Millionaire Interview 418

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)?

We are in our late 40s.

We have been married for more than 20 years.

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

We have two teenagers.

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

We live in the suburbs of the west coast. It’s expensive, but we love it here.

Several times, we thought about moving to a lower cost living area, but couldn’t find a place that we both like.

What is your current net worth?

$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?

• Real Estate (Primary home, rental properties & syndications) – 50%
• Retirement (401K, Roth IRA) – 24%
• Taxable Account – 19%
• Cash (Checking, Saving, Money Market) – 4%
• College Fund – 2%
• Personal (Car, Jewelry, etc) – 1%

EARN

What is your job?

I work as a software engineer.

My wife has been a homemaker and recently just started as a freelancer.

What is your annual income?

$317,000 including RSUs and bonus.

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 job was working for my uncles in the summer for 4 weeks helping their business deliver goods to other businesses. I was paid $160 a week for a total of $640. It felt like a lot of money back then.

My second job was a teaching assistant for my professor at a university. My pay was about $2000/semester and I got a tuition reduction. I was happy with the arrangement.

I wasn’t prepared for what was ahead after I graduated from college. I grew up thinking that if I do well in college, my life would be set. However, it was not the case when I came out to look for work.

There wasn’t a lot of demand for my major. I started work as a HVAC engineer. The pay was $40K with long hours and health insurance was the only benefit.

At times, I have to crawl into attic spaces of commercial buildings to inspect and install sensors and controls. Those periods were one of the most stressful moments with a very difficult and demanding boss.

After working for less than a year, I quit and decided to go back to school full time. I pivoted my career to computers because it was on high demand.

And since I already have fulfilled most of the requirements, it took me a year to get the degree.

Once I graduated, I was hired to work as a software engineer. My pay was $60K with great benefits that included stock options, matching 401K, etc.

From then on, my role became more senior and my responsibilities increased along with my pay. At one point in my tech career, I was promoted to become a manager.

I found managing a group of people wasn’t to my liking so after a few years, I went back to being an individual contributor. I am much happier to work with technology and lead projects, and I am fine with slightly lower pay compared to the leadership track.

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

Don’t be afraid to make changes if you feel stuck in your career. Like the Jim Rohn quote: “Nothing will change unless you change”.

Love a career that loves you back. Although I love engineering, that career is not as lucrative as computer science.

Front load your career when you are young. Go as far and as high as you can in your career, because once you start a family, you don’t have the time nor the commitment.

Do more than bare minimum. Actively seek opportunities to contribute value for your company or manager. Invest time and effort in understanding how you can assist them and in return you will be looked after and become irreplaceable.

Learn how to negotiate. I’ve been fortunate that all my past and present tech employers have treated me fairly, but there are moments where I felt my compensation doesn’t match what I bring to the table.

Learning to ask for what I deserve is still a skill I’m constantly trying to hone.

What’s your work-life balance look like?

My work life balance is good. I work on average 40 hours a week. Occasionally, I may work 60 hours a week when I’m on call, but I could take some time off the following week to compensate for the time I put in.

I am also fortunate to have a flexible work arrangement. I can work onsite or remotely.

My preference is to be in the office, but I do take advantage of working remotely around 30% of the time. I prefer to be in the office more because in-person interaction for complex projects are invaluable and the physical workspace allows me to focus on my work and get things done without the distraction.

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?

• Rental income and syndications: $38,000
• Dividend: $20,000
• Interest: $4,800

SAVE

What is your annual spending?

On average we spend about $140,000 per year.

Our spending has been steadily increasing as the kids get older and with inflation. I will not be surprised if next year our spending will be more than $150,000/year.

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

• Home (mortgage, utilities, insurance, property tax, maintenance, etc) – 40%
• Food (grocery, dining, take out) – 17%
• Transportation (gas, registration, toll, insurance, maintenance, etc) – 3%
• Health (gym membership, medical, dental, etc) – 2%
• Kids (education, sports, etc) – 18%
• Travel & Entertainment – 14%
• Shopping (clothes, personal care, etc) – 4%
• Other ( internet, phone, misc., etc) – 2%

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

Early in our marriage, we diligently followed a budget. My wife maintained a spreadsheet that she tracked for our expenses. However, as our income increased over the years, we didn’t do it anymore.

We are frugal by nature. We don’t go out to shop just for the sake of shopping. Our purchases were generally reasonable and aligned with our financial values.

In the last few years though, we do indulge ourselves much more in shopping items that make us happy like electronic gadgets, furnishings, etc.

We don’t really think much about cost anymore; we kind of know what we can afford. Our mindset used to be “can we afford it?” but these days, we have to ask ourselves “do we really need it? Does it have value?”

We tried MINT a couple years ago, but overtime we abandoned it. Perhaps in retirement, I will commit to another budgeting tool since MINT is no longer available.

It will be necessary to get back to budgeting again so that we can monitor our spending as we would no longer have a stable income.

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

Our savings rate is around 30 – 35%. Our savings would have been higher if not for the spending for our kids.

They consist of contributions to 401K, After tax 401K, HSA and ESPP. I max out all the contributions and take advantage of all available company matches, as they are essentially free money.

We also max out both our ROTH IRA via backdoor beginning of every year.

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

Live like no one else, so that later you can live like no one else. In our earlier years, we stayed in a one bedroom apartment with our first child until we had our second child.

This decision allowed us to allocate less than 10% of our income toward housing, resulting in substantial savings.

Resist the urge to keep up with the Joneses. While many of my colleagues drove luxurious cars, I opted to continue driving my small compact car.

Despite the temptation to indulge, I stayed the course and drove that car, and only much later I bought something that I liked.

Avoid bad debt, and learn how to leverage debt to your advantage. You want to ensure your debt works for you rather than against you (Ex: credit card debt, car payment, etc).

Currently, our only debt is our mortgage, which has a very low interest rate.

Automate your savings. It helps you avoid the temptation to spend.

During the years of accumulating wealth, we forego extravagant vacations and excessive indulgence, focusing instead on saving and investing. We felt like we were 10 years behind our peers in terms of spending.

Looking back, we should have balanced it out and enjoyed a bit more of the journey. On the other hand, we also felt like it was all worth it.

Knowing that we don’t have to worry about money these days, the peace of mind that comes with it, makes the fruit that much sweeter from our sacrifices.

What’s your best tip for spending less money?

As much as we can, we try to spend what we need rather than what we want. In the beginning, it was all about the cost of the item, not so much about value and quality.

Later, it was a more balanced approach about cost, value and quality. These days, when we do spend on big items, we buy high quality products that can last.

Our favorite store is Costco, where we buy the majority of our food, household products, personal items and furniture. You can’t beat COSTCO when it comes to value and convenience.

If you can, buy used. Before FI, my wife frequented garage sales and used good stores to buy our children’s toys and clothing. We figured they were young and didn’t really care about the brand.

Spend things that matters to you, and only if you can afford it. For example, cars are just a means of transportation so we just get what works.

We buy good enough reliable brands that can get us from point A to point B. This way our car registration fee and insurance is cheaper than most luxury cars.

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

Our ultimate splurge is traveling. We tried to travel internationally every year although it is getting harder nowadays with our children’s schedules.

We love to experience other countries, immersing ourselves in diverse cultures and savoring local cuisines. On average, our annual travel expenses are around $20,000.

When the children all go to college, we plan to travel more. Ideally, we would like to spend 4-6 weeks in a single country, allowing us to truly embrace the local way of life.

We also love to eat out and try different ethnic foods. We drink very little coffee and alcohol, so we save money on those.

But we do spend a lot on food. We buy organic often. As we grow older, we value our health and want to eat clean and healthy.

INVEST

What is your investment philosophy/plan?

We used to invest in individual stocks, but now we’ve shifted to a simpler strategy. We invest in VTSAX or VTI, opting for a “set it and forget it” approach.

This choice brings us peace of mind and helps me sleep well at night. By investing in the entire US economy, our investment approach is more stable and diversified.

What has been your best investment?

Myself. Investing in my education and transitioning to a career in the tech sector allowed me to earn close to 8 times my initial full-time salary.

The second most impactful investment has been in our primary residence and rental properties. Those assets increase our net worth by over a million dollars.

We were lucky to get these assets during the housing market crash, and we know we might not get such a great opportunity again. You never know though.

If it happens again, we have more capital now to seize even more of the opportunity.

What has been your worst investment?

Individual tech stocks. I’ve lost count on how many…

Back during the tech dot-com bubble, I invested all my 401K funds into tech stocks and watched as their value plummeted by over 80%. Fortunately, the amount involved was relatively small back then, just under $10,000.

What’s been your overall return?

Honestly, I don’t know. I never keep track. All I did was to keep saving and investing.

Whenever I have a bonus or raise, my lifestyle changes little. I keep doing what I have been doing. Put the money in the bank and brokerage account.

How often do you monitor/review your portfolio?

Not very often. I check my bank and credit card accounts every week since they’re the ones we use for our daily expenses. I want to ensure there’s no hacking or unauthorized use.

However, when it comes to retirement and brokerage accounts, I typically review them every quarter. This approach helps me avoid becoming overly fixated on the fluctuations in my net worth and making impulsive decisions based on market reactions.

NET WORTH

How did you accumulate your net worth?

I’m always on the lookout for how to make more. The main thing is working hard and being good at what I do at work helps increase my salary.

I make it a habit to spend less than what I know I can afford, knowing that the money that I saved I can put to good use to make more money. Not trying to keep up with the Joneses in the beginning of my professional life is a big advantage to helping spend less and save more.

As my net worth increases over time, I began to spend more and at times splurging on things that I enjoy. I make purchases based on value, not the cheapest or the most expensive, but what will last and give me joy.

This mindset helps me enjoy what I earn but still ensure I spend less than my peers. Knowing that I don’t need to worry financially when I am near retirement age is what gives me the most happiness and peace.

With the money I saved, I just keep putting them into index funds or total stock market funds. It’s such a simple strategy and stress free strategy to manage my wealth.

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 would say our greatest strength has been saving. It was instilled in us by our parents who constantly remind us the importance of putting money aside.

While saving is undeniably important, its impact can be limited without significant earnings. Moreover, merely saving money won’t necessarily translate into wealth unless it’s invested wisely.

Therefore you need all three components -EARN, SAVE and INVEST- to build wealth effectively.

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

In my first job after college, I faced the challenge of working under a demanding boss. I was required to put in extra hours, including weekends, without compensation.

It was mentally and physically taxing, but it taught me that change wouldn’t come unless I made it happen myself. That realization led me to pursue a second degree and transition to a new career.

During the dot-com bust in 2000, I was laid off a year after starting my tech career. It was a tough period as the entire industry was facing a downturn and opportunities were scarce.

Competing with more experienced candidates, I knew I had to be flexible. I landed a position for a new role with a startup that has much more direct interaction with customers.

I began working with clients on the east coast, which meant starting my day at 6 am. While it wasn’t the ideal schedule and position, I recognized the necessity of doing what needed to be done.

I manage the stress by exercising physically, taking mental breaks, sufficient sleep, and looking from the perspective that what I was doing would help me grow professionally (glass half full).

It was challenging at first but it was also the time that I grew the most in my career. Eventually, when the tech market picks up again, I was able to pivot back to the position that I wanted, and all the interpersonal skills that I had learned were invaluable.

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

Continue to max out all the retirement accounts, ESPP, HSA. Also continue to save and invest in the index fund.

Not allowing our lifestyle to creep too much even when our income and net worth go up. We still drive the same cars and live in the same neighborhood.

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

Our financial goal is to achieve a net worth of $8 million and retire.

Based on our calculation, this can comfortably fund our current lifestyle and continue to increase our net worth after, and yet still provide a good cushion for any financial emergencies.

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

I can’t recall exactly when it happened, perhaps in my mid 30s. It was such a non-event, which is probably why it slipped my memory.

There wasn’t any significant change in behavior. However, achieving financial independence did offer me more freedom and flexibility at work.

This newfound sense of security allowed me to take more risk, knowing that I could weather job loss or layoffs if they were to occur.

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

We never incur debt to purchase anything, except our house. Even with our house, we can easily pay the monthly payment.

We always pay off our credit card balance immediately, never allowing it to carry over. Only use 1 or 2 primary credit cards at any one time to keep things simple.

We live below our means and practice stealth wealth. We avoid lifestyle inflation even when our net worth increases.

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

Plenty of mistakes.

After experiencing an early loss on my 401K, I did not participate in my company’s 401K for a couple years, except when there was a matching contribution available.

I missed the opportunity to save more for retirement in a tax-advantaged manner for those years. And also lost the advantage of potential tax deductions associated with 401K contributions.

Being overly cautious with debt due to my upbringing, I regarded all debt as inherently bad. Consequently, I missed the opportunity to make significant investment during the 2008 housing crash.

I wish we knew about the advantage of index funds sooner instead of investing in individual stocks. We heard about index funds early on but kind of dismissed it in our minds.

8% to 10% a year when we had only like 40K to 50K to invest, that was like … Meh! It was nothing compared to the individual stocks that made 3 baggers or more.

Wish we would have taken more seriously about compounding interests. If we looked back and started with index funds instead of individual stocks, we would have already achieved our financial goals today.

I also had the tendency to overbuild my emergency fund, hoarding cash under the belief that I need to prepare for another market or housing crash.

On average, I’ve maintained around $200,000 in savings. That money could have been earning a better return if invested.

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

Invest in yourself first. To increase your earnings, it’s imperative to excel in your field. Continuously improve your skills by learning from books or others who excel in your industry.

Set specific objectives for where you want to go and what you hope to accomplish. Without clear goals, you’re essentially wandering aimlessly, risking the potential of remaining stagnant or ending up somewhere you never intended to be.

Live below your means and invest the difference. It’s very tempting to succumb to lifestyle inflation especially when witnessing extravagant spending on social media.

However, those kinds of lifestyles may not be sustainable if you don’t prioritize financial prudence.

Start investing early; time is your friend when you are young. Consistently contribute to your savings and allocate those to an index fund.

Tune out the distractions and ignore the market fluctuations.

Choose your life partner wisely. Seek someone who shares your values and has an equal or better financial mindset. Divorce can be expensive and set you back significantly for years.

FUTURE

What are your plans for the future regarding lifestyle?

Not much will change in my lifestyle, given that we already prioritize healthy eating and almost daily exercise. However, I would like to not wake up to an alarm clock, stay in bed longer when I do wake up, and every day becomes its own fun and adventurous journey.

Whether it’s hanging out with friends, biking, kayaking, fishing, woodworking, or simply sitting and enjoying nature, the possibilities are endless. I’m so looking forward to it!

What are your retirement plans?

I’m planning to retire once my youngest graduates from college in 7 years. Our expenses will significantly decrease since I no longer have to pay for college tuition and health care for my kids will no longer be a concern.

It would be just my wife and me, resulting in a much lower cost.

I can’t wait to retire. While some may say I’ll get bored, I don’t foresee that happening. I have tons of hobbies and DIY projects that I would love to do.

We also plan to travel the world and tick off items on our bucket list.

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

My primary concern is health insurance. Currently, we only pay a $2400/year premium for our family of four.

Those costs could be $15,000-$20,000 annually for me and my wife when I retire. While options like ACA or Medishare are on the table, I haven’t looked into it yet.

MISCELLANEOUS

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

It has always been at the back of my mind to make money. I just didn’t know how and what is the safe way.

In my younger days, I often pursued the hot tech stocks. However, after getting burned often, I finally came to my senses that investing in index funds is the right strategy.

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

Don’t really have one but if I had to pick who has an early influence in my life, it would be my parents and uncles.

While my dad didn’t teach me about finance, he instilled in me the values of hard work and integrity, forming the foundation of my character. His lessons included the importance of empathy to those who are suffering and generosity towards those less fortunate.

As a child, I often witnessed him making purchases from struggling vendors/sellers even though we clearly didn’t need the stuff he bought.

From my mom, I learn to be self sufficient. Despite not having education beyond middle school, she adeptly figured things out on her own and could fix various things such as locks, fan, VCR player/tapes (anyone still remembers those?).

This was in a time before the existence of Google or YouTube.

My uncles came from a low income family. However, they were hardworking and entrepreneurial, and became successful later in life, owning multiple businesses.

When I spent a summer working for them, I would always remember the one thing they impressed upon me. Your word is your bond. They told me that’s what builds trust and credibility in business, and in life.

It has always guided me in my life when dealing and working with others, from delivering what I said I would even though I didn’t feel like it, to something that may appear mostly inconsequential like being punctual.

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 don’t read many finance books. But if I have to recommend one for those who just started in their financial journey it will be Rich Dad Poor Dad.

This book transformed my perspective on money, wealth and income. It highlighted that a high income doesn’t automatically translate to a high net worth.

The key to building substantial net worth lies in accumulating income-producing assets.

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

We support various organizations based on needs.

It could be for natural disasters, food banks or sponsoring individuals in third-world countries for spinal surgery, etc.

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 intend to leave an inheritance to our children but with a belief that “having money to do something not to do nothing”. We live in a high cost of living area, so it’s really a challenge for those who just started fresh from college, particularly when it comes to housing.

Sometimes, I do find myself concerned about whether my children would be able to afford housing, thrive and support themselves.