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)?
Do you have kids/family (if so, how old are they)?
Single, never married, no kids. (Still hoping she’s out there somewhere.)
What area of the country do you live in (and urban or rural)?
Large, growing Midwestern city.
What is your current net worth?
Right about $1.1 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?
- Cash: $24,000
- Present value of Public Sector Defined Benefit Account: $305,000
- 457 Account #1: $72,000
- 457 Account #2: $218,000
- Roth IRA: $57,000
- Vanguard Brokerage Account: $155,000
- 529 Account for my nephew: $9,500
- Home: $440,000
- Car and other property: $33,000
- Mortgage: $210,000
That’s it, really. I just this month paid off my car loan, nearly two years early, and pay off my credit cards in full every month.
What is your job?
I’m in an executive-level position in local government. I’ve been in local government for more than 20 years, and am proud of my profession.
What is your annual income?
Just over $150,000.
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?
I’ve always worked. My first job growing up was a daily morning paper route, which taught me a few valuable lessons, not the least of which was the value in getting up – every day – and going to work. I came from a modest middle class family, so I learned from a very early age that in order to have spending money I had to go work for it.
All through high school and college, I worked to put some money in my pocket. I worked for many years at a local gas station, starting at age 14 by pulling weeds and painting curbs.
Through college and immediately after (I graduated in the early 1990s, during the “jobless recovery”) I bartended and barbacked to earn a living while figuring out what to do with my life.
After volunteering on my first political campaign in my mid 20s – after all, bartending left my days free – the victorious candidate helped me get my first local government job, for the princely sum of $27,000 a year.
Luckily, only a few months after I started, my state had created a program by which they would pay for government employees to continue their education, provided it was job-related. I started working towards my graduate degree in public affairs in the evenings, one or two classes at a time, and after several years earned my masters from a very reputable program in my field.
A couple of promotions later, I landed a job for the big-city mayor of my city. This eventually led to a job with a second big-city mayor in my state a couple of hours away (my current home), and one final promotion led to my current local government executive level job, a position I have held for eight years. I didn’t hit six figures in salary until this current job.
What tips do you have for others who want to grow their career-related income?
There have been many good pieces of advice from others in this space, so I will just highlight a few from my story:
- When starting out, never underestimate the value of volunteering in your field to learn and to make connections. My campaign volunteering directly led to my first professional job.
- Take advantage of any company programs to improve your knowledge and skills, be it training, certifications or tuition reimbursement.
- Don’t be afraid to relocate to advance your career, if you can. I moved from one city to another to improve my career prospects and it has paid significant dividends.
- Work hard, deliver when expected, seek mentors in your profession, and stretch to achieve.
- Finally, remember that EVERYONE has a setback at one time or another in their careers. It’s all about how you learn, grow and respond to your failures that will lead to future successes.
What’s your work-life balance look like?
It’s actually pretty balanced. I work 45-50 hours a week, which includes the occasional evening meetings or take-home work, but that leaves me plenty of time to have outside interests.
I am technically on call 24/7 for significant emergencies (or the needs of my elected officials), but this rarely happens.
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?
I’ve earned almost all my income from being a salaried employee.
When I moved, I did keep my house in my old city as a rental property for several years, but did not enjoy being a landlord (especially from two hours away) so I sold it. I appreciate and admire those that build their wealth through property ownership – it’s just not for me.
What is your annual spending?
I generally spend about $4,000 a month on essentials; multiply that by 12 and add a few thousand dollars annually for travel and other one-time expenses, and I’m spending about $50,000-$55,000 annually.
As I scratch this number out, I’m a little surprised – I guess that’s not a lot for my salary.
What are the main categories (expenses) this spending breaks into?
Let’s see…my monthly spending is as follows (and it’s not a very sophisticated budgeting system, ha):
- $1,825 Housing – mortgage P&I (30-year fixed at 3.5%), property taxes and condo association fee.
- $450 Utilities – gas, electric, cable and cell phone. Someday when I actually cut the cable cord this will go down.
- $120 Insurance – auto insurance and rental insurance (my home is a condo townhouse; I pay rental insurance for the inside and the condo association fee covers the outside).
- $1,600 Credit Card – this includes just about everything else: food, restaurants, gas, clothing, entertainment, etc. I don’t budget in any more detail than this; however, I know that if my credit card spending is generally in this range then I’m not overspending. If I’m trending significantly over, I throttle back my spending.
Do you have a budget? If so, how do you implement it?
As you can probably tell from above, not really.
I tend to pay my bills and move money into savings or investments on the days I get paid, and live off the rest. The scarcity model at work, I suppose.
What percentage of your gross income do you save and how has that changed over time?
I save a significant percentage of my salary. I currently save in the neighborhood of 27-32% annually, and that doesn’t include the mandatory 10% I put into my pension fund (more on that later).
What is your favorite thing to spend money on/your secret splurge?
I’m willing to spend money on nice things if I want them – spent $2,200 on a nice road bike, for example.
But my secret splurge would have to be on books – I’m an avid reader and like to own the books I read.
What is your investment philosophy/plan?
I’m squarely in the buy and hold, low-cost index fund camp. All of my 457, Roth IRA and brokerage account investments are in Vanguard funds.
What has been your best investment?
Although I don’t think of it as solely as an investment, my current home has appreciated dramatically in just over five years. I bought it in the early spring of 2013 for $287,500, just before the housing market in my city really took off. It was built in 2008, right as the market tanked, so it was rented out for several years. I’m the first owner, and got a great deal. Had I waited even a few months later, I would have been priced out of the place.
What has been your worst investment?
Conversely, I bought my first house in my former city in mid-2005, near the top of the market. I sold it nine years later, after it had appreciated a grand total of $8,000. Frankly, I was happy I didn’t lose money on the deal.
What’s been your overall return?
Because I received a big raise in 2010 when I moved into my current job, my accelerated savings and investments have ridden the bull market wave this past decade. My 457 annual statements from the end of 2017 tell me what I have earned over time; account #1 has earned a whopping 14% annually over the last 10 years and account #2 has earned 14.8% over the last five (the account is not yet 10 years old).
These accounts currently have about 75% in stock funds (70% domestic, 30% international), 22% in bond funds and 3% in a stable value fund.
My brokerage accounts have earned less, as they have been more conservative in nature at 65% stock funds, 35% bond funds, but have earned about 8% over the last five years.
I am fully aware that this has been a long bull market and am planning to put more of my after-tax dollars in cash in the coming months to weather any future storm and perhaps buy a little on a dip. However, with my pension program I can afford to take higher risk with my deferred comp investments and so will keep my current contributions and allocations through thick and thin.
I do rebalance on an annual basis faithfully and have slowly, gradually decreased my stock allocation over time as I’ve gotten older.
How often do you monitor/review your portfolio?
Several times a week, as I run all my accounts through Mint.com and can monitor both my investments and my spending.
How did you accumulate your net worth?
I’m a prime example of “slow and steady” winning the race. I invest on a regular basis, keep my costs low, rebalance annually and go about my day.
I have approximately $500,000 in total investable assets, between pre-tax, after-tax and tax-free. The remainder of my wealth comes from my home equity and the value of my pension account. No inheritances and, sadly, no lottery jackpots.
Now would be a good time to dive into the pension account in more detail. It’s always a little difficult to calculate the true value of a pension; for the purposes of my net worth balance sheet, I only use the literal amount in my account. The $305,000 includes the sum total of my annual contributions over the course of my public sector career (10% of my pay), any interest earned, and the amount matched by my employer (because I am vested, it is 6.67% of my pay). Should something happen to me before I retire, my beneficiaries would receive that total amount.
The value of the pension stands to be significantly more than what is just in the account, however. I have been in the system nearly 21 years; to reach “full” retirement I need 32 years. To run the model, let’s assume I just simply stay in my current job for 11 more years (I hope not), earn nothing more than a 2% cost-of-living increase annually (ditto), and retire just before my 59th birthday with my 32 years of service. Based on just those assumptions, I would earn a pension in the neighborhood of $10,000 a month, or $120,000 a year. Reversing the 4% rule, that’s the equivalent of having $3 million invested! It is a pretty damn good deal.
There are a couple of caveats, however: first, my state’s pension system does not participate in the Social Security program; I do not pay the Social Security tax, but I also do not earn credits for my years in public service. The practical impact of this is that any Social Security I receive from employment in my youth will be negligible. That’s an important consideration when doing retirement planning.
The second caveat is this: because of the value of the pension, I’m going to have some tough decisions ahead in my career when I consider my next professional step. Because the maximum value of the pension benefit is only realized if I reach the “full” retirement service of 32 years, and the payment is significantly less if I retire with fewer years than that, there is a real strong incentive to stay in the system – but, this may limit my career options. It’s something I am currently struggling with as I consider my next career move. (I would love to hear from fellow readers who have faced this choice in their career.)
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
No significant bumps; but, like many others that have been interviewed, I wish I would have started saving sooner.
In particular, I did not start a Roth IRA until 2012. Next year my state’s 457 plan intends to introduce a Roth option; given the new tax law and my being in the 24% tax bracket, I intend to take full advantage.
My goal is to have real balance between pre-tax, Roth and brokerage investments when I retire, with as much in Roth vehicles as I can.
What are you currently doing to maintain/grow your net worth?
I keep saving away, and continue to educate myself on investing and financial planning.
Do you have a target net worth you are trying to attain?
I hope to be in the $1.75-$2 million range in investable assets when I reach my pension retirement age of 59, and if my current savings rate holds (life does happen), I should get there.
At that point, I can decide to keep going in my profession, try something new in my career or ride off into the retirement sunset.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I hit $1 million in net worth on Thanksgiving Day, 2017, when my paycheck deposited into my checking account. I was 46.
Not enough time to significantly impact my behavior just yet, haha.
What money mistakes have you made along the way that others can learn from?
Start young, or encourage those around you to start as soon as possible. I try to tell that to my younger colleagues whenever they’ll listen to me and have encouraged my siblings to do the same.
One of the things I’m proud of is helping my mom and siblings with their planning; in fact, after several conversations I helped my mom break free from her “guy” and his high-cost investments and transition everything over to Vanguard.
What advice do you have for ESI Money readers on how to become wealthy?
If you’ve read this far, I’m guessing you know the answers. 🙂
There are many different ways to become wealthy, but the real trick is to have the discipline to stick to whatever game plan you’ve put together.
What are your plans for the future regarding lifestyle?
I’m a ways away from considering what to do in retirement; for me, it’s all about providing myself with options when decision-time comes.
I will have the flexibility to retire before 60 if I wish.
As for lifestyle now, I’m quite comfortable with the way things are, and I still have additional professional goals I’d like to accomplish. I’m fortunate in that I can choose to occasionally splurge for the latest toy or hop on a plane for a fun weekend.
What are your retirement plans?
My mom is a great example here. She retired from her company financially secure after a buyout at 64; she’s now 71 but is extremely active in her life, through her parish, her friends and her volunteer roles – she’s actually taken on non-profit board leadership and development roles since retiring, while still having time to travel and enjoy life. That seems like a good model to me.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
I’ll let you all know when I get there.
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 have distinct memories of having a passport savings account with the bank up the street, riding my bike up the hill to deposit my paper route earnings and watching that account grow. So I guess it clicked pretty early.
My grandparents, having lived through the Great Depression, were constantly harping to their grandchildren about the value of saving.
I had one detour period in my early 20s when I discovered the joy of spending on credit cards, but that never got too far out of hand.
Who inspired you to excel in life? Who are your heroes?
I have several personal and political heroes. What has been most important to me, however, has been to constantly seek out important personal and professional mentors to help navigate both my career and life. Likewise, I try my best to be a mentor to those who seek me out as well. I’m getting to that age.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I do give to charity, but not a large amount. My personal goal is to make significant giving part of my retirement plan.
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?
I do have at least one eyeball on wealth planning beyond my retirement, and in the coming years will begin to prepare more carefully.
It will likely include a combination of charitable giving and wealth planning for the rest of my family. Without a spouse or children at this point in my life, I will say this: my little nephew is going to be one lucky kid. Ha.