Millionaire Interview 401, Part 2

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 January.

It’s a long one (which I love!) so I’m breaking it into two separate posts. If you missed part one, you can catch up by reading Millionaire Interview 401.

My questions are in bold italics and their responses follow in black.

Let’s get started…

NET WORTH

How did you accumulate your net worth?

Save, save, and more saving. We’ve never made (and never will make) a lot of money but being a super saver especially when you’re young is the key.

I teach my students that if you dedicate your 20’s to saving instead of partying – like we did – that might be all the saving you have to do. How big can you make your money pile before you reach age 30? Compound interest will take care of the rest.

By the time we reached our 40’s, we were saving more money than the average person made each month. That doesn’t happen by accident.

You either have a big salary, or you control your spending and save a lot – there is no other way. My wife and I made it a game almost – how much money can we save this month? As we closed in on age 40, and saw compound interest really starting to work, we let off the gas somewhat and took fancier vacations and gave away more money.

Avoiding debt is a big key as well. Besides being scriptural, having debt is taking money away from your future self. Your future self will either bless or curse the spending and lifestyle choices of your youth.

We’re not Dave Ramsey anti-debt types, and it’s not realistic with prices these days. We had a house mortgage for several years, and people were shocked when we paid if off so early. We were motivated by flexibility and freedom, not saving money on taxes or other ideas and opinions on debt. We also gave ourselves a big raise, which allowed us to save even more money going forward. Because we saved and put down a 1/3 down payment on our house, our house payment was only $499. After paying the house off, we decided to use that money and put it into a giving account.

We only had a car payment once, because buying the car without a loan would drop us under our $10,000 savings safety margin. Once we were clearly back above that number, we paid the car loan off in six months. Since then we’ve always bought cars in cash, but we always buy used cars about 3 years old and keep them for at least ten years.

Putting large down payments into rent properties was a big success. When we talked to people who owned rent properties we were surprised how many were not making money at all. Some were even losing money and they told us things like, “It’s ok. This is our long-term investment, we won’t make money on this until the loan is paid off in 13 years.”

That didn’t make sense to us, so we decided to see if there was a way to start making money almost right away. Turns out you can if you can either buy a home in cash, or pay it off quickly which is what we did. Thanks to my job at a high school serving the “bad” part of town, we got to know that side of town has its good and bad areas too. We didn’t avoid it entirely like a lot of people do and we’ve benefitted from having those properties. A lot of homes in so called “rough” areas are underpriced, especially compared to the rent you can get from it.

We have always put at least 40% down on all our properties, and then paid them off in one or two years with a combination of our savings and the money that was being made off of the first property we paid cash for. Once you get more than two properties paid for, and you can roll those funds into a third, you start to see the process work. Having just one rental unit is not a safe investment.

Lastly, and probably most importantly, is picking the right spouse. Two people almost always beat one in the game of life, but both horses must be pulling the cart in the same direction. A lot of people should be walking around with a ‘Danger – Do Not Touch’ sign on them.

My wife is a patient angel, and my greatest asset. You could take away all the net worth we’ve accumulated, but as long as I have her, we’ll be fine. In fact, we’ll make it back almost twice as fast since we’ve learned from our mistakes and have way more life experience.

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?

Saving, not even close.

We were very focused on that when we were in our 20’s. If your savings rate is high enough, you have a safety margin that will cover any investment mistakes you make. Save until it hurts.

The other two parts of the ESI model can be out of your control. Not everyone has the skills or education to get a high salary and even the best investments can have ferocious losses from time to time. Saving is something everyone must find a way to do.

No offense, but I’ve always chuckled at some of my fellow millionaires when you see how much money they earn. If you’re making over $200,000 a year and are NOT a millionaire, you have either had several bad breaks, or probably don’t know what you’re doing.

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

Turning off the evening news took away a big road bump.

As a former news/sports reporter I used to pride myself on knowing about what’s going on in the world. Then one day you realize that most “news” you watch is so devoid of truth that it serves little to no purpose to watch it. We fell for some of that, and it affected our investment returns.

For example, the re-election of Barack Obama in 2012 was supposed to be the beginning of the end for this country, just like the election of Donald Trump in 2016 was going to be the end. Stocks were going to collapse, remember? What nonsense!

Confirmation bias and echo chambers have become so strong that most of the country doesn’t even know where to look for the truth on relevant matters, much less what the truth actually is.

Bottom line is save money, invest conservatively, and live virtuously – everything else will be fine and fall into place.

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

Very little.

Since we’re natural savers, I think we will always try to save a little. However, with my wife doing her PhD, 2023 was the least amount we’ve saved since our first year of marriage. We only saved around $200 a month on average, and even had some negative months. My wife was a little concerned, but I’m at peace with it.

When you have your spending under control, there is not much difference between one million and two, two and four, etc. Compound interest takes care of the rest, and we have made our ‘money pile’ big enough to deal with whatever comes.

I know there will be some that disagree, but we could live on less than $2,000 a month if we had to. We have no debt and with rental income that clears (after expenses) roughly $1500 a month, one of us could go work a minimum wage job and cover the rest. After we buy our last two rent houses, we can actually live what I teach my students: FIWO – Financial Independence, Work Optional.

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

Not anymore.

When I was young, I would look up stories comparing people’s age and net worth to others, but that is simply vanity and vexation of your spirit. It is a fatal flaw in mankind to not only want to compare yourselves to others, but then to be envious of whatever they have.

Everyone in this country is rich anyways. Or as my wife’s East Asian immigrant janitor who cleaned her office said, “There are no hard lives in America.” Well said.

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

I was 45, the wifey was 42. It happened sometime in early 2022, as close as we can guess as I don’t check our net worth spreadsheets often anymore.

The day we went from five to six figures is unknown as well, sometime around age 30.

To go from less than $5,000 net worth when we were first married to $100,000 by 30, to $1-million by age 45 shows the power of consistent saving and compound interest.

The only thing that has changed is that I look now more than ever for people to help financially — especially former students that were smart enough to keep in touch over the years.

I taught at a high-poverty school for most of my career, and many students had few adults they could count on. When we were in our 30’s we set up a giving account and put in $500.00 a month and started looking for people to help. That has provided amazing memories and helped change lives. We feel very grateful and humbled to be in a position to do that.

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

My wife and I were both natural savers, which helps a lot.

I’ve been on my own since 19, and I knew I had to find a way to take care of myself. My wife comes from a great family but has always been afraid of being poor.

Having the right mindset when it comes to handling money is crucial. I teach that when a spender marries a spender, hang on for a stressful ride. When a saver marries a spender, there’s usually going to be a lot of fighting. But when a saver marries a saver, amazing things can happen.

Study and recognize the personality traits of a person more than their looks and you’ll save yourself a lot of heartache. It’s easier to recognize when you’re ugly and awkward like me!

Delayed gratification is a big key. We live in a world that promotes spending and wants to separate you from your money. Can you put off spending a little bit of money now, so that you can save it and have a lot of money later? For people under the age of 30, that is a literal million-dollar question!

The other thing that is very important is to be a lifelong learner. This is especially true in financial matters. Financial markets and companies can go from huge to collapse in a short time – see A&P grocery stores or Kodak Film. If you study and begin to recognize market and historical trends you will be fine, especially if you have Index Funds.

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

We have been fortunate to surround ourselves with good people and have had very few money mistakes. Most of our mistakes would be what Charle Munger called, “mistakes of omission.”

I suppose we could have bought more rent houses and started earlier. We could have been early investors in things like Amazon, or bought Exxon Mobil when it was $30 a share, but I have learned that ignorance is not a bad word. We are all ignorant about a great many things, and we better be humble enough to recognize that or you can get eaten up. That’s especially true in the investing world.

The biggest mistake (mentioned earlier) was allowing emotions to get involved in our retirement accounts, and transferring them into cash for long periods of time. When one of our main investment funds lost over 40% in 2007-08, we began to panic and pulled out a large chunk of our investments.

We would probably have close to $2 million dollars in net worth if we had just been patient and ignored all the noise from “experts” who thought the stock market was going to collapse. Most people who claim to be “financial experts” are usually trying to sell you something and are not worth the time or money. Just watch American Greed to see several different examples.

Remember that long-term investing in Index Funds over decades ALWAYS wins. Short-term investing over days or weeks or months is little more than educated gambling. I once read that trading individual stocks is like playing tennis against an invisible opponent – the problem is you might be playing Roger Federer! If you want to compete against people who have an Ivy League MBA, have inside information, or are as good at picking stocks as a human can get, be my guest.

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

I do adult personal finance training and money coaching classes on the side and have been blessed to look at a lot of people’s finances. I would say there are only three fundamental money questions you have to get right, and you can teach them to a 7th grader:

• Will I save money?
• How much can I save?
• What do I invest it in after that?

If you commit to saving money regularly, save an above average portion (at least 15-20%), and invest it in Low-Cost Index Funds like Vanguard offers…if you live long enough, in this country you’re probably going to end up wealthy.

Most people are either house poor or vehicle poor, or both. Avoid silly vehicle and house purchases.

My wife’s grandparents lived in the same house for 51 years. While we might not follow their example completely, ideas like “starter homes” only enrich the real estate industry. You see the exact same problems with cars. If you can’t buy a car and pay it off in four years…you can’t afford the car. Vehicles should be kept for ten years, minimum. Whether you drive a rust bucket or a Ferrari, it is still used to get from point A to point B. Plus, you save a ton on car insurance with older cars.

Having a good realtor and property manager plays a big role if you want to invest in real estate. We found a phenomenal realtor who had over 30 years experience. Some people want their realtor to be energetic and working 24/7. Remember that older people with experience in a given field can be far superior.

For example, two of the rentals we purchased never even went on the market. Our realtor had a lot of connections with older sellers who were ready to cash out and give young investors a chance to get started. We will be forever grateful to that man, and his wife who was our property manager.

Not having children, or waiting until you’re older to have children can be a big factor. Children are a blessing, but can slow down the wealth accumulation process by several years. However, I have former students who became teen moms – one had two kids by 19 – yet they are on their way to financial success. It just takes a little longer with kids.

The only other things that matter are your moral code, and who do you trust enough to let into your inner circle? You can make a truckload of money and save and invest with the best of them, but if your morals and/or the people you trust (especially a spouse) are questionable – it can all be for nothing. Look at all those broke athletes and entertainers for examples.

FUTURE

What are your plans for the future regarding lifestyle?

My wife is nearly at FIWO (Financial Independence, Work Optional) position now. She sacrificed and worked for 20 years, so that she can do what she wants for the next 40. We’re not guaranteed tomorrow, but that’s a pretty small price to pay in the big picture. She’ll probably work for at least a few more years after graduating to put the PhD to use, but she can do whatever going forward.

An initial plan was for both of us to retire around age 50, but then we realized that was a little silly. We support the FIRE movement, but sitting on a beach in Tahiti would only be fun for a week or two. We can do better things with our time and try to make this world a better place. There are some bucket-list trips to take, and maybe build a dream house somewhere, but those are not priorities anymore.

A few years ago, we started doing some trips with some of my former students. Our annual alumni ski trip in Colorado has been a huge success. For most of my “adopted” children it is something they have never experienced and might never get to otherwise. We’ll probably do more things like that in the future. Quality time with people is sorely missing these days, and we have learned as much from them as they probably have learned from us.

I will continue to teach as long as I can reach students and make a difference in their lives. If I turn into an old curmudgeon, I don’t have to hang on so I can get full teacher retirement. I might teach part-time for my final years, depending on the situation at whatever school I teach at. I also do a lot of church ministry and travel around some for the work of the Lord. If the demand is there, I will do more of that going forward.

What are your retirement plans?

We love Hawaii and would love to live there for part of the year, but again not a priority or something we’re likely to pursue.

I will continue to have Bible studies, mainly with former students who have questions or are looking for some hope/direction. The ignorance of the scriptures today keeps me pretty busy.

We will slowly drain our savings and retirement accounts if necessary, but will mainly live off of our rental income as we age.

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

No. I only hope my wife dies first, as she says she would fall apart without me.

I am a very blessed man. I had some dear friends say they were afraid that we would be all alone with no children to take care of us when we’re old. I laughed and said my “children” will take better care of us than your children will! I can only hope for that, but I am confident as some of them literally call me their dad.

Master Yoda was correct when he said, “Death is a natural part of life.” We’re all terminal, and serious Christians should not fear the end of life anyway. It is a release to a better place.

Many people worry about medical costs, Long-Term care, and things like that….you shouldn’t. I’ve looked at enough people’s finances to know that many people will never have $100,000 in retirement savings, much less $1 million. Yet they have a roof over their heads and enough food to eat. Also, my wife’s experience working at a nursing home made it clear that DNR orders and Hospice care can be a very good thing. I have no interest or intention to live as long as possible, as it turns into “existing” if you’re not careful.

MISCELLANEOUS

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

Mostly self-taught.

Like most everyone else, I was ignorant about personal finance and investing. I was always a natural saver but didn’t know what to do with it.

My wife’s grandma got me a subscription to Kiplinger’s magazine when we got married at age 25 and she bought my wife the book, Making the Most of Your Money. All I had at that time was a checking account.

The magazine helped me learn the lingo, and from there I just started reading anything and everything I could find on-line and several books like the Millionaire Next Door. Being a lifelong learner, and starting real world learning right after college, is so important.

It didn’t ‘click’ until we did our first budget about six months into our marriage – once we saw how much money was going to eating out and Cable TV we made changes. We have had nothing but free antenna TV since 2002 as we ‘Cut the Cord’ long before most. We were also the only adults I know of who didn’t have a cell phone until 2011. That is unrealistic today, but we saved a lot of money with the old land line – which we kept until 2023 so we didn’t have to give out our cell numbers.

Another ‘click’ moment was when our net worth went from five figures to six figures. We had just trusted all the information we had read and kept going. Once I saw the results, soon I was teaching it — to my students by the time I was 32, to other adults by age 40.

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

When I met my wife and we were blessed to fall in love, I knew I had won the lottery. I want to be a good husband and role model for her and for those I come into contact with. I fall short in that pursuit sometimes, but trying to be a faithful servant of God is something we both take seriously.

I get most of my inspiration from the King James Bible, and some of the heroes in the scriptures have provided wisdom, knowledge, and understanding over and over again.

I have also been blessed to meet some amazing Godly people in the body of Christ who have lived through and overcome unbelievable hardship – yet you would never know it by the way they conduct themselves. Those heroes have taught me you don’t have to look very far to find people that have more problems than you do.

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?

• For Beginners: The Millionaire Next Door by Stanley & Danko — I teach the examples in this book to my students every year. It teaches them that ‘regular people’ can get rich too. The Automatic Millionaire by David Bach has some great points as well, starting with ‘Pay Yourself First’ and the ‘Latte Factor’.
• Intermediate: The Investor’s Manifesto by William Bernstein — This was written by a medical doctor, who does a great job of breaking down basic principles so that people can better understand buying stocks and the investment game. I particularly enjoyed his non-financial background explanations of the stock market and the risks involved.
• More Advanced: Basic Economics by Thomas Sowell — Basic Economics should be required reading for every 19-year-old in the country — as are most of Dr. Sowell’s books. The man’s a pure genius who is always looking for the truth in things. Spend some time down a YouTube rabbit hole looking at Thomas Sowell videos – it can change your life. The Intelligent Investor by Benjamin Graham is a great choice as well.

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

Yes, because there is also a special joy that you can’t get anywhere else when you use your money to help other people. Christians are also commanded to.

We give anywhere from 5 to 15% to the church we go to. Unless you’re Jewish, 10% is not required because that is only designated in the Old Testament. The New Testament doesn’t specify.

We also have a charitable giving account set up that we deposit money into every month. It has really provided a lot of joy and opened the hearts of people. We do spend a lot of time keeping up with and meeting with former students. Everything from just visiting about life over coffee to Bible studies. It can keep you busy, but very rewarding.

Our giving is to people we come across who need something, which has been everything from new prescription glasses, a laptop for school, help buy or fix a car, pay off tuition from a previous semester so the student can register for the next semester, etc. There have been many similar situations, too numerous to write about here. They usually involve tears of joy.

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?

With no blood heirs to leave assets to, we are in the process of setting up a trust fund to handle that.

The plan is to leave our properties and any money left over in our accounts to some very special children. Who those former students are have not been decided entirely yet. Maybe we’ll put about ten of them in a room and see who comes out at the end. Just kidding.