Millionaire Interview Update 40

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…

OVERVIEW

This interviewee chose to begin with the following statement…

I am the bad example, the exception to the rule, the cautionary tale.

Warning: avert your eyes if you are easily shocked by financial malfeasance!

Don’t do as I say, or do what I do.

My E was always moderate, my S was usually negative and my I has been pathetic. I still have a large mortgage (gasp!) and I own two BMWs (horrors!)

On the other hand, we are multimillionaires. Please read on.

How old are you?

I am 63 and my wife is also 63.

We have been married 30 years.

Do you have kids?

Our daughter is 24. She has lived in NYC since graduation except for the 2020 Covid year at home.

She is working in her field of interest but is not quite self-sustaining. She gets the first (of three) tranche of her Trust Fund this summer, which would give her about $290,000 at current valuation.

She has either $5,000 or $15,000 in student debt (Supreme Court decision pending). She is fond of her cat.

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

We live in Coastal California.

It’s a semi-rural community in the Bay Area, but still a 30 minute or less drive to San Francisco, Silicon Valley and everything the Bay Area has to offer. We think it is the perfect place to live. Some think it is too expensive (average house price: $1.5 million in our community) but we moved from SF three years ago into a house that cost 30% less but was 30% larger.

(Note: I do see the value and purpose of downsizing as an empty nester. However, we found 1900 s.f. was too small given our daughters’ frequent multi-week visits and our desire to each have our own office/retreat/man or woman cave. So we are back up to 2400 s.f. and much happier)

What was your original Millionaire Interview on ESI Money?

I was Millionaire Interview 175.

Is there anything else we should know about you?

I retired in 2019 from a high-level government position (behind the scenes) and haven’t worked a day since. No plans to ever work again.

My wife hasn’t really worked since our daughter was born, though she is becoming a local celebrity playing piano at the wine bars here. We enjoy holding hands, long walks on the beach and…uh, this might be the wrong place for the rest of this sentence.

Our relationship with money is that my wife has always had a lot (not mega rich, but multi-millions) and is comfortable living well but also values a good deal. I have come to enjoy loving well too.

She thinks we should keep trying to grow the portfolio while I think it’s ok to tread water and very slowly reduce it (given that we’ve already taken care of our daughter with the Trust Fund). We have compromised by mostly ignoring the whole thing and hoping it works out. So far, so good.

NET WORTH

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

As of today, our net worth is about $4.7 million. That includes $3.5 million in investment assets and $1.2 million in home equity. Plus we manage our daughter’s $870,000 Trust Fund.

Our net worth has declined from about $5.4 million in 2019 due to our profligacy and negligence.

Perhaps here is where I should mention that our net worth stems almost entirely from my wife’s inheritance. She inherited several million dollars over time as the sole heir (after her mother passed) from her hard-working, frugal and savvy investor father.

We have been successful in our quest to live semi-large, eschew work, invest poorly and (fairly slowly) fritter away this windfall. If we had been even marginally competent or thrifty, we would surely have over $10 million now. But — our life would not really be any different, expect that we would have enjoyed it less.

To keep us from blowing it all, we set up our daughter’s Trust Fund (she can decide herself if she wants to blow through that).

What happened along the way to make these changes?

The main change is our net worth is that we took a $300,000 loss on the sale of our SF home, plus another $150,000 in commissions and fees. As mentioned, we bought a less expensive home, so our cash/investable assets improved by $400,000. We also took a $600,000 mortgage at 3.25% so ended up with a total of $1 million more in non-home equity assets.

Beyond that, we have continued our pattern since the 1990s of spending more than we take in every year. Between subsidizing our daughter, and now paying for long-term care for my father, plus our usual combination of anti-frugal gluttony (what is a Costco?), sinful entertainment (rock and roll! Pro basketball!) and decadent travel (mostly to SoCal and New York since Covid) we have no problem adding to the bills.

But we still have several million left and are running out of new ways to throw it away. Or maybe we are just getting old and lazy. (Yeah, we do know about charitable giving; a bunch goes that direction already and we may ramp that up.) Suggestions welcome.

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

More like trying to slow down the losses, without reducing our semi-lavish lifestyle.

We have cut lots of expenses in the last year or so. Fired the housekeeper ($350/month). Quit a useless health club ($250/month). Reduced the cable bill ($50/month). Changed insurance companies ($2,000/year). Stopped working with an investment advisor ($25,000/year). Cut car payments by $700/month by buying our BMWs off of leases. Reduced my health care costs by $8000/ year by changing plans.

Total savings: About $50,000/year. Yea!

We also added expenses in the last year: added concierge health for wife ($8,000/year), deck repair ($20,000 one time), outdoor storm repairs ($3,000 one time), new, better club ($75/month), father’s assisted living ($3,500/month).

Total additional expense: About $50,000/ year, excluding one-time expenses. Boo!

EARN

What is your job?

Retired 4 years ago. Zero work since then. Zero plans to work in the future.

Wife performs music a few times a month locally and has earned about $500/month (which she then spends on musical equipment and related items).

What is your annual income?

I have a pension which is currently $114,000/year, and will increase 2% every year. This includes health care. At age 65, the pension will pay for Medicare Part D.

Our investment portfolio throws off about $90-100 k/year (not counting any capital gains from sales).

How has this changed since your last interview?

Income has not changed much since last interview, except to go up a bit each year due to annual 2% pension increases and a shift to more bond income.

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

No, except for the small performance income by my wife.

SAVE

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

I think we are spending around the same amount as before. Something like $225,000/year.

I keep trying to figure out why our credit card bill averages about $10,000 each month. Pretty sure it’s all those “bargain” clothes my wife buys, but it’s “possible” my sports habits contributes a bit. And we either buy fresh food daily or eat out, so that adds up. Plus our daughter sneaks Uber charges onto our credit card.

Mainly, we just live our lives as we see fit and it kinda works out this way.

What happened along the way to make these changes?

Don’t know. We buy things and pay the bills.

Wife is good at saving small amounts on purchases, but making many purchases (the more you buy, the more you save, right?).

I rarely buy anything but spend on food, travel and experiences.

Our efforts to reduce unnecessary costs are roughly balanced by additional family needs.

Overall, I figure we spend no more than 1% of our net worth above our pension + investment income. So we should be ok long term.

INVEST

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

We have added a bunch of bonds with the remaining cash from house proceeds/mortgage that wasn’t yet invested. Put in about $100,000 in I-bonds. Bought about $150,000 in 3 month to 18 month T-bills. Bought $60,000 in munis.

Working on reducing the number of ETFs and mutual funds in our accounts from about 25 to under 10. It was fine to have a lot of narrow investments when we had an investment advisor to track and adjust them. But we no longer need that service so will DIY it with fewer funds (wife was an investment advisor a long time ago so can handle this— just didn’t want to for a long time),

We have roughly 60% equities, 30% bonds (mostly individual munis) and 10% cash.

What happened along the way to make these changes?

We ended our relationship with our investment advisor because we no longer needed his services.

We had turned to him after making several horrible investing mistakes, mostly based on emotional decisions (me) or eye off the ball (her).

Mixing my metaphors, we have righted the ship and plan on putting it into near-autopilot once we clean up the poop deck (note: I was not an English major).

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

We thought our daughter would be self-sufficient by now, but not so. But when she gets her first tranche of her Trust Fund this year, she will be on her own.

We are grateful that my father is still alive and relatively healthy at age 89, but he finally ran out of money this year and we now must pay for much of his assisted living care or move him somewhere cheaper (but lower quality). So we will keep paying for where he is for now.

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

Better — glad to be retired, healthy and living in a beautiful and friendly area. My wife is happy that she can play piano and keyboards at local wine bars and senior centers. My golf handicap is going down.

Worse — Our cat died. My hairline continues to recede. My golf handicap has only decreased by one stroke in 4 years.

What are your plans for the future?

Keep living our best life! Do more things we enjoy and less that we don’t. Support family as needed. Contribute to the community. Remain in good health. Ramp up travel that was deferred during Covid. Keep playing baseball and golf and taking hikes around the beautiful Bay Area (especially along the coast). Get even better at pickleball.

In the immediate future, I am traveling to New York next month to help my daughter pack up and move back to CA, where she will look for a job in her field and probably apply to grad school. She and I are renting a vehicle and taking a 10 day cross country journey (wish me luck).

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

I still advise those who can to find a partner who inherited millions of dollars (though I didn’t do this on purpose).

Once accomplished, feel free to make every financial mistake in the book because you can probably still retire at 59 as a multi-millionaire.

If that doesn’t work, listen to all the great advice from people who have done well without the pure stroke of good luck I had.