Millionaire Interview Update 37

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 February.

As usual, my questions are in bold italics and their responses follow…

OVERVIEW

How old are you?

My wife and I are in our late 40’s.

We’ve been married 18 years.

Do you have kids?

We have two teenagers (ages 13 and 14).

They are very good kids overall, but have been giving a lot more attitude lately. I know, I know, teenagers with attitudes, you don’t say?

What area of the country do you live in (and urban or rural)?

We live in urban Southern California, a HCOL area.

What was your original Millionaire Interview on ESI Money?

I am Millionaire Interview 158, interviewed in 2013, with an update in 2016, and now this is the 2nd update.

I can’t believe it’s been ten years!

NET WORTH

What is your current net worth and how is that different from your original interview?

Our current net worth is currently 3.9M (in Feb 2023).

It was 1.2M in 2013 (original interview) and 1.8M in 2016 (1st update).

It poked briefly above 4M in late 2021, but then 2022 happened and it went as low as 3.6M before coming back up to almost 4M again.

What happened along the way to make these changes?

We’ve never done anything fancy and still don’t.

We work W2 jobs, save about 40-50% of our net income and invest in index funds/ETFs (mostly VTI).

I dabble with stock options and dividend stock investing, but those are only a small part of our portfolio.

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

High earnings (320K in W2 income), high saving (40-50% of net income) and investing (in index funds/ETFs).

Like I said, we don’t do anything fancy. No real estate, no hedge funds, no real estate syndications, no business of our own.

I did rent out our old home when we bought a new home around the time of the 2016 update, but I absolutely hated being a landlord. There was a call to repair something or other every…single…month. I had nice tenants, but having to deal with repairs and the fickle and expensive tradespeople just turned me off on rentals. I thought about using a property management company, but then I’d have to deal with them and the nickel and diming that I know will take place.

I sold the place after a year of renting it out, glad to be rid of it.

EARN

What is your job?

I am a software developer.

My wife works for an insurance broker.

We are both senior level in our occupations.

What is your annual income?

My salary is 170K.

My wife makes 150K with an annual bonus of 20-40K.

How has this changed since your last interview?

Our salaries have increased since the last interview in 2016.

My wife went from ~130K to 150K just through annual raises with the same company.

I went from ~130K to 170K through a combination of annual raises and a job change in 2022.

Have you added, grown, or lost any additional sources of income besides your career?

I stopped working from mid 2021 to mid 2022 due to burn out on the job. This gave me a chance to try out retirement and it was very enjoyable, but I feel I can’t quite FIRE yet, especially with college costs for two kids coming up in a few years.

I believe I can definitely CoastFIRE though and might look to slow down to part time work or less stressful work in the coming years.

I was worried about finding another job after a year of not working, but it turned out to not be an issue at all. I was very picky about my next job and still found one within 3 months of looking.

One thing I kept a close eye on was how my net worth grew (or not) when I wasn’t working. Despite losing my income, our net worth grew 150K in the ~12 months I didn’t work. Part of that is of course because my wife was still working, but take away my wife’s net income and our NW still grew about 60K. It was quite a revelation to know that if we had zero income, our NW would still have increased.

SAVE

What is your annual spending and how has it changed since your interview?

Our annual spending was about 90K in 2016, the year of my last interview.

Since then:

• 2017 – 70K
• 2018 – 80K
• 2019 – 80K
• 2020 – 100K (this included the purchase of a used car for 45K in Jan 2020, otherwise it’d be 55K!)
• 2021 – 60K
• 2022 – 105K

During the pandemic lockdowns in 2020 and their residual effects in 2021, we weren’t travelling or eating out much; a lot of our kids’ activities (summer camps, sports) also got curtailed and our annual expenses got as low as 60K.

Pandemic aside, it was a very instructive exercise in knowing how low we could go. It wasn’t even close to any hardship; we just stayed home, cooked a lot and did a lot of free outdoor activities (hiking, biking, played basketball/tennis on our own or with a few friends).

I believe we could have gone even lower if we had to, but probably not by much more, maybe 50K.

What happened along the way to make these changes?

We never give much thought to our spending nor do we set a budget on anything. We usually do what we want to do, spend what we want to spend. We are fortunate that we just naturally seem to have inexpensive hobbies and tastes.

Except for knowing that our expenses were much lower in 2020/2021 due to the pandemic, I did not know how much we spent the other years until I looked it up for this update. I just used the 90K from the last update in 2016 as sort of the baseline going forward, and estimating we spent 90-100K annually.

It looks like I was below that for 2017-2019, and started approaching 100K until the pandemic occurred. But then it shot up to 105K in 2022. In 2022, we went on 2 big trips after being homebound for 2020 and 2021, started eating out again with a vengeance and spent 20K for some home renovations.

While I don’t keep very close track of expenses, I do use my monthly credit card payment as a proxy for my expenses. My credit card payment ranges from 4K to 7K per month. Anything over that I will look into more closely. But as long as my NW keeps trending up, which I look at monthly in Quicken, I don’t worry much about expenses.

Case in point, I did not know we spent less than the 90K we did in 2016 the following years until I looked it up for this update. Even the >100K we spent in 2020 and 2022 included a large one-time expense (45K car in 2020 and 20K home renovation in 2022). They count, of course, but in the back of my mind, I’m mentally discounting them and marveling that we really spent far less than the 90-100K I thought we had spent most years since 2016.

INVEST

What are your current investments and how have they changed over the years?

Very roughly, our NW is divided like so:

• 100K in cash
• 200K in CDs and treasury bills
• 700K in home equity
• 1.5M in retirement accounts, all invested in index or target funds
• 1.4M in brokerage accounts (1M in index funds/ETFs, 200K in dividend stocks, 200K in individual stocks)

My investment portfolio used to be a mess. I used to try to pick stocks and when they didn’t work out, I just left them there. And for a long period of time, I didn’t even invest, except in my IRAs and 401Ks, and just accumulated cash. At one point, I had probably over 600K in cash. It wasn’t until around the time of my first interview in 2013 that I started cleaning up my investments to where they stand today.

I invest heavily in VTI. All my retirement accounts are in VTI or some equivalent and so is the majority of my regular investments. I still dabble in stock picking though because I just can’t help it. And I started buying dividend stocks as a middle ground between index investing and stock speculating. It is working out OK, but my interest in it varies. I’ll pay attention to my dividend stock portfolio for a while, and then let it languish, only to pay attention to it again. More and more, I just buy VTI and forget about it.

What happened along the way to make these changes?

I finally noticed how well my IRAs and 401ks were doing, invested in index/target funds and being left alone, as compared to the rest of my investments. That lit a fire under me to do the same with my non-retirement investments and cash pile.

Basically, I sold off all those stock picks that didn’t work out from years past and started dollar cost averaging into VTI. It hurts to think where I’d be if I did this earlier, or if I just started index investing from the very beginning.

I also consolidated all my accounts into as few as possible. There are necessarily multiple retirement accounts (Roth IRA, traditional IRA, 401k, for both my wife and me), but we now only have one brokerage account. I even buy CD’s and treasury bills only from this brokerage account now. This has made managing investments much easier for me.

MISCELLANEOUS

Overall, what’s better and what’s worse since your last interview?

What’s better is that:

• Our investment portfolio is in much better shape.
• Our net worth increased substantially.
• I have another job that I can tolerate at the moment.

What’s worse is that I seem to have a decreasing ability to put up with my job, perhaps a direct result of an increasing net worth. I always seem to suffer from burning out at my job.

In 2013, I talked about really not liking my job. In 2016, I talked about having found a better job. But now in this update, that same job caused me to burn out and stop working for a year. I don’t know what to do about this. I tend to get too involved in the work, but I’m trying not to do that now.

I don’t know if there’s any other line of work I can do, other than software development, that wouldn’t be a worse fit. I’m very introverted and shy, and it is the deadlines and working with other people and presenting to groups that stress me out. What job doesn’t have these aspects?

What are your plans for the future?

I’m targeting investable assets (not net worth) of $4M and then I’ll probably semi-retire or retire early.

Before, I thought this would happen by 2024 or 2025, but then 2022 happened.

Now it might take a few more years, though I am seriously getting senioritis now.

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

If you’re going to do nothing about investing, at least contribute to a 401K and IRA.

Keeping invested in 401K and IRA’s was really my saving grace. I started out investing badly and sporadically in my regular investments, but I kept contributing 8-10% every paycheck to 401K and the max every year to Roth IRA (until I didn’t qualify anymore), auto-investing in index funds/ETFs. I finally saw the light after more than a decade and a half when my retirement accounts were doing so much better, and I started cleaning up my regular investment portfolio to emulate them. I said it before and I’ll say it again; it hurts to think where I’d be had I done this from the very beginning.

Everyone thinks there’s some secret to getting rich. I know I did. But there isn’t. Just earn as much as you can, save a lot and invest. Millionaires didn’t receive some secret cheat codes or hot stock tips. At least I didn’t. I don’t own any real estate, other than the home I live in. I don’t have my own business. I didn’t even invest all that well (some might even say horribly and I wouldn’t disagree) and we still made it.