Millionaire Interview 388

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 October.

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)?

Spouse and I are both 48.

We have been married for 22 years.

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

We have two children.

They are 20 and 17 years old.

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

Suburban.

What is your current net worth?

$16 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?

• Primary residence: 7.25 million
• 2 single family rentals: 750k
• Taxable investments: 6.8 million
• 401k/IRA: 1.4 million
• Cash: 500k
• Primary Mortgage: (750k @ 2.3% interest)

Net worth: $16 million

EARN

What is your job?

Physician.

I am a specialist in employed private practice.

I was formerly a minority equity partner in the same practice.

What is your annual income?

$800-900k.

Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?

I started working during summers as a teenager for minimum wage at a restaurant and the local movie theater. I was only allowed to work during the summers as focusing on my education was the top priority for my parents.

In college, I worked in the admissions office giving tours for $10/hour and later as a resident assistant for room and board.

During residency, my annual salary was roughly 30k. That probably worked out to about $10/hour given how many hours we worked!

My first job after residency paid $200k/year the first year and ended at $275k the final year. I left this practice because of a disagreement over the terms of partnership.

Because of my reputation in the community, another group recruited me to join as a minority equity partner and my annual income has been $800-900k in the dozen or so years since.

The practice has since been acquired and I received about $1.5 million for my minority equity stake. I remain employed in the same practice with no equity stake and my income has remained stable.

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

Focusing on education, working hard, and maximizing relationships are the keys to my success.

I knew early on that I wanted to be a physician and studied hard to achieve that goal. Becoming a physician takes a lot of sacrifice. I cannot emphasize this enough for aspiring physicians. One’s motivation to become a physician is important.

Those who do it as a calling to help people are much more likely to be happy than those who do it for financial motives. Getting into medical school means staying in and studying when your friends are out partying. Getting into a competitive specialty generally requires being in the upper tier of your med school class.

In residency, I worked hard to maximize my technical and people skills. In private practice, I work hard and strive to maximize my relationship with my staff, my colleagues, my referring physicians, and most importantly, my patients. My staff understands my expectation that everyone is treated to the best of our ability from a medical and personal standpoint. For these reasons, I have a very successful practice.

What’s your work-life balance look like?

In the spectrum of medicine, I would say it’s good.

Among my specialty peers, I work (and earn) more than the average. I usually am in the office about 10 hours per day, Monday-Friday. Sometimes it’s more.

I don’t generally “work” on weekends. However, computer work often bleeds into the evening hours and weekends.

I have always made it to my kids’ school and extracurricular events. I’ve even coached a few of their sports teams!

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 investments are primarily in low-cost index funds, which spin off dividends that we just roll back into the index funds.

We had several single family home rentals at one point and are in the process of selling the last two. They have always been cash flow positive as they were purchased quite inexpensively after the 2007-2009 recession.

However, the hassles of being a landlord, even though the properties are under management, increasingly outweigh the financial benefits for us.

SAVE

What is your annual spending?

$215-250k/year.

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

• $66k primary home mortgage
• $40k primary home property tax
• $12k primary home insurance
• $6k utilities
• $16k car and umbrella insurance
• $75-110k/year everything else

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

We do not have a budget per se.

My wife monitors and pays the bills.

We spend a lot of money, but much of it is home related. We were paying down the mortgage aggressively but stopped doing so with the rise in interest rates as our mortgage rate is only 2.3% on a 15 year loan.

We don’t have extravagant tastes, are financially on the same page, and our habit is to run bigger than average “one off” purchases by the other person. Arbitrarily, this was $100 at the beginning of our marriage and is currently something more than $500.

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

Roughly 50%.

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

Obviously, I earn a lot of money. But there are plenty of high earners who are not wealthy.

To become wealthy, you must learn to live within your means, save a reasonable percentage, and invest wisely.

What’s your best tip for spending less money?

Along the spectrum of our earning careers, we have always lived below our means. Not super frugally like Mr. Money Mustache, but enough so that we always had money saved for investing.

Over time, we have evolved into focusing on purposeful spending. We try not to be wasteful and are not motivated to buy the latest gadget or luxury items. We try to balance quality and value when we want to get something.

If it is a “need” then we spend now for quality and not necessarily for value. If it is a “want” then we will wait for a sale to get a quality item at a more reasonable price.

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

We are foodies and will splurge on food experiences.

We try to subscribe to the Ramit Sethi approach to eating. If there’s something on the menu that looks good, try it!

My friends and I like trying different single malt scotches, generally in the $50-120/bottle range, and we are opening nicer bottles of wine these days.

INVEST

What is your investment philosophy/plan?

Taylor Larimore’s 3-fund portfolio, consisting of the total U.S., total international, and total bond index funds.

When I first discovered the FIRE community, I found his post on Bogleheads.org and, after reading a good percentage of the super long discussion thread, decided to follow his lead.

To me, simpler is better.

What has been your best investment?

My education and career.

Our home. We built our dream home and the paper value has skyrocketed.

Taking time to learn about investing and putting savings to work following the 3-fund portfolio.

I have given up on individual stock picking, but during the Great Recession everything was on sale and I bought a handful of blue-chip stocks that have done quite well, including a few 10-15 baggers!

What has been your worst investment?

In my beginning investment days, I bought a few thousand dollars worth of Boston Chicken stock because I really liked their food. It went to zero shortly afterwards.

It was a relatively cheap lesson that a good product doesn’t necessarily mean a well-run company or a good investment.

What’s been your overall return?

Equity portfolio return is about 8%.

How often do you monitor/review your portfolio?

I look if there is a major market move.

I will tax loss harvest if there is a sizeable loss.

NET WORTH

How did you accumulate your net worth?

Our net worth is the culmination of earning, saving, and investing.

It is also from the willingness to take calculated risks. I joke that I took a big risk on my spouse, but that decision was actually a no-brainer and I couldn’t have ended up with a better life partner!

I took calculated risk when I bought into my practice. I had just gotten burned by my old practice. It was a bet on myself, but also a bet on my new partners to fulfill their end of the bargain.

I take calculated risk to continuously invest in the stock market. I learned early on that a) I am a horrible individual stock picker b) I don’t have the proper time to watch over a portfolio of individual stocks c) low-cost index funds are the way to go for most people d) time in the market is more important than timing the market.

We took calculated risk when we decided to build a custom home. It was shortly after the Great Recession and housing was in the weeds, I was in a new practice, and we very easily could have stayed in our then home, which was perfectly nice and affordable. I had a dream to live on the water but nice waterfront homes were out of our comfortable price range. We had never considered building a custom home before, but fortuitously, a great lot came up for sale and we put in an offer which was accepted. Before we knew it, we were committed to building a custom home.

It was an experience I’m happy we did but hope to never do again! We have no plans to move in the foreseeable future, but on paper, our home is worth more than 3x our cost for the lot and construction!

We also took calculated risk acquiring our rentals. They were also purchased after the Great Recession when foreclosures were everywhere. They have been cash flow positive from day one and all are now valued 3-4x our purchase price. We are planning on selling the remaining two to minimize our headaches.

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?

I think our success is truly from implementing all 3 pillars of ESI.

I earn a lot, but if we didn’t save and invest, we would be nowhere near where we are today.

As I wrote earlier, there are plenty of high earning individuals in all walks of life who have minimal or negative net worth because they spend all of it and/or invest none of it.

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

Like many of my peers, my first job out of residency did not pan out as planned. My “partners” did not honor the originally agreed upon terms of partnership despite me more than fulfilling my end.

It’s a long story, but to put it simply, when it became time to make me a partner, they got greedy. However, because I had built a great reputation, a competing group in town reached out and asked if I’d be interested in joining them! And the rest is history!

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

I am continuing to ESI.

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

Not really. I do play around with the online calculators on FireCalc.com and physicianonfire.com.

I discovered the Physician on FIRE early on in my FIRE journey and love his posts “The Tale of 4 Physicians” and “The $10 Million Dream.” He has a spreadsheet where you can enter your current invested amount and ongoing monthly contributions and see where you’ll be in x years with y return.

Obviously, investment outcomes have many more factors, but on this simple model, if the market provides its historic 7-8% annual returns without a correction (and I do think a correction will happen soon but have been saying that for many years now…I’m a horrible market timer…) we will hit $10 million in equity investments around the time I hit 50 y.o. Pretty crazy!

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

I believe it was around 38 y.o., but it wasn’t a milestone that we paid attention to.

Doctors don’t finish training and start earning “doctor salaries” until their early-mid 30’s. Although I had not learned of the White Coat Investor yet, we were following his mantra to “live like a resident” the first few years out from training.

Fortunately, between a 50% scholarship during college and my parents paying the rest, as well as for the vast majority of medical school, I graduated with less than 50k debt. I went to an expensive top private university and medical school and I owe my parents a tremendous debt of gratitude for their sacrifice and financial support. So for me, education debt was fortunately not the massive albatross that many of my colleagues have dealt with.

After residency, we drove older cars and did not inflate our lifestyles significantly. At the time, we had young kids and I was building my practice with my new group. We just had our heads down and were pushing forward with “life”.

Only after discovering the FIRE movement did we do an accounting to see where we were financially. Fortunately, we had been doing enough “right” things and were pleasantly surprised to see where we stood.

In recent years, we have been focusing on trying to consciously spend. Our parents came to the United States to seek better opportunities for themselves and especially for their children. Through hard work, saving and investing, they have done quite well. However, after a lifetime of being savers, they cannot turn the switch to become spenders despite our encouragement to do so. So we are trying to avoid following that same path by consciously spending more.

We are mostly doing this by trying to seek out more experiences, such as sporting events, concerts, and taking “better” vacations. We are not really into buying things, but we do buy nicer clothes and shoes than we used to. We still look for value and buy when they are on sale as these are generally wants, not needs.

I am not a car guy but my Tesla was a splurge and I love it! I briefly considered a Porsche 911 but decided that, for me, between the higher purchase cost and maintenance, the value isn’t there.

We still haven’t been able to pull the trigger on first/business class plane tickets over coach because of the significant price difference but might make the leap for long flights in the future!

We are trying our best to balance conscious spending with teaching our kids prudent money values. This is not necessarily easy, but I think we are doing a fairly decent job.

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

I think focusing on my education and subsequently, focusing on what my ideal medical practice should be, have been the secret to my earning success.

I know I am good at what I do, work hard to do my best for my patients, and focus on building/maintaining strong professional relationships with my referring colleagues.

But the secret ingredient to my successful practice is that I treat my staff well and, in turn, they know I expect them to treat our patients equally well. They do a fabulous job and make me look good!

My spouse and I are nearly completely aligned in all aspects of life. That is a blessing.

Many years ago, as I was telling a friend that I was waiting on investing in stocks because I thought a market correction was imminent, he asked me “Do you think the market will be higher or lower 20 years from now, when you need the money? If you think it’ll be higher, who cares what it is right now. Put your money in.” Some of the best advice I have ever received!

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

From my first job after finishing residency, I learned that you cannot trust people implicitly to follow their word when finances are on the line. Contracts with detailed language are important. And even a great contract is no good if you are dealing with someone with bad intent.

But you have to pick yourself up and move forward. And try to find good people to partner with. A partner in the group I subsequently joined advised me to make sure I negotiated with him and his partners what I thought I was worth. Know your worth!

I am a certified bad individual stock picker and too busy to give an individual stock portfolio the attention it deserves. Low-cost index funds allow you to set it and forget it.

Early in my career, I had an investment advisor for a few years. He didn’t reach out to me ever, no matter what the market was doing. Just sat back and collected his 1% fees. Maybe the size of my portfolio back then wasn’t compelling enough for him, although he certainly wasn’t happy when I fired him.

I think most people can educate themselves, invest on their own, and save on investment fees/not enrich their investment advisers. As Fred Schwed wrote: “Where are the Customers’ Yachts?”

Fortunately, I learned to do it myself with a simple 3 fund portfolio. Average market returns compounded over many years will likely beat what a professional investment advisor will achieve. If you are not aware of Warren Buffet’s bet with the hedge funds, it’s a great read and supports this point. My wise friend taught me that time in the market is more important than timing the market.

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

Be on the same page as your spouse.

I know that my income plays a huge role in what we have achieved. But no matter what your income is, saving and investing are the keys to building wealth.

FUTURE

What are your plans for the future regarding lifestyle?

That’s the million-dollar question! I have built a great practice that is thriving. We are solid financially, so cutting back or retiring is on my mind, but it is not an easy decision. I mostly enjoy what I do. I love taking care of patients. My practice employs a lot of people that I care about.

However, I am increasingly annoyed by the hassles of modern practice, such as the ever-increasing amounts of paperwork, insurance authorization/peer review (when often the peer reviewing your requested authorization isn’t in your specialty and is just reading off an algorithm), and corporate America/private equity making business decisions from the C-Suite, etc. I don’t know if I can go part time but might start discussions in the near future on the possibility of doing so and/or bringing in another doctor to decrease my load and for succession planning.

What are your retirement plans?

Firecalc.com predicts I can retire, spend 250k/year and never risk running out of money in the next 40 years.

If I had concrete retirement plans, I think I’d retire in the near future. I have some hobbies, but nothing that I think will be enough to occupy my time right now in retirement. Plus, we still have one at home in high school and our time is very much currently dictated by the school schedule.

When we are empty nesters and retired, we look forward to taking longer, slower vacations.

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

Being healthy. My spouse and I are both actively working on exercising more and leading overall better lifestyles. We have a target weight and level of fitness that we’d like to achieve before we hit 50.

I haven’t looked into purchasing individual private health insurance, but presume it’ll be an expense we can absorb.

We are looking at hobbies/things to do in our next phase in life. I worry about being bored, especially as most of my similarly aged friends will be working into the foreseeable future.

Many early retirees profess that they aren’t bored and joke that they don’t know how they found time to work before retiring! In my practice, I run across a lot of early retirees (police, firefighters, etc.) who went back to work part time because they’re bored. They have good pensions and don’t need the money. They just need to get out of the house and many aren’t doing work that is meaningful to them. I don’t want to retire and then go back to work in another field because I’m bored! I think I’d rather just keep practicing a few more years if that were the case.

I admittedly have much of my identity tied into being a doctor. I have concerns about giving that up, particularly as a minority. I have experienced painful racism in my lifetime but never directly in my professional life. Will taking off the white coat remove that shield, especially during these contentious times?

MISCELLANEOUS

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

My parents are retired teachers. They are the proverbial “millionaires next door.”

My mother grew up poor and is very adverse to financial risk. Fortunately for my parents, my father did not share her perspective and overruled her penchant to put all their savings into the bank.

My father taught me about investing. Growing up, we often had a financial talk radio show playing in the car. He invested regularly into the stock market. He bought rental homes each time he saved enough.

My favorite investment story of his is when he showed up to a foreclosure auction out of curiosity and ended up being the only one left with one house to go. The auctioneer asked him to bid 1k above asking, which he did. He bought the house sight unseen because it was at a great price in a great location. It turned out to be a fabulous purchase!

So I grew up learning about the value of investing. Early on, I dabbled poorly in individual stocks. I learned from that and subsequently transitioned to low maintenance, low-cost index fund investments.

In the past decade, I have solidified our financial approaches after stumbling onto the FIRE movement and learning from ESI, Physician on FIRE, the White Coat Investor, Ramit Sethi, and the countless others who contribute to this space. Thank you!!!

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

My parents taught me to excel in life by emphasizing education and hard work.

My mother worked hard to help me succeed as a student. She taught me to not be wasteful and to have a strong work ethic.

My father taught me to take calculated risks in equities and real estate. He also taught me to be generous and kind. He has forgiven rent on countless tenants over the years when they were struggling.

Working with one of my attendings in medical school inspired me to choose my specialty. She loves our specialty, excels in it, and is an excellent teacher and patient advocate. She is an amazing person and I model my professional self after her.

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?

I recommend “A Simple Path to Wealth” to anyone who wants to learn about taking control of their investments.

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

I run an outreach clinic for indigent patients and treat them for free when necessary.

We have a donor advised fund for charitable giving.

Any kid that asks for a fundraiser donation gets a yes from us. But they must be able to briefly tell us what they are raising money for and why.

To my kids’ chagrin, I’m always trying to teach them money and life lessons. “Yes Dad, we know, the guy did (fill in the blank stupid thing) and he lost his opportunity/went broke/ruined his life/went to jail/died/etc…we have heard this already (eyeroll)….” Haha!

I hope the kid who is fundraising can learn something from the endeavor, aside from earning a reward. If nothing else, being able to make eye contact and have a brief, meaningful conversation with an adult is a life skill I feel many kids need reinforced. Yes, I’m that guy. Always trying to give “dad lessons.”

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?

Yes, our kids will get an inheritance. Other than that they will get equal amounts, we have not thought out the details of an inheritance plan but need to.

Each will have their higher educations paid for, much as my wife and I had ours paid for. Depending on where they go and how much they need, we have 529’s in place and will cover any overages.

We have tried to teach them about saving and investing as they’ve grown. One is a saver and one is a spender. It will probably be a staggered inheritance so that we can help them when they are younger, the money is more meaningful, and we can see them enjoy it. Hopefully, they will be thriving and well on their own financial way by the time we pass.

Causes that we donate to now will likely continue to receive donations. We favor local organizations who run lean and use the bulk of their donations to help locals in need.