Millionaire Interview 463, Part 2

Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.

If you’d like to be considered for an interview, drop me a note and we can chat about specifics.

This interview took place in October.

It’s a long one (which I love!) so I’m breaking it into two separate posts. If you missed part one, you can catch up by reading Millionaire Interview 463.

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

NET WORTH

How did you accumulate your net worth?

Very simple – via earned W2 income + investment income. We earned and saved as much as we could, and the power of time did its work.

I inherited a modest amount, but it’s not a significant portion of the current NW at this point.

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?

It has definitely taken all three but in order of priority:

1. Earn: We have both done very well in our careers.
2. Invest: Everything we saved was invested as it came in.
3. Save: We spend on what we value but are definitely not overly frugal.

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

I think we have been incredibly lucky, and the road bumps have been minimal in the grand scheme of things. That said, we’ve had our share of family troubles and health issues to manage, both within our immediate family and extended family with aging parents, etc.

My husband was also laid off 2x from jobs and took ~8 months each time to secure a new job.

As for me, while the work history above probably looks linear and “easy”, it also came with many ups and downs. I enjoyed many parts of it, but it was still a hard grind over almost 3 decades.

I had some terrible bosses who took credit for my work and were borderline abusive. I was passed over for promotions I thought I deserved.

When negotiating a role at a new company, I was told they maxed out the comp at my band level and couldn’t go higher. Fast forward 1 year, and I was promoted into my boss’s role and ended up managing my peers, and found out that I was the lowest paid of the group and the only woman.

Work and life are always going to have their ups and downs. It’s not realistic to expect everything to be perfect 100% of the time.

It is important to have grit and persevere through the tough times. Show up and continue to do your best work and be professional.

I learned as much from the bad bosses as from the great ones and have much thicker skin. And while I fantasized about rage-quitting many times, I’m happy I never did so and didn’t burn any bridges.

Having FU money certainly makes it easier!

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

We are focused on not running out of money now! Although I would love to see our NW continue to grow, I don’t expect it to do so.

We will be carefully monitoring it as we are entering the expensive college years, while not having an income.

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

We hit our original and revised targets multiple times. Our original target back in 2017 was $5M liquid + paid off house & college funded.

Knowing what we spend now, I’m very happy we increased it.

For those considering very early retirement with kids, I would strongly suggest building a bigger buffer for future unknowns.

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

My husband’s earnings were very front-loaded loaded so when we married, he had accumulated significant NW while I had basically nothing. We probably hit it around my 30th birthday, but that was mainly due to him.

Zero behavior shifts.

We’ve always practiced stealth wealth. Given how we live, I think a lot of people would be surprised by how much we have accumulated, and I plan to keep it that way.

My husband has always been the more frugal one, and surprising to me, once he stopped working and being so maniacally focused on saving and NW growth, he has become much more relaxed about spending. I’ve read about this happening after pulling the trigger, but I was surprised it happened to him.

I have not yet experienced this, but have never had much trouble spending.

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

Tracking both spend and net worth – knowing where your money goes is so empowering. If you track it, you can manage it. I get great satisfaction seeing our balances and NW increase.

Spending less than we earn. We’ve always paid off credit cards every month and never carried debt besides mortgage.

We paid off the mortgage early as well, and the peace of mind in owning our home outright is huge for us. Again, maybe a more financially conservative approach but the right choice for us.

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

Starting too late. I was naturally pretty frugal and never racked up debt, but lived paycheck to paycheck in those early years and hated the way that felt.

I didn’t earn or start saving real money until after business school in my late 20s. I wish the principles of FIRE were taught in high school.

I can’t believe I had 2 business degrees from top universities, and I had no idea how much I needed to save or what my FI number was until I stumbled upon FI blogs in 2017, in my 40s! Even my husband, who always worked in finance, had never heard of the 4% rule when I shared it with him.

His initial reaction when I raised early retirement was “that’s a pipe dream”. Well, he should thank me since he opted out at 51 and before me!

And I thank the FIRE bloggers out there for quite literally changing our lives!

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

Save now so you can buy yourself options later. I feel so fortunate to get to “opt out” now on my own terms.

But also enjoy the ride. I’m really proud of what I accomplished in my career and feel like now is the right time.

I could have quit earlier, but I wasn’t ready. I don’t feel like we deprived ourselves along the way either.

We could have saved more, but this was fast enough for us.

The least painful way to become wealthy is to save bonuses and raises before you get used to spending them. It’s soooo much harder to pull back once you’re accustomed to it.

FUTURE

What are your plans for the future regarding lifestyle?

After a summer of travel, my immediate plans are to detox from corporate life, catch up on sleep, focus on my health, and explore hobbies I haven’t had time for. I’m not committing to anything for the first 6 months and am just going to go with the flow and relax.

Longer-term, I’m pretty sure I’ll want to dip my toes into something else – volunteer, board work, etc. I might even be open to going back to work for the right opportunity, but we’ll see!

It’s Sunday night as I write this, and I am GIDDY that I am going to the beach tomorrow and not to the office!

What are your retirement plans?

Financially, we have some expensive college years hitting us now, and we will be focused on managing sequence risk. I do expect the next 10 years to be our most expensive with school, travel, etc, so we are planning to spen,d but will be flexible.

For activities, my #1 focus is on health. I definitely put my own health behind work and family for too many years.

I am restarting daily meditation, weight lifting, and increasing aerobic activity. Living in a city, I easily get 10K+ steps per day.

I play tennis and am going to look into joining some pickleball groups as well.

I also intend to optimize time with friends and family, including more travel to see them now that I have the time to do so. I spent 3 of the 7 weeks of summer travel with extended family, have an international girls trip planned with my mom next month, and another one with high school girlfriends later this year.

Who knows how much longer my mom will be able to travel, and a big part of retiring now was to take advantage of whatever time we all have left. Similarly, we are prioritizing activities that are more physically demanding now (surf school, hiking Machu Picchu, etc.).

We are beholden to school schedules for the next 4 years, so we won’t have full flexibility. Going into it, I wasn’t sure if 7 weeks of travel would be too much, but I was surprised that it didn’t feel too long.

I was worried we’d kill each other, but we had a blast! Once we are empty-nesters, we’ll likely test out longer, slow travel trips (e.g. 1-3 month rentals).

Some of the longer-term items on my list to explore:

• Learn to sail liveaboard catamaran course
• Walk the Camino de Santiago
• Live for a month+ on an island and in a ski town
• Volunteer
• Board work
• Sommelier school
• Learn to sew/quilt/knit
• Learn another language / “study abroad”
• Repositioning cruises or Semester at Sea
• Many, many house projects

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

No huge concerns, but a few things top of mind that we are discussing:

• Healthcare – plan to use COBRA through the end of the year as we have hit the deductible this year and will assess whether to continue or move to ACA next year. I am concerned about the current administration impacting ACA plans. I’m not expecting a subsidy, but do need access to plans.
• US vs. Intl Stock exposure – I’m curious what the ESI hive thinks about this. My husband is bullish on international stocks while I’m more comfortable with the US long-term, despite current high valuations. We are sitting on a pile of cash that needs to be reinvested and are having trouble pulling the trigger.
• Roth Conversions – need to figure out strategy & plan now that we will have lower income. Will likely start next year.
• Social Connections – I’ve had no issue staying busy and social so far, but I will be interested to see if I feel lonely and isolated once I’m in more of a day-to-day routine, given most of our friends work full-time.

MISCELLANEOUS

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

I had a slightly unusual childhood in that I was extremely privileged but exposed to a lot of wealth and poverty. I had a solidly upper-middle-class upbringing, but went to a very diverse school and had friends living in housing projects and others with private jets.

I realized very early on what type of life I wanted to create for myself and appreciated what my parents were able to give us. My mom came from a very wealthy family that was terrible with money, and the stereotypical rags-to-riches-to-rags in 3 generations perfectly describes them.

She was raised in a mansion with servants, but she and her siblings are the 3rd generation spending the last of it, and I expect no inheritance. My father was the oldest of 8 and put himself through college while working full-time and helping support his younger siblings.

He was ultimately a senior executive and traveled extensively for work and brought my siblings and me along to many events (Michelin Star restaurants, big sporting events, fancy resorts, private jets, etc.). I saw the whole gamut and knew what I aspired to.

I also saw how hard my father worked to achieve what he did, and also how easy it was for my mom’s family to fritter it away.

I was always driven to excel in school and work, but I’m not sure when it “clicked” other than I always knew I wanted to succeed in my career, be independent and self-sufficient, and have the means to afford some of those things we were exposed to.

I suppose there is also an element of fear of being poor that drove me to earn and accumulate a big safety net.

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

My Parents! There were certainly ups and downs, but they provided an amazing childhood with lots of love and set me up to achieve what I have accomplished.

I don’t take any of that for granted.

Mom – she never worked for pay and was an amazing stay-at-home parent and a role model for me as a mother. My dad travelled a lot, so she basically raised us.

My parents divorced in her late 40s, and had she not inherited money, I have no idea what she would have done.

Since then, I’ve never wanted to be reliant on anyone else and always worked to be financially independent w/o my partner. If need be, I can take care of myself and my kids on my own.

I never wanted to be stuck in a job or a relationship due to financial handcuffs. My mom was very fortunate; many women are not and are left holding the bag in these situations.

Dad – As mentioned, he exposed us to a ton of really cool experiences and had an exceptional work ethic. I remember little lessons along the way, like him explaining (while we mowed the lawn) needing to save money in case the lawn mower broke and you had to buy a new one.

He said he would mortgage the house if needed to send us to Harvard and that we should aim for the stars. He was also tough on us and didn’t baby us.

I always played sports with the boys and was taught to “throw like a man and not a little girl” (I know not PC today), but now appreciate the toughening up.

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?

• Simple Path to Wealth (JL Collins) – I give it to every high school grad but I think college grads might be a better age/maturity level.
• The Psychology of Money (Morgan Housel)
• Millionaire Next Door (Thomas Stanley)
• Your Money or Your Life (Vicki Robin)

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

Yes, we support various causes financially and plan to support them with time as well, now that we have more to offer.

Our current giving is low as a percent of net income, but we plan to increase it going forward as we have more confidence in our money not running out.

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?

Yes, but unsure how much. We plan to fund 4 years of undergrad to set them up to support themselves, and anything beyond that is on them to pay for.

My parents did this for me, which was a huge head start that I am grateful for. Another goal is to never become a burden on them, which means never coming close to running out of money, so we should have money left over.

Right now, I have earmarked 30% of invested assets as a buffer. We also haven’t yet determined how much to leave to them versus charities.

Until they are launched, it’s all going to them, but that may change over time.

Finally, assuming we are able to do so, I’d love to be able to help them out along the way if needed (e.g. house downpayment).

Bonus Question: Additional thoughts on geo-arbitrage?

There is a lot written in the FIRE space about geo-arbitrage to save money. I am not opposed to moving to a lower COL location and view it as another margin of safety in our plan if the need arose.

But I have a few strong opinions on this:

• Impact on quality of life: I don’t take lightly giving up the friends and relationships we have built in our current location, despite having no family nearby. Moving and starting over is a lot of work and reinvestment in social connections. I’m ok paying higher taxes and COL when that comes with all a location has to offer – from weather to entertainment to medical access to transportation options (public transit + ride shares) to a strong social network.
• Living in the city is not necessarily more expensive than the suburbs. The biggest difference is the cost of housing for the size of the space, and less outdoor space. Beyond that, you eliminate so many expenses and the work/added complexity that comes with owning a house: monthly commuting costs on expensive trains or ferries, landscaping, filling & cleaning a large space, need for multiple cars, childcare that can drive kids to activities, etc. We locked up our apartment and left for 2 months this summer to travel, and had a doorman to accept packages and check on the apartment/water plants. Easy! Leaky roof? Guess who deals with it? Not me! While we have less space, our cost of living in the city is less than many of our friends, with an equivalent cost of home in the burbs.
• When it comes to retiring overseas, I think it’s a great option when you’re younger and more self-sufficient, but have a plan for when you are older and need more help. We are dealing with aging parents in a low COL paradise that is amazing to visit, but really insufficient with assisted living/nursing home type care, as the custom is for kids to take parents into their homes. You might be able to afford full-time in-home care, but will you have the mental ability to interview, pay, and manage household staff? Just something to think about as we are currently living it, and it’s not easy to deal with from overseas.

Finally, another huge thanks to ESI, the readers who have shared their stories, and all the other money bloggers out there helping to educate the rest of us.

Your work is changing lives (mine included!) for the better. Thank you!