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)?
I am 36 and my wife is 38.
We just celebrated our 10th wedding anniversary, and we met two years before we got married.
Do you have kids/family (if so, how old are they)?
We have been blessed with two children, who are now eight and five.
What area of the country do you live in (and urban or rural)?
We live in a suburb in the Southern U.S. that is roughly 50% of the housing cost that the nearby metro is.
The decision to live in a suburb is more a reflection of a quality of life choice as we raise our two children.
What is your current net worth?
Our current net worth is roughly $1.7-$1.8M.
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?
- Home – $1.0M less $0.5M remaining on a traditional mortgage product
- Cash – $0.5M- I am keeping above average liquidity given the direction I believe the market is heading in. I would like to either upgrade our home, or buy some discounted investments in the 1-2 year timeframe.
- Tax deferred Retirement accounts – $0.5M
- After tax ROTH accounts – $0.1M
- I-Bonds – $0.1M
- 529 Accounts – we have started to set aside small amounts every year for both of our children
There is some additional value from cash surrender value of whole life insurance and a small pension from one of my wife’s previous employers that I don’t include in my quarterly net worth calculations.
What is your job?
I am a c-level finance executive at a small private company.
My wife is a senior (non-partner) consultant.
What is your annual income?
Our combined gross income this year is going to be approximately $900k.
Over the past decade we have alternated who is the highest earner, but it has always been fairly evenly split, perhaps 60/40 in any given year, depending on bonuses. I have really appreciated the balance because it de-risks our family income during downturns, which allows me to sleep a little easier.
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 out of school paid about $40k annually. I job-hopped early in my career to capture some significant wage increases that have continued to see modest gains on an annual basis (a 3% annual increase on $100k is a whole lot nicer than it is on a $40k base. Also, 401k matches and bonuses have a compounding effect on base pay increases.)
For example, I moved from $50k to $75k per year with one new job, from $75k to $92k, and $102k to $115k. I currently earn roughly $350k in base pay and an additional $150k in annual bonuses.
My wife had a series of low paying jobs (under $40k per year despite living in HCOL areas), and then really started to gain momentum while in consulting (went from $70k to $220k base). She currently earns about $250k in base pay and an additional $150k in annual incentives.
Two years ago, at the start of the pandemic, we earned about half of our 2022 compensation. The pandemic has really accelerated both our earnings and net worth. I would attribute this to being in high demand roles in which a lot of others have resigned or retired, which in turn led to large compensation increases to retain us.
What tips do you have for others who want to grow their career-related income?
I worked longish hours and earned several credentials and graduate degrees prior to getting married and having kids. I heard the advice that those things will never get any easier and I certainly think that is true.
I also had a mindset to always learn my bosses’ job and to make their life as easy as possible.
Early on we also offered geographic mobility in order for me to more quickly climb the corporate ladder at various companies.
My wife took a very non-traditional path, and created a lot of opportunity for herself by paying her dues in consulting for 7+ years. There were no tricks to this. She worked extremely hard for very long hours for many years.
I know the question is only about tips to increase income but I think that in general having some combination of post grad education, specialized credentials, or consulting experience opens many doors later on. Having options is always a good thing whether your focus is on income maximization or otherwise.
What’s your work-life balance look like?
I don’t do balance so I generally work between 5-8 highly productive hours each weekday and end each work day promptly at 5 pm. During the pandemic I worked a lot of evenings because I wasn’t going out, but this is a bad habit I put an end to. Now, maybe once or twice a month I will have a work call that is after 5 pm if there is a project I am working on with people outside of my time zone.
For the past year my wife took a 20% pay reduction to take every Friday off, but her work is generally more stressful than mine. Due to the more demanding work this time off has been critical to allow for self-care that she couldn’t fit in while working 100%.
We have both maintained our focus on our children and family, potentially to the detriment of our careers. This is a risk we are willing to take 🙂
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?
Outside of dividends being generated in our ROTH accounts, we do not have any other sources of income.
At one point we owned a rental property, but we sold it when we were living in a different state and were temporarily faced with paying three mortgages on our own without any rental income. At that time we decided that the level of effort and risk of renting a single family home was too much of a distraction from our careers and family life. Even knowing the subsequent appreciation in the housing market I stand by this decision because we were so early in our careers at that time, and cash flow was more of a concern as we were starting a family.
What is your annual spending?
We are spending about $175,000 per year, not counting taxes.
Taxes are actually our largest expense since the majority of our income is W-2.
The spending number is actually an average of our 2021 and 2022 spending.
What are the main categories (expenses) this spending breaks into?
I calculate my spending categories as a percentage of after-tax income. I also do some mental tricks here like allowing my 401k contributions to come out along with taxes so I don’t even count 401k contributions as money saved. Even with these tricks I typically manage to save between 50-60% of after tax-income every year.
Here is my spending breakdown:
- Fixed Expenses (mortgage and insurance): 11%
- Semi-Fixed Expenses (private school tuition, groceries, medical, utilities, house cleaning): 21%
- Variable Expenses (vacations and gifts): 14%
Do you have a budget? If so, how do you implement it?
We loosely have a budget. I should note that my wife doesn’t even look at the spreadsheet I created and is repulsed by the idea of budgetary constraints on spending. With that said she appreciates planning for long term financial security.
Being the more finance minded person in the relationship, I created a rolling 10-year financial plan to track our high level income goals, home and car purchases, and general financial trajectory. Beneath this I have an annual income and spending plan to see how our short term cash balance will fluctuate.
This annual plan, which I track monthly, goes into line item detail for major spend categories, but I admittedly have a large “other” bucket of discretionary spending. I basically set aside a couple hundred dollars a month for random purchases. My main use of a monthly/annual budget is to see how close I came to the spending plan, and if there is a major difference, I want to understand whether a course correction is needed.
One thing I found interesting when applying for financial aid to our children’s private school several years ago, was that our cash flow budget was essentially neutral (by this I mean that our cash position would essentially be unchanged in a year, not counting contributions to retirement accounts). This despite not having car payments and being very fiscally responsible.
From the school’s perspective it is not a concern if the tuition took you cash flow negative provided they determined you could potentially borrow if needed. To me this is a rather irksome assumption of American education: that they are perfectly ok with families running up debt in order to pay for a decent education. Then again, this continues to the PhD level, where presumably candidates should realize there aren’t enough high paying jobs for graduates, and yet they don’t.
What percentage of your gross income do you save and how has that changed over time?
I have been averaging saving between 50-60% of my after-tax income, but I also ignore my 401k contributions (which both my wife and I max out) when arriving at after-tax income in these calculations. Our income taxes have really shot through the roof as our W-2 income has grown, so I think looking at after-tax savings rate helps to normalize things.
As crazy as it seems, I have almost always saved at this level, even in my relatively broke post-college days, but perhaps I was only saving 40% then. As a result of this approach I have been able to enjoy increases in quality of life as my income has grown, which I think is healthy. Otherwise I’d be saving something like 90%+ of my income now, and still living a spartan existence which just wouldn’t be fun.
What’s your best tip for saving (accumulating) money?
Being laser focused on increasing earnings potential, while simultaneously having simple wants in life is a great combination for wealth accumulation.
Simple wants make happiness a much easier path (check out Buddha’s teachings on this point).
What’s your best tip for spending less money?
I don’t use social media in order to avoid comparisons, and regularly think about how grateful I am that all of my needs are met.
I realize this doesn’t apply to everyone, but I think that having a smaller house also makes it easier to spend less because there isn’t room for extra possessions.
What is your favorite thing to spend money on/your secret splurge?
$1 McDonalds ice cream cones are my favorite splurge because I like them, they’re cheap, and I have fond memories of enjoying them as a child with my grandpa.
I think it’s important to find joy in the simple things in life to help avoid lifestyle creep. I actually have a long list of these kinds of things…bleacher seats at a baseball game, apartment nine (Kohl’s store brand) polos, trivia nights at the bar (winning the prize subsidizes this entertainment), playing old N64 or Wii games.
My wife’s splurge is on fancy all-inclusive resorts. Clearly we are very different and yet we balance one another.
We don’t have any secret splurges, and if we do, my wife hasn’t told me about them.
What is your investment philosophy/plan?
Due to my wife’s family owning their own businesses, and losing everything, we have been extremely conservative with our investments.
What has been your best investment?
Besides marrying well, I’d say buying a large single-family home in 2018 with an ideal work from home layout.
The price point we are at has plenty of buyers within our metropolitan area, and we have a low fixed interest rate mortgage.
What has been your worst investment?
It wasn’t a bad investment, but I sold some oil ETFs in 2020 when I was worried that they would go to $0.
The dollar amount I lost wasn’t meaningful to my net worth, but I probably lost 60% of my original investment.
What’s been your overall return?
This is pretty hard to calculate across accounts, but I’d estimate about a 5-7% AGR since 2007.
There have been some great years in stocks, some horrible years in stocks, and the same can really be said for each asset class.
In case you can’t tell from this comment, I am a big proponent of diversification.
How often do you monitor/review your portfolio?
I monitor the individual stocks that I own almost daily, and the index funds and my retirement accounts quarterly.
How did you accumulate your net worth?
Making a lot of money and consistently saving are our path.
Since I’ve covered our earnings above, I’ll go a little deeper into the savings component. I think the biggest key to saving has been maintaining our lifestyle on the big items (housing and cars) while maintaining percentage of spend on luxuries like travel so we get some benefit from our all of our hard work.
We easily qualified for our mortgage on one of our incomes (we actually used the lower persons income), so that we could maintain our lifestyle with no changes in the event one of us lost our jobs. This decision criteria made our overall housing affordability really great for us.
As far as vehicles, we have always purchased ours outright in cash and driven them for 10 years. Our nice new 2019 vehicle cost us below the median vehicle purchase price despite our having a 1% income.
If we made less money we would be making different purchase decisions, but we don’t want to take the hardcore FIRE approach and be miserable while working as hard as we do. Perhaps if retiring by 40 had been a goal we would have pulled back the reigns on some spending but this just seems like an unnaturally early retirement to us.
Neither of us has received an inheritance or any other kind of windfall event.
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?
As a result of being extremely conservative with our investing, we have been forced to emphasize the “earn” component to achieve our net worth targets.
However, earning money won’t get you there if you can’t save money.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I’m pretty stubborn and that landed me on the wrong side of two legal matters that cost five figures.
Luckily stubbornness can also be called determination, and I was very determined to earn enough to pay these off very quickly.
I was pretty embarrassed about these issues, but my wife was extremely supportive and understanding.
What are you currently doing to maintain/grow your net worth?
Well, since we are in our 30’s we are mainly going out and trying to earn good chunks of money in our prime earnings years before age discrimination kicks in.
I think focusing on our physical health has also been a good investment in ourselves as it has a twofold purpose: 1.) bringing a sharp intellect and positive spirit to our work which enhances our income and 2.) reducing healthcare costs in retirement as well as enhancing quality of life for the long term. This has also been the underlying logic in why I am risk-averse to COVID: I would hate to experience a brain fog that hampers my mental acuity and earnings potential.
Monetarily we now have enough assets to take advantage of meaningful changes in the market, such as when stock or housing prices decline. It’s been hard to stay motivated to work when the market declines and there is more of an impact to my net worth from changes in investment value than one of us is earning in income in that period.
Do you have a target net worth you are trying to attain?
We are trying to reach about $5M in order to fat FIRE at a young age (50).
How old were you when you made your first million and have you had any significant behavior shifts since then?
We crossed a million when I had just turned 35 years old (almost three years ago). I can’t say that we have had any significant behavior shifts. I still wear mostly used clothes, drive the same vehicles, and live in the same house.
The biggest change, which also is related to COVID, is that we are taking more international vacations as a family, and we typically fly either first class or comfort plus.
There has also been a general change in our awareness that we are on track to accumulate wealth that would have been unimaginable for our parents or grandparents.
There is one other psychological aspect here, in that greed is clearly a powerful force.
Everyone you deal with (real estate agents, financial planners, employers) counts on the fact that you want more / as much as you can possibly get, and there is definitely an urge to do this. For example, once you buy a $1M home, all of a sudden you will notice a $2M home that has something yours doesn’t. After you have a $2M home you will notice a $4M home, and so on.
I’ve noticed that our financial planner clearly doesn’t believe that we will stop trying to make more money after hitting our fat FIRE number, because it will happen at a reasonably young age and I’m sure they are counting on greed to kick in.
What money mistakes have you made along the way that others can learn from?
I have tried to time the financial markets too often to be good for my investment returns.
Luckily we’ve earned enough money to still be in a decent position.
What advice do you have for ESI Money readers on how to become wealthy?
I don’t have any special advice given our fairly traditional path to becoming millionaires.
Perhaps I can offer some encouragement in that almost anything can be overcome if your goal is to become wealthy, particularly when you are young. That is when I had my two legal issues, and my wife had a bad credit score and no money to her name when we met.
Perhaps the best thing, as far as getting us to this point, was that we had a shared goal of not being poor. Along the way we found the right balance for us between having more options available to us with our wealth, and the career sacrifices we would be willing to make in order to have more.
What are your plans for the future regarding lifestyle?
I believe we will hit our fat FIRE number somewhere around age 45-50.
What are your retirement plans? Are there any issues in retirement that concern you? If so, how are you planning to address them?
I don’t think we will fully stop working but I can easily see working half days while we travel and enjoy the activities we’d like to at that point.
There are two drivers of this: 1.) health insurance is typically provided at no cost by our employers and this will take care of one of the biggest expenses we face before touching our retirement accounts or drawing social security. 2.) we can earn enough to fund our lifestyle with one person working part-time, so why not “retire” early until we hit 99%+ certainty of never tapping into our principal.
How did you learn about finances and at what age did it “click”?
My grandpa showed me, when I was about 10 years old, how to hand-chart stocks and taught me all of the fundamentals of trend analysis on graph paper. As far as personal finances go, I think this was something that came intuitively. I wanted to be financially secure and so I knew that I would need to both make money and save money. I may not be the fastest runner in the race, but I have been methodically plugging along towards the same goal for my entire adult life.
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?
Here are my top three favorite money books. Only one is truly a personal finance guide, but the principles in these books have all helped in the process of building my net worth:
- Family Inc — This is a good basic personal finance guide that takes the perspective of running your life as a business, and you are the CFO whose goal is to maximize the value of the business.
- Never Split the Difference — This is a fun to read book about negotiations, and I would say that negotiating has the potential to help in all three dimensions (ESI) if you understand the players and the game.
- Where are all of the customers yachts? — This is an oldie but a goodie that should be perquisite reading for anyone before investing through a financial advisor.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
We do contribute to charities that are meaningful to us, and that also have good Charity Navigator ratings (this ensures that most of the money goes to the intended purpose). The amount we donate is inconsistent from year to year, but is steadily increasing.
One difference between my wife and I is that she donates to her alma mater because she is grateful that she received a scholarship for her undergrad. I paid full tuition, without any help from my parents, so I don’t share this sentiment and instead contribute to my children’s 529s first. Eventually I could see creating an endowed scholarship, but not until I fund my own children’s tuition.
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?
My goal is to not touch the principal of our net worth in retirement, but I haven’t given significant thought about what to do with that money if the plan actually succeeds.
Hopefully I have many years that are not consumed by full-time work to ponder this question.