Millionaire Interview 415

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 May.

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 47.

My partner whom I’ve been with for 15 years is 35.

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

I have two fur babies.

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

I live in Tampa, FL very close to downtown.

What is your current net worth?

My net worth is $2.1 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?

• Taxable Brokerage Accounts: $75,000
• Non-Taxable (Retirement) Brokerage Accounts: $245,000
• Self-Directed IRA Cash: $80,000
• Real Estate Syndications (2) Held in Self-Directed IRA: $85,000
• Real Estate Syndications (13) Not in IRA: $536,000
• Promissory Note: $250,000
• Personal Residence: $490,000
• Two Rental Properties: $305,000
• Other Assets: $107,000

I am debt-free. I use credit cards to earn rewards but pay the balances off in full.

EARN

What is your job?

I am a travel director in the events industry, specializing in corporate meetings and incentive trips.

What is your annual income?

In 2023 I earned $130,000 from all sources. Income from work was about $80,000.

I earned $35,000 from rental income and $11,570 from interest income last year.

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?

As a kid my brother and I would spend a few weeks each summer at our grandparents’ house. My grandfather was the plant supervisor at an alfalfa mill and would get up around 3 AM every day to go to work.

He would come home mid-afternoon before leaving for his second job as the maintenance man at a marina. As if that weren’t enough, he mowed most of the neighbors’ lawns. Hard work was in my blood.

My first job was earning minimum wage ($4.25/hour at the time) at a fast food restaurant. My father only wanted me to work weekends, but as long as I kept my grades up, I could hang out with friends on school nights.

Well, I liked working so much that I would hide my car behind the restaurant and go to work right after school. He never found out. I was promoted to assistant manager when I turned 18 and soon was working 80 hour weeks. I thought I was making good money back then.

Fast forward to today, and I probably still work too much. My income fluctuates every year.

During the pandemic my industry was completely shut down. Because many people in my industry had to move on to other fields to survive, there have been more opportunities for those of us who stuck around. I started working in the event industry in 2012.

My previous career was in software sales. Since 2006 I have been investing in real estate, which at times exceeds my “job” income.

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

Finding a profession that satisfies you is the key to growing your career-related income over the long haul. I worked in software sales for 7 years, and absolutely loved what I did for 6 of those years. The company made major changes which took the fun out of the job.

It was so bad that I lost interest in the field. Fortunately, the income from rental properties gave me the flexibility to spend time finding something better.

What’s your work-life balance look like?

When I am working I am always on the road. Each trip is its own contract (I am a freelance business owner and accept work from multiple clients). Sometimes I have time between trips while others are back-to-back.

All this to say I need to improve my work-life balance.

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?

Real estate has been the largest contributor to my net worth, and until recently was a major source of cash flow. In 2003 I bought a townhome for less than $60,000 and house-hacked it. I had a roommate who paid rent and then, in 2006, my best friend announced he and his wife were moving back to town as soon as they found a place to live.

I was already thinking about buying a home closer to my office, so this presented an opportunity to become a landlord while helping a friend. I started buying more rental properties during the housing market crash.

I would buy a house, live in it for a while, and then rent the house out and buy a new house to live in. At its peak I owned 12 single family residences.

I moved out of state in 2012 and tried being an absentee landlord, but it became very stressful and I made the decision to start selling some of the out of state properties. The transition to real estate syndications has meant a dramatic drop in cash flow.

SAVE

What is your annual spending?

My annual spending varies, but overall we are frugal.

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

The only area where we like to splurge is on vacations, but even that is a relatively minor expense because I earn a lot of points and miles in my day job. I try to keep the “fun” category of spending, which includes vacations, under $5,000 per year.

Because I eat out all the time on the road (and my clients pay for it!), I rarely want to eat out at home. My partner cooks most of our meals, and we average $400/month for food. In 2023 I spent $5,075 on Utilities (Power, Water, Phones). I paid cash for my home, so there’s no mortgage.

My car is also paid for and I paid off my student loans a few years ago. Living in Florida, auto and home insurance are relatively high expenses.

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

I do not budget. Sometimes I set goals for spending.

For example, the last two years I have set a goal to spend less than $5,000 on vacations.

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

For 2024 my goal is to save 40% of my gross income from work.

I have always saved a large portion of my income – that’s how I built my net worth!

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

The easiest way to save is to set a goal and hold yourself accountable. When I decided to save 40% of my job income this year, I added an automatic calculation on my earnings spreadsheet to tell me how much I had to save that month.

10% of job income goes towards a brokerage account where I make more aggressive investments such as options and individual stocks. The 30% is used either for index funds or CDs since interest rates have become more attractive.

What’s your best tip for spending less money?

Keeping a frugal mindset starts by questioning the big stuff. In Florida, insurance rates have increased dramatically, so shopping around each year can save hundreds of dollars.

I have also resisted thus far buying expensive cars (with one minor, short-term exception). I drive a Hyundai Elantra. It’s not sexy, but it’s very practical.

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

I love spending money on vacations, which is why I set a budget on only that category.

It forces me to get creative when planning trips to stretch our travel dollar.

INVEST

What is your investment philosophy/plan?

I am a huge fan of Warren Buffett and have attended the Berkshire Hathaway meeting several times. The secret to investment success is to never overpay for an investment. That takes extreme patience sometimes, which most people lack.

Even I find it to be dull sometimes, which is why I decided to scratch my investing itch this year by using 10% of my job income to make aggressive investments.

What has been your best investment?

My best real estate investments were two of the homes I purchased in Florida when I moved here. I bought a 3/2 foreclosure that was falling apart for $45,000. I lived in it for a couple of years while fixing it up and turned it into an Airbnb.

The annual rental income was approaching what I bought the house for, but with real estate prices rising dramatically after the pandemic, and my patience for managing a short-term rental running thin, I sold that house for $345,000 in 2022.

The other Florida home was a 3/1 foreclosure I bought for $63,000 in 2012 and sold for $315,000 in 2023.

As far as stocks go, my single best investments were PUT options I bought a few years back that exploded overnight. It was very obvious to me the company, HMNY (their product was an unlimited movie subscription called MoviePass), had an unsustainable business model.

In 2018 I made $42,000 profit in a relatively abbreviated period of time. I also realized a substantial gain during the pandemic investing in Moderna stock.

What has been your worst investment?

Selling my individual rental properties and investing the proceeds into syndications will be my worst investment move. The losses have yet to be realized, but they will be.

I have invested in 15 real estate syndications. Two have gone full cycle (17% and 18% IRRs). I expect 4 of the remaining 13 will be near total losses.

What’s been your overall return? 

This is too difficult to answer.

With stocks I have performed inline with the broader market over time.

Real estate investing has been extremely profitable, but is about to take a turn for the worse.

How often do you monitor/review your portfolio?

Because I enjoy reading business news, I often log into my brokerage accounts to peruse the headlines related to my investments, so I keep an eye on my portfolio regularly.

Once a year, in late fall, I take a closer look and decide whether I need to make adjustments in the next year.

NET WORTH

How did you accumulate your net worth?

Most of my net worth can be attributed to rental property investing. I had three relatively small inheritances when my father and grandparents passed away. Together they were only about $200,000.

Income from working has been inconsistent: during my first career, I had one year where I earned low six figures. My current work earns a little less than $100,000/year.

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?

Investing is my greatest strength, but I am about to be reminded of a very important lesson, which is that your performance is determined by the price you pay.

Real estate syndications were very exciting investments, and when interest rates were low, the projected returns looked attractive and reasonable. Some of the deals I invested in used variable rate debt, and those are the\ deals that are struggling.

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

The biggest financial obstacle I ever faced was the loss of my software job. During the last year I was there, the boss that I loved as a mentor was reassigned, and his replacement was a sociopath.

The guy only lasted 8 months, but I did not know his tenure was going to be so short and negotiated an exit with a decent severance package. Before I found my current career I opened a restaurant that was a quick failure.

The lesson I learned is that life throws you lemons. It’s what you do with those lemons that determines the outcome. Instead of wasting time feeling sorry for myself, I pushed forward to fight my way back to the top.

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

Because I suspect tough times are ahead for my real estate syndications, I am currently focused on moving as much cash flow as possible to safer investments – index funds and certificates of deposit.

It’s all about reallocating that income stream for better diversification.

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

I like the 4% rule, but personally want to be closer to 3%.

By that I mean that my goal is to be able to live off 3% of my net worth annually.

$100,000/year would give us a very comfortable retirement, so my target net worth is $3.3 million.

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

My net worth crossed $1 million in 2017, when I turned 40. Four years later, in March 2021, it exceeded $2 million.

How has my behavior changed? I used to be “cheap”, but I have learned how valuable it is to pay for quality.

Since I travel so often, luggage is the perfect example. Instead of buying the least expensive suitcase, I buy the most durable. It costs more upfront, but over the lifetime it should be a much better value.

Same with housing. In the early days, I would live in lower middle class neighborhoods because that’s where I found what looked like the best deals.

Problem is, homes may cashflow there, but they barely appreciate, and they aren’t as convenient to amenities such as airports, parks, stores, etc.

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

I don’t follow the herd. One of my proudest traits is following the path less traveled. On a day to day basis, people are drawn to crowds. So much time is wasted waiting in lines.

There is often an equivalent or better choice to be had by doing the exact opposite of what everyone else is doing. There’s a good chance the line to checkout at Walmart will be virtually non-existent at the garden center, electronics counter, or the pharmacy.

Similarly, investing in cryptocurrency because everybody is buying Bitcoin doesn’t make it a smart investment. Be the guy selling shovels to the gold miners.

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

My biggest investing mistake was believing the rosy projections made by syndication sponsors. These individuals make money on fees at the beginning, middle and end of your investment.

They have an income stream that is often independent of the performance of the investment, so their goal is to raise money. You have to be your own advocate.

My biggest spending mistake was in 2009 when I bought a brand new luxury sports car. I had a record year in 2008, was feeling overconfident, and had a lapse in judgment. Fortunately I realized my blunder a few months after buying the car and sold it.

I lost a little but it wasn’t a terrible amount. That mistake has saved me from making many more.

On the job side, sometimes I wish I had tried harder to live with my new boss when I was at the software company. He only lasted 8 months, and if I somehow could have made it through that period, my income today would have been at least twice what it is today.

Whether I would be happier is uncertain.

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

• Don’t get caught up in the hype of too-good-to-be-true investments.
• Never underestimate the power of compounding. Why spend $100 on a restaurant meal every week when you could spend $10 for a nutritious home-cooked meal and invest the difference? It isn’t “just” $90. Compounded over 25 years, that $90 weekly savings would become over $200,000 at a 5% return.
• When you do make mistakes on the road to wealth – and they will happen – learn from them. Try not to repeat them.

FUTURE

What are your plans for the future regarding lifestyle?

After our net worth reaches $3 million, I will consider myself financially independent.

I like the work I do and don’t think I will stop working completely. But I plan to slow down and be more selective. I would like to travel more for fun, including longer trips to more exotic locations.

What are your retirement plans?

If I get to a point where my health won’t allow me to work, I’ll have to fully retire.

As long as I am able, I will continue working at least some.

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

I am more concerned with being bored if I retired. I find a lot of fulfillment in the work I do. A client just paid me to spend 13 days in Monaco.

A few weeks ago I was at an all-inclusive resort in Montego Bay. Sure, the work is very demanding. But I get paid to go to great destinations.

MISCELLANEOUS

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

I wish I remembered the name of the book. When I was 18 I read a book about managing
your money. The key suggestion was to open a brokerage account, which I did. None of that
stuff was taught in school. Had I not learned at such a young age the power of investing,
who knows where I would be today.

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

I had some great mentors throughout life, starting with my father, who taught me to save my allowance, continuing in junior high school with a great English teacher who pushed me to succeed and onto my first job in fast food, to my first “real” job at a software company, to reading everything I could get my hands on about Warren Buffett.

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?

• The Intelligent Investor by Ben Graham. Common sense advice about how to look at investing.
• The Millionaire Next Door by Thomas Stanley. Dispels the myth that the people driving expensive cars and living in McMansions are the rich ones.
• The Snowball by Alice Schroeder. The single best book about Warren Buffett.

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

I haven’t yet made significant charitable contributions.

I donate unwanted things to a local non-profit that operates a thrift store.

I believe I can grow my money faster than the average person and that I can make a bigger impact later in life.

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 time my partner will inherit all my assets.