Millionaire Interview Update 41

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 July.

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

OVERVIEW

How old are you?

I am 44 and my wife is 43.

We have been married 13 years this summer. (Hard to believe!)

Do you have kids?

Yes, we have a 10 year old and a 7 year old.

Both are really great kids. They have their moments as most children their age do.

COVID really screwed us and many other families when it came to education as we had to balance watching kids with kids learning at home while we worked from home but I feel like they are finally back on track with respect to their education.

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

Suburban; just a short drive to the city.

What was your original Millionaire Interview on ESI Money?

I am interview #184.

Is there anything else we should know about you?

I’m actually surprised by our net worth since I last was interviewed. I never would have guessed in my wildest dreams that I’d be where I am right now.

It really shows you the effects of compounding and having time on your side. Similarly, it shows that money is precious and you need to treat it with respect.

Over the past few years I have lost friends to diseases and it has shown me just how short life is. I’m starting to live a little by spending a bit more money and enjoy what life has to offer.

Last, but not least, I feel like everyone talks about retirement and what they’re going to do. Well, COVID showed me that I do a great job fixing stuff around the house but other than that and my full time job, I am not that great at much else and don’t have any hobbies. It just shows me that I might just want to consider working until I’m about 65. Again, time will tell what happens.

Extrapolating, I believe that healthcare costs will be exceptionally high and most people will have to work into their 60s to have an enjoyable retirement.

NET WORTH

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

As of early July 2023 when I’m composing this interview, about $3.7 million.

What happened along the way to make these changes?

Just like I wrote in my interview approximately 3 years ago, saving, saving some more, investing in various stocks, mutual funds as well as alternative investments, and living below our means whenever possible.

Yes, I still buy some generic things at Walmart and the grocery store. Yes, I clip coupons and wait for things to go on sale and when they do I stock up on them. I am still driving a 20 year old car. I drive by the high school and the kids are driving better cars than me.

But guess what? I’m still driving a safe vehicle, the insurance isn’t that bad and because it’s paid off I’m only paying for minor repairs and upkeep. If it were to break beyond repair tomorrow I suppose I’d just go out and buy a new car.

I wrote about various investments in my previous interview. I did a lot of looking backward the past several months. I came to the conclusion that just about everyone compares their performance to the S&P 500. If that’s the case why not just invest in the S&P 500?

Warren Buffett, John Bogle and others recommend doing just that. Had I just done what they recommended — which is to invest in the S&P 500 with low costs and not try to pick individual stocks, I’d have even more money.

Last, but not least, don’t look for a get rich scheme. Slow and steady wins the race here. Just because something returned 20% the past year doesn’t mean that next year will be 20%. There are countless factors that affect each individual stock. I don’t have the time to research each of these stocks.

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

Because we saved so much for our children’s education when they were very young, it is now pretty much fully funded, at least for undergrad. I never anticipated being in my mid 40s, having my kids in elementary school, and their college would be totally funded.

I’m now taking the money that I was putting into their 529 plan back into my personal checking account/investment account.

I’m still living below my means but the amount of money I/we spend has increased a bit over the past few years. I blame part of this on inflation and just a little bit on lifestyle creep. As I stated earlier, I have seen some really bad and sad things over the past 3 years and I’m ok buying a cup of coffee every once in a while at Starbucks and treating myself to a tasty cheeseburger every now and again.

I finally have learned that it’s ok to enjoy life just a little bit and not save every last penny for a rainy day. I am, though, still maxing out my 401k contributions. The same goes for my wife.

Fundamentally, though, I can’t stress enough that I am where I am right now because I was so frugal for 20+ years since starting my first full-time job.

EARN

What is your job?

I am in the same job, a very specialized, technical role in engineering where I’m looking at numbers for a majority of the workday. I’m “almost” at the managerial level but have peaked in terms of job title and responsibilities/salary range.

The remaining hours of my work day are giving opinions, going to meetings, and preparing documentation.

I actually don’t know if I want to be a manger. While I love my job, I don’t love giving feedback to people who don’t give work 100% everyday and don’t want to have to confront and reprimand people like that. I’m an over performer and I expect others on my team to be over performers.

My wife is still in the medical field, same job and is busier than ever. She and I blame this on baby boomers getting older and living longer.

What is your annual income?

I’m estimating to be around $295,000, combined, for 2023.

I can’t say for certain until the end of the year as bonuses are very unpredictable, as is overtime pay (I never count on either).

How has this changed since your last interview?

Life has become unpredictable. I blame part of this on COVID disrupting every aspect of our lives at the time the pandemic began.

The good news is that as a result of COVID, in some ways, our life has gotten better. Being able to work from home every so often has made my work-life balance considerably better. Not having to take a day of vacation in order to be home for something like an appliance repair is really nice.

Over the past 3 years I did receive a small salary increase and at one point was to be promoted. After looking at the logistics of childcare and family dynamics, it wouldn’t have been easy or worthwhile for a job title change. Yes, I would have made more money on paper but after taxes virtually all of the money would have been used to hire out work that my wife and I currently do and I feel like I’d be doing more work (at work) for less money.

Looking back at this opportunity, it made me learn that money isn’t everything in life. You reach a point where you have enough money that just a little bit more money doesn’t necessarily make life easier or more fulfilling.

You’ve probably heard this before, “I can buy a lot of things but what I can’t buy is time”. If you’re new to investing you likely think I am crazy. If you’re in your 60s you probably are nodding your head in agreement.

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

I made the very difficult decision about a year ago to let one of my two advisors go. I took all the money they were managing and I invest it myself.

I’m happy in terms of my investment choices as well as not having to pay a steep monthly fee for their service. (See above where I discuss the S&P 500 versus choosing individual stocks).

Our rental income has changed rather dramatically. I had one renter that paid below market rates for approximately 10 years. My wife and I made the decision at the end of 2022 to sell the property and told our renter our plans as affordable housing isn’t easy to find. Then, my wife and I sat down and looked at the properties in the area and thought about the future for us and our children and said something to the effect of “maybe we should just keep this property forever because we don’t know what the future will hold for the kids or ourselves. Maybe the kids won’t go to college and they’ll need an affordable place to live…we might want to rethink selling…”. We then told the renter very politely that we’d continue to rent to them, but it would have to be for a market rate, take it or leave it.

Everything (and I mean EVERYTHING) has gotten more expensive over the past three years: HOA dues, condo fees, repairs, materials, labor, etc. After a quick little back and forth we both got what we wanted: a market based rate and a renter who isn’t a deadbeat and treats the property with respect and pays on time. I can’t ask for much more. So, we’re keeping both of our rental properties for the long term. (The second rental property is a story that I can’t get into but I’m not worried about the renter or the property, itself).

I can’t really think of a better way to have non-correlated investments to the market than real estate in a good location. Regardless of what happens in the stock market, everyone needs a place to live. The only downside of real estate is that things break and upkeep is time consuming if you do it yourself. While finding someone to fix things is a little difficult, it is even more expensive.

SAVE

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

We have increased our spending by quite a bit.

As stated earlier, some of this is the fact that we have realized life is short and we’re ok spending on some little things, both to make life easier, and to enjoy what life has to offer.

I have also spent quite a bit of money fixing and upgrading things around my primary house.

Material prices have increased quite a bit since COVID and this shouldn’t be too much of a surprise to any reader out there that owns their home/rental property. Go to Home Depot or Lowe’s and look at the price of paint, nails, wood, tools, appliances, etc. Ballpark, I’d say most of these materials are up 15-20% relative to 5 years ago. That estimate is likely low, I know. But, everyone is dealing with inflation and at this point we can’t really wait for prices to go down. It’s a new normal.

What happened along the way to make these changes?

I’ll be really blunt here. “Life” happened, and even though we were adults three years ago we are even more “adults” today.

We are getting older. Friends get sick and die. In some instances, so do their children. Our parents are getting older to the point that we have to help them. Be it driving them to the doctor, grocery store, or helping them with things they can no longer do by themselves around the home.

All of this is taken into account when we are buying something/selling something. Be it mutual funds, appliances, etc. Every decision is strategic in terms of maximizing value and maximizing our time and making decisions that make our life easier.

In terms of investments I’m making it simple. A majority of my investments going forward are a mutual fund that purchases “the entire stock market”. I’m just at the point of trying to maximize returns, minimize risk and minimize fees. Sure I’ll buy stock every once in a while but it will be infrequent.

Making things easy is what I’m after at this point in my life.

INVEST

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

Note: these are all rounded figures…

• Stock, mutual funds, and 401k accounts: $2.1 million
• Cash: $376,000
• Real estate: $1.4 million (this is a conservative estimate)
• 529 plan: $261,000

Total: around $4.2 million

What happened along the way to make these changes?

A lot of this is attributed to the fact that compounding really works.

Many years ago, when I got my first full time job I recognized that if I could save as much as I possibly could when I was young that time would be on my side and as I got older and older I would make even more money due to my investments compounding.

MISCELLANEOUS

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

When I last wrote I discussed how a family member lost everything and were as close to homeless as you could get. It has actually worked out for both of us. I had to make a financial commitment and that commitment is working out for me. This might just be dumb luck, though.

I have also done a huge overhaul of my finances where I have looked at all of my mutual funds and stocks and looked to see my returns. Without a doubt, Warren Buffett gets it right: the average investor really can’t go wrong investing in the S&P 500. I have moved around quite a bit of investments to the S&P 500 and other mutual funds that are almost identical to the “whole stock market index”.

So long as you believe in America (I do, and you should, too), you’ll be just fine in the long run. It really is that simple.

It almost makes me mad because I have invested hours and hours trying to learn what stocks and mutual funds to buy. The answer has been staring me in the face for years: the market itself. Buy and hold it and don’t look at your returns. When it’s a bad day, go eat some ice cream or watch a movie. (Yes, I stole that last bit by Warren Buffett.)

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

Real estate has pretty much exploded. It’s probably the one good thing that came out of the COVID pandemic in addition to working from home. The current value of our real estate has gone up quite a bit.

Besides that, you’ve seen the stock market. I do believe the stock market is very overvalued at the moment.

Back when COVID hit, I stopped investing as I didn’t know what was going to happen. I should have just listened to John Bogle and Warren Buffett and continued investing every month, like clockwork. So, I was definitely dumb in that aspect. But at the time, my crystal ball said to sit back and let things settle out. I suspect many investors did the same thing I did.

What are your plans for the future?

Keep working, keep saving.

I came across an interview by JL Collins and I feel like he did a good job of making things simple, verifying exactly what Buffett, and Bogle say in layman’s terms. So long as you invest in the entire market and live below your means you’ll be ok. It’s really hard to beat the market. Period.

I posted something very similar to the ESI Money blog and the responses were something like “yep, that’s how to make money”.

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

For those new to the market, or for those who are experienced: you are not smarter than the market. Only a handful of people are. They probably aren’t reading this website. They are running their hedge funds or managing their own investments and are likely multi millionaires, if not multi billionaires.

If you want to get a pretty great return on your money with minimal brainpower and low fees just invest in the entire market, consistently. Don’t look at your balance. It’s a marathon, not a sprint. In 20 or 30 years you’ll have more money than you do now by a lot. But between now and then good things and bad things will happen and that’s life.

Any major brokerage will have mutual funds that offer the entire market. Vanguard*, Fidelity*, etc. Choose one firm that meets your needs. You may want a brokerage where you can consolidate all your finances with bill paying options and see your entire financial perspective at a glance.

Invest monthly, or every paycheck, if you can. Save as much as you can.

Spend below your means.

If you need some hand holding these brokerages can certainly help you out.

If you’re brand new to investing, consider a fee only financial advisor. They can at least get you started by holding your hand and getting things started.

*I am not recommending Vanguard or Fidelity specifically. Do your own research. These are just names to get started on your journey to financial independence.