Millionaire Interview 375

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 July.

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 am 45 years old and my wife is 47 years old.

We have been married for 16 years. We met in college and started dating after college.

Do you have kids/family (if so, how old are they)?

We have 2 kids.

Our son is 12 years old and our daughter is 10 years old. The “tween” years, their eyes roll when I do a dad joke.

What area of the country do you live in (and urban or rural)?

We live in Southwest, in the suburbs of a major city.

What is your current net worth?

Including real estate, our net worth is $2.5M as of the end of June 2023.

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?

• Taxable Investment Accounts: 5%
• Tax Deferred including 401k/Traditional IRA Accounts: 37%
• Roth IRAs: 9%
• HSA: 1%
• College Fund: 6%
• Cash/I Bonds: 4%
• Real estate equity including house, and rental units : 38%
• Our home is paid for. We have mortgages on rental units (120k).

EARN

What is your job?

As of this writing, I’m currently unemployed. I got laid off from working for a startup. Due to funding issues, I didn’t get my last two paychecks before being let go. I’m still waiting for them to pay me. I started to receive unemployment benefits.

I used to manage software engineers. I recently moved to the management track, I have been in the individual contributor track as a software engineer for 20 years.

My wife works as a software engineer in a large company.

We both graduated with bachelor’s degree in Computer Science. We’ve been in software engineering for more than 20+ years.

What is your annual income?

No income at the moment. I used to make 185k income.

My wife’s salary is around 120K+ with a potential bonus of 10%.

Our rental properties have cash flow but not enough to replace income.

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 got my bachelor’s degree from a different country in Southeast Asia. It’s way cheaper so I don’t have student loans coming out of college.

My first job in the US back in 2000, I was paid $10 per hour, then it grew to $18 per hour after a year. I was repairing card printers and doing some web development. I was on-call 24/7 in a manufacturing plant, I remember driving at 2 AM to repair a printer for 15 minutes, then I had to drive back home again.

I used to prepare taxes for other people as a part-time job at a national tax prep. I did this for 15 years. It helped me learn how to communicate with people. I got to learn about life experiences in America through the eyes of others through taxes.

Rich and poor, I would interview, they sit on the same chair, would have different ways on how they treat their salary every year. I heard about different struggles and joys in life; From graduating from school, getting a new job, getting married, having our first child, moving to a different state, buying a new house, going thru divorce, being a single parent, losing a job, starting a business, enjoying retirement, and experiencing death in family.

I have met people that are super savers and met people that are living paycheck to paycheck, some living beyond their means and needing refund checks to pay off loans. I have met people who are gambling on their retirement and people that are well prepared for retirement. Every person is different, I respect every person, young and old. They all have stories to tell, a life to live, and hopes, and dreams for their future.

Every tax season I made around $2k-$5k a year, not really big amount, I only worked 4 months per year, but the education and experience are very useful. This is also where I learned about tax-advantaged accounts, 401k, HSA, 529 plans, and Roths. I learned about real estate and investments. I didn’t know at that time that learning how to read the tax code would help me become a millionaire. The American dream is supported through our tax system.

I moved to a bigger town and got a job as a programmer in a manufacturing plant. I received $24 per hour in 2005. Then I got promoted to lead programmer. My salary went up to $41 per hour after 7 years working there.

Then I moved to another manufacturing company where I made $43 per hour as a senior software engineer. I worked there for 5 years and my salary went up to $52 per hour. However, the company decided to move my job to a different state. I decided to stay where I am so I just looked for another company.

I made $60 per hour in my next job for one year. I then moved to a startup company, made $67 per hour and got the opportunity to be part of management, and got bumped to $88 per hour. Then got laid off.

I found a new job and will start soon.

What tips do you have for others who want to grow their career-related income?

I realized being in IT, career has ups and downs. There are years that are tough for software engineers and years that are really stellar. Salary moves faster when you change jobs more often. I like to stay and learn and improve systems that I care about.

Be adaptive and learn new technologies. Being a software engineer is challenging, the stuff we were developing doing years ago is now just a click of a button. At some point things get automated and simplified, then there are new paradigms to learn. There are faster ways of doing things. There are better approaches to solving a problem. There are patterns to learn.

There’s no stopping in learning. When skills get outdated, we start at the bottom again to catch up. It doesn’t take a long time to catch up, always be willing to learn something new. Adapt to new technologies. Share your knowledge and learn from others. Everyone is navigating, no one is a truly expert.

Network with others. Be connected with your peers, and have an online presence. Post some side projects that you worked on. Most of my jobs I got thru LinkedIn, either by being found by recruiters or connecting with my network for job reference.

Collaborate with others. Build projects together. Find time to attend hackathons. These are some examples of expanding your network. Sometimes it’s ‘who knows you’ that is important and perceived value to a new organization.

What’s your work-life balance look like?

Right now, I’m glad that it’s summer and I don’t have work. For the past few months, I was able to spend more time with my kids. I was able to travel and go to different countries, go on a cruise. I was able to ride my bicycle and be out in nature.

It’s a blessing rather than an emergency. Our main home is paid for. We don’t have any car loans. We have a fully funded emergency fund. My wife has medical insurance and we have our HSA account for emergencies. We have a vacation fund that we’ve been saving up. We don’t have debt as we pay our credit cards on time.

Since our cost of living is lower, our cost of living expenses is more manageable. I stopped other investing during this time, but we are still able to contribute to our kids’ college fund.

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?

Our real estate rentals are cash flowing about $10k a year, not enough to replace our income. We bought those investments after the housing market crash in 2008. And we bought it right and it was cash flowing from the start.

I studied real estate investing with a local mentor who helped me evaluate deals and also understand the market. Find a local real estate investor with whom you can ask important questions and find a support group who has the same goals like you. Find a support group and mentor who are local and know the rules in your area. This is very important.

We had to increase rent for the past few years because real estate taxes since insurance rates have been going up. Sometimes I wish we could’ve bought more rental real estate back then. We had opportunity to buy more rental properties, but then again I had to borrow much. It was way beyond my risk tolerance at that time. Hindsight is 20/20.

We have interest and dividends from investments, I typically reinvest those.

I speak at tech conferences, but they sometimes pay for hotel and flights, so I get mini vacations from those. My wife and kids would join and these events help us save on some vacation expenses.

SAVE

What is your annual spending?

We probably spend close to $100k per year.

What are the main categories (expenses) this spending breaks into?

Our expenses break down to 50% needs and 50% wants. Needs are important, we can’t live without. Wants are variable expense, it’s harder to budget and can be controlled (supposedly).

Needs:

• House (taxes, and insurance, home improvement/repair): 13%
• Car Insurance/Auto Repair/Gas: 8%
• Medical/Dental/Vision Expenses: 3% (High deductible health plan)
• Groceries: 13% (I have 2 growing kids, they drink milk like water).
• Utilities (phone, heat, cable, streaming services, electricity): $6k
• Insurance: 2%
• Cellphone: 2%
• Child Expenses (After School/Summer): 3%

Wants:

• Personal Care/Clothes/Shopping/Electronics: 12%
• Restaurants: 10% (kids eat adult meals now)
• Travel/Entertainment: 14%
• Charity: 6%
• Gifts (Christmas, birthdays)/Hobbies/Other: 9%

Do you have a budget? If so, how do you implement it?

Every paycheck we transfer money to different savings funds such as Christmas, vehicle, education, travel, and emergency funds. Utilities and cellphones are all autodrafted even charity donations.

We don’t have a hard and fast budget. I track our spending but we don’t have a set budget. My wife and I discuss about money.

We debated if we should pay off the house or just keep the loan. We had some cash to pay it off but I was thinking about the mortgage loan since the interest rate is low, I can stretch the money and perhaps invest it somewhere else. My wife thought about safety and peace of mind. We decided to pay it off completely and today we are glad we did it. It reduced our expenses and it definitely helped us for the past few months after I got laid off.

We used to have car loans and we paid them early. We keep our cars for a long time. We have a vehicle fund where we save some money every month for our next car purchase.

What percentage of your gross income do you save and how has that changed over time?

Before we got married I was saving about 10% of my income.

When we got married, I just kept increasing my contributions.

We now contribute to our Roth 401k per year, the maximum allowable contribution. We also contribute to HSA and my kids’ 529 plan.

We save about 25-30% of our income.

What’s your best tip for saving (accumulating) money?

The best thing is to start early. Having money auto-drafted every month and moving to different funds helped me accumulate savings. I started doing that after we paid off our car, I scheduled the same car payment amount to move into a separate savings fund. Eventually, we were able to pay cash for our vehicles. When we have car repairs, I take it out money from the car savings fund.

Now that I’m unemployed for a few months, most likely our tax rate would be lower this year. I plan to convert some funds from my IRA account to Roth IRA account before the end of the year, and pay taxes on those. This will help.

What’s your best tip for spending less money?

Keep driving the same vehicle longer. Not having a car loan opens up more room for savings. We bought a modest home and have been living in it for more than 15 years. Moving is expensive. Moving up to an upscale neighborhood suggests additional lifestyle expense.

If you can work remote, it can reduce expenses. It reduces commuting cost, slows down car depreciation and maintenance expense.

If you like to cook, it is also healthier to eat at home. It costs less than eating at restaurants.

What is your favorite thing to spend money on/your secret splurge?

Since I’m a technologist, I like to splurge on new electronics and gadgets. For me, it’s an investment in education, to keep with current trends.

My wife has crafting hobbies like soap making.

INVEST

What is your investment philosophy/plan?

I have been interested in building wealth for a long time. I enjoy reading personal finance books. When my wife and I got married, we attended Dave Ramsey’s Financial Peace University. It helped us be in the same page. We both agreed to have a financial plan and reduce debt, not necessarily eliminate all debt as we still use credit cards for convenience. I read blogs like this and listen to personal finance podcasts.

By reducing debt, it opened up more room for savings and investments. I tried investing in single stocks and ended up losing money. I kept a stock all the way down to zero to remind me about the risk of investing. I still have some DRIP (dividend reinvestment plan) stocks, and most of my investments are in index funds, ETFs, actively managed funds, and also Treasury I-Bonds.

What has been your best investment?

The best investment is investing in yourself by having a good education and building marketable skills. My wife and I are fortunate enough to not have student loans. I acknowledge my wife whom without her we would not be in a good position financially and in life in general.

Another thing is buying a modest house, and staying in it for a longer period of time. It builds up equity and paying it off reduces expenses.

Investing in real estate needs careful consideration. There’s high risk involved but the rewards are great. It’s important to have emergency funds in both personal and business. You can be equity-rich but cash poor. There has to be a balance. It takes patience to find a good real estate deal.

What has been your worst investment?

I have tried to play around with individual stocks. Investing in individual stock and not selling it earlier when it was going down. Admitting the wrong investment purchase and hoping that it would rebound is not a good investing methodology. What is important is to understand your risk tolerance. Some people treat investing like gambling money in casinos. Financial education is key.

Another bad investment is a car. A car is not an investment. It is a depreciating asset. Do not treat it as an investment, but the important thing is that it is reliable and can take you where you need to be in order to find better investments or earn more income.

What’s been your overall return?

I would say that my return has been about 9-11% over the past 15 years.

How often do you monitor/review your portfolio?

I look at our portfolio and spending accounts twice a month. Everything is linked to my personal capital account so I see my accounts. I look for invalid charges or annual subscriptions we typically forget.

I rebalance and adjust our portfolio twice a year.

NET WORTH

How did you accumulate your net worth?

Right from the start we contributed to our 401k, accumulated through time.

We invested in the stock market and bought a modest home.

We invested in real estate by connecting with local real estate groups and learning from them.

We increased our savings by paying down debt and not taking money out of retirement accounts.

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?

Different stages in life require different levels of focus.

First phase of life is focusing on Earning and Saving. Try to find ways to increase earnings by learning marketable skills, connecting with the right people, and building a personal brand. It is important at this stage to save early and save often.

The second phase of life is focusing on Savings and Investments. As earnings increase, focus on reducing expenses to increase savings, and focus on slowing down lifestyle inflation. Moving to a nicer neighborhood requires changes in lifestyle, costs typically go up. This slows down savings.

Start investing after the emergency fund is in place. This will make sure that money in 401k is not withdrawn in case of emergency especially when you’re out of a job like me. Make it a habit to save money for kids’ college fund, and make it automatically withdrawn like 401k. Accumulate money to be prepared when a good deal comes along. Always look out for good deals, and understanding what a good deal is important. This might be the time to be investing in a more aggressive portfolio.

Third phase of life is focusing on Investments and Savings. As earnings dwindle, focus on finding ways to improve investments. This maybe the time to rebalance to a conservative portfolio rather than an aggressive one. This maybe time to move money from deferred taxable investments (401k) into tax-free investments like Roth IRA/HSA/529 plan. Prepare for retirement. Don’t think it is still too far away.

What road bumps did you face along the way to becoming a millionaire and how did you handle them?

I’ve been a saver from the beginning of my career. I didn’t save enough on tax-advantaged accounts earlier though, I just piled them in up savings accounts. The rate of return on savings account is lower but it helped with life expenses like weddings and having kids.

We have a road bump right now that’s slowing us down. We are drawing money from our emergency fund in this job transition phase.

What are you currently doing to maintain/grow your net worth?

Since our annual income is going to be less this year, our tax rate would be lower. I plan to do a conversion from Traditional IRA to Roth IRA before the end of the year. I may have to pay taxes on it from our savings.

I will start a new job soon. I plan to catch up on Roth 401k contributions for the months that I was unemployed, just to make sure that we would still be maxing out our contributions to our tax advantage.

I will aggressively save and replenish our emergency fund so we’ll be ready for what life brings next. I will consistently invest.

Do you have a target net worth you are trying to attain?

I would love to be a decamillionaire in the next 25 years closer to retirement age.

But the more I think about it, I would like to retire “early” which for me would be about 60 or earlier.

How old were you when you made your first million and have you had any significant behavior shifts since then?

I was 43. And it was in 2021. That’s when we decided to ramp up our mortgage payment and to pay it off early to solidify our net worth. The pandemic helped us reduce our expenses and pay off our mortgage faster.

I am a bit more relaxed about money, we are taking more trips and vacations now. I figured there are few summers left with kids, eventually they will grow and have preference and plans on their own summer vacation.

What personal habits and/or traits have you developed that have made you successful at growing your net worth?

I enjoy reading personal finance books and listening to other people.

I prepared taxes for a lot of people which helped me learn how successful people behave financially and how broke people spend their tax refund.

What money mistakes have you made along the way that others can learn from?

I’ve lost money by buying individual stocks and not understanding fundamentals.

I also lost money on hobbies, they add up. I have lots of unfinished projects and hobbies that are collecting dust — it could’ve been army of dollar bills instead.

What advice do you have for ESI Money readers on how to become wealthy?

I think savings rate makes a difference. Always save for a rainy day. Emergencies will happen. It happened to me, losing a job is one of them.

Having a full emergency fund makes financial sense. It didn’t rock my financial base too much. It made a dent, yes, but I am able to stay in the right path to wealth. By paying off the mortgage early, it didn’t steer me too much out of my target.

I didn’t have to rely on unemployment benefits from the government. The unemployment benefits are a blessing to reduce the rate of drawings from our emergency fund.

FUTURE

What are your plans for the future regarding lifestyle?

I think the biggest change to our lifestyle is that I spend more time traveling abroad.

We will continue to look for good real estate deals and find ways to build up passive income.

What are your retirement plans?

I plan to retire around the time our youngest daughter finishes college. My wife wants to retire earlier. I would love to travel more and go on a world tour. I like to volunteer more and be part of the tech community.

Being out of a job for the past few months felt like having a mini-retirement or a sabbatical. It gave me a taste of what I would do. I ended up exercising more, cycling and walking, and being with nature. I ended up listening to audiobooks and reading books and learning new ideas. I ended up organizing tech events and speaking and teaching others.

Are there any issues in retirement that concern you? If so, how are you planning to address them?

Healthcare expenses are always a question and concern especially living abroad or traveling out of the country. Emergencies can happen, and having good insurance should take care of that. Long Term care insurance is another way to reduce risk.

If our portfolio has a catastrophic downturn (like 40% or more loss, which can happen), then we will adjust spending until the market recovers.

MISCELLANEOUS

How did you learn about finances and at what age did it “click”?

I learned about finances from my parents. Growing up, I experienced the hardships they endured to get us a better life. I was born in a place where poverty is everywhere, we learn to appreciate opportunities that life has given to us.

I was in high school when it “clicked”. My parents taught us how to save and reduce everyday expenses. I remember my dad saying about the everyday little expenses that add up. Limiting those goes a long way. My grandmother would tell me stories about WWII, how limited the food was, and the hardships everyone had to endure.

Being a tax preparer for 15 years also helped me appreciate life in America. Everyone has the opportunity to become a millionaire compared to other countries. We live in the land of opportunity, the land where you can be anything as long as you work towards your goals.

I also enjoy reading personal finance books. Early on in the start of my career, I started to listen to and read Dave Ramsey, Suze Orman, and Robert Kiyosaki books. Everyone has a different perspective on finances.

Who inspired you to excel in life? Who are your heroes?

My parents instilled good values. My dad taught me the value of saving, the value of spending less, the value of investing, and the value of appreciating the opportunity for better income.

I also want to instill the same values in my kids. My wife and I are both on the same page that we want our kids to learn these important values.

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?

Dave Ramsey’s book Total Money Makeover is excellent. It is a great book, with basic advice, and if you follow the financial peace path, it works. The step-by-step process has wisdom behind it.

Rich Dad, Poor Dad – Kiyosaki encourages readers to build and acquire income-generating assets, like real estate, businesses, and stocks, rather than working for a salary alone.

Do you give to charity? Why or why not? If you do, what percent of time/money do you give?

Yes, we give to charity.

For me, charity is for the giver. A cheerful giver is a trait of a person with good emotional intelligence.

Six percent goes to charity.

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?

The best inheritance I can give is to provide good education to our kids and encourage them to finish college without debt just like my parents did for me. Not having student debt really made a difference as I was able to grow my net worth earlier. We plan to do the same.

We teach them the value of money and how to respect it.

I believe receiving an inheritance can be a blessing if it’s given to a person that’s ready to manage the wealth. It can be a curse for some that’s not prepared enough. We plan to teach them the value of Earnings, Savings, and Investing; that’s the best inheritance that builds a long-lasting legacy.