helped me get promotions.
The other part was working to get a more responsible position by asking for special assignments and task forces to gain more visibility and responsibility at work.
While I’ve heard that moving around between employers is a good way to get jumps in salary, I haven’t seen that with my husband’s career as this is also very dependent on the job market when you move. Staying with the same company has afforded me a deep network and a lot of institutional knowledge of my employer which really helps me get the job done efficiently (which also helps with work life balance – new people have to work harder to figure stuff out).
I’ve also participated in multiple professional organizations which has been useful to gain more knowledge and in networking.
While I didn’t end up switching companies, the network was very helpful to understand the job market, potential salaries and the tradeoffs when leaving a job. This helped me see that for me, the grass wasn’t greener on the other side. I think participating in these types of groups is useful for figuring out the market for your skills and getting the connections for your next job. I’ve seen lots of people find their positions through connections.
What’s your work-life balance look like?
I’d say my work-life balance is very good. Even years ago when I had a more field based job, most weeks were about 40 hours with occasional late meetings or early days at work.
Several years ago I moved to a more senior position at work that took me out of field work and now most of my job involves phone meetings and computer work. I do travel for work which might have been more difficult when my son was young, but is not a problem now.
For the past two years I’ve been working from home which has significantly increased the work-life balance and I do not anticipate having to go back full time into the office.
Staying with one employer has really helped with work-life balance. Changing jobs is stressful, might require you to move or do a lot more travel and you have to earn the respect at your new job over and over again.
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 currently have no other income outside of interest and dividends from investments.
I did do some teaching on the side a while back.
I could get involved in consulting when I’m retired and have the time to focus on this, it wouldn’t really be possible with a full time job for me and could be a conflict of interest.
SAVE
What is your annual spending?
Last year we spent 60K (not including taxes).
We tracked our spending in general but in 2020 decided to track all spending by category, thinking this would give us an idea of a typical year now that our son had moved away.
Turns out 2020 was not a typical year (we spent 45K), but we’ve stuck with the tracking for now.
What are the main categories (expenses) this spending breaks into?
The 2021 data showed:
- 11K on food (split about evenly on groceries and eating out)
- 11K on travel
- 6K medical (we didn’t pay for insurance, but have a high deductible plan)
- 2.4K cleaning service
- 6K home items and maintenance
- 2.4K insurance
- 1K clothing (mostly lounging clothes from Costco and shoes)
- 3.7K hobbies (my husband has a lot of hobbies), etc.
Do you have a budget? If so, how do you implement it?
We don’t have a budget.
One reason we started tracking spending was to see what our typical spending was and categories so we could have a better idea of our needs when we stopped working. This has been very reassuring to me and I like keeping track of the spending. It gives me an awareness of our everyday patterns (e.g. how many times a week we eat out) and also some ideas of where we can cut back if we need to.
We are very aligned about spending. When we were younger we had an agreement that neither spouse would decide to purchase an expensive item (over $500) without consulting the other. As we have increased our income, we are a bit more relaxed about this, but it’s rare for one of us to spend on something significant without talking about it first with the other.
Nowadays the most significant spending we do is on travel and we make those decisions together.
What percentage of your gross income do you save and how has that changed over time?
We currently save about 60% of our income.
This has increased over time.
In my first years on the job I didn’t even max out my 401K contributions (as I didn’t focus on this as much and we had high childcare costs), but after a few years we moved to always maxing out the 401Ks, once we moved to high deductible insurance plans started contributing to HSA accounts and investing these accounts and in the past two years also maxed out the “mega backdoor” Roth option that my employer added.
We also save outside retirement plans in regular mutual funds and other saving vehicles.
What’s your best tip for saving (accumulating) money?
Pay yourself first.
Automate the savings via paycheck deductions for 401K etc., and automatic deductions to saving accounts and investments.
Don’t check your investment performance too frequently as this can lead to panicked selling when the balance drops.
What’s your best tip for spending less money?
We’ve always aspired to save significant amounts of our income and live well below our means.
We bought a house we could afford even on one income, purchased medium priced, reliable cars (basically either Honda or Toyota) with cash and kept them for as long as we could. Our current cars are from 2011 and 2014 and especially with reduction in driving once our kid left home and now with working from home, I see no reason to replace them any time soon. We made a conscious effort not to get into debt except for a mortgage, we saved for 20% down payment on the house to avoid mortgage insurance and other fees.
I think we are proof that it’s not necessary to always buy the latest hot brand, the biggest house or the best car to have a good life. In fact when our son was little he asked if we were poor because our house was smaller than most of our friends. We assured him that we were not poor, our 3 bedroom house was enough for 3 people and we just made different choices with our money (reminding him of a recent vacation trip to Europe).
What is your favorite thing to spend money on/your secret splurge?
Probably traveling and eating out.
We have family in other states and overseas and try to visit them about once a year and like to travel for vacations.
Prior to working from home, we ate out for lunch 3-4 times a week and dinner another 2, now we end up eating out (or takeout) 1-2 times a week.
Not much secret spending here – I don’t like to dress up, don’t own jewelry, my hobbies are home centered (cooking, gardening) and don’t cost much and I do a lot of reading but all on free ebooks from the library.
INVEST
What is your investment philosophy/plan?
I don’t know if I have a coherent philosophy or plan.
Once we learned of low cost index funds, we mostly invested in these, but we’ve dabbled with all kinds of investments including stocks, bonds, and even directly investing with a small business.
We tried to spread out our investments in many categories to reduce risk but sometimes it feels like we are still investing in the same stuff with different names.
If you look at a fund and its top 10 investments, many times they are all the same few stocks. This also causes more overhead of keeping track of multiple funds and is probably not very tax efficient.
This is one area I would like to improve on but have been hesitant to sell off investments due to the tax consequences.
What has been your best investment?
Probably the S&P 500 and NASDAQ index funds.
It’s hard to beat and sometimes I wonder if we would have been better off just putting most of our money in 1-2 funds.
What has been your worst investment?
We have three I can think of.
We bought eToys and other individual stocks that went to zero.
We invested in a small business that went bankrupt and we got very little back once the bankruptcy was settled.
The third was with money my mother gave me, we went to the bank and asked them how to invest it (this is before the internet). They suggested a mutual fund that had a 2% fee and a 4.5% load (sales charge). Now this seems outrageous but at the time was very normal for regular investors.
I’m very happy that now much more information is available to regular people on investments.
What’s been your overall return?
We don’t really calculate this.
We look at our net worth overall (quarterly) but those increases (or decreases) include the money we add to the accounts.
Overall for the past 26 years our net worth increased annually on average by 17%. This includes three down years with the worst being a decrease of 19% in 2008.
This year is looking to be a down year which makes me feel worried as we are contemplating retirement.
How often do you monitor/review your portfolio?
Quarterly.
NET WORTH
How did you accumulate your net worth?
Basically all of our net worth is from W2 salaries that were saved and invested.
My husband started working with no savings a few years before I finished school, my mother gave me 10K she has saved for me and everything else came from our jobs.
We both worked through college, went to low cost state schools and I got some help from my family as well so started my life with no school debt.
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?
Save – we always lived well below our means. This allowed us to also have money to invest.
I don’t feel we deprived ourselves of anything important along the way. We still traveled, ate out, bought stuff and supported our son in college, so he (like us) graduated with no debt. Compared to some of my friends, we had a smaller house, older cars, and did not splurge on the latest tech device.
We are always open to buying a used item or less expensive brand if available without sacrificing quality. For example, our latest TV was purchased from a coworker, and our previous TV lasted 10 or more years.
How did you plan and finance your son’s education?
We started saving right after our son was born in the available saving options at the time; Uniform Gift to Minors Act (UGMA) accounts. This ended up not being very useful due to account restrictions. Later when 529 plans became available we switched.
We really increased our saving amounts when our son hit middle school and it became obvious he was a good student and at the same time we looked at costs for private colleges and realized we need to save more.
In the end with our encouragement, our son went to a local state school. This combined with a significant merit scholarship that covered tuition meant we had plenty of money to pay for college and there was some leftover to help him with graduate school expenses.
During his undergraduate studies we gave him the money for his room & board from the college savings accounts. He paid for all other expenses from his savings and internship income.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
My husband was laid off twice, and worked very hard to find a new job as soon as he could.
In 2008 I didn’t look at my 401K balance for about six months and when I finally checked it, it was down 40% or more.
We handled these types of challenges by spending less and when investments were down, we stuck with our plan and didn’t pull money out of the market.
What are you currently doing to maintain/grow your net worth?
We continue to live beneath our means and contribute to our retirement accounts as well as savings.
The “mega backdoor Roth” is a new savings vehicle for us to try and get more tax deferred benefit from our investments.
Do you have a target net worth you are trying to attain?
No, we’ve always just tried to save as much as we could.
For the past few years I did look at what a 3% withdrawal amount would be compared to our net worth to see if that would be enough for us to use in retirement. (The answer is YES!)
How old were you when you made your first million and have you had any significant behavior shifts since then?
Net worth hit 1 million in 2007 – when I was 39.
I don’t think we changed our behavior significantly, maybe just felt a bit more relaxed about spending. I still kept (and do today) using coupons at the grocery store.
What money mistakes have you made along the way that others can learn from?
As I mentioned, I think our biggest mistake was investing in too many funds and other investment types and not understanding the tax implications of various investments enough (e.g. some actively managed funds distributed a lot of capital gains).
What advice do you have for ESI Money readers on how to become wealthy?
Marry a spouse that is compatible money-wise with you and work together on your goals.
My husband asked – what if the person is single? My answer is that being married (with a compatible person) saves you money. We both have similar values about avoiding debt and saving and are pretty aligned on spending.
FUTURE
What are your plans for the future regarding lifestyle?
We definitely want to retire early.
We are currently evaluating retirement dates in the next few years.
While retiring scares us a bit, we also feel like we need to seize the day and be able to have fun, travel etc. while we are still younger and healthier.
What are your retirement plans?
We hope to do more traveling and spend more time with distant families.
I hope to get involved in more serious volunteer positions – right now I do some casual volunteering but can see myself joining a non profit board or getting more involved in a cause.
We have both increased our exercising a bit in the last couple of years but would like to get more regular with this in the future.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
The big issue is healthcare. It’s pretty much what is holding us in our jobs right now.
We both have some preexisting health issues that we need to make sure are adequately covered by insurance. We are planning for this by saving all we can since this is such an unpredictable expense in the future.
I don’t feel like I can trust the government to provide reliable insurance options for us given the political nature of this topic and we have many years till Medicare eligibility.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
While our parents taught us to live frugally, debt free and within our means, neither of us were educated by our parents about finances and investments.
We learned everything on our own by reading books, magazine articles and later on FIRE blogs.
Early sources were Andrew Tobias – a personal finance writer – and the Motley Fool publications.
Who inspired you to excel in life? Who are your heroes?
My parents always encouraged me to do the best I could for myself and my family. My mother encouraged me to take care of myself and help others, my father focused on being self-sufficient.
While neither particularly emphasized money, seeing the money struggles they had did inspire me to try to earn and save.
I also had an early encounter with an individual that was very challenged by all aspects of ESI that inspired us to save as much as we could for old age and retirement.
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?
I like the Millionaire Next Door (Thomas Stanley) and The Only Investment Guide You’ll Ever Need (Andrew Tobias).
The Millionaire book showed me it was achievable to get to a higher net worth than I imagined on a regular person’s salary.
I just took a peek at Andrew Tobias’s website to remind myself about this book and I found this quote which I think is still valid “But the basics never change. Live beneath your means, get off the debt treadmill, minimize your transaction costs, trust no one — this book attempts to take you through it all, from buying tuna in bulk to avoiding variable annuities” and why I liked it when I was starting out.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
We give small sums to charity, and I donate my time to several causes.
This is something I hope to increase in retirement.
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 a very simple will and asset allocation.
All of our assets will go to our only child on our death. We have advised him to do nothing for at least a year in the event of our early death as this would give a lot of wealth to him at a young age.
He is pretty level headed and already fiscally responsible, so we are not too concerned about this.
Jim says
These folks are amazing! The ability to accumulate over 6 Mil on salaries in the 200K+ range while having no debt is fantastic. This seems like an ideal road map people should want to model after. Thanks for sharing this!!
Bev says
This is a very balanced post. No drama!
K D says
Thanks for sharing. It is an inspiring story especially since the salaries are good but not extraordinary.
Paul T says
Love this post! So relatable as our kids think we are poor too. Older cars with a modest (paid off) home. This is the recipe for success!!
PEScott says
Another win for the tortoise! You both are the epitome of the Millionaire Next Door. Well done!