Millionaire Interview 429

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 July.

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 53 and my wife is 49.

We have been married for 18 years.

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

We have 2 boys aged 14 and 16.

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

We are Canadians, eh? We live in an Urban center. 

It is large but has a small feel overall with a population of around 1 Million.

What is your current net worth?

Our net worth is $5.9 Million US — which is almost a billion in Canadian dollars.

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?

• $700K in Retirement Tax sheltered accounts. In Canada, they are called RRSPs and we pay tax when we withdraw.
• $1.5M in normal post-tax accounts.
• $2.60M in a defined benefit pension.
• $1.1M in Real Estate. This is made up of our house and a small cottage on a lake.

We have no debt.

EARN

What is your job?

My job(s) is the Director of Operations. My job for most of my career has been the guy that takes what Designers design and then interfaces with the outside world to get it built.

I am an engineer by training, so tongue in check, I usually explain to people that I speak Geek and I speak Factory. I have been the guy in the middle taking what the engineers design and getting in built somehow.

I have done this across 10 different companies in my 30-year career.

My wife is an Executive within one of the last companies with a Defined Benefit Pension. She has spent 27 years with the company. She has spent the last 10 years as part of the executive team in various roles including CFO

What is your annual income?

Between the two of us, we make an annual income of $470K.

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?

First off let me say we have been extremely lucky in life with our salaries. When we first met I was 32 years old and a VP within a High Tech startup of 200 people.

The High-tech bubble years were good years for fast salary growth. Once the bubble burst salaries stayed roughly where they were. I was at an artificially high salary in 2000.

My initial engineering salary was $30K and escalated over 6 years to $110K. It now sits at $150K 24 years later.

That is a 1.3% increase per year for 24 years with some major ups and downs across some of the 10 jobs.

I look back and I am grateful for how crazy the bubble times were back then as they gave me a great start on my path. Salaries may not be as crazy versus what happens in Silicon Valley but for Canada, it was still an insane time.

I had early success in my career by being vocal when I shouldn’t be. I can pinpoint most of the success in my career to 30 minutes of conversation back when I was 27.

The factory I worked in was being closed as part of a Fortune 500 company outsourcing manufacturing. The new product launch I was working on was one of the most important company products being launched that year.

It was being launched as the company was shutting down its factory and transferring the work to 2 partners. The two partners notified my company that they needed to delay the launch by 6 months to a year.

My General Manager of the closing factory was telling my design team the same. I only had a seat at that table of this senior meeting because I was part of the team launching the product.

The 27-year-old me stood up and told the 3 General Managers, all 50 to 60 years old, how to build the product without delay. I solved this issue in front of the Guy who controlled the money.

We were ultimately successful in launching the product on time. It lifted my career to a rock star that day and led to the rest of my career. 

That one conversation led to my first fancy VP title at my first startup. When the same Fortune 500 guys I had worked with launched their own company they gave me a call. They trusted me to get it done.

Because of a 30-minute conversation, where politically I should have kept quiet, it has made getting every job since easy to get. Titles, unfortunately, matter.

Regardless of the job you did or how big the company was a big title gives you a qualification of sorts to help with looking for your next job.

The moral of the story? Know your stuff better than anyone. Build trust with the right people.

Speak up and lead regardless of position or age if the people in the room, that matter, have your back. Good ideas are owned by everyone.

My wife’s story is the opposite. She has been with the same company since graduating. Her starting salary was $20K and is now $320K.

Her rise is due to being smart but mainly to having really high EQ (Emotional Intelligence).

She is very good at reading and relating to people regardless of who they are. Combined with the smarts she can walk into any room and belong.

With high EQ and a good brain, she makes an extremely good people manager. She is much better than me at being a people manager and at leading teams.

Although she has been with the same company for all these years she has led totally unrelated departments because of the people skill side of her personally. She knows everyone at work, relates to everyone regardless of position, and they all want to see her succeed.

It is more important for people to like working with you than being the smartest in the room. If you have both likability and smarts the sky is typically the limit. The likability makes everything easier.

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

For me, I learned early that it was better to be a part of the end customer than working for the manufacturing company. Salaries are kept low in manufacturing because they have to be to make any profit, but on the customer side, you are valued as an engineer like the rest of the team.

The customer side has more profit so it is shared with employees through salary and bonus. I would likely have made at least 25% less if I had stayed in manufacturing.

Another way to put that is to follow the money. You can be paid more if you are in an industry with a good pay scale. You get paid more if the company you are with is highly profitable.

Also, be trusted to come through. Your next job depends upon the people you work with today who know how good you are.

Helping other people succeed will help you down the road.

The most important is to be likable. I know many people who were average at their jobs but because everyone liked them they rose in the ranks.

People want to work with people they like. I have seen the smartest people torpedo their careers by not being able to relate to others.

Speak up but know your audience. Sometimes it is a career-limiting move but it can be worth the risk.

I likely have shot myself in the foot two or three times at my jobs for being too vocal but the 1 success was worth it.

What’s your work-life balance look like?

In the last 15 years, I have switched from “doing” the work to building and managing the team that does the work. For me, that means 40-hour work weeks with lots of flexibility to do what I want with regards to family.

I depend upon my team and I put them front and center to own the work. It is a good way to have balance but at times it also means I am bored at work.

Sometimes doing is more fun than managing through delegation.

My wife’s job is the opposite. She is always “on” and works 50-hour weeks every week.

It is taking its toll and we are looking forward to her pulling back in the next year. That may mean a new job or it may mean retiring early as the high pay no longer matters at this stage of our life.

We have found over the years that only one spouse can be pushing hard in their career. Early on when we met I was the one always working.

As she continued to rise in the ranks I stepped back and made sure to be able to handle more of the average day life things.

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 salaries make up the majority of our income.

We have been pretty conservative investors over the years.

As the nest egg has grown it is starting to throw off its own healthy income through dividends and boring interest

SAVE

What is your annual spending?

We spend about $110K per year.

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

We don’t really track in any great detail. We are fortunate to be done with mortgage and car payments. Funny enough it looks like food was our top spending last year at around 18K.

Growing boys are tough to fill. Vacations, fixed costs like insurance, property taxes, utilities, and Charity get us to about 57K spend of the 110K.

The rest is small projects to improve the house and cottage, eating out, and recreation. We try to stay active at the gym and are a skiing family.

Having two properties means twice the typical bills that come in. Vacations have also been ramping up as the kids get older.

They are not far from the stage where they will not want to hang out with their parents as much.

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

We don’t budget. When we met we both had very reasonable lifestyles for the incomes we had.

The incomes grew faster over the years than our spending so we have always had a healthy savings cushion every year.

With my career in high tech, we have always worried that my income could end tomorrow. Most of the companies I worked with over our first 10 years together were always one bad quarter away from bankruptcy.

This made us very adverse to debt or spending in any big way.

We haven’t had a car payment since I met my wife. We typically buy a car almost new and then drive it until rust starts to show, problems start occurring, or some sort of collision like a tree falling on my van.

We have been extremely lucky with vehicles and they typically are in the driveway for about 10 years. For the handful of times we have bought a vehicle it was with cash that we had saved up.

Maybe not the brightest of things to do when interest rates were close to zero but I have never liked having payments.

Housing has followed almost the same pattern. I bought a cottage outright 25 years ago during the internet bubble.

Vacation real estate had crashed right before the tech bubble so it was also a down market. It was the only good investment I made at the time.

When I met my wife she had bought a fixer-upper for next to nothing. Over a few years, she made it respectable.

When we decided to move to the city, where we now live, she sold the house for almost double what she paid for it after 6 years

When we bought our now house we put down about 40% of its value. We were paying the mortgage in an aggressive fashion for about 3 years.

I then was laid off from my high-tech job with a decent severance package. We were both earning good salaries at that time.

We took my severance package and paid off the house. Looking back it seems weird that the first thing we thought of doing, when I became freshly unemployed, was to pay the mortgage off.

Usually, that is a call you make from the security of income.

As we think about retirement we have been getting more conscious of what we have been spending so we have gone back over the last 2 years of statements. To be honest I was surprised at how much we do spend.

Before the exercise with no big monthly bills, I would have guessed it was closer to $90K a year versus the $110K it is. The little things add up.

We are looking at how we get a little better at being more conscious of our spending

Each year I have always tracked if the bank accounts were growing or shrinking and have net worth recorded for the last 15 years. Money is more my thing and my wife checks in every now and then to make sure we are good.

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

We save about 40% of our gross income and have since the mortgage was paid off.

As salaries have increased so has the savings rate.

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

For us, the biggest part when we were young was to pay off the house. I always say I wanted to buy my house only once, not twice with the interest I would have paid over a 25-year period.

It was not the best investment strategy as the market has gone straight up but it was right for us at the time.

Outside of the forced savings of having no debt, it was to spend less than what is coming in. With no debt and only moderate spending increases, our savings increased fast as our incomes rose.

That is the main reason we are where we are today What’s your best tip for spending less money?

We have always focused on the big stuff. We wanted to buy a house together only once.

Instead of a starter home, we bought one that could be a forever place. We bought much less house than we could afford at the time. It means smaller bills and a smaller mortgage.

It is a more moderate 1300 square foot house built in the 60s with a bigger lot. It was beneath market value in the city because it was on well and septic.

We finished the basement for more space and added an addition that we built ourselves. It was quite surprising coming home from work one day to see my 6-month-pregnant wife shingling the roof with her dad.

We have grown handy over the years and rarely hire out to contractors as we fixed up the house and the cottage.

We both grew up in the country so it was no deal to us to have a smaller place and to do our own work on it.

Cars were similar. Neither one of us has had a fancy car.

We bought used cars early on and drove them for about 10 years. Only now are we getting new slightly higher-end vehicles.

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

The biggest splurge for me is eating lunch out most days. It’s a bad habit but I like getting out of the office midday either to be by myself or social with someone else.

My wife is more of a travel hound. A girl’s trip is coming up? Sign her up.

INVEST

What is your investment philosophy/plan?

Let me start by stating that I have been a bad investor. We are where we are because of savings.

If we had been Bogleheads and were index investors I likely would have been retired in my mid-40s (10 years ago).

I am like the scared rabbit when investing. I’ve been in and out of the market too much.

When an event like COVID happens I don’t want to risk staying in the market. I don’t do well with volatility. My “sleep well” at night factor has me way too conservative.

My whole goal in investing is to preserve capital. That means I am in stocks that your grandmother would own. The Utility companies, telecom, banks, railroads. If it is stable and throws off a dividend, I am attracted to it.

This mindset comes from starting my investing career in the stock market bubble of the mid-90s. Almost no matter what you bought it went up.

It made you think you were good at investing. It taught us to keep shooting for the bullseye to keep being a stock picker. When the bubble burst it was not quickly.

It took almost a year of dips and surges. After 3 or years of learning to buy the dip the last 12 months of the bubble I spent giving the money away with lower highs and lower lows.

That year has left deep scars. It still influences how I look at investing today.

Ever since the bubble I find it hard to invest in companies that are in growth mode with limited profits. Think Amazon, think Uber, think Tesla, think any company that sacrificed all profit for faster growth.

These companies became the rock stars. The success stories.

These were the companies I learned to stay away from with the Internet bubble burst. A bad lesson to learn.

We learned about investing from our friends. I wonder how my investing career would have been if I had been friends with finance people vs engineers.

Working in tech I was attracted to the shiny object that was rising quickly.

What I invested in was based upon where I worked. What I thought I knew I still struggle with buying ETFs.

When the top 7 stocks make up 30 percent of the market it seems like I am just buying the top 7 hot stocks of the day. Like the internet bubble.

I will get over it. Some day. The data does not lie.

Just buy the index and leave it alone. Set an allocation and just invest money in every month.

But I still find it hard. I still resist. I find valuations seem like they keep rising.

It just seems like stocks have been going up for 15 years. I keep waiting for the other shoe to drop.

This basically means my returns are less than the index. And I have been ok with that.

Thankfully the ESI works if you do 2 of the 3 well. The “I” is my obvious weakness.

As you can tell I invest based upon emotions and scars from my past. It is not the right way to invest. But for me as I get closer to retirement I am ok with my conservative returns.

Because that is all I need for where we are today. Why reach for more and risk retiring later when we have won the game already. Regardless of how we got here.

I know I should be indexing but it scares me when 5 companies make up all the gains. I know it only takes a rotating few skyrocketing for the index to have good gains and it’s about not trying to pick the winner.

As you can tell I invest based upon emotions and scars from my past. It is not the right way to invest. I hope to fix this one day.

What has been your best investment?

First a great partner in life. Having two great incomes and moderate spending habits makes up for almost anything.

The second has been the real estate. It has doubled to tripled over the years and as seen above everything else I touched has not done so well

What has been your worst investment?

Almost any stock I pick and trade in less than a 5-year period. Most stocks will climb over time but I will get impatience and sell losers before they recover.

What’s been your overall return?

Capital Gains, I have been close to zero over 30 years. Dividends, and now decent interest, have made up most of my investment return over the years but I have not tracked it that closely.

It was trivial in the end versus what we save each year.

This dividend and interest income combined with the soon-to-be-taken pension will cover all our spending. We will still save money every year. I call it escape velocity.

Between the pension and about 4% return, we will be taking in about 150K post-tax. More than enough for our lifestyle.

How often do you monitor/review your portfolio?

Even though I am bad at investing the stock market is entertaining to me. I am like a bug attracted to the light for any finance news.

Article on the market going up, must read it. Article next to it on the market going down, must read it.

I check the market daily. Even in times I had almost stocks I still watched it.

NET WORTH

How did you accumulate your net worth? 

In the end, it was to control spending to be less than incoming money. If you keep the income line growing faster than the spending line does there is almost nothing you can do to screw it up.

Also, I realize how fortunate we are to have one of the last Old School pensions on earth. It makes up more than 40% of our net worth.

Sometimes staying with one company for your entire career can really can be worth it. If you have a path to progress in title you will be rewarded.

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?

For us, it has been Earn first and Save second.

Because of the high salaries it made the saving part of the equation so much easier.

Without high salaries, my investing mistakes would have mattered a lot more.

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

As a couple, our career choices had to be supported by each other to prevent any bumps in the road. I always had a job that could easily end at any point in time for the first 10 years.

My wife had a secure job in an extremely stable company. It allowed me to take risks and join smaller companies. Five of the first six companies I worked at no longer exist including some which were really big.

I handled the flames outs by somehow being good at getting the next job. Sometimes it was through the network but most times it was because of the broad experience you get from working for small companies.

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

One of my favorite theories around money comes from Morgan Housel’s book The Psychology of Money. It’s how I am trying to move forward His story of the 2 investors who go through the market crash of 1929 keeps drawing me back.

One is short the market when it crashes and becomes an extremely rich man. The other is long the market and is wiped out.

Both men a few years later are in the same spot, both wiped out. The rich could not stop playing the market.

His brilliance of being short the market in 1929 gives him out-sized confidence to keep betting. Like Vegas, the house wins in the end.

The big takeaway from both of these quotes/stories is it takes one skill to get rich, and a different skill to stay rich. That lesson is never far away for me.

We have gotten to where we are by making good salaries and saving money. Now I need the skill to keep it. This keeps me up at night and makes me almost too conservative.

We don’t need to swing for the fences to stay comfortable. We don’t need to be fully invested.

The pension is indexed to inflation so almost ½ of our income is protected. I just need the remainder to be stable, to contribute, and to match inflation.

The other famous quote I like is “You have won the game so why keep playing”.

Having said that my plan is to get our investments to 1/3 index funds, 1/3 dividend stocks for tax-advantaged income, and 1/3 Bonds or Income. We have everything but the index funds in place and I will slowly limp into them over time.

I admit it is hard for me to get in. So today we are closer to 2/3 in income and 1/3 in dividend stocks.

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

We don’t. It is more about a date. My wife cannot draw her reduced pension until she turns 50.

Fifty minus a day and her pension is locked up until she turns 60. She turns 50 in 7 months.

We have been FI for a while but I continued to work to get her across the finish line. There have been points lately where it was possible she wasn’t going to make it to 50 as her company has been going through an executive change out.

It would make our savings and income from investment more important if she does not make it to where she can immediately draw her pension.

I also promised my oldest son for years I would retire when he finished high school so I could go to college with him. It’s good to scare your children.

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

I was about 41 and my wife 36 when we crossed the $ 1 million threshold.

We like to think we haven’t changed our habits much

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

For me, it is almost a bad habit. When I have needed a job I have always based it upon the highest pay.

Looking back, I should have taken some jobs out of interest to be more satisfied in my career.

For my wife, it was to take on more risks outside of her normal swim lane at work. It led to exposure to the right people who have led her on an upwards climb of the ladder.

Without taking these risks her income would been capped a long time ago

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

Don’t try to stock pick. The investing herd will go places you never imagined so you can never be right enough to do well.

Buy index funds and stay in the market. As you get older or your wealth gets to an escape velocity path become more conservative.

When there is no need to risk it then why keep doing it?

Understand taxes. Based upon where you live you need to figure out how to reduce taxes in retirement.

It is currently a big focus of ours. Canada is not as tax-friendly as the U.S.

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

Be good at whatever job you take. Try to pick an industry where your company is quite profitable.

Be nice to everyone because you never know who will be your boss someday. Try to get exposure or relationships at work with the people who make the decisions or control the money.

Most importantly pick the right partner.

FUTURE

What are your plans for the future regarding lifestyle?

I am in my OMY (one more year). It’s real. Enjoy the victory lap if you take it.

I will be retiring in less than 12 months. I may get some “play” jobs afterward but more for being social.

By play jobs, I mean something I try for fun that is one or two days a week. Craft Breweries I am looking at you.

Or maybe I really will join my oldest at College. Kind of like Rodney Dangerfield in the movie “Back to School.”

My partner is undecided. I have been working on her to retire when I do.

Her job is stressful but she likes it. I think she may leave but she still wants to work. After 27 years in one place, she has a “grass is greener” wonder to her about other companies.

It will be easier when the kids are a few years older. It is tough to pick up and travel when they are in high school.

What are your retirement plans?

I would like to slow travel. By that I mean fly to one city and live in it for 2 or 3 months at a time.  I think it would be ideal to do one or two times a year.

I am also going to try out some of the FIRE conferences to see if I can expand my tribe.  By this, I mean finding people my age who retired to maybe hang out with.

My wife has not looked that far forward. She is just coming to grips that she can retire but has not thought about it enough.

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

I am concerned about being social enough. It is very easy to rabbit hole on the internet or a book and not see any live humans.  It will be a focus of mine to get out in the community and make new contacts.

One thing I have learned in the last few years is that work friends quickly fade away. It is natural to be social with people that are in the same circumstance or in the same day to day fight as you.

Once you are in a different stage it can be tough to maintain friendships without that common bond. I have contemplated starting a blog to see if can find an online tribe to go with the real humans.

I have written enough for myself over the last 3 years about FIRE and upcoming retirement that I have enough material to launch one. Writing is almost my self-therapy in ways.

MISCELLANEOUS

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

My parents were always money-focused. My dad ran his own business and it was always about making more.

It likely influenced my choices early on to go into engineering as Engineers made a bigger income when they graduated.

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

I can’t say I had one specific person I looked up to.

I have followed finance and the FIRE movement from the early days so it has been an influence in some small ways.

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 Psychology of Money I have read a few times. For Morgan Housel who has talked about money for his entire career, I find it fascinating how he approaches his own investing approach style.

He describes it as a barbell approach. Really conservative on one end of the barbell and the other end seems to be in index funds.

This seems like the style I am approaching so his material pulls me in.

I would also say I have enjoyed Warren Buffett and his approach. I have been to the Berkshire Hathaway annual meeting and their approach to investments and life is amazing to listen to.

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

We do give to Charity. It makes up about 10% of what we spend per year.

We don’t give time as of yet but are looking at that as we get into retirement.

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 plan to leave an inheritance to our two kids. I like the Bill Perkin’s Die with Zero approach of giving your kids a significant part of their inheritance when they turn 30.

Or at least what we can afford to give at that point.

Real Estate has gotten expensive in Canada. My kids could really use the help in their 30s where the money could help change their lives and let them get ahead.

Why 30? Because by then they will likely have matured as much as they are going to and hopefully have the right partner by then and be thinking of having their own kids.

I have watched my parents save all their life and they will have a nice inheritance to pass on to their two kids.  But by the time it happens, it will not make any difference in our lives.

We will both likely be retired and living the way we want to at that point.  It will be nice but it will not change my life. My inheritance from my parents may just skip over to my kids at that point.

We have enough at this point in our lives. We will help out our kids as long as it will be a help and not a handout.