Millionaire Interview 386

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…

OVERVIEW

How old are you (and spouse if applicable, plus how long you’ve been married)?

I am 39 and my spouse is 46.

We have been married for 10 years.

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

We have 2 children, ages 7 and 1.

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

We live in the suburbs of a major city in the northeast.

What is your current net worth?

$2.5 million.

What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?

• Retirement: $1.75 million
• HSA: $45k
• Taxable investments: $100k
• Company stock: $175k
• Bonds: $160k
• Cash: $70k
• Home equity: $200k (~500k mortgage remaining)

We also have about $80k in 529 accounts for the kids, which I do not count as part of our net worth since it is already set aside for their education.

EARN

What is your job?

I am a business applications specialist at a large publicly-traded tech company.

Level-wise, I would say I am a mid-level individual contributor. I sometimes feel bad if I dwell on this part – my peers tend to be younger than I am, while colleagues my age generally are in more senior roles. But, this also means I get to focus more on the things I enjoy (solving technical problems and digging into the details) with little of the parts I don’t (corporate politics, managing others.) And, I am still making far more money than I had ever dreamed, and more than enough to meet my financial goals. So, I count myself very lucky overall.

My spouse is a high-school teacher. It’s a lot of work for less pay, but very fulfilling for my spouse and also comes with some great benefits.

What is your annual income?

My 2023 income will be ~$300k, which breaks down to $160k/year base salary + bonus + vesting RSUs (restricted stock units) of ~$115k at current stock price.

My spouse makes $95k/year, including various stipends for voluntary additional responsibilities beyond teaching.

Thus, our total household income for 2023 will be ~$400k. This is absolutely mind-blowing to me, as I never expected to be making anywhere close to this amount.

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 real job out of college was as an entry-level consultant at a starting salary of $55k. I stayed in that job with nominal raises until the financial crisis hit in 2008/2009 and I was laid off.

After that, I floundered for a bit just trying to stay afloat, until a friend helped me find an analyst position with a $70k salary. I again stayed in that job for many years with nominal raises.

Several years into the analyst job, I had the opportunity to work on a new project involving an up-and-coming business applications software. I enjoyed the challenge of exploring this new world with its own rules, and I set out to learn as much as I could. This eventually led to obtaining top certifications in my domain, which really started the recruiters calling. At the same time, due to changing leadership and politicking at my company, my project and I kept getting bounced around with little direction and support.

Seeing no future for me at my existing company, I left for a business applications specialist role at a smaller company. This came with a sizable pay bump – my final salary at the analyst job was $90k, but my salary at the smaller company was $140k + 10% target bonus.

I spent a year at the smaller company before the opportunity came up for my current job. My initial compensation was ~$230k/year, however additional stock grants, stock growth, and raises have boosted it to the current ~$300k.

Early next year, I should receive another stock grant. This and appreciation of my vesting RSUs should add another ~$40k, for an estimated 2024 income of ~$340k at current stock prices. Of course, this number could change significantly depending on what happens with my company’s stock.

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

Be prepared to job-hop — the biggest pay boosts generally come from changing companies rather than collecting incremental raises in the same organization.

Try to apply and interview for several positions simultaneously. Having multiple offers in hand will give you leverage to negotiate for better compensation.

Even as you seek to grow your income, don’t do it at the expense of your mental health, your passions, or your friends and family. Remember that this is a marathon and not a sprint.

What’s your work-life balance look like?

It’s honestly pretty good right now. I work from home full-time, so I have no commute and a lot of flexibility for things like picking up kids or being home for deliveries. I am also lucky to work for a company with generous (for the United States) vacation, sick, and parental leave policies, and I make sure to take full advantage as applicable.

Outside of an occasional quick email or emergencies, I don’t work evenings or weekends, and am actively trying to reduce the exceptions. This can be tough sometimes when colleagues around me seemingly work around the clock. However, our savings/net worth level means that I am no longer concerned about hustling for promotions or even avoiding possible layoffs, so that is very freeing.

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?

None besides investment income.

We’ve considered a couple of “side hustles”, the easiest of which would be my spouse picking up some tutoring in the summers, but at this point in our lives we value our time more than the potential additional income.

SAVE

What is your annual spending?

The past couple of years have been abnormal spending years because of frontloading several large purchases (house, car, a few big-ticket home improvements/repairs) that I don’t expect to repeat for well over a decade, at least.

I estimate our steady-state spending to be ~$120k/year. This is significantly higher than just a few years ago, primarily due to the house.

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

• $54k – Housing (mortgage, property taxes, insurance, utilities, maintenance)
• $6k – Groceries
• $6k – Restaurants/takeout
• $30k – Childcare (daycare + private school)
• $8k – Travel
• $4k – Auto (insurance, gas, maintenance, tolls, parking, registration)
• $3k – Entertainment (games, streaming, pool/zoo/museum memberships)
• $2k – Medical

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

We keep a household budget, but it is more of a rough target meant for keeping an eye on our overall spending and making sure we are aware of where the money is going than a true hard-and-fast budget. I review this every year or so with my spouse to make sure it’s still generally accurate. We also update our monthly joint contributions as needed at that time.

When we first moved in together, before we were married, we opened a joint bank account and began contributing monthly to the account to cover joint expenses, split roughly according to our relative incomes. We’ve adjusted the total amount and percentage split many times over the years as our income and family situation have changed. This system has worked so well for us that we decided to keep it even after marriage, rather than attempting to reinvent the wheel.

In the beginning, we tracked every joint expense to the penny, but after a while this stopped feeling meaningful. I’ve also had periods of time of attempting to use YNAB. The idea of having this detailed spending data available is very appealing to my analytical side, but I’ve struggled with keeping it up regularly, especially now when we are busy caring for young kids, and free time and mental bandwidth are both in short supply.

So while it would be nice to have that detailed data, I’m coming around to the belief that at our income and net worth level, it’s just not worth worrying about chasing down and accounting for every dollar. As long as we are hitting our savings goals and have a general idea of our spending, we are doing fine and our time is probably better spent elsewhere.

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

We max out our tax-advantaged accounts (401k/403b, HSA, backdoor Roth IRAs) and I am currently saving the entirety of my vesting RSUs, for a current total of ~45% of gross income. This is dedicated savings and we do not touch it.

Additionally, even though it is not intentionally saved, the money left over after our expenses accumulates as savings by default. This amount fluctuates wildly and we deploy as opportunities and needs arise – e.g. house, car, taxable investments.

We frontloaded the kids’ 529s and they are currently on track for a substantial amount by the time they would enter college. As such, I currently do not plan to contribute more for the foreseeable future.

I’m actually pleasantly surprised with how high our current savings rate is, as I know we have been very lax lately with both spending and accounting. Prior to kids, this number was 60%+ at times (myself only; my spouse did not specifically track.) But, I was making a lot less money then, so just maxing out 401k + Roth was already almost a third. Once our incomes grew enough that we were easily maxing out tax-advantaged accounts, it became much harder to figure out where to put the extra savings.

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

Be specific about your motivation and goals. It’s easy to say “I want to save more” but it’s hard for that to happen without knowing what that means or what success looks like.

When motivation is high, decide on a goal and plan of action, then automate it so that the right things just happen without having to repeatedly run the gauntlet of all of your day-to-day decisions and tasks. Make it easy for yourself to succeed.

For example, early on in my career I was contributing a fair amount to my 401k but nowhere near the max. One day I decided, hey if I want to retire in my 40s then I need to be far more aggressive, and I immediately logged in to max it out. At the time I was making about 70k so this was a big chunk of my income, but it felt great and I adapted. Now, it’s just one of our financial rules, and it happens automatically without me having to actively remember, decide how much, log in and make the selection, not get distracted by somewhere else to spend it, etc.

What’s your best tip for spending less money?

Create an environment and social circle that matches your spending values and makes it easy for you to succeed.

Some people have iron will and immaculate self-control; this is definitely not me. If I constantly put myself into situations that encourage spending money in certain ways, I end up spending money in those ways. If I don’t put myself in those situations, I don’t spend the money and probably never even miss it.

For example, I have a habit of browsing deal websites. During the periods of my life when I’m checking them daily or even more, I usually end up buying something at least every couple of days. Sometimes these are great purchases (one time we scored $300 flights to Europe!) but a lot of times it’s something I use only once or twice if at all. When I’m not looking at deal sites all the time, I buy much fewer unnecessary items.

I do want to point out here that there is nothing inherently bad about spending money, nor is spending less money inherently virtuous. The more important thing is making sure you are spending consciously, within your means, and according to your values. I grew up with a save-save-save mentality deeply ingrained for most of my life, so it’s taken me a long time and a lot of work to come around on this.

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

I love board gaming, and I love splurging on ways, big and small, to enhance my board gaming experience. I love finding upgraded game pieces that are stunning visually and/or tactilely satisfying, or well-designed component organizers that reduce setup and teardown time for favorite games. I am also excited to finally own a dedicated board gaming table soon.

Prior to COVID, I enjoyed attending board gaming conventions near and far, and I look forward to picking that back up in the near future and even bringing my kids to share in the experience.

INVEST

What is your investment philosophy/plan?

Invest as much as possible in low-cost index funds and let time do the heavy lifting.

The few times I’ve attempted to time the market or pick my own stocks haven’t really worked out and I no longer try. If fund managers with far more time, knowledge, resources, and interest than I can’t consistently beat the market, why would I?

What has been your best investment?

My best financial investment has been in my relationship with my spouse.

I am very lucky to have found a partner with very similar values, financial and otherwise, so that was an excellent foundation to start from. From there, we designed a financial system to allow us to start building our joint life together while also giving both of us the freedom for guilt-free personal purchases. We also set ground rules for handling financial questions like gifts and trips with our families so they would never become a point of contention for us. We check in regularly with each other to make sure the numbers are still working out and align with our vision for our lives.

Our system may not be for everyone, but it’s worked for us through a layoff, several moves and job changes, marriage, and two kids. Looking at our net worth now, I’m extremely proud and thankful to have achieved this much so far, and I’m so excited for all the amazing things this will allow our family to do in the future.

What has been your worst investment?

At my first job, I purchased some company stock via the ESPP at a 15% discount. The stock then went up another 25% and I was thrilled!

However, it seemed like there was a hefty transaction fee (maybe $75 or so? I don’t recall exactly) which seemed ridiculous, so I wanted to look into transferring to a discount brokerage. By the time I actually got around to doing so, the value had plummeted almost 50%.

Rather than cutting my losses, I doubled down by purchasing even more shares (without even a discount this time,) all of which eventually went to 0 after the company went bankrupt and I lost my job too. It was only about $2000 total investment so not a ton of money overall, but it was an expensive lesson!

What’s been your overall return?

Around 9% for invested assets (retirement, HSA, taxable brokerage).

How often do you monitor/review your portfolio?

I keep an eye on the market most days, mostly for monitoring the price of my company stock, and generally review/update my portfolio and net worth monthly.

I’ve been doing this for over a decade now, and It’s definitely satisfying seeing how much the numbers have grown.

NET WORTH

How did you accumulate your net worth?

We accumulated our net worth primarily by aggressively saving and investing for retirement from the very beginning of our careers, despite making what I would consider comfortable but not high incomes for our area (my high income now is a very recent development.) This positioned us well to take advantage of the massive stock market growth of the 2010s.

An important piece of our success was family support as we were starting out – we were both extremely fortunate to have our parents pay for our respective college education. This allowed us both to graduate without the burden of student loans. Additionally, we were each given a car when starting our first jobs. I can’t overstate how much of a leg up this gave us compared to peers who had taken large loans to fund their education and then borrowed more to buy a car. Instead of making loan repayments, we were able to invest that money and build wealth.

Another key factor was living below our means, particularly with regards to big-ticket fixed costs such as housing and cars. We rented comfortable but modest apartments in less-trendy areas, allowing us to stay far below the 25-30% of income rule of thumb for rent.

My spouse’s car was totaled one year, and we adapted and learned to share one car rather than immediately buying another. When we replaced it years later, we bought a reliable, gas-efficient hatchback and paid in cash. Keeping our fixed costs low meant we were better prepared to weather unexpected setbacks such as my layoff.

The corollary to this is making sure our spending aligns with what we truly value, even if it goes against conventional wisdom, other people’s expectations, or what “everyone else” is doing. For example, neither my spouse nor I cared much about having a big traditional wedding. Instead, we married in a small private ceremony and just threw a dinner party afterwards for friends and family. We still got to celebrate and enjoy good food, and we saved tens of thousands compared to the “average” wedding cost.

I also remember vividly a moment from my first job: we were building a system that displayed employee data, and someone had expressed concern about visible job levels being used to “back into” someone’s compensation. My project manager dismissively responded: “you can ‘back into’ someone’s compensation by looking at the clothes they wear and the car they drive!”

I still smile when I think of this comment. I wonder what financial picture he would “back into” for me if he saw me now, driving the same car (now over 20 years old!) and usually wearing shirts I got free as “swag” from my employers. But the key is that I don’t value fancy clothes or luxury cars, so cutting back in these areas helped me build my net worth faster to focus more on the things I do value.

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?

My greatest strength is definitely Save, mostly because my family always had a strong saving mindset when I was growing up, so I naturally picked up those habits and values. It’s also the most universal of the three – it’s not always easy to earn more or even invest, but everyone can find ways to save at least a little.

I do agree with others who have said that you need at least a little of all three in order to reliably build wealth.

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

The biggest financial road bump was definitely my layoff. I have also struggled at times with depression, which has affected all areas of my life including finances.

The way I’ve handled these is largely through the loving support of friends and family, especially my spouse. Throughout all the ups and downs, they’ve supported me, believed in me, counseled me, invested in me, and helped me create paths to success. I am extremely fortunate and thankful to have them.

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

At this point, we are mostly just staying the course on continuing to save and invest in our tax-advantaged accounts.

I feel like we are more than on track for our financial goals, so we have little interest in taking big risks or making big sacrifices in the hopes of chasing more wealth.

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

The number in my head right now is $3 million investable assets + paid off house.

Just a few years ago, I had a much lower number, which we’ve already blown past. It’s very easy to keep moving the goalposts, especially when hitting a number doesn’t feel significantly different or more secure. I don’t want to do that indefinitely, but at the same time I want us to have room to grow our lives in ways we may not even know we want yet, without being artificially limited by an arbitrary target.

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

I was 34 when my spouse and I first jointly had a million, and 37 when my individual net worth first crossed the million dollar mark.

The biggest behavioral shift is that I am intentionally letting go of the urge to always save and optimize small things in my life. I have spent so much of my life worrying about occasional $5 mistakes or waiting for grocery store sales to save $2 on asparagus. Maybe at one point in my life that made sense, but now it is just manufacturing stress over amounts that are literally not even a rounding error in our current net worth. So when these situations come up now, I intentionally just move on and focus on something more important.

Along the same lines, I am also learning to value my time more. When I was growing up, my family treated our own time as if it was basically worthless. Why would we pay someone else to do something we could do ourselves for free? Now, I feel like we are shorter on time than on money. As a result, I am actively looking for ways we can buy back time. This includes things I would have considered “lazy” just a few years ago, such as paying for delivery, hiring house cleaners, and choosing to take toll routes.

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

The biggest thing has been just deciding on a goal and automating my finances so that the right things keep happening even when I lapse in motivation or self-control.

I also track my accounts and net worth monthly, which has become an enjoyable ritual and provides powerful motivation when I see how far I’ve come from where I started.

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

I’ve definitely made the mistake of trying to pick individual stocks or time the market. I would’ve gotten better returns and also saved time by just sticking to the plan regardless of the noise around me.

But my biggest regret actually involves spending too little, specifically on experiences and travel to see friends and family. There were so many times when I artificially limited myself by just assuming something was too expensive or not for someone like me.

I’m not saying I should have done them all or even most of them; I just wish I had really stopped to consider whether I could afford something and if it was worth it rather than just immediately dismissing the idea. I am trying to change this now, but I am already 39 and can never get those years and opportunities back.

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

First, take the time to understand what “wealthy” really means to you and what it would look like in terms of concrete changes to your life.

Set clear goals and be honest with yourself about whether your current path will allow you to achieve them.

Focus on the big wins. If you save 50% on a $10 shirt, that’s nice but the $5 savings is not going to move the needle on your finances. But if you can save 50% on your housing or 50% on your car, that is really going to add up.

FUTURE

What are your plans for the future regarding lifestyle?

I plan to retire within the next couple of years. My spouse is currently planning to continue working another ~10 years.

When I retire, our income will decrease significantly, so we have already planned ahead for this by making major purchases (house, car, etc.) and frontloading relevant accounts while I am still working. We bought a house but kept the purchase price under 2x of our current income, and we plan to live in it at least until my spouse stops working.

Another planned lifestyle change, really more of a mindset change, is that I want to be more generous. I’m so used to always trying to save and optimize everywhere in my life, but sometimes being so focused on the specifics of cost or efficiency gets in the way of generosity.

I can think of many instances where I’ve looked back later and wished that I had tipped a little more, or bought a little extra, or just covered something for a friend instead of figuring out how to split it. I want to let go of this habit of trying to analyze and calculate everything, and build a lifestyle of generosity in everything from tipping to charitable giving.

What are your retirement plans?

I am tentatively planning to retire after 1-2 more years. Because of the way my stock grants are structured, my income should increase next year but decrease significantly after that, so this feels like a logical stopping point that appeals to my optimization tendencies. This should hopefully give me enough time to prepare financially as well as mentally for retirement.

Once I am retired, since my spouse has summers off anyway, we’ll be able to travel extensively in the summers. I am so excited to show our kids the wonders of this country and the world. We also have friends and family all across the United States to visit. I’m really looking forward to exploring “slow travel”, as my traveling in the past has always been about squeezing in as much as possible all the time.

As far as day-to-day activities, I’d like to cook more thoughtful, exciting, and healthy meals for my family. I enjoy cooking but am not particularly fast at it, and weekday dinners often end up being takeout or the same quick go-to recipes again and again, because we are tired from work and rushing to get dinner on the table as quickly as possible.

I’d also love to take up martial arts again. This was a passion of mine when I was young, but it’s been over a decade since I’ve been. I’d love to volunteer at my children’s schools and local causes that I find valuable. And of course, I have shelves of games waiting to be played more!

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

I feel like I have a good sense of the financial risks and considerations and will likely analyze in great depth before making the move, so I am actually not too concerned about the numbers.

My biggest concern is that without the forced schedule of work to provide structure, I may struggle to create my own motivation and spiral into depression instead of actually doing all of the great things I want to do. I plan to talk with other early retirees to learn how they’ve handled this, and maybe even try a shorter leave of absence before completely retiring for good. I also plan to schedule activities throughout each day to help with motivation.

MISCELLANEOUS

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

I don’t have a specific age where it “clicked” – I feel like I have been learning about finances throughout my life, just with a different focus at different times.

Growing up, my family was always hyper-focused on saving. We had periods of literal poverty when this was just a necessity, but this mindset persisted even when my parents were earning middle-class incomes. We did everything as cheaply as possible, and squeezed out every last drop of value when we did spend. We did all the cleaning, maintenance, most repairs, etc. ourselves. I also learned to avoid debt. My parents bought their cars with cash, paid off their homes as quickly as possible, and always paid credit cards in full every month.

Out on my own in my 20s is when I really started learning about the details of personal finance, different investment vehicles and philosophies, etc. This is also when I discovered FIRE and began saving aggressively for an early retirement.

Now that I am nearing that goal, my focus has shifted away from simply trying to retire as quickly as possible. Instead, I am working on building a more enjoyable and meaningful life, prioritizing time and experiences with loved ones, and creating a positive impact on the world.

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

“Heroes” is a heavy word and I’m not sure I have anyone I would describe as such. Putting any human on a pedestal is a surefire way to be disappointed when they eventually fall short of expectations in some way or another.

I do have many people I admire and am inspired by in various ways, first and foremost of all my parents. They have both worked so hard and sacrificed so much in order to provide a better life for our family, and I hope I can help bring them joy and comfort as they get older.

But the people who inspire me most to excel in life are my kids. They make me want to do better, be better, and reach my financial goals so I can do more with them and support them in becoming the best versions of themselves.

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?

Your Money or Your Life helped jumpstart my interest in FIRE – the concept of calculating a real hourly wage, taking into account all of the hidden costs and additional time needed for working, then thinking of each expense in terms of minutes/hours of work was truly eye-opening.

Die With Zero is a more recent read that helped me realize how much I’ve been throwing money on the pile for a vague “tomorrow” when I should be focusing more on creating memories today. I also really liked some of the suggested strategies (giving to heirs/charities earlier instead of waiting until death; annuities as a solution to the risk of outliving money) that I had never considered in this way before.

Ramit Sethi’s I Will Teach You to Be Rich is primarily focused on nuts & bolts financial information that I already knew. However, his message of creating your own personalized “Rich Life” has really resonated with me lately, and I picked up I Will Teach You to Be Rich: the Journal to help me work through it in more detail. This is a workbook filled with prompts to help identify and unravel ingrained financial beliefs, create more positive mindsets, and design a happier and richer life. I’ve spent so much of my life focused on how to save more, and so little considering how to spend, rather than just always trying to spend less. Going through this journal with my spouse has sparked a lot of great conversations about how we want to live the rest of our lives.

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

Yes – up to this point it’s only been a small percentage of our income, but will increase significantly in the near future.

My plan is to open a Donor-Advised Fund using vested and appreciated company stock. This has the benefit of maximizing the impact of our gifts while also helping reduce our exposure to a single stock.

I also plan to frontload our gifts over the next couple of years while I am still working, in order to take advantage of my company’s generous charity-matching benefit. I am still researching the specifics, but am so excited to get this up and running.

Neither I nor my spouse grew up in households that prioritized charitable giving, and it is important to both of us that we change this with our own kids. We hope to instill in them the values of generosity and responsibility to others in the world.

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?

We do not plan to leave significant inheritance to our children upon our deaths. We’ve always felt there was little value to us in doing so, and reading Die with Zero has only reinforced this belief. I am also hoping we live long enough and teach our kids well enough that, by the time we die, they will be well established and financially successful in their own rights, so that any money we might leave them would have little impact at that point.

Instead, we hope to spend the majority of our wealth while we are alive. Our priorities are to create amazing experiences and lasting memories with our families and friends, pay for our kids’ educations and possibly help with other major costs while they are starting out their lives, and donate significantly to causes we value while we are alive to see the impact.