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 August.
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)?
We are both 58 and have been married 34 years.
Do you have kids/family (if so, how old are they)?
Yes, 4 grown kids ages 26, 28, 30 & 32.
What area of the country do you live in (and urban or rural)?
Southwest US in an urban area.
What is your current net worth?
Today’s snapshot (8/15/22): $14.3 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?
- Brokerage/Bank Accts: $6,767,771
- Retirement Accts: $6,121,185
- Home/Personal Property: $1,300,000
- Cars: $140,000
- No Debt
Total: $14,328,956
EARN
What is your job?
I retired full time this year (2022) but spent the last 2.5 years in a semi-retired state.
I worked as a Real Estate Broker for the last 31 years (effectively self-employed in an LLC status)
What is your annual income?
Last year of earned income was 2021 and my gross income was approximately $1.3M.
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 graduating college I got paid $25K/year and thought I was rich!
After 2 years there, I transitioned into a job as effectively copier salesman and saw my income go to around $40K/Year.
Decided to roll the dice after 1 more year and jumped into real estate which was 100% commission and never looked back.
My wife quit working once our first child was born 32 years ago so we were a 1 income family since then. I was highly motivated with a growing family knowing I was the only one pulling the (financial) sled but was fortunate to make some money and see my income grow over time.
Being 100% commission, my income fluctuated quite often, but by the time I was in my mid 40’s it was typically ranged from $500k – $1M, and by 50’s it was typically a $1M plus with best year a little over $2M.
What tips do you have for others who want to grow their career-related income?
Good question! I was in an industry/compensation plan the offered high risk/high reward income opportunities. The challenge quite frankly was keeping a work/life balance as the allure of doing one more deal was always out there. I chose to work hard and smart during a set period of hours the day so I could be part of my family’s life, but I knew plenty of people who made more money than me but sacrificed their family life and relationships.
It seems today networking and being flexible to jump to new opportunities is the way people quickly improve their positions and income. It appears the days of doing many years with one company are somewhat frowned upon as employers almost want to know “what’s wrong with you?”.
I think the main thing is to keep your skills sharp, don’t get complacent in a good market, standout above your peers and learn how the politics of your company/industry operate.
What’s your work-life balance look like?
Today it’s just a “life” balance. 🙂
As mentioned, that was always a big deal for me and something I was intentional about while working. I’m a little old school, but always believed that having a strong healthy relationship with your wife and kids, especially having the support of your wife, was a big deal in making me successful.
I now have some hindsight…now retired, I can say I have a great relationship with my wife and grown kids. Unfortunately, I cannot say that about many of my A-driven male friends who poured all their energy and hours in their careers.
For those of you with families and still building careers…I strongly encourage you to find a healthy balance.
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?
Other than income that came in from various real estate investments (all sold now) and naturally occurring dividends/interest/capital gains from my brokerage/bank accts (all reinvested), none.
I always viewed by earned income as the source of funding my expenses and everything else as long-term investments.
SAVE
What is your annual spending?
Well, based on some of the other spending I have read on ESI I am frankly a little embarrassed to say our planned spend is between $300K – $350K. This is HIGHLY discretionary and includes projected taxes, charity/gifting, a good bit of travel expense, and lumpy expenses.
If the $hit hits the fan, this can be cut drastically, but my wife and I do enjoy some nice things and we try to be generous with our family and friends. Can’t take it with you so we are trying to enjoy it without being the Kardashians.
What are the main categories (expenses) this spending breaks into?
- Auto (gas/repairs/insurance): $12,500
- My/Wife’s Personal (Hobbies/clubs/other): $40,000
- Entertainment/Groceries: $30,200
- Christmas/Bday Gifts: $15,000
- Home (Repairs/Taxes/Ins/Utilities/Maid): $40,500
- Medical: $20,000
- Travel: $25,000
- Charity: $10,000
- Taxes: $30,000
- Contingency: $75,000 – $125,000
Contingency covers lumpy expenses and any overruns of budget items (i.e. home improvements, new cars, extra travel/gifting), basically anything that spills outside the “budget”. I realize this is probably a larger number than is typical, but this helps me do some mental gymnastics based on market performance.
When the market is down, like it has been this year, I mentally try and work off a $300K spend. If the market is up, I use a $350K spend. This is year 1 of retirement so this plan is subject to change.
Despite my low withdrawal rate even at a $350K spend, my conservative nature has me playing these Jedi mind tricks for year 1. I suspect I will loosen up over time.
Do you have a budget? If so, how do you implement it?
My wife has zero interest in finances, and I have always done all the investing, most of the bill paying and budget planning.
We do meet and discuss a planned “budget” at the end of each year. At this point, we don’t call it a budget but our planned spend.
When I was in the accumulation stage, I was much more anal regarding a budget. Now, I just keep on an eye on how much of the Contingency we are spending.
What percentage of your gross income do you save and how has that changed over time?
Last few years while working we were spending around between $300K – $350K/yr.
So as an example, my gross income in 2021 was $1.3M so we were saving/investing whatever was left over after taxes less around $350K. The spending was fairly consistent, but obviously the savings % would vary from year to year.
What’s your best tip for saving (accumulating) money?
Live below your means, watch lifestyle creep, but enjoy some more goodies as your income goes up as long as you are consistently saving some set % every year.
I started out saving/investing a hard 10% every year in my 20’s and eventually grew that %, but typically cut off my spend at $350K/yr (in the last 10 or so years.)
What’s your best tip for spending less money?
Once you have more and CAN spend more, really stop and think about what THINGS/EXPERIENCES are really important to you. While I do believe in treating yourself, still be prudent in your buying and look for the best/reasonable deal and avoid being too impulsive.
I am frugal by nature, but my wife (who is not) gets me sometimes to say buy a $200 belt when I would have bought the $50 belt. I have come to appreciate certain things that do cost more from time to time.
What is your favorite thing to spend money on/your secret splurge?
My biggest vices now are nice cars, nice meals and wine, and nice travel.
My wife likes nice clothes & shoes!
With 4 kids, we are starting to splurge more on family trips. I am a big believer in having experiences with the family, especially while we are younger and healthy.
INVEST
What is your investment philosophy/plan?
I was a Total Return investor for most of my accumulation years starting around a 90/10 asset allocation and eventually transitioning to a 60/40 asset allocation before retirement. I really kept it simple with a mix of primarily index funds for both stocks and bonds.
Upon retiring, I switched to somewhat of a 2 Bucket system basically laddering 5 years of individual bonds and bond funds that total my planned spend for 10 years and letting the rest run in equities.
If stocks are down, I will spend out of my bonds. If stocks are up, I will spend out of stocks.
Most of the models I have run show a high probability of a big leave-behind for kids/charity so I am arguably investing for legacy.
What has been your best investment?
From a pure return perspective, some individual real estate investments/partnerships I have been in over the years, but frankly, I believe my primary investing in boring index funds is how I got where I am today.
What has been your worst investment?
Like my best investments, it was a real estate deal we bought before 2007.
Despite performing, the Great Recession and new banking rules gave us no choice but to hand over the keys.
What’s been your overall return?
Good question. I really don’t know. I know I probably should, but I was plowing so much new capital into the markets during my 40’s and 50’s, hard to know.
I would say a combination of the S&P index and returns on intermediate bonds…say around 8% on average.
Winning real estate deals from 18% – 60%, but they were not a huge part of my NW.
How often do you monitor/review your portfolio?
I look at it 1 to 5 times a week.
Probably should look at it less.
NET WORTH
How did you accumulate your net worth?
I grew up somewhat lower middle class. I had some type of job since I was 14. Hard work, frugality, saving a % was instilled in me at a young age.
When it came to investing, I was somewhat self-taught and remember opening my first Vanguard GNMA and MMKT accts when I was around 18 yrs old. I read books on finance like The Millionaire Next Door and that made a huge impression on me and how I thought I wanted to live my life.
Once I graduated college and had my first real job, my goal was to save a min of 10% off the top of each paycheck which is what I did. As I was self-employed, I initially used a SEP plan and plowed $$ there. As my income and family grew, I continued to plow $$ in and saving closer to 15%. We lived on a tight budget, but we kept a min investing % a priority. Once I was in position to maximize my SEP, I started putting $$ to work in a brokerage account.
As time went on and my income grew further, I was introduced to a Defined Benefit (DB) Plan as an alternative to a SEP, which allowed me to put significant $$ away year after year. DB Plans are ideal for 1 – 2 person entities where your income is higher, you have some level of cash reserves, and are willing to commit significant $$ to tax deferred accounts year after year.
At its height when my wife was working with me, we had a year or 2 where we could defer over $400K. The DB plan was clearly impactful in supercharging our NW growth. Unfortunately, DB plans have a limit and once your balance hits a value which is formula based (I think mine was around $2.3M??), its time to transfer it to a 401K. FYI…there are a lot of legal specifics as to how theses DB plans work as they are managed by a 3rd party.
As you can imagine, particularly as my income grew larger in my 40’s and 50’s, managing my tax efficiency and keeping more $$ on my side of the ledger was a priority. The DB plan helped a lot but was closed out by the end of my 40’s which then basically left me with a traditional 401K for both my wife and I. That plan allowed us to max out something under $100K/yr. I also did a number of real estate investments, but they totaled less than 10% of my portfolio, but did generate some tax savings.
Further, which I know is controversy with some, yet legal, I invested in some conservation easements…knock on wood which all worked out so far.
The biggest needle mover was I 1) was very fortunate to make good income for multiple years, 2) saved/invested a min %, which grew significantly over the years, and 3) kept my expenses in check living below my means. Pretty boring I know, but these 101 principles do really work!
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?
Hard to say, but clearly my earning history propelled me.
However, without being a saver and practicing living below my means, my NW would not be where it is today.
While I did practice investing at a young age, I really did not have any “home run” investments that in the end made a huge impact. I always believed in “slow and steady wins the race!”
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Raising a family on 1 income was definitely stressful at times but also very motivating. Maintaining a work/life balance and trying to be financially successful pulled me in different directions at times, particularly when kids were younger.
Additionally, managing lifestyle creep as my income grew was at times a challenge. We wanted to reward ourselves with our success, but not live so ridiculously that our other long-term goals were in jeopardy (i.e. pay for kids college, early retirement).
What are you currently doing to maintain/grow your net worth?
There seem to be 2 sets of thinking once you hit financial independence/” won the game”… 1) quit playing and go conservative with your investments, preserving capital since risk is not needed, or 2) keep playing as you can afford to take some risk and grow your assets for legacy/charity reasons.
I have chosen 2) and for now, will continue my strategy as noted in my Investment Philosophy/Plan.
Do you have a target net worth you are trying to attain?
Funny, when I was younger in my 20’s, I thought financial independence could be reached once I had $1M in investable assets. What I found was once I hit $1M, my income was higher and my expenses rose (mainly from a growing family) so I moved the goal posts to $5M.
Once I hit $5M (somewhere in my 40’s) I started to focus in on where my expenses and desired spend amount were going to be if I retired at 55. Based on the 4% rule, I moved the goal posts 1 more time to $7.5M. Upon hitting that marker, a combination of high income, strong savings, and a growing stock market, my NW just naturally grew and prior to the 2022 downturn was around $15.5M.
In my case, once I hit 55, I wasn’t ready mentally to just hit the switch and cold turkey retire so chose a semi-retire path eventually fully retiring this year at age 58.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I don’t recall for sure, but I believe early 30’s.
The main behavior shifts are really noted above.
What money mistakes have you made along the way that others can learn from?
Not a lot I would have done differently. I jumped partially out of the market after 2008, but relatively quickly got back in, but I needed some smarter people to talk me off a ledge then.
That experience has made me a better long-term investor going forward.
What advice do you have for ESI Money readers on how to become wealthy?
Honestly, old school practices still work…live below your means, invest a minimum set % every year, and try and grow your income.
FUTURE
What are your plans for the future regarding lifestyle?
Being in year 1 of retirement, I am still in the honeymoon stage, but plans are to focus on experiences and perhaps more luxurious experiences with family.
I am also a big believer in living larger, particularly relative to physically active pursuits, now in my “go go” years.
No plans to do any side gigs other than perhaps some volunteer things from time to time.
Conservative projections have my stash potentially growing quite a bit so further strategic gifting/charity will need to be planned at some point
What are your retirement plans?
Financially, as noted above.
Activities…playing more golf, steady/regular gym time, more travel, some volunteer gigs, pickleball, and general entertainment with friends & family.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Not yet, but I like structure so keeping somewhat of a schedule makes me feel productive.
I am still experimenting with what the perfect amount of play/rest/mental stimulation will be for me but want to avoid sitting in front of the TV for hours or starting Happy Hour too early! 🙂
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
As mentioned earlier, I started working at age 14 and my parents instilled in me personal and financial responsibility, including saving a % and living below your means.
I started saving/investing as an adult as soon as I had my first job after college.
Who inspired you to excel in life? Who are your heroes?
Parents.
Warren Buffet.
Book The Millionaire Next Door.
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 was more of a magazine reader and read Kiplingers and Money magazine for years.
As mentioned, The Millionaire Next Door was impactful.
Also 7 Habits of Highly Effective People.
I could relate to their philosophies and wanted to implement their teachings.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Yes, right now being retired, I have circled giving away $10K/yr, but as mentioned above, am also planning on some volunteer work.
Further, I anticipate giving away more significant dollars from my estate as I further plan things out.
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?
Yes, but not sure of the overall strategy yet as further estate planning will drive some changes, especially once the estate tax limits start affecting me based on NW.
While we have a current plan in place which leaves all our $$ to kids, I will probably look at a more active gifting plan while alive. I’m still trying to determine how I want to do that. TBD.
All my kids are self sufficient and have adopted many of the principles I learned so I don’t believe they are standing by waiting for an inheritance. However, I have seen young people get money too fast or start to feel entitled waiting for mom & dad’s check every year, so I have some sensitivity here.
Also, while my kids know mom and dad are doing fine and won’t be a burden on them, we do not discuss specifics like NW with them, for reasons noted above…at least at this time.
I believe in stealth wealth with family and friends.
Super impressive story. Definitely ESI in action.
Was your real estate brokerage just yourself/independent or did you work for a firm or run your own firm? Mostly CRE or residential?
Thanks. I worked for a larger firm, but we were all 1099 100% commission, very entrepreneurial shop. I specialized in selling commercial income properties.
Wow…..you must be in the top 0.1% of RE brokers to regularly having made that income. Impressive! True ESI in action.
Thanks. I was fortunate and my niche was very active/lucrative, especially over the last 10 years.
Congrats on all your financial success. I’m also a married dad here with 4 kids, though my kids are much younger. Did your kids end up going to college? If so, how did you pay for it? I’m sure you had many years where you had 2 or 3 tuition bills.
Have you also done any estate planning?
Thanks. All 4 kids went to a good public college, graduated, and are financially self-sufficient… lucked out there :). We did pay for all their tuition, 2 through 529 plans, other 2 out of savings/cashflow. However, all 4 had a part time job during college to cover “fun” spending above a min floor stipend. They all had jobs in HS since turning 16 as well. And yes, seemed like we always had 2 in college (and 1 in private HS due to some special needs at the time).
As it relates to estate planning, we are all set based on the current tax code. Should estate limits sunset at the end of 25 as currently planned, we will have to make some changes.
Enjoy your kids!
Given how many realtors there are in our area and in general (seems when the market is good a lot of people get into it) I never knew one could make THAT much in real estate. It’s all over the board I guess. But $500k+ in regular income? That’s incredible. Wish I got into real estate. You’ve obviously done everything right, with a stable marriage and grown/independent kids along with the NW and retiring early, so great job.
Thanks. Many of my RE mentors were producers which I am sure helped me along the way. It’s kind of like my golf game… I play better with lower handi-capers than the guys who hit over 100 🙂
Thanks for sharing your information and story. I never heard of Defined Benefit Plan, so I will do more research, because that may be something we can utilize to increase our savings and investments. With all your money I can feel your humbleness and that is indeed refreshing.
Thanks, appreciate the comment. Humility is something I try to instill in myself and my kids. While I enjoy some nice things, I try and practice stealth wealth as a general rule. Money can do funny things to people.
Definitely look into a DB plan. Generally, many CPAs and FAs are knowledgeable about the product. Ideal for 1 – 2 man shops, especially if you have strong incomes and/or are holding a reasonable amount of after tax dollars you funnel into the plan.
Thank you for sharing! I loved your best tip for spending money. People who don’t take that way of doing things into account often shoot themselves in the foot with regard to building wealth. They do not maintain a reasonable margin between income and expenses and thus have no cash flow to put toward gainful investing.