Millionaire Interview 452

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 September.

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 43 and my wife is 45. While difficult to believe, we have been married for 24 years now.

Yes, if you do that math, that means that we were married at a very very very young age. While I typically would not recommend this, it worked for us as we both came from very similar backgrounds and have grown together throughout the years.

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

We have two kids, one who is away in college and one who is wrapping up high school this year.

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

We live in a mid-sized metropolitan area in the Midwest.

What is your current net worth?

Our net worth at the time of this interview is approximately $1.1 million. When I calculate this I keep this number very conservative and straightforward so that there are no surprises.

Our net worth statement is our assets (investments, cash, and value of our house based on Zillow minus our liabilities which is just a very small remaining loan on our house). I intentionally do not include things such as our vehicles, life insurance cash value etc., etc.….

I like to keep this streamlined and only include the house due to the large nature of the asset.

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?

As I mentioned above: we currently do not include a lot of the ancillary things in our net worth statement just so that it is easy to run and look at.

The above net worth statement includes approximate percentages of the below: (all percentages are approximate as the market often changes these numbers)

Assets:

• Investments (stocks and bonds): 55%
• Cash (HYSA +Checking): 20%
• Real Estate (Primary Residence): 25%

Liabilities:

No debt except approximately $45,000 left on our mortgage that we are just paying off slowly due to the good interest rate we have. We have always utilized a credit card, but for the last 20 years have paid this balance off at the end of each month.

A few items to note:

Outside of a small mutual fund I purchased 20 years ago, all our investment accounts are in either index funds or target date funds. Our portfolio has followed the Boglehead philosophy for the most part with primary holdings being broad market index funds when possible.

Our bond holdings are currently about 20% of our portfolio and are all in Bond Index funds as well.

Between my wife and I we have the following:

• 401k
• Taxable Brokerage
• Government Deferred Compensation Plan
• State Employee Retirement Account (chose to opt into the Defined Contribution plan instead of the Defined
• Benefit plan for flexibility purposes)
• Roth IRA
• Rollover IRA
• HSA
• High-Yield Savings Account

EARN

What is your job?

I work at a State University currently and would consider myself a mid level on a pay scale. To supplement my income I teach some classes almost every semester.

An added bonus of my job is the excellent benefits package as a state employee.

My spouse has also worked ever since my kids started school. Her income has somewhat fluctuated throughout the years, but she is currently a higher-level manager at the company where she is employed.

What is your annual income?

Combined, we have an annual gross income of approximately $160,000-$170,000, depending on some of the side teaching I do.

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?

The story of our salaries throughout the years is interesting as we are currently making the most we have ever made in our lives. When we were first married, and partly because we were so young, our income was very low.

Thankfully, even though we were married very young, my wife had already graduated College and I had my associate’s degree. We didn’t make much, but we also didn’t require much and I believe that was one of the key components to our progress.

We have always lived within our means and watched our spending very closely. We knew that education was a critical component to progress and so once we were married we came up with a plan for higher education.

That plan was for my wife to pursue and complete her Graduate Degree first, as we knew we wanted to have kids down the road, and it would be wise for her to finish her Grad degree first.

Once she completed her graduate degree we then began to have kids, which was about 4 years after we were married.

I then began to pursue the completion of my undergraduate degree while working full-time, and then immediately signed up for my graduate degree and completed that a few years later. I utilized tuition remission as much as possible to minimize the costs out of pocket, but my wife and I always viewed our education as an investment that would open up opportunities for us.

I remember the first time our combined income broke through the $100,000 a year range and we thought it was an absolute miracle….. From there our income has just steadily increased throughout the years as our job responsibilities have grown and we have entered some of the prime years of our career.

One key component that I would mention is that our career trajectories have not been standard. Throughout the years, both my wife and I have almost always had side incomes and things that we have done that have produced extra income.

For example, we have both taught classes and worked as adjunct teachers on the side. I have also done some coaching/consulting work for some projects that I have been involved in.

We have always viewed these vitally important elements of growing our career, income, and network.

Neither of us has ever made significant amounts of money in our career W2 jobs. It has just been pretty standard.

What I would say has been uncommon for us is our ability to live within our means, consistently invest even if it was small amounts, and always be looking for ways to grow and build our lives.

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

One tip that I would have is to consider yourself as the CEO of “YOU Company”. In other words… you are not merely an employee, you are the owner of your own company, and when you work for a place you are in contract with them.

Having this mentality gives you the opportunity to always have an owner’s mentality and not a victim mentality. If you enjoy your job, you can choose to stay; if you don’t, you have the choice to leave and find a new employment arrangement.

Additionally, I view the side jobs and teaching opportunities as contracts that people make with me that create other income streams besides my regular job. I can choose to increase my income or not by being the CEO.

What’s your work-life balance look like?

While I do work a lot of hours, it is doing things that I thoroughly enjoy. When our children were younger and at home, I was always home at night, coached their youth sports leagues etc.…

Now that they are older, I teach some nights of the week, but for the most part, our work life balance is pretty good. We choose to instead view this as a work life rhythm that follows seasons.

There are some seasons, during the academic calendar, when the season is intense, but then there are other seasons that lighten up. We have learned to take advantage of the lighter seasons and then lean in during the hectic seasons.

SAVE

What is your annual spending?

I would say that our current annual spending is approximately $80-90,000 a year.

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

The main categories of our spending are as follows:

Housing, food, taxes, insurance (life + health + long term disability), giving, clothing, travel…

I would say our spending is pretty standard to most families.

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

When we were younger we kept a pretty strict budget and followed some of the Dave Ramsey principles pretty closely. However, as we have progressed throughout the years, I would say we maintain a more loose budget.

The reason for this is that my wife and I are, for the most part see eye to eye in our finances and do not spend too much on frivolous things. We both value experiences and travel more so than things….

The bigger focus for us has been to save and invest first, then once we have done that, we live off of what is left. So, in some respects, we budget our investments and savings every month, and then we just know that we can live on whatever remains after that.

This approach has worked well, but as you can see from above, our cash position has grown quite a bit following this process throughout the years. Part of this has been intentional, as we have considered buying a new house, and we know we would like to be positioned with a good amount of cash to make this happen.

About a month ago we signed up for a budgeting app that tracks inflows and outflows and tracks net worth. I signed up for this for the purpose of getting a more specific idea of monthly expenses so that we can begin to develop a thoughtful plan moving forward as to what we want to do with any excess once our monthly needs are met.

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

I would say we are currently saving between 35-40% of our income, but this is something I would like to get a little more specific about moving forward, which is why we started utilizing the budgeting app.

Some of this money goes into savings, some of this goes into investing, some goes into goals we have created. For example…. We make a car payment to ourselves each month, but have not had a car payment for years.

We just make payments each month into a high-yield savings account, and then when we need to get another car, we pay cash and just keep making payments to ourselves. It took us about 15 years of marriage to get to that point, but for the last 9-10 years, we have just kept following this path, and it has worked well for us.

When we initially started saving, it was nothing close to this. For years our aspirational goal was to save 10%, then 15% and then over the last 5 years or so it has just grown as our lifestyle remained the same, but our income continued to grow.

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

The best tip I have for saving money is to prioritize saving and investing. If you take care of this and do this consistently week in and week out, month after month, it will eventually take a life of it’s own.

I would say we have started to see that happen.

Another massive tip I have is to track your Net Worth monthly. In 2018, I started getting very serious about tracking our net worth, and I have monthly sheets where I update our account values and track them faithfully.

It is unbelievable when I go back and see where we have come from to where we are today. It took forever to get to anywhere that felt meaningful, but now that our accounts have grown, they are starting to somewhat take a life of their own.

Not only does tracking this monthly inspire you to keep going, but it also helps you develop a framework for every dollar that you spend.

What’s your best tip for spending less money?

I would say the biggest principles that we have followed is to just be mindful about our spending habits. We follow principles that have served us well.

One of those principles is to not purchase things driven out of emotion. We often think it is funny because we may contemplate a purchase for 6 months, but then one day just decide that it makes sense to make the purchase, and we will go and do it on a random day.

While it may appear that we make a decision quickly, the reality is we have talked about it and often saved for the purchase for weeks, months, and sometimes years before we actually pull the trigger and do it. For smaller purchases we follow this principle by letting a day or two lapse between when we say we want to buy something and when we actually do.

Another tip we have followed is to recognize that we will not be driven by the emotional pull of sales that happen at stores. For example, Black Friday sales etc. If there is something we want and we know a sale is coming, then great.

However, we do not go shopping looking for sales. When you do this, you end up finding “deals” on things you never wanted to start with and end up making purchases you wouldn’t have made if the sale was not going.

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

We have always prioritized experiences over things. We live a pretty simple life in our day-to-day lives; however, we would not think twice about spending money to go on a trip or a vacation that we have planned for.

We have always prioritized family vacations, even when our kids were young. We have flown around the country, gone on some great trips, and have created some memory dividends that will pay out over a lifetime.

For us, that is what life is all about.

Now that our kids are older and my wife and I are at the beginning phase of “empty nesting” in the next year or two, we are planning to start taking some international trips, hopefully.

INVEST

What is your investment philosophy/plan?

I have never tried to beat the market, but I do want to get the return of the market. Because of this, we have invested in index funds and focused on just being ok with the return that the market gives us while focusing on low-cost cost broad-based index funds as our primary focus.

I drafted an investment policy statement several years ago, and it has proven to be helpful when the market has gyrations. Keeping historical context has helped us stay invested over the long haul.

An interesting element of our investment years has been that I opened my first investment account at 20 years old, and to date, I have only sold an investment one time. That was when I was much younger, and I purchased a few shares of GE stock, thinking I was going to “beat” the market.

I quickly learned my lesson, sold the few shares, and embraced index investing wholeheartedly. That was probably 12 years ago and I have never looked back.

For the most part we follow the Bogleheads philosophy of investing. However, one thing I have not acted on, but I am thinking through, is building cash flow from investments.

Boglehead’s for the most part are “Total Return” investors, but I have often considered whether it made sense to start building a dividend index fund portfolio to create some income and ultimately create some cash flow that could replace some of the side income I have when the time is right or in a season of life where I want to pull back some from all the additional things I am doing.

What has been your best investment?

The best investment I have made by far is purchasing Total Stock Market Index Funds. I hold Total US Market Funds, and I hold a Total World Market fund.

This simplifies investing enormously and allows me to simply focus on just investing every month and letting the market take care of the results.

What has been your worst investment?

The worst investment I have made was the time I purchased a few shares of GE stock years ago.

As I mentioned above, I learned my lesson and sold the stock after holding it for a little while.

What’s been your overall return?

I would say my overall return as a rough estimate is probably around 10% annually if you look over the last 10-15 years.

While we have had some very strong years of growth, my return has been lower than the market overall because I have always held about 20-25% in a broad market Bond fund and I have also held approximately 20% of my overall holdings in International Index funds which have had lower returns throughout the years (although this year those holdings have paid off nicely).

How often do you monitor/review your portfolio?

I keep an eye on our accounts pretty regularly, but since 2018, I have logged a monthly spreadsheet where I track all of our accounts.

I do check-ins and update balances on the spreadsheet monthly, but I do a deeper dive probably every quarter or so if you average it out.

NET WORTH

How did you accumulate your net worth?

There is nothing special about what we have done to accumulate the Net Worth that we have. What we have done can easily be replicated by anyone who is willing and intentional about the decisions that they make.

We have inherited no money and have never made a large salary. We have simply always made sure we invested with every paycheck.

We have treated debt like a poison that can erode your finances. We have never tried to beat the market; we have just focused on keeping expenses low, being consistent, and then letting compound interest take effect.

Another key element and decision that we made is to not purchase a house we couldn’t afford. We bought a house that we knew we could easily afford monthly.

Plus, we pay cash for cars. Keeping our housing costs low for all these years and then paying cash for cars has helped us keep our monthly expenses manageable and then be able to keep our savings and investing consistent.

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 key strength has been saving and investing. Saving first because that’s where we got to the point we are now.

Lately, I would say our investing is starting to eclipse our savings abilities. Not that you graduate beyond saving money, but I am learning now that we have accumulated what we have that we need to make sure our money is working for us and not just let balances in our HYSA accumulate unless we have very specific plans for it.

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

We have faced the same roadblocks that many face. We have faced seasons of under-employment.

We have had job shifts and transitions. We intentionally relocated from a small town to where we live now about 15 years ago because we wanted to raise our kids in a place where there were more opportunities.

The biggest way to handle the road bumps is to just not play the victim card, but instead focus on the journey ahead. We get to choose to make the shifts and transitions along the way.

Ultimately, we choose whether we remain in the position we are in or not.

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

Right now, we are just following the systems and routines we have held for the last 5-10 years.

If we keep investing and doing what we are currently doing, we will have a good trajectory if the market gives average results over the next 20 years.

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

Initially, I had a goal of a million-dollar net worth, which we hit about a year ago. The next goal is a million-dollar net worth without counting the house, which we have the potential to hit in the next year or two.

The next big goal will be 2 million, as that would be our number that would offer us the ability to consider whether we want to downshift our work. If we hit 3-5 million, that would definitely afford us the ability to walk away.

We still have approximately 20 years to traditional retirement age, but I would like the opportunity to retire by 60 years old so that we can travel and enjoy our family as our kids begin to build their lives in the years ahead.

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

We crossed the million-dollar net worth goal about a year ago. Nothing changed at all.

As a matter of fact, I don’t even think my wife noticed we had crossed the threshold until about 4 months after we had crossed it. I had shared the spreadsheet I made with her, but I don’t think she looked too closely at it until a few months down the road.

Our life has not changed at all. We are just continuing on as we always have.

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

To me, the key ingredient is being focused and keeping your eye on the goal. Additionally, we have created systems and follow those systems each and every month.

We automate what we can and just make sure we stick with our plan through market highs and lows.

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

While I think we have done a lot right along the way, there have been things that we could have done differently that would have been smart. When we were very young, we focused so much on trying to purchase a car in cash that we bought a car that was a clunker.

After driving it for a few weeks, it exploded on us, and we were left with no money and no car. If I had to do it all over, I would have probably just bought a reasonable car with a loan and known that dependability is more important than paying cash for a car sometimes.

You have to build up your cash over time before you can pay cash for a car sometimes.

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

My advice would just be to think long-term and trust the process.

You can not rush compound interest, but over time, it will work if you are consistent and methodical in what you do.

FUTURE

What are your plans for the future regarding lifestyle?

I would say that we are just beginning to even think about this. We are still in great health and have about 20 years left to traditional retirement age.

I am sure this will become clearer in the years ahead.

MISCELLANEOUS

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

I remember at the age of 17 reading a book about investing. I have always been interested in finance and investing specifically.

I can’t say I remember a time it “clicked”, but I never remember a time when I was not reading about it, listening to the radio or podcasts about finances, or actively investing, even if it was only very small amounts, because that is all we had.

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

Yes. Generosity has always been a big part of our lives.

We have always at a minimum tithed or given 10% of our gross income to the church. In some years our giving has gone as high as 20%.

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 would like to give an inheritance to our kids and their future families, but not at the expense of making sure that my wife and I are fully funded and ok first.

Once we feel confident that our needs will be met, we will then start considering what we can do for our kids and their future families.