Today I have an update for you from a previous millionaire interview.
I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. 😉
This update was submitted in April.
As usual, my questions are in bold italics and their responses follow…
How old are you?
I’m 46 and my wife is 48.
We’ve been married 13 years.
Do you have kids?
We have three children under age 12.
What area of the country do you live in (and urban or rural)?
We live in a suburban area in Texas.
What was your original Millionaire Interview on ESI Money?
I was MI 107.
My original interview was in late 2018.
Is there anything else we should know about you?
My wife and I were fortunate to grow up in stable middle-class families that prioritized education and a strong work ethic.
All four of our parents worked growing up. My wife’s parents were extremely frugal. Mine, not so much – they tended to spend whatever they earned.
In any case, our parents laid a solid foundation for us. We got a head start in life and we’re grateful for it.
One downside is that we both have trouble relaxing. If we’re not working on something productive, it feels like we’re cheating.
What is your current net worth and how is that different than your original interview?
Our net worth is $7.5M.
This is up from $4.2M at the time of the interview.
What happened along the way to make these changes?
Our investments are up roughly 55% since the original interview. We have benefited from market tailwinds, continuing to invest aggressively, and riding out the brief Covid dip in March 2020.
Due to the red-hot Texas real estate market, our primary residence has increased in value by nearly $500,000 according to a recent appraisal. I know there’s debate about whether to count your primary residence in your net worth, but if you follow the basic definition that net worth is assets minus liabilities, then you count it. Late last year we refinanced our primary residence to a 10-year mortgage at just over 2%. In hindsight I’m very glad we did this, with mortgage rates and inflation very much on the rise.
We have also purchased two rental properties in the past few years. We have about $275,000 in equity in those two properties.
Finally, we invested $50,000 in two private equity funds. One investment was in a broad fund of artificial intelligence startups. Of those startups, one has gone public but has not done well since its IPO, so the return on that fraction of the investment was around negative 75%. That’s really the only “bad” financial experience I can think of over the past few years, and in the g picture it’s not a lot of money.
The other private equity investment was in a single technology company that I’ve followed for several years. A few years after this investment, the company had another funding round and, based on the resulting valuation and assuming we found a buyer at that price, our return would be roughly 4x to 5x. Our intention is to hold this indefinitely.
These private equity investments are illiquid and are high risk, but it’s a small percentage of our portfolio so we’re comfortable with it.
What are you currently doing to maintain/grow your net worth?
We are continuing to work at our “day jobs” and are probably close to our peak earning years.
We continue to max out our tax-advantaged retirement accounts. We also do a backdoor Roth every year as well as a “mega” backdoor Roth with after-tax contributions to my 401k. We put another $3000 per month into our primary brokerage account.
The real estate investments mentioned above are a way to increase our net worth using leverage. A metric I track is our ratio of assets to liabilities. For us, it’s about 9:1 even after taking on new mortgages for the rental properties.
What is your job?
This is unchanged from our previous interview.
I’m a senior manager at a high-tech company, working in research & development.
My wife is a primary care physician.
What is your annual income?
According to our 2021 tax return our total income was around $750,000.
Of that, about $640,000 was from salary and bonuses, and the rest from dividends and capital gains.
How has this changed since your last interview?
This is up from 2018, when our total income was $620,000, of which $505,000 was salary and bonus.
Our base salaries have continued to increase at a modest rate. Other differences would be:
- The bonus/variable portion of my pay, which fluctuates year to year based on the company’s performance, our stock price, and other factors. Recently it has been higher. It will not necessarily increase every year.
- We sold some stock to make down payments on the rental properties, which caused some capital gains.
Have you added, grown, or lost any additional sources of income besides your career?
As mentioned above, we now own two rental properties. In terms of cash flow, these are just slightly positive, so we aren’t counting them as a source of “income”.
As I said in the original interview, trying to work two demanding jobs and raising three young children makes us hesitate to take on a “side hustle”, even though this is standard dogma in the FIRE world. I suppose you could call the rentals a side hustle, but I am using a property manager, so this doesn’t take too much time.
What is your annual spending and how has it changed since your interview?
We spent about $220,000 in 2021.
I tried to include just “lifestyle spending” here and not things like income tax, home repairs that were covered by insurance, down payments on the rental properties, etc. This is up about 10% from 2018.
The major categories are:
- Home mortgage – $70,000 in 2021 vs $55,000 in 2018. This increased because we started paying a mortgage a few years ago on a second house, which my mother lives in. This and the mortgage on our primary residence were 15-year, which drove the monthly payments higher as we wanted to pay these off sooner. We were also paying extra principal. Late in 2021, we did a cash-out refinance on our primary residence and paid off the balance on the second house. Now we have just one 10-year mortgage at a super-low rate.
- Child care – $23,000 in 2021 vs. $35,000 in 2018. Child care does get cheaper as your kids get older and age out of day care. Hooray!
- General merchandise – $10,000 in 2021 vs $10,000 in 2018. This is Amazon, Sam’s, Wal-Mart, Kohl’s, Target, etc. Kind of pleased that this didn’t increase even more given inflation and that kids’ clothing, shoes etc. are getting more expensive as they get older.
- Charity – $6,000 in 2021 vs. $10,000 in 2018. We had a one-time gift in 2018 that hasn’t repeated. I’m embarrassed that this isn’t higher.
- Auto Loan – $0 in 2020 vs. $9,000 in 2018. I have a goal to never have another auto loan!
- Home maintenance – $10,000 in 2020 vs. $8,000 in 2018. Although I find a lot of home maintenance tasks to be a welcome break from working on the computer all day, and I am a DIYer at heart, this is about buying back our time. We still outsource as many tasks as we can – lawn mowing, pest control, housekeeping, etc. I think this increase is just inflation.
- Travel/vacation – $13,000 in 2021 vs. $8000 in 2018. As we started to pull out of the pandemic, we scratched the travel itch a little more. We’re also past the days of forcing ourselves to stay at Motel 6 or Super 8.
- Groceries – $10,000 in 2021 vs. $8,000 in 2018. Inflation and bigger kids!
- Eating out – $7,500 in 2021 vs. $5,000 in 2018. It certainly didn’t feel like we “ate out” as much during the pandemic, but we did order a lot of take-out food.
- Insurance – $5,500 in 2020 vs. $4,000 in 2018. Includes life, auto, disability, and umbrella.
- Internet/TV/Mobile Phones/Streaming Services – $4,500 in 2021 vs. $4,000 in 2018.
- Healthcare – $3,500 in 2021 vs. $3,000 in 2018. We’re fortunate to have a healthy family.
- Utilities – $3,500 in 2021 vs. $3,000 in 2018. This is just the basics: water, electricity, gas.
- Clothing – $1,500 in 2021 vs. $2,500 in 2018. This seems low. Working from home has allowed me to skimp on new clothes!
- Auto – $6,000 in 2021 vs. $2,000 in 2018. We had some expensive repairs last year. But one of our cars is approaching 200,000 miles and both cars are paid for! I’ll spend $5,000 on repairs if it gets me another two years of life out of my car.
- Entertainment – $2,500 in 2021 vs. $1,500 in 2018. This includes concerts, sports tickets, etc.
- Subscriptions – $1,000 in 2021 vs. $900 in 2018. Includes newspapers and a few magazines. I must not be a Millennial because I read the local newspaper every morning with breakfast as well as other traditional sources like the New York Times and the Economist.
- Homeowners Dues – $700 in 2020 vs. $700 in 2018. Among other things this gets us access to the neighborhood pool. Cheapest pool ever, and I don’t have to clean it.
- Gasoline – $2,800 in 2021 vs. 1,600 in 2018. A few more long road trips. One of our cars is electric, so the overall spend is not too high here.
- Education – $5,000 in 2021 vs. $1,000 in 2018. This includes kids’ sports leagues, music lessons, gymnastics, various summer camps. This has increased dramatically as the kids have gotten older and are in more activities.
- Hobbies – $8,000 in 2021. We bought a used piano as multiple people are now taking lessons and like to play at home.
- Legal – $5,000. We did some estate planning and needed help with a few other things.
- Personal Care – $1,500 vs. $1,300 in 2018. Mostly haircuts.
What happened along the way to make these changes?
Our spending has not changed much from 2018. The main factors would be inflation and the kids getting older. We are fortunate to not have any huge, unexpected expenses.
I don’t feel like we’re big spenders. But when you step back and look at how we spent $220,000…that’s a big number.
What are your current investments and how have they changed over the years?
According to Personal Capital we’re currently at:
- 1.8% cash
- 11.7% bonds
- 24.1% international stocks
- 54.6% U.S. stocks
- 7.8% alternatives
This is not much different than our allocation in 2018.
What happened along the way to make these changes?
Knowing that we are getting closer to retirement, we have been trying to reduce the aggressiveness of our portfolio for a few years now.
Due to the long bull market, the stock portion of the portfolio continues to dominate. We’d like to increase the non-stock portion as a percentage. But to do that, we need to sell some stock (which triggers a capital gain); invest more aggressively in the other categories (we’re trying, but the “old money” already in these accounts is a lot more than the “new money” we’re contributing each month); or wait for stocks to fall such that it comes into balance.
What other financial challenges or opportunities have you faced since your last interview?
The biggest challenge we have is long term care for my mother, whose health has declined since my father’s death a few years ago.
Unfortunately, my parents would be a case study in how not to prepare financially for old age. Although they earned good money for a very long time, they saved very little and, to my knowledge, never invested any of it.
My mother lives month-to-month on Social Security. She has no long-term care insurance. She lives in a house that we own and maintain, so she has no “home equity”. If she reaches a point where she cannot live independently, it’s likely we’ll have to shoulder more of her financial burden.
To be honest, I sometimes feel resentful that my parents didn’t plan better and that they never had an honest conversation with me, telling me they might need my help some day. My father was very secretive about money, so my parents’ financial problems were left for me to discover after he died. My mother was mostly ignorant. This weighs on me.
On the other hand, my wife and I are in a very strong financial position, and we have the means to help. My parents laid a strong foundation for me early in life that has allowed me to be successful. In my more grateful moments, I try to think of this as my way of repaying what my parents gave me.
Overall, what’s better and what’s worse since your last interview?
Our kids are older, so child-raising is easier now and just as rewarding. Changing diapers, waking up in the middle of the night, getting kids dressed, making lunches, putting them over your shoulder when they’re tired and can’t walk any more, pushing strollers – all of that is a physical drain. We’re approaching 50 and we’re happy that our kids are becoming more self-sufficient.
My own work has become less stressful. A combination of working mostly from home since the pandemic began, very limited work travel, plus other changes within my company, has resulted in work feeling a little less frantic now.
Our financial picture also lets me relax a little. If I lost my job or needed to make a change, I could take several months off, and we’d be fine.
On the other hand, the last few years have been very stressful for my wife. Physicians are avoiding or leaving primary care for many reasons. Primary care doctors, on average, earn less than specialists while medical school debt continues to climb, so fewer medical students want to enter primary care. Others are just burned out – by the pandemic or otherwise – and are quitting or retiring early. That shortage leaves a growing burden on those who remain.
My wife’s company wants her to see more patients, but she physically can’t do it – there aren’t enough hours in the day and patients are already angry that they don’t get more of her time. Nearly every night, she’s up until midnight answering patient emails, typing notes, filling out forms for insurance companies, etc.
She loves practicing medicine and she loves (most of) her patients, but she loathes the bureaucracy of the health care system. The pandemic has exacerbated all these problems. She’s seen an increase in the number of patients who are uncooperative or belligerent due to pandemic-related rules. Some of her office staff have even been threatened with violence.
Both of us would hesitate to recommend our kids pursue a career in health care, which is sad.
What are your plans for the future?
In the original interview, I wrote: “We’d like to have a net worth of $7M by the time we’re in our mid-50s. We think that will be enough to sustain us through retirement.”
Well, here we are shy of 50 and we’re at $7.5M. But it doesn’t feel like time to stop.
I still see a ton of uncertainty. We have three young children. The youngest is more than a decade away from starting college. Who knows what college will cost then, or whether they’ll need help after college, or whether they’ll even go to college?
Then there’s my mother’s situation. I don’t think I’d be comfortable retiring now, even if our net worth was $10M or more. We’re in a different place than people whose parents are well-off and who are empty nesters in their early 50s.
There’s also the looming question of: what would we do with our time if we retired? We’d like to travel, but that’s mostly limited to summers and holidays while our kids are in school. I’ve read the advice that one needs to retire “to” something as much as “from” something. I admit that we haven’t figured out the “to” part yet.
I’m also afraid that if I stopped working, it would be hard to go back. Even now, if I take just a week off, I feel disoriented when I come back to work. I can’t imagine taking 6-12 months off and trying to re-immerse myself if I decided I needed to work again. I’m not saying this fear is rational, but it’s real.
We will likely be poster children for “one more year” syndrome.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
I mentioned above feeling less stress in my job than I did several years ago. Another factor in that is trying to adopt more of a “don’t sweat the small stuff” attitude. I recently came across some old work notebooks, many from 10-15 years ago. One thing that struck me was the amount of stress I remembered feeling at the time, versus how unimportant the things mentioned in those notebooks seem in retrospect. I’m more likely now to save my stress for the things that are really going to matter in the long run, and letting the day-to-day annoyances just slide. There’s not enough emotional energy to worry about everything.
A few years ago, around the time my father died, I read The Top Five Regrets of the Dying. The regret that jumped out at me the most was, “I wish I’d had the courage to live a life true to myself, not the life others expected of me”.
Social media has amplified comparisons to family, friends, and colleagues. All day we are bombarded by messaging about what we “should” be doing. I can tell you that after my father died, the things people praised him for were about being true to himself as a husband, father, friend, and person of faith, not how he measured up against some artificial comparison.
David Brooks, in The Road to Character, talks about “eulogy virtues” versus “resume virtues”. As I get older, I think more about the eulogy virtues and less about the resume virtues.
Thanks for the update. I, too, had one-more-year syndrome but found that saying “yes” to something was what needed to kick-start the process of retiring. The “yes” was volunteering to be head coach of my son’s team for 7+ months, 5-10 hours a week (or more). I found something that could be what I retire to, and I embraced it. Prior to that “yes” I was happy to be the helper because it was easy and gave me options. I retired a bit more than a year later. I recommend finding something outside of work to really commit to and go for it. It may end up not being what you retire to, but if it’s an activity with your family, you won’t regret making the commitment.
Really enjoyed this update! I’m bookmarking it to re-read, as well as to follow the comments.
In most ways, we are in the same position. Except our kids will be out of the house in the next few years. I agree that retiring when your lives are tied to the school calendar is limiting; I will probably seriously consider retiring once my youngest is off to college.
But the one more year syndrome is real. Especially when you are making great money and work is (usually) enjoyable and easy at this point in your careers. As it seems you both are not ready to retire, I would suggest your wife consider the possibility of going part-time. You can afford it and it may make medicine more enjoyable and prolong her career. If you collectively “only” made enough to cover your expenses moving forward, your net worth is likely to soar well beyond what you will spend in your lifetimes. If you haven’t yet done so, play around with some calculators like FireCalc. It’s really interesting!
Finding something to retire to is also something I need to work on before retiring. I look forward to hopefully reading another update down the road on what you ended up doing! Best of luck!
I agree your wife should consider going part time. My wife is in health care and works one day a week. If she did more than 1-2 days, the job becomes a chore so we agreed she shouldn’t work more than what she enjoys. You indicated you already hit “your number” so I’m unsure why your wife is working for more money than you say you need when she’s getting burned out. Healthcare insurance for your family can be covered under your employer’s plan.
This is what we’ve been doing for over a decade.
MI 107 says
I neglected to mention in the original update that my wife is already part time. I know what people are thinking: How is she working so many hours if she’s part time? Among the myriad failures of our health care system is the volume of non-clinical work we ask physicians to deal with. Although she only sees patients for part of the day, she spends many hours answering emails, calling patients with lab results, writing up notes, filling out insurance forms, etc. And every year, there seem to be more forms to fill out than before. There also seem to be no disincentives (like a copay) to discourage certain patients from emailing their physicians dozens of times per week. So the inbox is essentially unbounded. Physician assistants and nurses can carry some of the load. But believe me: some patients get very angry if you ask them to communicate with anyone but “the doctor”.
She hasn’t explicitly asked but based on others’ experiences we don’t think her employer would allow her to be more part time than she already is. We’ve talked about moving to a different employer. However, doing so would mean she’d likely leave behind the great majority of her patients, some of whom she’s treated for nearly twenty years. She feels a strong sense of obligation to her patients.
My wife also has some workaholic tendencies. She’s wired to push herself hard.
I don’t claim that we’re dealing with this situation 100% rationally, but that’s some context on why we are where we are. Motivated by these comments, I need to try harder to get her to cut back.
Nebraska Walker says
Bless you and your wife. Primary care doc here. I get it.
Great share / great update.
Question. What did you guys pay in taxes last year as W-2 employees and what are your plans going forward for tax abatement ? I’m alway curious.
Again great share here.
MI 107 says
Total tax owed in 2021 was approximately $195,000. So far we have managed to reach this number by tweaking our payroll withholding, but at some point I might have to also pay estimated taxes.
Predicting how much tax we’re going to owe, and avoiding a penalty, is a whole discussion itself 🙂
As far as abatement, nothing special:
Take advantage of tax-deferred retirement accounts where we can (401k, HSA)
Avoid investments that produce dividends and capital gains distributions.
Avoid selling in general (more capital gains).
Let me introduce you to form 8960…
We also have the rental properties, which I mentioned. Those have some well-known tax advantages.
Exactly. It’s a real problem. That would seem to be worth looking into.
I wonder what would happen long term if you simply bought more real estate with that choking amount of tax you pay each year.
Good luck out there!
Good update. One item I read that sounded very familiar. You wrote in your original interview, “We’d like to have a net worth of $7M by the time we’re in our mid-50s. We think that will be enough to sustain us through retirement.” You have nearly hit that and still feel you need to keep going and padding further. I have reset our goal number a few times after hitting it, surpassing it and still similarly feeling not done. I wonder if that is just human nature? As we set these financial goal milestones, once obtained, the perceived correct number is always “just a little bit more than we have now”.
Enjoy those kids while they are still small and around the house a lot. Read my update (#23), teen years coming soon, your time with kids will soon be very scarce! I love my big teen boys, but I really miss my little boys that used to live in our house : )
I took care of my mother forever. Eventually she had a stroke and had to go into a nursing home. She gets SS and a small pension. Even though she was not eligible for Medicaid when she was home (which would have covered some homecare), she is eligible for Medicaid in the nursing home. All but $50/mo of her SS and pension go to the nursing home.
Not sure if this helps, but a resource if needed.
MI 107 says
I need to do more research on this. My mother’s health issues are a combination physical and cognitive, and they are chronic rather than acute. She doesn’t need full-time medical attention right now. But with each passing month, she’s less able to live on her own. We already are paying for periodic, non-medical in-home help. There will likely be a period of time where she’s no longer able to live on her own but is not a candidate for a nursing home (or at least, a candidate that Medicaid would cover.)
So the question is: how do we best care for her during that period? There are many possibilities, all with significant downsides as far as I can tell.
JeffB MI20 says
Our best financial move was buying LTHI for my MIL. We paid about $50K in premiums over 20 years and she is now in a memory care center that is about $9K a month, fully paid by the insurance. Our payback was about 8 months and she has been in memory care for 3 years now. Her policy most likely isn’t even available anymore, but even $500 a month for a policy is cheaper than $9K a month.
MI 107 says
Thanks for sharing. Sounds like that definitely paid off for you.
My mother’s health is so poor now that I fear we either couldn’t get a policy at all, or the premiums would be off the charts, but I admit I haven’t tried to price it.
Long term care insurance was definitely never on my parents’ radar, nor mine, when both were living and healthy. Lesson learned.
Your interview resonated with me as the “1 more year” syndrome was definitely a factor in deciding when to retire and also after working 50 to 60 hours weeks for the last 30+ years wondering what I would retire to
Something you should consider is transitioning to part time work and it does not have to be in the same job. I retired from full time work in February this year at 58. My wife who is 65 retired fully at the same time. We had a couple of months of just chilling and touring around our country (New Zealand). Last year we had made a “in principle” decision to retire but one of the things worrying me was what I would do after working full time so I actively starting exploring options. I was not ready to fully stop working but wanted more free time so thought about contracting in the financial services space (I working in banking during my full time career). Happily enough at a networking event I got talking to someone I knew and he mentioned he was looking for someone to help him out. Long story short, we talked and I agreed to come on board as a contractor once retired so that firmed up decision to retire
It has worked out well. I work roughly 20 hours a week mostly from home and hours are totally flexible. I do not work Fridays so have plenty of time to do other things. I can choose not to work if I wish (we are off to Australia for 3 weeks shortly and have 7 week holiday planned to US next June/July to replace cancelled trip ). I appreciate the flexibility might not be available in many roles but I was fortunate to find one so I have zero regrets about deciding to retire from full time work
You situation with your parents and in laws is not uncommon. We were in a similar position here buying my in laws house to free up capital so they has money to supplement their Social Security in retirement. They never needed long term care but even if they had they had, in New Zealand the government pays for it if you have assets less than approx $US150K
My parents both needed long term care. My mother has subsequently passed away and my father who is in late 80’s is in long term care which he pays for from the sale of the family home. If he survives long enough to get down to the US$150K limit then the government will pay