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.
My questions are in bold italics and his responses follow in black.
Let’s get started…
How old are you (and spouse if applicable, plus how long you’ve been married)?
Hi! My wife and I are both 48. We’ve been married for 18 years.
Do you have kids/family (if so, how old are they)?
We have one daughter who’s 16.
What area of the country do you live in (and urban or rural)?
We live in a suburban area outside LA…and yes, it’s just as absurdly overpriced as you think it is.
But it’s certainly nice! I’ll give it that.
What is your current net worth?
Our current net worth is $4.2 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?
- $2.8M is in after-tax brokerage accounts
- $900k is in retirement accounts
- $400k is in home equity
- The remaining $100k is in various assets like cars and whatnot
The after-tax brokerage and retirement accounts are about 54% in US equities, 20% in foreign equities, 11% in bonds, 10% in alternatives (REITs, peer to peer, etc.), and 5% in cash.
We don’t own any individual stocks, everything is in low fee ETFs.
What is your job?
I was an RF engineer and my wife worked as an actuary until the birth of our daughter.
I guess now you could say we’re retired although I expect we’ll end up doing something we’re passionate about at some point.
Both of us would like to try a new line of work just to spice things up.
What is your annual income?
My last salary was $240k and then there’s various bonuses and incentives beyond that…call it $280k.
That’s about the average for the last 10 years. That sounds impressive but taxes on that bracket are devastating.
Tell us about your income performance over time. What was the starting salary of your first job and how did it grow from there?
My first engineering job back in the early 90’s paid $30k a year and a few years in I was more like $45k.
I hated it and questioned my career choice. But then I discovered the glorious world of contract engineering for defense companies. There’s virtually no benefits but there’s lots and lots of cash.
I went from $45k to $150k AND a job I loved…plus you just get paid to do the work and there’s no politics or those stupid annual reviews. It was fantastic!
For about 10 years I chased the money all around the country charging higher and higher rates as my experience grew.
Ultimately, I merged back into a more “normal” career path which was fun for a while but finally wore thin.
What tips do you have for others who want to grow their income?
My somewhat contrarian advice is don’t buy a house when you’re young. It’ll suck up your youth, time, and money but most importantly it’s a barrier to opportunity. You need to be able to go where the money is.
Later, when you have kids and need the stability then sure, buy a house. But don’t bolt yourself down right out of the gate.
Everyone thinks where they live is “the best” having never really experienced anywhere else. It’s a big world, go have fun!
And lastly, if you’re not passionate about what you’re doing you won’t grow and nor will your income. Find something you love and the money will come later.
What’s your work-life balance look like?
Excellent! This is one of the things I’m most proud of.
Sure, back in the day I had my share of 80 hour weeks but that was when I was living out of a suitcase in some dump by myself. When my wife finally joined me on my contracts the hours went down to 60/week or so.
I was home virtually every night by 6pm and was able to be extremely involved with our daughter since she was born. I’m not a fan of being away from the family at all, even for a few days.
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 investments return about $85k/year in dividends and interest. I’m not investing specifically to maximize dividends but all of our ETFs spit out some.
Anything more we need will come via draw down, at least in the short term.
What is your annual spending?
OK, this is a bit embarrassing. It’s like $150,000/year. But I have excuses!
What are the main categories (expenses) this spending breaks into?
It’s the house!
I don’t get a lot of jollies out of houses and mine is literally $1M! LA is nuts on the house front. You hear $1M and you think palace. But no, think $150k in Iowa. The house sucks up over 1/3 of our expenses despite being at a low rate.
If you have kids you have to buy in a decent school district and we got a great one. When we’re empty nest in a few years I’m dumping it like a hot potato. And yes, I could pay it off but at 3.25% why would I?
Beyond the house, our biggest single expense would be “dining and travel” which includes going out to eat a few times a week and lots of vacations. Sometimes we vacation locally, sometimes overseas.
Do you have a budget? If so, how do you implement it?
We don’t really have a budget but that being said, both us watch what we spend.
We don’t have fancy cars and never will. We rarely buy expensive material things, preferring to spend on experiences instead.
Right now, my wife and I are going to great lengths to extend the life of our food processor another year or two via duct tape. But I don’t blink at dropping $6k for a European vacation.
What percentage of your gross income do you save and how has that changed over time?
When we were younger? Jeez, almost all of it. Like maybe 80%.
Our expenses were absurdly small compared to the income.
Since our daughter was born I’ll admit to a fair amount of lifestyle bloat compared to the cardboard box furniture days but we still saved over 50%.
What is your favorite thing to spend money on/your secret splurge?
Travel and doing stuff! I’m particularly bad with getting bored in the house and am constantly semi-dragging my family on some sort of activity.
My wife likes clothes but not insanely, maybe $250/month.
What is your investment philosophy/plan?
For about 18 years I’ve been buy and hold with low cost ETFs. Mostly stock with bonds returning so little lately.
I rebalance a few times a year. Very boring really.
What has been your best investment?
OK, so normally I ride through market bumps with no alteration of blood pressure. I’ve seen the movie many times.
But in 2008 when the market dropped from 14,000 to 11,000 in a few days I panicked and sold some stuff. Not everything, but maybe 1/3 or so.
The following March I had all this cash sitting around and was feeling sorry for myself. I literally dumped it all back in on its lowest day by shear dumb luck.
I’d have to look it up but the DOW was like 6000 and some magazine (“Time”, maybe) had a cover saying “DOW 5000?” That random decision was worth well over $1M.
What has been your worst investment?
Most of the 90’s.
Yes, I saved a lot but back then it was all about the watercooler stock tip and/or mutual funds with ridiculous fees.
It turns out I’m not a good stock picker nor am I good at market timing. But hey! Who really is?
I’d pour over Barron’s or whatever like a miniature Warren Buffett to no avail. Some of the companies I’d pick did OK, most did not. I’d have a lot more if I’d either sought or stumbled upon the right advice.
What’s been your overall return?
My portfolio closely tracks the S&P500….as goes it, so goes I. I trail it a bit due to bonds but not by much.
How often do you monitor/review your portfolio?
Every single day. Personal Capital is the best.
How did you accumulate your net worth?
My wife and I didn’t inherit anything.
I’d say in our case the accumulation was 50% due to brute force and 50% due to investments.
But really the whole key is investing early and for that you need to make more than you spend. Preferably a lot more but any amount is worthwhile.
Find joy in experiences rather than just stuff. Stuff is a short-term fix but experiences last forever. And experiences can be super cheap or even free!
If you can change your attitude on what’s really important, everything else will follow.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I’ve acutely felt all the financial crises of the past 25 years. I never balked except for that one fortuitous time in 2008.
Just about everyone works towards things getting better and the market is the very manifestation of that desire. Who would bet against it? I understand trying to divine a short-term decline if you dare, but over time? Like 10 years? No one is shorting that. I pucker a bit on those days I lose $100k but I’m super optimistic long term.
What are you currently doing to maintain/grow your net worth?
Not much. I rebalance and that’s about it. I’ll probably ultimately get bored and then the answer will change.
Do you have a target net worth you are trying to attain?
I thought $1M would be neat and then I got there and thought $2M would be a good goal.
Then it was $3M, then it was $4M, now it’s $5M. It’s arbitrary and never really stops.
My wife still laughs at me about it. But let me answer in another way. If we were given $100M not much would change. We’d have the same house with slightly nicer cars and we’d fly business class.
So, although more is better it’s not that important.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I think I was 35. I ran around doing a jig and my wife didn’t give a hoot. It was kind of funny.
Then in 2009 for a brief period I wasn’t a millionaire anymore. That was unfun.
I can’t say there were any behavior shifts due to the money.
The kid is a different story and I’m so glad we aligned more with “normal” people while raising her. But when she’s off to college we’ll go back to our comfy 1000 ft^2 lifestyle.
What money mistakes have you made along the way that others can learn from?
Many mistakes! I screwed up an entire decade!
Also, I can’t say I’m terribly pleased with my current mortgage.
If I had to do it all over again I definitely would’ve done a better job in the 90’s. And while I’ve made money on the house I’m in now I just can’t stand the lack of liquidity and the monthly cost. Houses come with lots of expenses and transaction costs that some homeowners pretend don’t exist.
If you had to give advice to ESI Money readers about how to become wealthy, what would it be?
This is a tough one.
Sure, working hard and making a lot helps but there’s more to it than that. I can say I’ve never really cared that much about material things. Even as a kid I valued my time with my friends way more than any toy. If you’re already wired to not crave “stuff” then chances are you’re already wealthy or well on your way. If you do crave “stuff” and can’t control it then you’ll forever just be expanding to fill your tank, regardless of how much you make.
For me, I wanted the money for the money’s sake, not for what it could buy. When I see a Ferrari drive by it’s enough for me to think “I could buy that if I wanted” and then I’m done. The purpose of accumulating the money has always been to give my wife and I control over our own destiny.
What are your plans for the future regarding lifestyle?
Well, for sure we’re going to downsize when the kid is safely ensconced in college.
I see no reason why two people and a couple dogs can’t be perfectly happy in 1000-1200 ft^2….and if it’s a townhouse or condo we’ll even have a pool!
Also, both of us will seek out some rewarding secondary career.
What are your retirement plans?
I expect we’ll continue to travel a lot and exercise regularly. Both of us are in great health but that can change so we definitely want to do and see everything we can while we can.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Not much. A worldwide financial catastrophe would be unpleasant but it looks like our long-term spending minus the house and minus the kid is like $75,000.
So, worst case I buy a nice little place outright and we should be able to pull that out easily enough, even if you count Social Security as zero.
Plus, we expect some income from secondary careers as well.
How did you learn about finances and at what age did it ‘click’? Was it from family, books, forced to learn as wealth grew, etc.?
I didn’t learn from my parents. They were in the hands of the really bad full-service brokers of old and got the expected result.
There was a book I read in my early 20’s that explained the basics.
As for finally settling on buying and holding low cost ETFs I don’t recall but probably some financial site. This was around the year 2000.
I’ve always been self-directed, though. I’m hard wired to do everything myself.
Who inspired you to excel in life? Who are your heroes?
I’m not really the kind of guy that has heroes but I do have an older friend whose life outlook is very similar to mine. To me, he has just the right mix of cynicism and optimism. Since he’s older I’ve been able to get a sneak peek at my own future which has proven handy.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Some but not much beyond the usual Goodwill yearly load. I expect to give more later in life when our expenses are less.
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?
It’s not really a planned thing but it’ll happen. Statistically speaking it’s likely my wife and I will leave a substantial estate.
Our assets are held in a trust my wife and I set up and everything goes to our one child but not until she’s at least 30. I was an idiot in my early teens and 20’s. I’m not condoning Justin Bieber wrapping a Lamborghini around a street light but let’s just say I understand it. If someone gave me that kind of scratch at that age I’d probably be dead.
Our girl is very responsible but my wife and I feel she should make her own way for a while.