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 September.
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)?
My husband and I are both 38.
We have been married for 11 years, together for 20.
Do you have kids/family (if so, how old are they)?
We have two kids, age 7 and 5.
What area of the country do you live in (and urban or rural)?
We live in a dense, close-in suburb of a big city on the East Coast.
What is your current net worth?
As of Sept 2022: $1,485,000.
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?
- Retirement accounts: $860,000 (58% of net worth). $693,000 in 401Ks (my husband and me combined), which we also max out every year (more recently, as childcare costs have gone down as our kids have gotten older). About 50% of the balance is in Roth 401Ks. As of earlier this year, we now put all of our 401K contributions in as traditional (pre-tax), because I realized that our tax rate in retirement is likely to be much lower than it is today due to much lower earned (W-2) income. $167,150 in Roth IRAs (my husband and me combined), we max these out every year via Backdoor IRA.
- Home equity: $372,000 (25% of net worth). Home value according to Zillow: $733,000 (this is likely on the low side). Mortgage balance: $361,000. This is our only debt: 14 years left of a 15-year mortgage at 2.5% (refinanced in 2021). No plans to pay this off early unless/until inflation gets below 2.5% again, and then we might reevaluate.
- 529 accounts: $65,000 (4% of net worth). We have 529 accounts for each of our two kids, and have contributed $4,000 annually in each account since they were born. We chose this amount because it is the max tax-deductible in our state, so figure might as well get the tax break. I can’t figure out if this is saving too little in the 529s, but I figure we have enough in Roth accounts, I-Bonds, and our taxable account that we can “figure it out” as we get closer to their college years. I also can’t figure out the best asset allocation for these, so I have simply done the target date funds for each of them. The investment options also seem weirdly limited, so we’ve been sticking with the easy route.
- Pension: $62,664 (4% of net worth). My job has a pension with my employer contributing 3% of my salary each year, earning 3.8% interest. When I leave my job (anytime), I can take this as a lump sum or roll over into a 401K or IRA.
- Cash: $49,000 (3% of net worth). This includes a $20,000 emergency fund (that we no longer need once first our I-Bonds hit 12-months old, since they will be eligible for withdrawal at that time.) Also includes a slow/steady saving of $1,666/month to build up funds for next year’s Roth IRA and 529 contributions. We build up the $20,000 savings needed for this throughout the year, then do a lump sum investment into these accounts every January
- I-Bonds: $40,000 (3% of net worth). My husband and I bought $10K I-Bonds each in 2021 and 2022. I plan to contribute $20K combined each year if the rate of return continues to be higher than our mortgage interest rate (2.5%). If the interest rate on I-Bonds dips below 2.5%, we might consider liquidating some/all of it to pay down our mortgage (TBD). For now, we are putting money that we would have otherwise used on accelerated mortgage payments into I-Bonds instead, since it is a safe vehicle and guaranteed to earn more than we are paying in mortgage interest (at least for now). Once we hit the one-year mark on the first $20K, I plan to use this account as our emergency fund since the money will be readily accessible.
- Taxable brokerage account: $35,700 (2.4% of net worth). I opened this account with $20K in October 2021, and have been putting any “extra money” each month in since then… at least $500, and avg $2,135/month over the last year. I have bought all the way down as the market has done its thing this year, and so have had an “opportunity” to tax loss harvest over $6,000 already in my first year. Yay? Haha – but I am not worried about the market timing since I know that “time in the market beats timing the market.” And I’d much rather buy stocks on sale right now than spend on “stuff.”
What is your job?
I work in an internal operations function within a large global firm. I am up for promotion to Director level within the next year.
My husband works in IT at a different large global firm. His company is weird about levels/titles, but he is an experienced individual contributor.
What is your annual income?
I currently make $175,000, plus ~$20K bonus (variable) each year.
My husband makes $106,000 with no bonus. Because of his job, we only pay $1,500 annually (total) in healthcare premiums for our family of 4.
Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?
I started my career as a development assistant at a largish non-profit making $30,000/year. I got promoted quickly, making $72,000 as a manager by the time I left after 5 years.
I realized the potential for growth in that field was rather limited, so I went to business school to support a career change.
I made $98,000 in my first role after business school, and have steadily grown my salary through annual raises over the last 10 years (same employer). I know I could be making (a lot) more, at least $200K, but I have made an intentional choice to stay at my current employer because it affords me the work-life balance I am looking for while my kids are young. I have waffled about this choice over the last year, but feel at peace about it (right now, for now). Plus, I have a pretty clear growth path ahead if I want to continue pursuing it.
My husband started around $40,000, and has slowly/steadily grown his salary through annual raises.
What tips do you have for others who want to grow their career-related income?
Do what you say you are going to do! Being reliable, dependable, and simply following through automatically sets you apart from 70% of the rest.
Overcommunicate. I am a big fan of the “micro-update” when progress on a larger thing feels slow.
Only bring problems if you also bring recommendations (or at least considerations) alongside them. Think: “if I were in charge, what would I do?” and recommend that.
Know that your job is to make your boss’s job easier.
What’s your work-life balance look like?
Really good! Five years ago, I made the choice to shift from a client-facing role to internal operations after having kids, and this has made such a huge difference. I went from working most nights a week and most weekends a month (plus constant stress and not being able to mentally “turn off”)… to now working 40 hours (9-5) from home. I have been remote since 2018, and no commute plus flexibility on my work timing (when needed) has allowed me to be a present and lower stress parent.
I feel FOMO and left out knowing that I could be making so much more than I am today, but then I remind myself that $175K for a WFH 40-hours would be a dream for most. I know that I am very fortunate, and I try to remind myself of that when work is stressful or annoying (which is often). Then I hit 40 hours and close my laptop. 😉
When I shifted to my internal role, I made an intentional decision to draw stronger boundaries, since any job can take up your life if you let it. So I am pretty stingy about monitoring my work hours (if I work an extra hour on Tuesday, I sign off an hour early on Friday), and I turn my email off my phone when I go on PTO. I take 100% of my PTO, and have even started to use all of the available annual “volunteer hours” to volunteer at my kids’ school during the week on occasion.
I have realized that no one seems to either notice or care that I don’t work a ton of hours, and I think I am able to do this because when I am at work, I am very focused/committed to adding value and making the most of every hour that I am there. One thing about becoming a parent is that it made me much more efficient at work – I don’t have time to waste time.
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?
Nothing meaningful outside of W-2 income. I frequently sell old kids clothes/toys on our local Facebook group for a few bucks, which I like to say “pays for our pizza.”
I’d LOVE to develop a passive income stream, and I love how ESI emphasizes an income-based retirement instead of an asset-based retirement. However, all the side gigs I can think of are still “trading time for money” – like being a professional organizer. I haven’t yet come across a side hustle (or retirement gig) idea that sparks my interest enough to pursue it.
What is your annual spending?
$90,000 – $100,000ish, not including saving/investments.
What are the main categories (expenses) this spending breaks into?
- Mortgage: $3,282
- Extended day care at school: $878 (child care was >$3,000 when we had two kids in full-time care…)
- Groceries: $615
- HOA dues: $470
- Misc: $420
- Car stuff (parking at my husband’s work, gas, taxes, etc.): $350
- Kid stuff (activities, outings, clothes, etc.): $285
- Insurance (car, homeowners, life, umbrella): $250
- Utilities: $180
- Prescription (I have an autoimmune condition): $165
- “Allowance” for my husband and me: $100 (we made this just $50/ea/month when we started paying for daycare, and have never increased it. We slowly bust this budget line every so often, and I bring us back to $0 when I get my bonus or a tax refund)
- Cellphone: $50 (just one phone, my work pays for mine)
- Internet: $40
- Plus more for gifts/travel, as needed
Do you have a budget? If so, how do you implement it?
Yes, I use YNAB to budget, and I really like it. I use it less to monitor regular monthly spending (that is on auto-pilot for the most part), but more how to allocate “extra” money leftover. It helps me see, and us discuss, whether to put more in the vacation budget, home improvements, Christmas gift money, taxable brokerage account, etc. And every so often I feel like we have gotten a bit too loose with ad-hoc spending (too many random purchases, dinners out, arcade visits with kids, etc.) and we can dial it back in pretty easily.
I am the sole money manager in my house (my husband isn’t that interested), but I regularly give him updates, and we are aligned in our values and spending/saving/investing priorities. Our money is totally combined, and we are fortunate that it is not a source of disagreement in our marriage. I think it helps that we have been together since we were 17, and have similar backgrounds/expectations about money growing up. I’d imagine that merging finances later in life would be much harder.
What percentage of your gross income do you save and how has that changed over time?
We currently save ~40% of our gross income, between retirement accounts (incl. employer match), Roth IRAs, 529s, I-Bonds, and taxable brokerage account. Between all of these combined, we save ~$119,000/year. Since we otherwise spend ~$100,000/year, I think this is a pretty good ratio.
Our savings has gone up over time as we have earned more, and childcare costs decreased. We began contributing to our Roth IRAs when we were 31, and only started maxing out our 401Ks in 2020 (when childcare costs plummeted because the kids stayed home with us for 15 months straight). Now that we are out of the “two kids in full time childcare” years, we can really accelerate our savings.
What’s your best tip for saving (accumulating) money?
Keep that lifestyle inflation in check!
Raises, bonuses, etc., should primarily be used to further your progress towards financial goals. Sure, do/buy some fun stuff, but don’t increase your regular monthly spend beyond what you are already used to. This will help more than anything else.
What’s your best tip for spending less money?
Buy used! It is SO helpful for your finances, but also the environment. Especially kids clothes and gear – there is no need to buy that stuff new, when it sells on Facebook for pennies on the dollar. There are so many consignment sales, clothing swaps, buy/sell/trade groups on Facebook, etc., that I have only very rarely bought kids stuff new.
I especially like to buy “high end” kids clothes (Hanna Andersson, Mini Boden, etc.) used, and then have both of my kids wear them. Because they are better made, they can last through multiple kids more easily while still holding up. And still for the same/less cost than buying new “fast fashion” at Target, Old Navy, etc. (which has its own bad impacts on the environment, garment workers in the global south, etc.)
For myself, I also like to look for specific pieces used on Poshmark after finding them first on major retail websites – it is amazing what I’ve been able to find!
Two amazing books about “putting your wallet where your values are”: Wallet Activism (Tanja Hester) and Consumed (Aja Barber). Highly recommend these!
What is your favorite thing to spend money on/your secret splurge?
We spent $60,000 on a kitchen renovation in 2019, which took YEARS to save for, since we were also paying >$3,000/month in childcare at the time. That was definitely a splurge, but has made our house so much more functional/pleasant. I try not to think about the opportunity cost of saving all this cash in terms of what the stock market was doing at the time…!
Also, definitely travel. Now that the kids are getting a bit older, I want to go back to farther flung destinations. We went to a beautiful Spanish-speaking location this spring, and it was worth the $6,000 we spent on it for the experiences and memories made. I’m hoping for a “big trip” about once a year (with smaller ones sprinkled throughout).
What is your investment philosophy/plan?
Keep a reasonable lifestyle, balancing the present versus the future, and squirrel away as many acorns as I can.
I put 100% of my market investments into broad-based equity index funds, currently about 70% domestic (S&P 500 or total US market), and 30% international (total international market). I am gradually trying to shift this closer to 75% US/25% international through future purchases.
We do Backdoor Roth IRA purchases in January every year (lump sum), and dollar cost average into our 401Ks with each paycheck. I do additional purchases into our brokerage account on a monthly basis, which can vary depending on our latest spending and however much is “leftover.”
I don’t worry about whatever the market is doing, I just try to put in as much as reasonable.
As I write this in September, we are coming off of 2 small/medium size vacations, dinners out, some home purchases, etc., and feeling like I need to reign it in a bit. Not worried, though, this is the ebb and flow of things, and we are privileged to be able to go with the flow.
What has been your best investment?
In no particular order:
- My husband
- My MBA (esp since I got a scholarship for the first year, then tuition reimbursement from my new employer for the rest)
- My lower-stress internal role (for all the TIME I got back in my life)
What has been your worst investment?
Money-wise, probably spending $60,000 on a kitchen in 2019 (after years of saving for it) instead of investing that money instead.
However, #noregrets because our old kitchen was really, really bad. Ha.
Also, I know I keep talking about this but over 5 years we spent ~$160,000 on full-time childcare costs for 2 kids. I can’t say this was a “bad investment” because it was necessary, but I am constantly mind boggled at how this doesn’t get more attention from a public policy perspective. We are very privileged and able to pay for high-quality (but certainly not “fancy”) childcare. There are millions of families who simply cannot, which has both economic and social implications that ripple throughout our society. What if there were another way?
What’s been your overall return?
I’ve been investing for 16 years, and VTI (total US stock market) has had a ~9% return during that time (as of this writing in Sept 2022).
So I’d guess my personal returns are somewhere in that ballpark, as well, since I invest in broad based equities.
How often do you monitor/review your portfolio?
Depends on how annoyed I am at my job! When I am annoyed and just want to “be done,” I can check fairly frequently to then bounce to an investment calculator and do (yet another) back-of-the-napkin calculation on when I’ll hit my “magic number.” To me, it is a tangible sign that I’m not super happy in the day-to-day.
Since I now have a taxable brokerage account, I also check at least weekly since this year has afforded me so many opportunities to tax loss harvest (TLH). I only TLH when I have at least $1,000 in losses to capture, but this has been about every 2 months so far this year (including just last week). So this keeps me checking more frequently than I would otherwise.
Beyond TLH, I don’t buy/sell based on what the market is doing, though.
How did you accumulate your net worth?
I got a good job, did well in that good job, got an MBA, got another good job, did well in that good job, and have grown my lifestyle more slowly than I have grown my income.
I graduated college with ~$12,000 in Stafford loans – my parents paid for the rest (plus scholarships, and I graduated a semester early). Since college, I have not received any financial support from my parents (I moved out right away), and my husband has not either (aside from the free occasional babysitting and homecooked dinners his parents are so generous to provide!). Neither of us expect any/much inheritance from our parents due to various factors.
So while I can say “I did it all myself through hard work,” I also know that I am incredibly fortunate that my college was mostly paid for, and that we are not in a position to need to financially support other family members (at least, not yet).
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?
Probably “save” since it has been a constant throughout our adult lives.
I was fortunate to find ESI (in his early days, pre-ESI) online and learned that the key is simply spending less than you earn, and so have done that since the beginning. The difference in earning vs. spending allowed us to buy a house in 2015, and is now being thrown into the stock market to try to help us reach FI as quickly as reasonably possible (while still allowing for adequate Carpe Diem-ing in the meantime).
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Financially, very few. We are very lucky. Stable employment with good jobs, and spending less than we earn the whole time (to varying degrees, depending on the specific season/phase at the moment).
Beyond that, I had a medical crisis in 2017 that required three major surgeries and a 10 month (paid, fortunately) leave from work. It was the biggest roadblock of my life to date, and while it (fortunately) didn’t stall my financial progress in any meaningful way, I try to remind myself that any day I am not in the hospital is a good one. And that the people in our lives matter more than anything else. And to align my spending with my values accordingly.
What are you currently doing to maintain/grow your net worth?
Putting any “leftover” money each month into index funds through my taxable brokerage account, in addition to maxing out 401Ks and Backdoor Roth IRAs each year.
I also continue to invest effort/focus in my career to be known as a high performer, even as I closely manage my hours to maintain a good work/life balance.
Do you have a target net worth you are trying to attain?
I’d like to have $2M in retirement accounts/taxable brokerage, and then seriously consider downshifting my career, and making more concrete plans for whatever that looks like.
According to the investment calculators, I can hope to achieve that by ~45 years old (in 7 years).
How old were you when you made your first million and have you had any significant behavior shifts since then?
Not sure! We realized that we were millionaires sometime last year (2021) when we had already surpassed it, and we became “stock market millionaires” (>$1M in the stock market) around Dec 2021… but that status did not last for long. 😉
No significant behavior shifts since then, other than maybe my “you need me more than I need you” approach to work – ha. Although I do feel this helps keep me from stressing unnecessarily, and might make me a better leader as a result. I do prioritize being a team player.
What money mistakes have you made along the way that others can learn from?
With my 20/20 hindsight, I would have bought a bunch of real estate in 2008/2009, rented it out, bought more real estate. But alas, I was 24 and making $42K at the time. I have gone the “slow and steady” approach and in general am pretty risk averse especially with money moves.
Even now I wonder if I am overlooking great investments in real estate, vacation rentals, business ventures, etc., out of fear. Not sure. Nothing has really “spoken” to me, but also maybe it’s because I’m close minded to it?
What advice do you have for ESI Money readers on how to become wealthy?
Do what ESI says!!
He knows what he is talking about!!
What are your plans for the future regarding lifestyle?
I hope to hit $2M in retirement/taxable brokerage investments around age 45, and then potentially downshift my career (80%? 60%? Different role? Etc.) By that time, I may have different circumstances and/or more updated math to help inform the way forward. I just know that right now, I am “keep on keeping on” until I hit the $2M magic number.
I chose $2M because this, in theory, would be enough to live on for the rest of my days (given the 4%ish rule) after my mortgage is paid off. Again – rough math but a good target for now.
What are your retirement plans?
I want to be active on a Masters swim team. I did this in my early 20’s and it was great. I’d love to be able to go to those 12PM practices rather than waking up at 5AM like I used to!
I’d also love to volunteer more, host more parties, help out family members, read books for more than 10 minutes at a time, and maybe do some slow travelling.
Financially – my plans are to have sufficient assets to withdraw 3-4% without worry. I like the idea of an income-based retirement like ESI has, but I have no clue what this would be other than some sort of job where I trade my time for money. Would love to figure out a passive income stream, but anytime I look at the lists of passive income streams online, I am not inspired. And real estate scares me (see above re: risk averse). Any tips?!
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Yep! If I hit $2M by 45, that is when my kids will be in middle/high school, with college looming around the corner. So this might throw a wrench in things. How to plan for retirement when that big expense is an unknown? Should I work 100% until they are through (or at least in) college? Or draw down assets to pay for whatever their 529s don’t cover? Part of me wants to quit or really downshift my career 2 years before the oldest goes to college to try to “game” the financial aid system, but that seems dicey. Hard to say at this point.
Also, in 7 years our parents will be in their early 80’s. Hard to say what elder care will need to look like, and we have not talked about “plans” with any of them. So that is another big question mark. I’d love to talk about plans but it takes two to tango…
How did you learn about finances and at what age did it “click”?
In college when I found ESI’s old blog!
Changed my life, truly.
Who inspired you to excel in life? Who are your heroes?
I was a “success kid” for as long as I remember – always looking to accomplish something and also get the external validation that came along with it. Not always healthy, I’m sure – likely trying to fill an unmet need for unconditional love from one of my parents. But here we are!
I really admire Michelle Obama for everything she has accomplished in her life, while being a devoted mother and keeping perspective on What Matters Most.
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?
- Wallet Activism by Tanja Hester – all about how to align your money with your values. I learned a lot reading this book!
- Work Optional by Tanja Hester – the most brass-tacks personal finance book about retiring early I have ever read. I was already a millionaire when I read this book, and I learned a lot about withdrawal strategies, considerations, etc. I read a library copy, and now I need to go buy one so I can dog ear it and reference it over and over again
- Meet the Frugalwoods by Elizabeth Willard Thames – because she is about my age, I saw myself in her story. Representation matters!
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I give small amounts ($50-100) throughout the year as things come up – PTA donations, food drives, birthday fundraisers on Facebook, charity bike races, etc. My financial giving is neither regular nor significant, and there is definitely room to build more generosity into my life.
I also volunteer at my kids’ Title I school, and donate materials, supplies, etc., to their classrooms whenever needed.
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?
No clue! Maybe! Hopefully that is far away from now. But I guess if it isn’t far away from now, then my husband and kids will be getting everything you just read about above. Ha.
Neither my husband nor I have a family legacy of inheritances, and we do not expect anything from our parents. If I am able to leave something for my kids, then great. But my primary motive for saving money is leaving the workforce and having more freedom in my own life. Anything leftover would be gravy.