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.
Be sure to read all the way to the end as he has questions. Yes, a millionaire with questions. Refreshing, isn’t it? 😉
I’ll warn you, it’s a long one. But there are so many truth-bombs in this one that the value is through the roof! Well worth the complete read IMO.
My questions are in bold italics and his responses follow in black.
Let’s get started…
OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
My wife and I are both 52 years old and we have been married for 24 years.
Do you have kids/family (if so, how old are they)?
We have 3 kids – 2 daughters in college (one senior, one junior as of Fall 2018) and a son who is a freshman in High School.
What area of the country do you live in (and urban or rural)?
We live in the suburbs of Washington, DC.
What is your current net worth?
Our current net worth is $4.56 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?
- $2.488 million is managed by Schwab ($246.5K of that is in an IRA)(This is split between managed funds, mutual funds, ETFs, across large cap, small cap and munis)
- $162K is in an E*trade account which I manage, (68.7K of that are in additional IRAs)
- $863K is in additional tax deferred retirement accounts, all in index funds
- $1,045K is in home equity (Calculated as 0.9 x Zillow estimate price less mortgage)
EARN
What is your job?
I am a Senior Director of Technology Sales.
I earn $221K per year with an additional $90K+ available as commission.
My wife is a family counsellor and she earns about $70K per year.
What is your annual income?
In 2017 our taxable income was $464K, about $333K of that came from earned income, and the rest from dividends and realized capital gains in our taxable accounts.
After tax payments, and the increase in our tax-free accounts, I estimate that our net worth increased by almost $500K over the course of 2017.
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?
My first salary in 1988 at age 22 was about $10,500 and I was working in technology hardware sales. It was a very aggressive sales environment and I left it after 6 months to take another job with a company that was more technology service oriented. They paid me $17,000 per year and I had about $5,000 of debt.
Within 5 years my salary was about $46,000. I paid the debt and had about $41,000 saved – $15,000 in a tax free retirement account and $26,000 in cash.
My wife and I got married in 1994 and I spent the entire $26K on our wedding and honeymoon.
Within another 18 months or so I had saved an additional $20,000 and in late 1995 we bought our first house for about $265K, with the $20K as a deposit.
I stayed with the same company until 2005 and by then my total package – salary, bonus, stock options, was probably close to $500K per year.
I had been with the company for over 16 years and for most of that I had been travelling – as Millionaire Interview 72 so wonderfully said “Shooting myself out of a cannon at 4.00 am Monday and getting back 9.00 pm Thursday or Friday.”
My kids were young, I only got to see them at weekends, I was missing out on a lot and it was causing great stress in our marriage. I felt we did not need the money (we were saving a lot), I looked at all the guys 5 – 10 years older than me (and yes – most of them were guys) and they were all way richer than me, but mostly divorced, and – outside of work which they excelled at – mostly very unhappy, drinking too much, engaging in other vices and spending their hard-earned money on things like $25K wristwatches and $125K sports cars. (Q: what is it when a middle aged man buys an expensive sports car? A: Men-o-porsche).
I decided that was not the future I wanted. I wanted to be with my family – so I left the $500K job and took a job for $180K in the industry association/ advocacy sector. No travel, a humane working environment and interesting and challenging work. I took a big salary cut – but I was also working a 30-35 hour week with minimal travel, not a 90 – 120 hour week with constant travel.
I spent about 10 years at the advocacy group – some years we got great funding from sponsors, and bonuses were paid. There was a 3 – 4% salary increase every year, when I left it my salary was actually closer to $300K. The good times could not continue and we lost our major sponsors and it closed down. I took my current job back in technology sales about 2 years ago.
What tips do you have for others who want to grow their career-related income?
I am trying to do this from the perspective of my own career and what I learned – although a lot of it was pure dumb luck:
1. Get into a growth company or a growth sector.
I was lucky I joined a technology company that was in super-growth mode, and I was able to stay there a long time. The company philosophy was to reward effort and performance – the harder you worked the more promotions / bonuses etc you got – and because we were always in growth mode there was always a lot of opportunity to grow and be challenged. The other side of the coin is: if you are working as hard as you can and it is not being recognized, get out and find something else.
2. Embrace change and new challenges.
If you have mastered one skill, focus on developing another. Focus on new challenges and putting yourself in difficult situations. Be the person who volunteers for the difficult / unpleasant/risky assignments. I did that multiple times in my career and my success in each case transformed my career. Of course I could have screwed up each time and got fired, but I guess I got lucky.
3. Be excellent at relationship management and development.
Get to know, understand and appreciate everyone around you. Yes, the top performers, but even those who you (or others) see as non-performers. Be the person who helps them become good performers. Keep in touch with every boss, every client, every co-worker, every supplier. Figure out what you can learn from them and what you can do to help them – and don’t ask for anything in return. It will come back to you.
4. If you want to be promoted to the next level behave as if you already have that job.
5. Find and actively cultivate a network of mentors – not just one or two – as many as you can possibly manage. Reach out regularly and purposefully.
6. Sharpen the saw.
Be good to yourself, exercise, enjoy your friends and family, travel, live a healthy, full life. Read – not just books about your field or industry, but novels, books about history, biography, politics, economics, philosophy, science, medicine, etc. Become a smart, well-read, educated person. Be interesting and interested. Get a subscription to “The Economist.” Cultivate activities and interests outside of the work environment.
7. Find a way to enjoy your work and see a meaningful purpose in it.
It’s really tough to work 100 hour weeks and to excel if you do not genuinely enjoy the challenges of the work you are doing and the people you are doing it with. Find the positive aspects and embrace them – and let go of the negative aspects (although I was only able to do that for so long).
8. Follow the money.
Do you understand, for your company, the drivers of customer acquisition, customer retention and customer growth? How do you directly or indirectly contribute to those drivers? The greater your contribution – and the visibility and measurement of that contribution – the greater your success will be.
9. Be happy, positive, and authentic.
I read somewhere that someone (maybe Steven Covey?) had done an analysis of all the studies of happiness across all cultures and geographies, and he found that across all of them there were three fundamental and key drivers / contributors to a person’s happiness:
- Positive relationships with friends and family
- Work that you enjoy and find purpose and meaning in
- A spiritual and / or service component to your life
These are three things that everyone has control of. It is often a hard, tough, unfriendly, competitive world – full of unpleasant people – but focusing on these three things and making meaningful, measurable progress on them can and will make you happier. Notice that there is no significant relationship between money and happiness. And be your authentic self – don’t pretend to be someone or something you are not. Here endeth the lesson.
What’s your work-life balance look like?
Right now it is awesome. I work mainly from home and I travel out of town only 1 or 2 nights per week.
A boss I worked for years ago gave me good advice – you are the only person who can decide what the right work-life balance actually is – no-one else can decide that for you.
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?
Only the dividends and capital gains from my taxable accounts – don’t have a side hustle and don’t have any real estate apart from my home.
SAVE
What is your annual spending?
This is tough. We spend way too much as right now we have two kids in college.
Of our salaries we really only save the 401k contributions and of the gains in the taxable account – which last year were about $400K, of which $200K were realized and taxable.
We spent about $200K. So we need to do a lot better in the savings department.
I estimate we are spending about $400K – $450K per year – that includes about $135K in college expenses.
What are the main categories (expenses) this spending breaks into?
This is my estimate for 2017:
College for the two oldest kids: $135K
Estimated living expenses $130K (mortgage, property tax, utilities, cars, food, insurance, etc)
I realize our living expenses are quite a lot compared to most of your interviewees and I have a lot of work to do to try and bring them down.
To give you an idea of some of the components of this we spend $16K a year on property tax on our home, $11K on a lovely lady who comes twice a week to clean our house from top to bottom and do all the laundry, and probably about $6 K on the care of our pets.
Taxes: $125K
Vacations: $25K
Savings: $30K
Total 2017 spending: $445K
Do you have a budget? If so, how do you implement it?
NO! We do not have a budget!
This year we had $20K of home repairs to do – so no vacations this year…..
What percentage of your gross income do you save and how has that changed over time?
Early in my career I was a good saver – saving 50 – 60% of my salary – that changed when we bought a house and had kids.
I have always maxed out my 401k.
When I did get stock options I always looked at those as a windfall and saved those.
When I was awarded the stock options and they vested I saved all of those, so I was probably saving about 50% of my total income between 2000 and 2005.
That allowed me to downsize my job and when I took the reduced salary job my savings rate from my salary also reduced to about 15%.
What is your favorite thing to spend money on/your secret splurge?
Two big things – and they are not so secret:
1. Vacations. In the last 15 years I have probably spent $20K – $50K a year on family vacations. My kids have been to over 35 countries and 5 continents. Great times, experiences and memories.
2. Our home. We have always maxed out on the mortgage we could afford in order to have the nicest house we could have in the best neighborhood. We never looked at it as a financial investment but as a quality of life investment. It is our temple, it is where we live our lives, it is my safe haven from this turbulent world.
INVEST
What is your investment philosophy/plan?
I don’t really have one.
When all my stock options vested and the sales restrictions expired I set up an account with Schwab on the recommendation of a co-worker. This was about 9 years ago.
I did not feel smart or confident enough to manage it myself – even though I knew about index funds. So now I have a collection of mutual funds and ETFs for which I pay Schwab 1% a year and there are unpredictable tax consequences.
My E*trade account is mainly individual stocks and the other retirement accounts are all in index funds.
What has been your best investment?
By 1998 I had saved $30K, with the intention of buying a new car for cash. I read an article in The Economist about a new mobile initiative that Motorola, Oracle and Qualcomm were embarking on, so on a complete whim, I did not buy a new car. I kept my $5K clunker and spent $30K on those stocks and a few others.
I think within 2 years QCOM had increased by a factor of 8, the other stocks (late 90 tech stocks) had done well, and my $30K grew to about $200K.
At that point the house we had paid $265K for in 1995 was now worth about $450K, and my wife wanted to buy a bigger house in a better neighborhood. I was travelling all the time, and she was at home with the kids, so I thought it was only fair to do that.
I liquidated the stocks to buy the new house about 3 weeks before the March 2000 dotcom crash. Pure dumb luck. So we bought a house for $1,065K, with about $400K down, and a $665K mortgage, when I was earning about $200K (and driving a $5K clunker).
What has been your worst investment?
The great financier Bernard Baruch once said “I made all my money by selling too soon” and I have certainly done that over the years – but I cannot complain.
In 2005 I liquidated some of my options and had a friend of a friend who was a “Money Man” at an investment bank. He was a gunslinger with no strategy at all – a complete BSer who picked multiple stocks – including penny stocks – at random.
Within 6 months he had lost 10% – about $70K – so I liquidated the stocks and kept it in cash for about 2 or 3 years. By so doing I also missed the 2007 – 2008 market crash. Got lucky again. I don’t expect to get lucky a third time…
The decision to open up a Schwab account instead of managing the money myself in index funds in my E*Trade account was very bad decision. I did not have the confidence to do it myself, and I reckon between fees, taxes, and keeping $400K in bonds for the last 8 or 9 years it has cost me somewhere between $1 and $1.5 million.
In 2009 or 2010 my wife suggested we buy Apple stock. The guy from Schwab said they thought Apple was overvalued. I listened to him, not my wife. That was dumb.
What’s been your overall return?
My guess is I am averaging 6 – 8% annually over the last 20 years. If I can do that over the next 20 I will be very happy.
Last year was a banner year with the Schwab account up 17.4%, my E*Trade account up 30.6% and the various retirement accounts up around 20%.
My guess is it will be a long time – if ever – before we have another year like that, and there will probably be some down years ahead – but I am committed to the market for the long term.
How often do you monitor/review your portfolio?
I never used to review it at all and then in April 2017 I started monthly.
NET WORTH
How did you accumulate your net worth?
Earned it, saved what I could and invested it.
I just added up all my salary data from 1989-2018, and I estimate that my cumulative lifetime earnings have been a little over $6 million.
In addition I was awarded $1.5 million in options in the early 2000s.
So of that $7.5 million total lifetime earnings I have saved / (invested and earned) / kept $4.5 million. So my lifetime wealth ratio is 60%.
Not sure that the ratio is helpful – would appreciate any input feedback on it.
I did run a few models and saw that if I had consistently saved 15% of my income and gotten 6% consistent investment returns over my career the ratio would be 31.5%. And if I had saved 30% every year and still gotten a consistent 6% return the ratio would be 63%. Both of those models are calculated without the options grant.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I would not say I have had any bumps – but there are a few milestones / decision points worth sharing:
1. “The Decision.”
I started working in 1988 and I was a good saver. I started dating my now-wife in 1990 and by 1991 I told her: “Listen – I am saving about 50 – 60% of my income – by the time I am 30 I will have 2 – 3 years of salary saved – I am going to retire to the beach and backpack around the world for years – and if you play your cards right you can join me.”
She looked at me and said: “You are crazy – you have an amazing job with a global company. Stay with them and get them to send you around the world in style. Stay in 5 star hotels at the company’s expense and travel the world in luxury and style and not stay in hostels.”
She was right, so I stayed and worked all over Europe, the US, and other parts of the globe. If I had not met her I would probably have spent the last 22 years stacking deckchairs on a beach somewhere and living in a hut.
2. 1998 – The Dotcom offer
I got an offer to join a Dotcom that was going to completely transform the world. They were going to double my salary and give me 250,000 options at a penny a piece. The shares would easily be worth $100 when the company was successful – I would be worth $25 million. I knew it was going to be successful. Everything was golden back in those days. I accepted without any hesitation.
It involved relocating to San Francisco. At first my wife was fine with that, but then she decided she did not want to go. We had 2 young kids and she had a good support network where we lived. She did not want to move, and then still have me travelling.
I decided I did not want to be worth $25 million and divorced. I refused the job – knowing I had made the right family decision – but that I was losing out on millions.
Of course – that company went bust within about 3 years and my original company went from strength to strength and I was eventually offered options there too.
The moral of both of these stories is I am damned lucky to be married to my wife.
3. 2005 – Personal downsizing.
As I already mentioned, when I was 40 I quit the high paying stressful job for something that paid less than 40% of that, but had zero travel and zero stress.
I did not even calculate my net worth when I did it, I just knew we could live on the lesser salary, and that if I did not touch my investments they would grow and hopefully pay for my kids’ colleges and retirement.
My guess is my net worth then would have been around $2 million. My quality of life improvement was exponential and has stayed so over the last 13 years.
What are you currently doing to maintain/grow your net worth?
- Still maxing out the 401ks and IRA contributions.
- Trying to minimize any withdrawals from the taxable accounts – but I do have to make withdrawals for college payments and tax payments.
- Letting the market do its thing and not panicking when it goes down.
- Slowly but surely trying to reduce monthly expenditures. I know compared to a lot of the ESI interviewees and readers I need to do a much better job here.
Do you have a target net worth you are trying to attain?
I had always thought of $5 million as the magic number. Now that I am getting close to it I am not so sure any more.
I have not yet totally gotten a handle on my living expenses – and I know I still have another $200 – $250K or more of college expenses to shell out.
For years I was so uncertain about retirement – how much would I have? What return could I expect? How much would I need to spend in retirement? Thanks to ESI and all the bloggers I now feel more informed and I really understand the 4% rule.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I guess I was about 35 when I got the $1.5 million options grant – but it was so inaccessible and locked up, and so dependent on share price – which fluctuated wildly for several years. It did not seem like real money to me so I never really thought about it and did not change my behavior in any way.
I remember about 5 or 6 years ago when my Schwab account crossed over $2 million. I enjoyed that. That probably took my total net worth over $3 million.
I guess at some point in late 2016 or early 2017 it surpassed $4 million, but I was not really paying any attention to my net worth until I started monitoring regularly in April 2017 – and that was when some internet searching lead me to ESI and all the other phenomenal bloggers of the FIRE world.
What money mistakes have you made along the way that others can learn from?
OK – this is going to be painful – I have been around and I have made a bunch of mistakes. So here are a few of the big ones in chronological order:
1. 2000: Selling my first house vs keeping it and renting it out – impact on net worth: negative $500K. (All the smart people I know have real estate investments producing income as a part of their portfolio – I don’t think I could handle the stress of it though).
Lesson: Do a detailed analysis if it is worth keeping your starter home as a rental investment.
2. 2009: Moving to Schwab vs managing it myself in index funds – impact on net worth: negative $1.5 million
Lesson: Be brave and manage your money yourself in index funds.
3. 2009: Keeping $400K in a muni bond fund for the last 9 years (a component of the point above) – impact on net worth: negative $1 million.
Lesson: Do you really want muni-bonds? Even if they are tax free?
4. 2006 – 2016: Making 15% retirement contributions while at advocacy group (between the ages of 40 and 50) when I could have made 30% – impact on net worth: negative $670K. This is the biggest mistake I ever made, as it will keep on giving – it will be a $2 million mistake by the time I turn 70.5 and take RMDs and it would have been so easy to contribute an extra $2K – $3K per month.
Lesson: If you can afford to pay 30% into your retirement accounts do it! Think about it – you probably cannot afford not to…
5. 2009: Not listening to my wife when she said buy Apple – it has gone up 10x since then – so let’s say that impact on net worth is negative $200K.
Lesson: Listen to your spouse!
6. Having three children vs staying childless – impact on net worth – approximately negative $5 million. OK, I am only joking about that one (or am I….??).
Lesson: No lesson – I would rather be a pauper with my children than have $10 million now without them. Although there are days….
Wow – that is a bit painful.
There are 4 key decisions in that list, that if I had made differently, I would probably be almost $4 million better off. Hindsight is 2020 and all that. \
Each decision involved a level of risk and effort and worry and stress that I was not able to live with at the time. Apart from #5 – I was just bloody stupid not to listen to my wife.
Would I do them differently now, knowing what I know now– of course. Do I have any real regrets about them – yes and no (especially #4). I made each decision knowingly and purposefully and I am happy to accept the consequences. I list them here so others can learn from my mistakes, not to moan or complain – I have been very, very lucky.
The personal lessons I take from this (and thank you ESI for the opportunity to think about this and to do so) are:
1. I need to think about real estate investment for income – maybe that is a better use of the $400K I have in a muni ETF?
2. I need to put a plan together to move everything from Schwab to E*Trade.
3. I need to increase retirement savings.
What advice do you have for ESI Money readers on how to become wealthy?
There is such a lot of good and consistent advice on this website from the other interviewees, I am not sure what I can say to add to it. I look at myself as someone who has done a decent job earning, not such a great job saving and a below average job investing. I have already given my advice above about earning. As far as saving is concerned I do believe you need to save at least 15 – 30% of your gross earnings every year. More if you possibly can.
One of the reasons I have loved doing this interview is it gives me some time to reflect on the past and what I have learned.
In 1993, when I had been working for almost 5 years, I moved to the city my then girlfriend-now-wife lived in. Absolutely everything I possessed fit into my car (which I had bought for about $1500).
I did not realize it then, but I was a hyper saver, and a devotee of Marie Kondo (“The Life Changing Magic of Tidying Up”) 20 years before she wrote the book. I only bought things that I absolutely needed or which brought me great joy. Of course, that all changed with marriage, kids and a house – I would now need three bloody semi-trucks to hold all my stuff…
The entire capitalist system is designed to (a) give you as little money as possible and (b) separate you from it as quickly and as regularly as possible. You need to work very hard every day to ensure that you earn as much as you possibly can and that you keep as much of it as you possibly can.
However, don’t be frugal to the point of pain – enjoy the fruits of your labors, and treat yourself now and again – enjoy yourself and live every day to the fullest, (once you have saved 15 – 30+%).
Think long and hard about what it is you want to spend your money on – what is it that gives you joy? Where we differ from a lot of other ESI Interviewees is the % of our net worth in our home has always been very high. That will probably change as we move into retirement.
Another area where we probably differ from a lot of other interviewees is with individual stocks – we probably hold around 20% of our net worth in individual stocks and they have all done pretty well.
Around Christmas 1992, when I had saved $7,500, I read an article in the paper recommending 5 stocks for 1993. I bought about $1500 of each stock. I had to find a stock broker in the yellow pages. That year one of those 5 companies went bust – Ferranti – a 110 year old electronic and defense company – and one of them lost 50% in value.
However, the other three did really well and after 1 year I cashed out about $11K. I felt like I had dodged a bullet and it would be another 5 years before I bought another stock. But occasionally I will look at a number of Kiplinger or Bloomberg recommendations and buy them in groups of 3 – 5, so there is at least some diversification.
As I was completing this interview I asked myself what actual advice have I already given to my kids – so I asked them this past weekend as we were going out to lunch. Their responses:
Kid #1: “Yeah yeah Dad – you never shut up about it – we’re supposed to work as hard as we possibly can and save 30% of our income – I get it. Now can we go to Chipotle?”
Kid #2: “Yeah yeah – get into a growth industry, work hard, focus on relationships and a bunch of other stuff I can’t remember.”
I hope it sinks in with them!
I remember reading a book about the 5 big decisions you will make over the course of your lifetime:
1. Where / how to get educated
2. Where to work / what to do
3. Who to marry
4. How to raise your children
5. How to live a healthy / positive life
If you look across all the ESI interviews most of them have done an excellent job in all of these areas.
I got lucky with numbers 1, 2 and especially 3. I am still working hard on numbers 4 and 5 – and making plenty of mistakes along the way.
FUTURE
What are your plans for the future regarding lifestyle?
No plans for anything yet. The next big family milestones are a question: will the older kids graduate successfully from college and find gainful employment?
And then in four years’ time our youngest will graduate from High School. At that point we may make a geographic move – perhaps to Europe – however it is likely are kids will stay in the US, so we would probably try to keep some sort of footprint here.
I am really trying to figure out what the right ratio should be between home equity and investment equity, and then for the home portion of it, what’s the best bang for my buck I can get in say two different geographies.
I work in sales – and if I don’t perform I get fired – so that is also something that could impact our decisions over the next 1 – 3 years.
What are your retirement plans?
No plans – I need to figure this out and answer some serious questions:
1. How much money do we need to live on in retirement?
2. When should we stop working?
3. Where do we want to live?
4. What do we want to spend our time doing?
Apart from those little questions I have it all figured out…..
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Yes – I have a number of concerns:
1. Healthcare. It is not surprising that most of your (U.S.) millionaire interviews mention this – and it is amazing that in the US it is so ridiculously expensive, and so many rich people go bankrupt because of health care expenses. The Affordable Care Act was not perfect – but it was a meaningful step in the right direction – and to see it die the death of a thousand cuts should worry all of us.
2. My kids. One of my older kids has a serious behavioral health issue and it may prevent her from being a functioning adult and earning a decent living. I really do not know when or if she will be able to fully support herself and what the consequent impact will be on our finances.
3. Geography. Would like to do the geo-arbitrage thing – but really not sure where. Our problem is we love living in big, expensive cities.
4. Could I survive on 4% right now? Probably, and probably quite comfortably – although I still have 7 years of college to pay for, and I am planning for a 45-year retirement, and I have no idea how much health insurance would cost. How much do we really need versus how much do we want? My wife and I have not answered that question.
5. What the heck would I do? I need to figure that out too. I still enjoy my work (well, I enjoy the 30% of sales that I make and clients that I get to serve – the 70% of deals that I lose upsets me greatly).
Most of the people / friends / former clients I know who have retired have basically gone on vacation for 6 months, then spent six months being unhappy / at loose end, and then finally have gone back to some sort of part time work / contracting work or full time volunteer effort. My guess is I will probably figure out some combination of all-of-the-above.
MISCELLANEOUS
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 don’t think it has ever clicked – I am still learning.
I do think I have learned more in the last 6 – 18 months from ESI Money, Mr Money Moustache and all the other fabulous bloggers out there – than I have in the last 25+ years. It is an absolutely fantastic service you provide!
I did read the Millionaire Next Door book years ago and I really appreciated and enjoyed that. That taught me the importance of stealth wealth. None of our friends or family have any idea about our net worth and it is not something we talk ever talk about.
Who inspired you to excel in life? Who are your heroes?
My Dad. He left school at 14 and worked in a factory.
He was the first in his family to buy his own house – it was a small row house – but it was his, and he paid it off.
We were not poor, but we had no money for vacations, and most of my clothes were hand-me-downs from my cousins.
However anything I needed for school I got it – my parents really pushed me to excel at school, so I got to be the first on my father’s side of the family to go to University.
That drive continued and I was lucky to get hired by a growing company in a growing sector – that I actually knew nothing about – and then I stayed with them for about 16 years.
That is actually something else that worries me about the US – education used to be the great escalator for the working class to get to the middle class and beyond. It just does not work like that anymore, and if you are born working class, like I was, unfortunately today you are going to stay working class.
I am at my happiest when I have a book on the go. I love reading, and I have learned a lot from some great authors – some of those I would heartily recommend are:
- Steven Covey – 7 Habits of Highly Effective People
- EF Schumacher – Good Work & Small is Beautiful
- Charles Handy – The Empty Raincoat (and everything else he wrote)
- Peter Drucker – everything and anything he wrote
- Malcom Gladwell – The Tipping Point (his other books – meh…)
- Dale Carnegie – How to Win Friends and Influence people – this has come up a few times in these interviews.
I have also been a subscriber to “The Economist” since I was 16 years old. I love it when I go on the metro in DC and I see about 3 or 4 people in each car reading it.
One additional point: When I became a parent in 1997 I looked at these little helpless bundles of flesh and thought: “OMG – how the heck did this happen – I am now responsible for 3 other people – I really have to make sure I succeed”.
So although I joked about my kids costing me a lot, it is actually the opposite – I may not have been as successful in the earning department without them as a motivation / driver – even if that motivation was closer to pure unadulterated fear and terror!
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Yes. We set up our own 501 (c) 3 a few years ago for some causes that were very special to us. It became a burden though so we let it lapse with recent legislation.
We also contribute to our Church and to any friend or neighbor’s fund raising effort. Probably just less than 5%, so we need to do more.
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 have not thought that far ahead. I would like to, but my main priority is to ensure our wealth will cover a 45 year retirement for us both. I assume at least one of us is going to live to 95+.
We are paying for our kids’ bachelor degrees, I would like to help them fund IRAs when they start earning salaries, and maybe even be able to pay for their kids’ college education when the time comes – but that seems a long way away now – and it will depend on how the 4% rule works out for us.
I also have two nieces in elementary school and I would like to help them with their college education when the time comes – but we’ll see…
QUESTIONS
Thank you so much for the opportunity to share my experiences and lessons learned. I feel that I have learned so much from the other interviews, and ESI Money, and all the great financial bloggers out there.
It’s like I was in the Dark Ages until I found you guys. I do have a couple of questions I would appreciate ESI readers’ insights and advice on:
1. How do I move out everything of Schwab and into E*Trade without having to sell everything and trigger capital gains taxes? Are there easy ways to do it or is it tough?
2. Any advice on figuring out how much to have in home equity vs stock investments in retirement? I am looking for a way of thinking about it or a decision process, vs a specific number or ratio – but all contributions welcome!
3. Does anyone have any specific advice for me in where I can improve / do better? (I can guess priority item #1 – cut down the spending!)
4. Is there anything obvious I am doing wrong? (apart from not having 529 accounts – rightly or wrongly I decided to forgo the tax advantages and thought there would be better / more flexible investment options in my taxable account).
Mi-77 says
It’s a great interview, thanks for sharing your story. I actually read and enjoyed all 5 books you recommended. Funny how some people think alike 🙂 it took a lot of courage for you to walk away from a great paying job and started something completely different and a lot less pay! I also agree with you on the 5 most important decision to make in life, I do believe choosing the right person to marry is number one on the list, it’s make or break you 😛 thanks again for sharing your great story !
MI 9-5 "Tumble outta bed" says
MI-77 – thank you so much – I really enjoyed your article and admire what you have done in the start-up area – $$ success + lifestyle = perfection. In work, or other areas I have always felt like a bit of a misfit and this group is one where there is definitely seome strong shared values between all the participants ! Thank you !
Dave @ Accidental FIRE says
First off, great interview and love your honesty. You do have to get your spending down, esp in the living expenses department, but without seeing particulars it’ll be hard to get targeted advice from the community. There are TONS of frugal bloggers who would be happy to help with that 🙂
This passage struck me though:
I looked at all the guys 5 – 10 years older than me (and yes – most of them were guys) and they were all way richer than me, but mostly divorced, and – outside of work which they excelled at – mostly very unhappy, drinking too much, engaging in other vices and spending their hard-earned money on things like $25K wristwatches and $125K sports cars.
I’m also in the Washington D.C. suburbs and this is a very common sight. There’s SO much money in this area, the richest in the USA. But there’s so much of THAT crap too – overweight, overstressed, unhappy, substance-abusing workaholics who think they’re enjoying their Porsche and their Rolex.
Kudos to you for stepping off that train to nowhere!
MI 9-5 " Stumble to the kitchen" says
Dave – thank you – I know you know the DC environment – I have been learning a lot from you and the other bloggers out there and I am going to try to start implementing some of it !
Cheers !
Lily | The Frugal Gene says
One of my top 5 millionaire interview favorites! I mean your career and income advice = golden. Plus your money mistake section is really eye opening. How did you come up with those numbers by methodology? Your kids are costing $4 million to bring up?! Pops go easy on them!! 🙂 Money still doesn’t change a thing I bet 🙂
MI 9-5 " Pour myself a cup of ambition" says
Lily – that is high praise coming from you – one of the doyennes of this board and others !
The numbers are ROM – but in the ball park e.g.:
1. First house – paid $265K in 95, sold for $435K in ’00, equity of approx $220k, it’s now worth $775K – if we had kept it and rented it the tenants owuld have paid the mortgage and all that equity would be ours.
2. Kids – coworker between 1994 – 2006 ( same job, same promotions, same options) is now worth $10 million more than me – I attribute 50% of that to him staying there longer and better investment decisions and 50% to him having no kids…..
Mr. r2e says
Great interview. Very detailed.
1. Moving to a new brokerage firm – Call E*Trade – they will walk you through it. I found this article by googling https://www.nerdwallet.com/blog/investing/switch-brokers-move-investments/
3. Improving by reducing spending. You really need to understand where all the spending it going. I have been using Quicken for a long time and I review spending annually. Personal Capital has an App that is improving analysis of spending though I do not use it for that. Once you know where your spending is going, step back, have a healthy conversation with your wife and kids to decide what is nice to do vs. have to do. Then implement a plan to reduce spending. I have set up automatic transfers out of my checking account and into my brokerage account that “force” me to not spend money (we are not big spenders to begin with though).
4. Come up with that retirement plan you mention in the article. Make that a top priority. You have done very well financially to date. Need to make sure you have a plan for retirement. Make sure you have an estate plan also. This not only helps you and your wife plan but it will also need to address the potential concerns about your one child that may need assistance in the future.
MI 9-5 " And Yawn and Stretch" says
Thank you R2E – one of the reasons I did this was to motivate myself to do the things I know I really need to do – and you have outlined the top 3 right there. Thank you so much for the article !
The Physician Philosopher says
I agree with Lily. This one was one of my favorite.
I feel like a lot of the thinking you described about work life balance and choosing your family over work is exactly where I am right now – despite being young in my career. I just don’t want to miss out on my wife and kids.
As far as getting out of Scwab, that’s tough. I think you should do the math on what it might cost you to change. There is no fancy way to get out of a taxable account that I am aware of other than to tax loss harvest when you have losses and switch to index funds with the ones that are down. The draw back is that you are realizing your losses when you do that, and that’s likely not a good thing.
I do agree with you that you need to get your spending down. If you did that, you’d be able to be done right now. Of course, you are in the stage of life where things are really expensive (college, etc).
Either way, it sounds like you are making really intentional decisions with your life and have learned from your mistakes. Thanks for being so open and honest!
TPP
MI 9-5 "And try to come to life" says
TPP – I appreciate your comments and advice – and yes – it’s important to do as much with your kids as you can – the ironic thing is now that we are spending vast amounts of $$ on the college kids we are less and less in their lives as they move on and become the adults they are going to become – you only have them at home for the blink of an eye….enjoy it as much as you can !
Thanks for the positive energy you have shared with me and many others on this board ( board?? am I showing my age ?)
( note – will not be able to respond to any other comments until later this pm – but really appreciate all y’alls advice and input – cheers )
JWS says
Great interview, definitely one of my favorites!
I’ve shared this pearl of wisdom with many younger co-workers “4. If you want to be promoted to the next level behave as if you already have that job” and have employed it myself throughout my career with much success.
Don’t kick yourself too hard about holding bonds or any of the other “mistakes.” Having diversified portfolios isn’t really bad advice, but as you’ve noticed with your basket-of-stocks approach, some things will be losers, while others will be winners.
Regarding the Schwab vs E*Trade, I’m curious why you feel this move is necessary? You can simply fire your Schwab advisor and stay at Schwab without paying them a 1% adviser fee. Schwab is first and foremost a discount broker. I keep a sizable account there and decline any of their adviser services.
MI 9-5 says
“Jump in the shower”
JWS – thank you so much – that is new information to me – I had no idea I could decline the 1% advisory fee – and yes – I am trying not to kick myself about my mistakes..although there is always a little bit of “woulda shoulda”….
cheers !
Mike H says
You are doing really well and I really enjoyed reading your article and the pearls of wisdom that were across the entire piece.
I’d recommend you look at Dividend Growth Investing and slowly leg into a portfolio of 20 – 30 companies over a period of years. You want to look at long term dividend growers (they are usually solid businesses so an excellent screening test) and then identify those that don’t have balance sheet or other structural problems and then buy them at a low valuation. Do some google searches and read some books on this. The consistent stream of income that you can use to reinvest is the kicker that makes this a wonderful strategy. Also your holding costs are effectively zero, just the low commissions paid when you buy or sell.
When you hold enough quality stocks spread out this way then you are effectively a mutual fund. Even if one or two in the portfolio fall on hard times, overall you will do just fine.
My after tax DGI portfolio basis is about what your total Schwab numbers are and I’m on track to earn over $91K in dividends this year and over $100K next year (more with additional dividend raises as they get announced plus reinvestment of dividends into new positions). All unrealized gains are not taxable until I sell them and I sometimes look to offset winners and losers to tax harvest but generally don’t churn more than 1-3 positions a year. Overall you are accumulating new shares over time and new positions with the cash flow from dividends. It’s really hard to go wrong with this strategy, especially after several years pass. Time in the market beats timing the market.
As for home equity, I like to have it paid off as it’s one less drag on monthly cash flow.
If you would like to learn more about DGI I can point you to a few blogs. It’s awesome to hit new records every month and every year and it is generally a very passive activity. It’s like having a fun hobby that pays you and enriches you for participating. I only wish I found it sooner instead of 5 years ago!
-Mike
MI 9-5 says
“And the blood starts pumpin'”
Actually Mike those blogs and that strategy sounds extremely interesting – your numbers are close to mine in my taxable account except I have less dividend income but what you have sounds very tax efficient…can you please point me to the blogs? Thank you so much ?
Mike H says
Hi MI 95,
Check out http://www.theconservativeincomeinvestor.com, and http://www.mrfreeat33.com and his previous blog http://www.dividendmantra.com. Jason from Mr. Free at 33 does a weekly series where he writes about undervalued dividend stocks every Sunday and posts it on his blog, you can get a sense for the analysis and thought process going in.
There are others out there too.
If you keep a watch list on different companies and then decide to leg in slowly when volatility hits and prices come down, you will do just fine. It’s a bit like fishing in that sense, but much more fun and rewarding.
-Mike
Phronesis in CO says
Great interview, thanks to you and ESI for making all of this real. My career, family, age, and net worth situation is almost identical to yours, including technology sales, favorite authors, life principles, emphasis on family international travel, and excessive annual spending despite our best intentions to live frugally. We are revisiting every spending decision now, both scary and liberating at the same time. One thought for you. I’m not sure I completely understand your motivation to exit Schwab, and I agree with JWS above. I manage my tax-deferred, taxable and banking accounts all at Schwab, and I use them primarily as a discount brokerage. In addition I use a low-cost on-line advisor, MarketRiders, to help establish and periodically re-balance a large portfolio of ETFs in both the tax-deferred and taxable accounts. MarketRiders maximizes the number of Schwab ETFs in the mix which can be bought and sold for free, so this approach minimizes trading costs for a substantial portion of the portfolio. The Schwab/MarketRiders approach has worked really well for me the past 10 years, I have not seen this approach mentioned in previous ESI interviews, and I wonder if others have an opinion on this approach, good or bad? PS – Does your wife have any current stock tips? 😉
MI 9-5 says
” out on the street”
Damn Phronesis – you and JWS are making me think I am messing up the Schwab thing – do I just call them up and say “Stop charging me 1%” – and yes – the “excessive annual spending” which we have in common is something I am trying to bring under control and – if I can get Schwab to stop charging me 1% I will be happy to stay….
I also love ETFs – the breadth and growth of a mutual fund without the tax disadvantages
Thank you !
A Millionaire Next Door says
Excellent interview – open and transparent, which makes it a valuable read. I plan to see how you handle the transition from the Schwab account. I use a financial planner. I trust him completely as I started using him over 16 years ago when we were both just hungry professionals. However, he does charge 0.8% fee. He’s done well but looking at the fees in the various funds, it’s costing me about another 0.6% in fund fees. As I approach 50, low cost (or now no cost) index funds are looking attractive to self manage and save on fees. TBD. One thing I am currently doing that you may consider is most of my efforts now in investing are into income generating assets as I plan to transition out of 9-5 corporate America in the next 5 years. In the past four years, I’ve gotten my passive income up to about $50K (real estate rentals, CRE, and royalty streams). I agree with TPP to focus on getting your spending down. College spending will eventually pass. Great read
MI 9-5 says
“The traffic starts jumpin'”
AMND – thank you – my issue is less with the fees and more with the taxes I owe each year on the mutual funds / managed funds -sounds like you have a great deal with 0.8% -when you mention incomes generating assets do you mean dividend stocks / dividend ETFs etc – is CRE commercial real estate that you won directly vs in funds ?
thank you so much !
BSue says
As you kids become adults, make sure each has power of attorney, healthcare directives, and wills set up. If you set them up for all three, it could protect them in case of a lot of issues that might come up. And of course, you and your wife should have the same in place.
You might have the kids set up their own net worth summaries to give them benchmarks to judge future progress. It also helps them learn to take the long view on financial, career, and family decisions.
MI 9-5 says
“folks like me on the job from 9 to 5″
BSue – the older kids are ‘technically’ adults – ie over 21 now -and I need to have that serious conversation with them – one – the one with behavioural issues – is not ready for it – the other is – but does not want to have that conversation….I must admit – my estate planning to this point has consisted of ” I hope my wife and I don’t die for a while” – I do appreciate hwta you are telling me……
Jon Sharpe says
I really enjoyed this interview, thank you for sharing so much! I really connected and agree with your career advice. There is nothing better than working for a growth company in a growth category. At the end of the day, almost all opportunities are tied to growth! If your company and/or category are flat or declining it’s bad news all around.
As for your questions, my only thought is to begin tracking your expenses carefully and then target areas for reductions. Having a clear view of where it’s all going is definitely the first step.
As for your home equity question, I would think about it differently. I would target having your primary residence paid off by the time you retire. Don’t worry about how much equity is there. Then calculate how much you need/want to live off and go from there.
The house is not an investment, although it can go up in value. So, no need to treat it like part of your portfolio, IMO.
MI 9-5 says
“workin’ 9 to 5”
Jon – thanks for suggesting focus on expenses – it’s like working out – I know i have to do it – but it’s not fun….and that is real clarity around the investment in home equity – thank you – that is one of the biggest things i am trying to come to terms with as i move into the next phase….thank you !
Paper Tiger (aka MI 27) says
MI-95, great job on your interview. I love the detail and honest transparency. Don’t beat yourself up too bad. Anyone who has accumulated any meaningful nest egg on their own has had to take a risk in order to generate those returns. No one bats a thousand. That’s why the guy in baseball who consistently fails to get a hit 7 out of 10 times is in the Hall of Fame!
Your story mirrors mine in many ways which is probably why I enjoyed it so much. If I could maybe offer a couple of simple suggestions, here is what I would shoot for. I ran some numbers based on the following assumptions:
Let’s focus on your investible assets of 3.5M and set aside the home equity to just grow on its own. If we can let the 3.5M you have today continue to grow and not tap into it anymore for college expenses etc. then that is the starting baseline. Work to eliminate other expenses to cover college rather than taping into your savings.
You said you save and invest about 30K per year so we assume you will continue to do that and calculate it as $7500/QTR. We will also assume an average annual rate of return on your investments of 6%. For this calculation, we will treat all your savings as taxable, rather than deferred, and assume an inflation rate of 2.9%, Federal Tax Rate of 25% and a State Tax rate of 6%.
If we set a goal to achieve 5M of investible assets and run the numbers it says your 3.5M would grow to 5.2M in 6 years based on these assumptions. And you still have your home equity which will have grown significantly over those same years. You’d be near your 59th birthday and close to the magic 59.5 years to give you more options with your tax-deferred money.
If you and your wife enjoy what you do and can maintain the discipline to leave your current nest egg alone and continue to contribute 30K of additional savings per year, you guys should continue to be in great shape. You would be close to the same age that I checked out of the corporate world and decided to start my own thing. Those kinds of numbers give you lots of options and six years goes by pretty fast. You’d have those college expenses behind you and very little debt left by then so this seems like a reasonable time period to set as a potential retirement goal.
Thanks again for the detail and time you put into sharing your story and I wish you all the best as you continue to plan and execute on your future financial goals!
MI 9-5 says
“working 9 -5 – what a way to make a livin”
wow Paper Tiger ! thank you ! I love your outline of the next 6 years…..and thank you for (A) your good wishes and (B) you sharing your story ( but boy – that seems like a while ago now right ?
Cheers !
Phillip says
MI95,
Thanks for sharing your story on turning down the startup opportunity with 250k of options at a penny valuation. Us in tech all know of colleagues that joined the 8 figure net worth club due to a 5 year stint at some great new startup that went public and/or got acquired. What is never told are the many, many more that took the gamble and ended up spending 90 hour work weeks at sub-market pay and end up with nothing more than burn-out, bad relationships and less net worth than they otherwise would have obtained.
Like you, I’m also finding that my target net worth keeps moving upward. Nagging question for me include things like 1) The market is overheated, so my current net worth should be discounted 2) Heathcare costs are uncertain so I need to accumulate more cushion 3) I really should use a 3% rule or maybe even 2% since I’m going invest more conservative and I need to account for inflation 4) I need more because I love to vacation in expensive international locations 5) I should take into account potentially helping aging parents (both spouses) … we owe it to them 6) blah, blah, blah. My comforting conclusion after reading many of these blogs is that once you hit a baseline of about $2M in investable assets and a house paid-off that you enjoy living in, there are always reasonable options to FIRE with a reasonable level of comfort. So enjoy your accomplishements … in the scheme of things, you’ve already won!
I’m also curious about your decision to finance your kids at what seems to be expensive, private schools. My kid is not in college yet but I’m currently of the mindset that I’m going to allocate a fixed amount that my kid gets for college and he gets to choose how to spend it. He gets enough for all expenses for 4 years at the “best” in-state university. If he chooses to go out-of-state at a comparable school (public or private), he needs to find the money in scholarships, grants, aid or whatever. If he decides to take a bunch of AP courses and graduates in 3 years, earns a scholarship, etc., he gets to keep the extra money to go to Europe, pay for grad school, whatever. Only on an exception basis, would I fund my kid’s college at a higher level if I think it’s worth it (e.g. Stanford computer science program, Yale “pre-law”, Harvard “pre-med”, etc.). I think this teaches my kid to make more practical decisions (with incentives to overachieve). Don’t know what you’re kids are majoring in or where they are going but IMO, many private universities aren’t worth the money, especially if the kids have full intention of going to grad school where the payoffs are likely beneficial (e.g. med school, law school, MBA at a “top 5” B’school). Not trying to comfront your decision but am curious on how you arrived at it.
Ellie says
Although your comments on college were not addressed to me, I think I can speak to your thoughts. We did have an academic superstar child, our oldest, and he did go to Yale, and we did pay the entire bill. And he did get an amazing job in finance (no advanced degree required), and he has made a ton of money. So yeah, the ROI was well worth it (well, at least for him, we see no benefit except that he would help us in the future if needed), But then child number 2 and child number 3 also want to attend expensive private schools, so what do you do. In our case we also sent them to good schools, and they are both thriving. The youngest did choose to attend med school, after graduating from an Ivy, so he is there now. But I understand that a sociology degree from a mediocre or even highly competitive college may not be the wisest investment.
MI 9-5 says
“barely gettin’ by – all takin and no givin'”
boy Phillip – you are asking the key question here regarding the kids – one of them got into the dream school and I thought ” heck – we can pay for it – we should” – did not prioritize retirement three years ago and Ellie – thank you for chiming in – I think you have made that point before – and congratulations and well done to you -to be honest – when I write that $20K check each quarter it gives me great joy because I know it is a great fit for the kid and they are doing well…..part of me is thinking what did I work for for 30 years if I cannot do this for my kid…the other kid is in a much cheaper school…but has had additional health related expenses and again I am luck to be able to do this for my kids….and I can worm an extra year or two to cover it…..the real issue is at what point can we / will we cut them off…..
SMS says
MI95
Really enjoyed your interview.
I have always treated the house I live in as a lifestyle asset and never consisted as part of my investment portfolio. There are a couple of reasons for this:
Firstly, I like to live somewhere warm and comfortable that suits both myself and my wife. I try not to bring into that decision whether the house will make me money or not. The other things are more important for us.
Secondly, when retired you can’t “eat your house” to fund your retirement unless you get a reverse equity mortgage which I hope never have to be in the position to do. I know some will say potentially you can downside but that is reliant on it being a good time to sell and that downsizing will actually release capital. If you are buying in the same area that may not be the case. Timing would be crucial. I have moved around the country I live in a lot for work having owned 6 houses I have lived in. Sometimes I made money and sometimes I did not so there is an element of risk
Thirdly – I see some diversification risk. Most of us have a lot of equity tied up in the home we live in. Its illiquid. You have to sell the whole house to release any. With a stock portfolio you can sell just part of it. Not saying it won’t work just riskier.
I’m not against property as an investment and have done so in the past but never with the house I live in.
Good luck with whatever you decide
MI 9-5 says
“they just use your mind”
SMS – thank you – i agree with your perspective – I need to figure out how much house we will actually want / need in retirement. I have also learned that – although I thought I understood the 4% rule, I really did not as it should not really include the value of home equity in your residence, as to your point – “can’t eat it “
Interview#1Jason says
Thanks for opening up the books.
I thought I would address your questions…
How do I move out everything of Schwab and into E*Trade without having to sell everything and trigger capital gains taxes? Are there easy ways to do it or is it tough?
You can only move/transfer assets that are are individual equities or non-proprietary funds. However, you can liquidate all of the assets in qualified retirement accounts (401k/ira etc) and as long as they transfer into another qualified account, you won’t be taxed. But if you are in a Schwab loaded fund, and it is a taxable account, you will take capitol gains… I’ve found Vanfuard to be very good about managing fund moves. Also, not sure you need to entirely depart from Schwab. They have a number of well rated low fee index funds which might be appropriate for you.
2. Any advice on figuring out how much to have in home equity vs stock investments in retirement? I am looking for a way of thinking about it or a decision process, vs a specific number or ratio – but all contributions welcome!
I don’t think I’ve ever seen an exact ratio related to home equity v equities. In reality, in retirement, you need a place to live. How much home you buy (or rent…) depends on what you feel you can sustainably budget for. For example, you might decide that Tama Iowa is the place to be for you and your wife on retirement. A house there with equivalent sqft as your place in DC area will cost you 1/10th-1/5th of your current outlay. Alternatively, you may decide to forego purchasing all together and live in a rental upon retirement. My parents sold their LI, NY home after 40+ years and took their equity and have used it to rent a 3 bedroom penthouse near Lincoln Center in Manhattan. I know they have not regretted that despite the rent being ~$6500/month. It all depends on your budget, but in retirement I won’t be considering my home equity as a piece of my net worth for anything other than estate planning. Similarly, I don’t consider my cars as assets cause I use them.
3. Does anyone have any specific advice for me in where I can improve / do better? (I can guess priority item #1 – cut down the spending!) I think you are doing pretty well with spending. But I am in a HCOL area (NJ) and we make/spend lots now, so it is all relative.
4. Is there anything obvious I am doing wrong? (apart from not having 529 accounts – rightly or wrongly I decided to forgo the tax advantages and thought there would be better / more flexible investment options in my taxable account).
One minor thing is the lack of an HSA. If you are eligible, it makes sense to max that out as it is triple tax advantaged. Otherwise, estate planning (having a will durable power of attourney and health care proxy are important.
MI 9-5 says
“and they never give you credit”
Jason – thank you so much for your extremely helpful comments – I hear you loud and clear re not looking at home equity as wealth for anything other than estate planning. Also helpful comments on Schwab. Sadly I cannot get a HSA with my current employers – that is an employer specific thing right ? I will look into that…
Interview#1Jason says
I believe you are right, your employer needs to offer the HSA…
Meg says
Actually no, I researched this and established my own HSA last year when we moved off my husband’s insurance plan to mine. My company offers an HSA, but only a cash account (no investment piece). But it turns out you can open an HSA anywhere and fund it directly – not via payroll deductions. Actually my company even offered to do payroll deductions into my husband’s old HSA account (which we simply kept). The key is that your insurance plan must meet the definition of a high deductible health plan (which may vary year to year as it has to do with the minimum deductible allowed, but most larger employers offer one I believe).
MI 9-5 says
“want to move ahead”
OK – thanks for this Meg – I will definitely look into this – much appreciated
Jake Jones says
Amazing interview! This is really great stuff on both parts. Good and detailed questions that create a lot of value and honest answers from the interviewee.
Kudos to both of you guys. As a blogger in their humble beginnings I aspire to create content as great as this.
MI 9-5 says
“it’s enough to drive you crazy”
thank you Jake – I appreciate the good word – Mr ESI has done a phenomenal job with his blog ( and he has the patience of a saint for putting up with my Dolly Parton lyrics)
good luck to you on your blog journey !
FlyHi says
Schwab- I recommend calling them up, explaining your position. They should work to keep you at Schwab. They would prefer your assets being at Schwab versus some other place, even with less 1% commission. I did that at Scottrade about 2 years ago.
Retirement house- a friend of my neighbor moved into a local hotel suite. Negotiated a lease with the owner of the hotel. Never changed a light bulb, free swimming pool, always had fresh cookies downstairs. They currently live there and plan to leave never.
Retirement medical- friends go to Thailand for medical procedures and dental procedures- knee replacements and lasik and back issues. Even knew a girl who got all her teeth capped in Colombia for 1/8th the cost. I had the best medical care in Shanghai for $100. Medical tourism exists- there’s even an association with recommendations out there. My friend’s parents live in Costa Rica, use international travel insurance for $500 a year, and travel for what they need.
Per the children and nieces. My family friends started maxing out their IRAs when the kids started working at age 15-16. So every Christmas my friend and his sister got a check of 5k in their IRA and they got those until they were 28. The kids setup an adult administered IRA, all you need is a W-9, and the children get lots of savings that compound for 10+ years before they put stuff away on their own- given both went to grad schools.
Legal Stuff and Financial planning-
I pay by the service, versus a flat annual fee. A Financial Plan cost $1,500. Legal stuff ran $3,000-$3,500, which included irrevocable trust, living will, poa, and medical directive. Call a few with free reviews and then decide. The most I hear a real financial plan could run is $15-20k for the guys out there with complex medical issues, huge families, properties, estates, foundations. Annual percentage drives me up the wall for that. I pay % fee with UBS for a true honest opinion with my broker while his secretary takes care of the legal, administrative part. Even there, half of the assets are 1%, half are etfs I invest in forever with zero annual %fee. Only cost would be trading. Point being, you should probably pay less than 8k for everything initially with reviews for less than 1k as needed in the legal financial setup. No need to pay percentage fee
MI 9-5 says
“if you let it
for service and devotion”
FlyHi – this is tremendous advice and insight – thank you very much
Joe says
Just wondering what your strategy is for vested options. Do you sell right away when they vest or continue to hold them?
Thanks!
MI 9-5 says
“you would think that I”
Joe – yeah – I sold as soon as they vested and/or sales restrictions expired – all the advice I got was to diversify diversity diversify – also, after I left I had no emotional connection with the company and I wanted to be done and out
GreenDollarBills says
Really inspirational stuff. Clearly you’ve built this up through hard work and I think you need to be congratulated for creating your own work life balance. You’ve given me food for thought.
MI 9-5 says
“would deserve a fat promotion”
Thank you GDB – good luck and all the best as you think things through
JD says
Great post, really admire you when you say that because of the 20K in home repairs, you were not taking a vacation this year. This is great fiscal discipline when you can obviously afford to take one, Kudo’s! Keep socking it away, you’ll be at 5 Mill soon, then you’ll have to set a new goal…10 Mil!
MI 9-5 says
“but the boss won’t seem to let me”
thank you JD – I guess I did not answer the question properly though – we do not have a detailed budget that says ‘$X are allocated to Y spending’ – but we do have a ceiling that we do not go over.
Related to that, I have always thought if foolish to have six months of living expenses on hand in cash – especially in the last 11 years it is better to have that in the market.
DaveS says
Honestly- very good stuff. You spend a lot relative to other ESI Millionaires but you only live once. I love it. Seems like you have a good balance in your life now and money shouldn’t be a problem. Like others have posted- having lots of money is great- but there is nothing better than having a wonderful family. There is nothing worth more than that!
MI 9-5 says
” I swear sometimes that man is out to get me ”
Thanks Dave – you are absolutely right – i just read MI-96’s interview and that comes out loud and clearly in his point of view as well. Cheers !
Meg says
Love this! I’m working on my own Millionaire Interview for submission now, and this is great inspiration to get it done. OK since you asked…
1. How do I move out everything of Schwab and into E*Trade without having to sell everything and trigger capital gains taxes? Are there easy ways to do it or is it tough?
It’s super easy to move accounts to other firms with no taxes. It’s called a “like kind exchange.” You just contact the new firm and they initiate the transfer with Schwab. Your cost basis and holdings and everything will roll over. BUT Schwab is great and has nearly the cheapest index funds around. So you could just transfer out of a managed account onto their brokerage platform…I don’t know how to do that but I”m sure Schwab can walk you through it. They are awesome as a company and even lots of Vanguard die-hards are switching to them. May be easier to stick with it than totally bailing – just an idea. And it also could be worth leaving some with the advisor to retain access to someone who can help walk you into retirement and setting up an income/withdrawal strategy, navigating tax considerations, etc.
2. Any advice on figuring out how much to have in home equity vs stock investments in retirement? I am looking for a way of thinking about it or a decision process, vs a specific number or ratio – but all contributions welcome!
This is a false decision. It doesn’t matter how much to have in home equity/home value. It only matters how much you have in your portfolio assets that are actually generating income/gains you can tap for living expenses. In other words, net worth itself doesn’t matter. You can have a net worth of $10 million, but if it’s all tied up in a home, a lake house, 4 Ferraris and a watch collection – then from a retirement perspective you’re SOL.
3. Does anyone have any specific advice for me in where I can improve / do better? (I can guess priority item #1 – cut down the spending!)
Nah, you’re doing great. Clearly you could cut spending (who couldn’t?), but with your kids in college that’ll be tough right now. Not enabling/supporting them after college will be your biggest challenge I think. My boss is paying his 30 year old daughter’s rent even though she’s gainfully employed in the field she studied. She’s a teacher though, and he feels guilty that she couldn’t afford a very nice neighborhood on her own dime. But in my view, unless there’s a health or other issue to subsidize, and as long as she’s employed doing what she chose, she needs to live within her own means. What’s the alternative – is he going to pay her rent for life? Kicker is she spends her own income on things he doesn’t even like, like tattoos. Which, effectively, he’s subsidizing.
4. Is there anything obvious I am doing wrong? (apart from not having 529 accounts – rightly or wrongly I decided to forgo the tax advantages and thought there would be better / more flexible investment options in my taxable account).
Not that I can see. Keep up the good work!
MI 9-5 says
” They let you dream
Just to watch them shatter ”
Thank you so much Meg – I really appreciate the insight – good luck with your interview prep – I have enjoyed all the interaction and everything I have learned from the comments. You have reinforced the two biggest lessons for me:
1. Maybe Schwab is not all that bad – I need to use a scalpel, not a machete
2. Home equity does not go into the 4% ( as smart as I thought I was that point had not dawned on me)
And you are right about the biggest challenge being cutting the adult kids off – that is running straight at us over the next few months and it’s very scary…..
Meg says
It’s a process, and I’m not a parent so take my input with a grain of salt! I think it’s great to be generous to adult kids. My parents still pay for the whole family to go on trips; they gave each of us $50k for our weddings (to be used for whatever we wanted); and they recently announced that they plan to pay for child care for all their grandkids from 0-school age. It’s a fine line to walk and I know they’d give any of us anything if there was a true need – and had we needed it I’m sure we could have come back to live at home for some period after college. But it’s really hard to cut kids off once you start an ongoing subsidy (just as entitlements in our country are extremely difficult to cut). So tread carefully. But the good news is that you ARE a millionaire, so you can afford to overspend and overgive a little. Worst case you simply have to work a few more years.
MI 9-5 says
“you’re just a step
on the boss-man’s ladder”
Thanks Meg – I appreciate it and I would love to be in the situation your parents are in in terms of helping their adult kids -good for them and congrats to you and your siblings ! A key part of it is helping / supplementing vs covering everything – i.e. I’d love to be sliding them $5K to put in an IRA vs paying their rent with it….but we’ll see.
I am confident 1 of my 21 year -olds is going to out-earn and outwork me – the other one I am definitely worried about – so we’ll see.
Thanks again for your thoughts and comments
Richard says
I’d only like to add that for modern purposes, OANN and The Epoch Times are two of the best media resources left. HL.
MI-94 says
Great interview! Many great choices in life, most notably choosing your marriage and your kids over chasing higher earnings. Well done!
MI-95 says
thanks man – I just realized I did not mention the UK at all – and the Ferranti (RIP 😉 reference is the only way someone would make the connection!
MI-94 says
As I had inside knowledge on your origins a noticed a few word and phraseology choices that only Brits do. My ear is pretty tuned to it listening to them for the last 20 years. There was at least one “bloody” in there and they way you guys use the word “university” is just a little different than the yanks. I noticed reading this interview your concern about one of your kids in the future. I have a similar worry, mine are a bit younger, but one has some habits and tendencies that worry me. He is still young and has not hit high school yet. My hope is that he will grow out of them and mature into a fully functional grown up, but they would certainly put a successful adulthood at risk if they continue without some tempering. Kids are both the best thing that will ever happen to and perpetually your greatest worry.
MI95 says
FWIW we mistakenly let things slide a little bit in high school – the grades were good, the after-school activities were good, unbeknownst to us weed was being consumed and then at college it got a lot, lot worse.
If he is still in middle school you don’t want to bring the hammer down too much, but understand where the $$ is being spent, provide incentives for positive behaviour ( grades, voluntary work, helping neighbors, chores), and definitely do what you can to nip any weed, vaping, nicotine, alcohol in the bud. It is all too easy for these kids to get hold of the bad stuff.
I wish we had been a lot tougher a lot sooner . The really good news is that this is on your radar screen now and you have 4+ years of keeping on top of it – all the best !
JeffB MI20 says
3. Does anyone have any specific advice for me in where I can improve / do better? (I can guess priority item #1 – cut down the spending!)
If you need to sell to move investments I would move into ETFs since they are cheaper and more tax efficient. In a non taxable account, it’s hard to move funds in kind without selling, but I think it can be done. Or you move stuff slowly over the years.
MI-95 says
Thank you Jeff- just re-reading this for the first time in a while as I am about to do my MI- update article- the advice I got from everybody was absolutely brilliant- thanks y’all
MI-94 says
Funny – I was just typing up an update for #94 last night. “Brilliant”…that’s another British-ism.