Millionaire Interview 376

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)?

I am 64 and will turn the magical Medicare milestone of 65 in November.

My wife is 58 (going on 29!). She likes to remind me that she’s not technically a Boomer, since she was born at the tail end of that wave.

As we progressed in our marriage we used to wonder if the six-year gap would pose logistical challenges in retirement timing. Instead, we’ve found that our modest age difference provides a different perspective in relating to our daughter and other millennials.

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

We have one daughter, age 31.

We unfortunately lost our older daughter 25 years ago in an accident. She would have been 34. This tragic event had a big impact on our lives together, perspective on life and even retirement decisions.

At the time, this event caused my wife to become even more spiritual, and she encouraged me to throttle back on my career to be more available to our family. My reaction, typical of other men, was to retreat into what was familiar, my job. As a result, I probably should have retired years earlier with a different perspective.

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

We live in the mid-South. Although we’re in a small town of 5000 residents, we’re near a popular outdoor/tourist city of about 90,000. Several other larger cities are within a couple hour’s drive.

Having easy and quick access to the mountains and outdoor activities has been central to our lifestyle, especially in retirement.

What is your current net worth?

My current net worth is $4,098,073.

I’ve been tracking this metric weekly since 2005 (in Mint for the past 3 years, Quicken for the 17 years prior. I dropped Quicken because Mint is free and does 95% of what I was doing in Quicken).

Net worth is a measurement that intuitively made sense to me from Day One. When many of my peers in technology were buying expensive cars or building big houses, the associated debt of those assets did not make sense to me.

My wife and I worked to live well below our means, and despite the fact that I was making six-figure incomes, our proudest accomplishment was the year our net worth passed $1 million (2006).

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?

Our net worth is made up of the following components:

• Checking, savings & HSA: $12,909
• Credit cards (paid off monthly): ($6,164)
• Investment Accounts (HSA, IRA’s, Taxable accts, 401K rolled into IRA): $2,838,568
• Main house: $600,000
• Weekend lakehouse: $500,000
• Vacant lake land: $100,000
• Home inventory: $24,000
• Vehicles: $20,000
• Boat: $7,000
• Emergency cash: $3,000
• Debt: $0.00. We paid off our original mortgage around 1995, and have been debt free every year since.

EARN

What is your job?

I retired from corporate life in October of 2020 at the age of 61, where I ran sales for a consulting firm.

Prior to that I spent my whole career in sales and sales management, mostly in technology.

I was fortunate to come along when the data collection industry (barcode scanning, logistics, supply chain) took off beginning in the mid ‘80’s.

I eventually rose to the position of Sr. Vice President at one company where I worked for 20 years (where I met my wife).

Once we decided to start a family, my wife decided to stay at home and focus on raising our children. That decision was very good for us, and her running our household took a lot of pressure off of me, as I was traveling continually.

One financial life lesson I learned along the way. As our net worth grew through our savings habits, I gradually realized that I could retire early. As that realization took hold, I became a little less motivated to grow my career. In hindsight, I could have been more goal-oriented in the second half of my career. However, going through the loss of our child made those things less important to me.

Although I retired from my “day job” in 2020, I have been serving on my local town council for the past 6 years, which pays a nominal $4,000 salary per year. I’d highly encourage readers to get involved in their local community on some level, while they’re still working and raising a family, don’t wait until you’re retired.

What is your annual income?

My current earned income is $4,000 per year, from my part-time position on town council. However, to fund our retirement I am liquidating part of our taxable investment funds on a monthly basis, and am having dividends paid directly to me as they occur.

An important component of our income strategy is MAGI (Modified Adjusted Gross Income). Most of our taxable investments were purchased long ago, when we started investing (my wife’s idea, I fought her on it at the time, thinking we should have all tax-deferred investments). Since most of these funds paid taxes and had capital gains in the past, when I liquidate them they do not increase my MAGI for that year.

That’s important because when I decided to retire, health care costs were a major consideration. However, we learned from our financial advisor (and ESI Money) that keeping MAGI below a certain thresholds qualifies you for subsidies on ACA healthcare premiums. In our case the threshold is around $70K per year. Selecting a high deductible healthcare plan resulted in $0 in monthly premiums. We’ve invested fully in an attached HSA account, which directly lowers MAGI even further.

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 have been continually working in some type of income producing job since I was 13, when I had a paper route.

During college I had a work-study job at the university to pay my way through school.

My first job out of college in 1981, an entry level sales position in the steel industry, paid $19,000 per year.

After a few years I realized that industry was in decline, and to really grow my career (and income) I needed to get into the emerging technology industry. I started in one of the large computer companies, and from there my income started to grow steadily.

I took a chance and joined the emerging barcode scanning/data collection industry, and from there things took off for me. After a few years I made $100,000 for the first time in 1991, and grew it to over $300,000 per year during the late 1990’s.

My positions were salary plus commission, so total compensation varied year to year. However, I managed to keep it over $200,000 per year for most of my years in technology.

However, there was a good deal of stress and travel attached to those positions. As our net worth grew and I realized I could retire early, I took a couple sales jobs that were in a more personally fulfilling consulting sector, but at considerably lower income.

So by the time I retired my total income was in the low six figures.

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

Whatever industry you’re in, do your research and focus on the long term income potential in that space. Create a written plan for maximizing that, which may involve changing jobs or locations periodically.

If an MBA or graduate degree makes sense for your career track, try to do it early on, with minimal debt.

Ask for promotions or job changes that involve more responsibility (and income).

And don’t be afraid to have a backup plan, either in a different role or even industry.

For younger people, the trades are a very viable career path now, so a college education may not be as critical.

A lot of focus the past 20 years has been on being happy and fulfilled in your job or career. While that’s certainly important, I think the pendulum will start to swing back the other way towards emphasizing hard work and risk taking to grow your income. The people that get ahead of that curve will do the best for themselves.

There are many opportunities for personal fulfillment outside of your career, like volunteer work, mentoring and engagement in the community. Do those things early on, don’t wait for “retirement”. You’ll also find those activities become great networking opportunities.

What’s your work-life balance look like?

My work-life balance has always been good, but could have been better.

Before I retired, I still managed to stay involved in competitive outdoor sports, and built many lasting relationships through those activities. However, I continually slipped into working all the time, checking email when I had downtime, rather than focusing on family time, or searching for new outlets. Through my wife’s diligent scheduling efforts, we always spent a lot of time in the outdoors, camping and hiking, even when our daughters were very young. That time away was invaluable, and losing our older daughter made me grateful for those memories.

Most of my career was spent in technology, including building the amazing wireless infrastructure we have today. However I’d be the first to admit that spending our time staring at screens is the biggest health challenge we face today.

The ESI Money blog has some great features on achieving a better work-life balance. Since my time in town politics will be coming to an end this November, I plan to take some of those strategies to heart.

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?

As mentioned earlier, I have active in the zoning board and town council where we live. That part-time position pays $4,000 per year, which has been my only earned income since I retired in 2020.

I got into this area of civic engagement through a chance meeting on the street with the former head of our zoning board. She recruited me to serve on that board, which I did for 10 years. Then I was nominated to fill an opening on our town council and was reelected for another term 4 years ago.

The work has been very fulfilling. I think involvement in local affairs is more important than obsessing about national politics, since it has a greater impact on your daily life.

If we could go back in time, one of our regrets is that we didn’t buy and manage a few rental properties. That would be a nice income source now. It’s an area we plan to encourage our daughter and her husband to get involved in on the side, when the market is favorable again.

SAVE

What is your annual spending?

Prior to retiring, we worked with a fee-based financial planner for several years.

As I approached retirement, he encouraged us to keep our spending under $75K per year if possible, since that would allow us keep our MAGI at a level that would qualify for health insurance subsidies (see above). I had been tracking our spending for 20+ years, and given our lifestyle choices and debt position, this seemed pretty achievable.

Last year our total spending was $77,570. It’s on a similar track this year, although we’ve had a few one-time expenses like replacing 20-year-old heat pumps on our home.

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

Here are the major categories from last year’s spending:

• Automotive & transportation: $5,912
• Utilities & home services: $6,260
• Education: $153
• Entertainment: $852
• Food & dining: $18,184
• Gifts & donations: $11,557
• Healthcare & fitness: $5,033
• Home expenses, insurance: $8,911
• Shopping: $6,129
• Taxes: $5,780
• Travel: $4,271

Travel is the major category we plan to increase, to about $10K per year.

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

I’ve diligently used the budgeting capabilities of Quicken and Mint software for over 20 years. I create and manage it, but my wife and I review the budget on a monthly basis. Although I do my best to create a realistic goal for every subcategory (like haircuts for me), I don’t obsess over whether certain categories are over budget. Instead, I look at the bottom line figure the most.

Fortunately, or long term financial plan is conservative and has a lot of wiggle room built into our spending. In the last few years we’ve been utilizing another software tool called MaxiFi. Among other things, it calculates a sustainable lifetime spending level, based upon your individual situation. The program is very strong in social security strategies, and has become a sanity check to our regular financial plan.

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

I have always taken full advantage of 401K programs and matches.

We started an IRA for my wife early on, and made yearly contributions to capture the tax benefit.

The same goes for high deductible health care plans and attached HSA accounts, these are great investment vehicles.

Since we’ve kept our spending relatively constant over time, we typically accumulated additional savings over and above these tax deferred programs. That has been funneled into paying off mortgages to remain debt free.

I’m guessing over time we saved 20% of our gross income on average.

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

Utilize a software program like Mint or Quicken, and track all your accounts, expenditures and budget.

Discuss the budget regularly with your partner and family.

In parallel, track the net worth component, and check it every week.

For me, watching my net worth grow steadily became an ego thing, and a motivator to save. I found myself comparing my net worth to others in my age group, via online calculators, and knowing what percentile I was in.

Also, learn to be more frugal with spending, questioning the incremental value vs cost of various expenses. Getting away from this basic principle is what’s made it more difficult for many to save and retire at a reasonable age.

We tend to keep our cars for 15-20 years, and aren’t constantly shopping for consumer goods. This is basic “Millionaire Next Door” stuff.

What’s your best tip for spending less money?

Practicing delayed gratification for expenses, not purchasing something until you actually need it, then waiting until there’s a “deal” to do so.

This has a huge cumulative effect on your spending level.

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

We enjoy camping and mountain biking, and I’ve been involved in sports like rowing and cycling. The gear for those activities tends to be expensive (at least by our standards).

When we do finally find a deal and take the plunge on a new piece of gear, it feels like a splurge to us.

INVEST

What is your investment philosophy/plan?

Investing philosophy has never been my strong suit. I was an economics major, understand the basic principles of investing and regularly read articles in Kiplinger and Wall St. Journal on investing.

However, I was always nervous in the early years of building our portfolio, when I was doing it on my own. Did we pick the “right” funds? What’s the correct mix? What about carrying costs? I understood that my spare time was best spent becoming better at my job, or with family.

When we finally hired a fee-based financial planner (about 7 years ago), that fear went away, since he recommended the investment mix. We just followed his directions, and I think it’s been fairly conventional guidance. We consolidated our various accounts into just Vanguard, and he eliminated the overlap we had between various funds.

Since I was approaching retirement, he also focused on the taxable funds we owned, and reallocating them to minimize capital gains. Prior to Covid he steered us into a higher percentage of bonds, which has worked out very well.

What has been your best investment?

Our best financial investment was a small home we bought when we starting a family, for about $130,000. It was in a desirable area, but was cramped for 4 people.

We eventually sold it for $300,000.

In hindsight, we should have held onto the property and rented it out. It recently sold again for about $800,000.

What has been your worst investment?

Similarly, it was a home.

We were both married previously, and I agreed to keep the home in the divorce. I assumed I would be able to sell it within a year, but it took a full five years to sell, at a loss. Along the way, I had to have it repainted just to attract buyers.

That was 25 years ago, but it hurts me again just writing about it!

What’s been your overall return?

All of our financial investments have been consolidated into Vanguard, divided into two accounts.

The average total return of those has been 7.2%. This doesn’t count gains from real estate, or other accounts.

How often do you monitor/review your portfolio?

Since I have been using a financial advisor and plan, I have been reviewing the portfolio less frequently, probably every 2-3 weeks.

Every 6-9 months I rebalance the portfolio against the current financial plan, using a spreadsheet tool I developed.

NET WORTH

How did you accumulate your net worth?

Our net worth has been 100% accumulated by my wife and me.

Neither of us received any inheritance, and do not expect to (we just have one parent left, and her home will probably go toward covering healthcare expenses).

As mentioned earlier, I made a comfortable amount of money, but was not very intentional in investing, at least in the early years.

However, we were great savers, and enjoyed watching the net worth grow.

What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?

Save has definitely been tops, since it’s our personality.

Also, it was drilled into me growing up in the Midwest, starting with having a paper route. We were raised by a single mom, and she couldn’t cover all our expenses.

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

I was very fortunate and blessed to build my career in the boom technology years of the ‘90’s and 2000’s. Also, my wife and I were on the same page financially, and we talked about our philosophies on money when we first got together, so there were no surprises.

That being said, I did experience a few layoffs along the way in my career, which affected my income trajectory. A couple of them were definitely my fault; I could see it coming and could have worked harder to avoid it. However, when they occurred I immediately got another job, invested whatever severance I was due, and moved on.

The biggest road bump was losing our older daughter, which occurred when I was about to turn 40. It’s hard to say what effect that had on my career or financial plan, and that’s not important anyway.

My reaction at the time, and for many years afterward, was to become “all about the job”. In hindsight that was a defense mechanism, since I found out that men who have gone through that experience have a hard time talking about it, and reaching out.

One of my retirement goals is to try to grow more emotionally and reach out to others who are going through loss.

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

Since I’m almost 3 years into retirement, my goal is less to gain net worth but to hold onto it. Intelligently drawing it down is now the focus.

It took about a year for me to transition my thinking from saving to spending.

That being said, as I write this, I’m happy to say our net worth has actually increased by $40,000 since the day I retired.

We may decide to turn our weekend lake property into a rental, which may have a positive impact on net worth, but I’m not counting on it.

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

Unless something changes, our net worth has already peaked.

Based on the tables I see online, it puts us in the top 1-2% of people in our age group.

I’m very proud of that metric, and never would have dreamed I’d be in that position growing up.

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

My net worth passed a million in 2006, when I was 48.

I don’t think our financial behavior has changed since then, which I’m grateful for.

However, if I’m honest with myself I believe I began to go into cruise control with my career when I passed that milestone, which I’m not proud of. I should have used the event to work harder and come up with a plan to invest the proceeds in some way to change the world around me.

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

I believe talking openly about money with both your spouse/partner and your kids makes it easier to build a financial plan (and net worth) that everyone is bought into.

Also, saving is an underrated aspect of the 3-legged ESI stool. The lifestyle that we enjoy in this country is off the chart compared to the rest of the world, and the amount of money needed to be comfortable is far less for most people than they think it is.

I realized early on that net worth would provide me flexibility, but it wasn’t necessary for my happiness.

I’ve tried to become more communicative about these values with friends and family as I’ve gotten older, which has resulted in some interesting philosophical discussions.

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

If I could go back in time, I would have been more intentional in my career plan and net worth goals.

Secondly, I would have diversified our investing in real estate in my spare time, hopefully retiring with a rental portfolio.

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

Probably the best advice I can offer in this area is that wealth is not just about money. It’s about relationships, being a contributing member of society, and giving back more than you take from the world.

There’s great advice in the ESI blog about how to build your relationships and activities as you approach retirement. Basically, retire TO something, not FROM something.

Also, I read a great book a couple years ago called “The Second Mountain”, by David Brooks. Its premise would probably resonate with many of the readers of this column.

Finally true wealth, and your ability to enjoy it, is based on your health. Don’t ignore that or kick it down the road until retirement.

FUTURE

What are your plans for the future regarding lifestyle?

Our net worth has already allowed me to retire early, at age 61.

I’ve discovered that financial planners, and online financial calculators, tend to be very conservative and leave you with a bunch of money when you die. That’s not necessarily our goal, so we plan to carefully enhance our lifestyle in retirement.

This is a work in progress, and we’re still figuring it out. However, it will definitely include more of the following:

• Building stronger relationships with friends and family, and not taking any of them for granted.
• Active outdoor sports, including hiking, camping and pickleball/tennis. I also plan to get back into a few competitive sports, most of which have age group competitions into 80’s and 90’s.
• Travel. We have a short bucket list of countries and places in North American we haven’t seen yet.
• Volunteer work, including Habitat and hiking trail maintenance crews.
• Continue to be involved in local government on some level, whether serving on committees or running for office again
• Learning more home repair/home improvement skills, and offering those services to people in the community who are in need.
• Less time on screens and online news/entertainment. I thought this would naturally happen when I retired, but it didn’t.

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

My wife and I are both blessed to be in great health, with no issues we know of. Our number one goal is to not take that for granted and continue to build and keep a healthy lifestyle. Many of the political and money issues discussed in this country are due in part to health and lifestyle choices. Many of these are in our control, but that fact doesn’t get much attention.

Beyond that, I’m very excited about prospects for retirement, and the world at large. I’m trying to become more of an optimist in retirement and focus on positive developments in the world. Websites such as Human Progress, and blogs such as Money Mustache focus on the power of a positive, glass is half full outlook. Many of our friends have become unknowingly pessimistic and overly focused on politics and news. Not to discount any of that, but I believe it’s a choice.

MISCELLANEOUS

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

Learning about finances was an iterative thing for me. Growing up with a single mom and 3 siblings forced me to learn to be responsible and contribute to the household at a young age. So by my early teens I had a paper route and always had a couple part-time jobs in the summer. In Boy Scouts I earned the personal finance merit badge on the way to becoming an Eagle Scout, which taught me about personal accountability.

When I went off to college the unspoken message was there was nothing for me to come back to in my hometown, so I’d better figure it out. I became an economics major in college.

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

My mom was definitely my inspiration early on and is still my hero.

Despite my dad leaving her with 4 young kids, she always had a quiet strength in dealing with her circumstances, and never spoke badly of him. She encouraged us to read continually at a young age, and to go to college.

Although she eventually remarried, she was never able to “retire”, and never owned her own home.

However, she always had a smile on her face, and was loved by her close friends. She died way too young, but if I can make her proud now, I don’t need other heroes.

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?

There are several money books and resources that have very been helpful to me. In no particular order, they are:

• ESI Money. I can relate to your professional background and values.
• Kiplinger Personal Finance magazine
• Wall St. Journal has some great retirement and personal finance columns
• Clark Howard, a great resource for consumer spending advice.
• The Millionaire Next Door. A great book, which I’ve given to my daughter. Hopefully it will stick!
• MrMoneyMustache.com. Although the FIRE movement was a little extreme for me, philosophically I agree with much of what he writes.

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

We do give to charity, although candidly it’s not enough (roughly $1500 per year). We plan to increase that over time.

My wife volunteers her time on a weekly basis, and I’m working to increase my time to at least a day per week as well.

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?

At this point in time, we plan to leave our (fully paid for) properties to our daughter. However, we’re not planning to leave her large amounts of money, and she has no idea what our actual finances are.

That may change over time, and we may elect to gift some money to her and her husband while we’re alive (possibly as seed money to start a business or get into rental properties).

She has been doing a great job of managing her career and personal finances, and we don’t want to change that behavior in any way.