Millionaire Interview Update 57

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 May.

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

OVERVIEW

How old are you (and spouse if applicable, plus how long you’ve been married)?

I am 46 and since my last interview I have added a husband (52) and two kids to the family.

I was married for 13 years, divorced for 10 and now remarried for about 1 year.

Do you have kids/family (if so, how old are they)?

My daughter is now 23, graduated college and has limited financial support from me.

My son has graduated high school and did not want to go to college full time so he is attending community college and working about 35 hours a week while continuing to live with us.

I have added my husband’s son who is starting grad school in the fall and a son who is a high school freshman – it has been great to go back to watching high school sports!

My parents are still alive and very healthy.

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

I still live in the same small town of about 10,000 people, adjacent to much larger cities in the northeast.

What was your original Millionaire Interview on ESI Money?

I was ESI Millionaire Interview 213.

Is there anything else we should know about you?

Based on the comments from my original interview, it seems relevant to say that I am an engineer by training, apparently that shone through in my original interview answers and thought process. Haha.

My husband and I are both quite established in our financial habits and have different styles of spending, saving etc.

We are in different places especially in terms of support for our kids and college tuition. I will do my best in the questions to clarify which amounts are my individual versus joint.

When we got married, we both owned our own houses. I sold my house and moved into his house.

We calculated the monthly average for shared living expenses (mortgage, food, utilities, health insurance, maintenance) and put that into a joint account.

We over contribute a bit and any extra is used when we go out to eat or on vacation. The rest of our money goes into individual accounts.

Because my house had been paid off and I lived a relatively simple life, my expenses have gone up since getting married.

NET WORTH

What is your current net worth?

August 2020 = $1.3 million

May 2024 = $2.6 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 and how has that changed since the original interview?

This is my individual net worth, not including any of my husband’s assets.

So much has changed since my original interview, I was eagerly awaiting an email from ESI Money requesting an update!

From my original interview “I am staying true to my plan to keep my lifestyle at the same comfortable level while cash flowing college. I have been so focused on paying off my mortgage and then funding in-state tuition for each of my children that I am just now lifting my head from the task to determine what is next.”

It is pretty exciting to see the possibilities before me and also exciting to see compound growth really kicking in on my net worth.

So, four years later…I underestimated how exciting it would be to see the options ahead of me. I always wanted to try investing in real estate and at the end of 2021 I purchased rental property #1.

It had a lot of “deferred maintenance” from the prior owner and rents well below market value. I was eager to purchase, start repairs and renovations and make it a place I would be proud to live in.

It took about 1 week for reality to set in – my tenants didn’t want a place I would be proud to live in. They were afraid of a sharp increase in rent and wanted a house that was safe and affordable.

I have spent three years slowly increasing rents and chipping away at the maintenance issues. When I have turnover, I will renovate and increase rent on each apartment.

It is working well because they are very helpful, appear happy, and I am not spending significant time managing the property. I have now purchased rental property #2.

The goal is to have one for each of our 4 children to eventually take over.

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

Really just letting the magic happen. Continuing to max out my 401 pretax, backdoor roth, megaback door roth and putting some money into deferred comp.

The extra is going into a joint brokerage account.

EARN

What is your job? 

I have worked my way up over the last 25 years to my current position of general manager for a mid-size company – a promotion from my last interview.

What is your annual income?

Base salary is $270k; with my variable annual bonus it should be around $380k.

From my original interview:

“Once I paid off my mortgage in 2018, I found a couple months that I was floundering because that had been my goal for 5 years; payday was no longer as exciting and I thought about quitting a few times. After those couple months, I reset my priorities and decided I could use my new-found freedom (and FU money) to take a hard stance on my need to spend time with my teenagers and not miss any big events.”

My relationship with work has continued to evolve over the last 4 years with the help of my FU money. I know that the role I am in now will be my last with this organization.

I do not want to relocate and the desire to do something completely different continues to grow. I plan to continue in this role for a while longer and it feels like I will know when my time is up here.

I enjoy the hustle and working hard and I am certain that building a small rental portfolio will be a good outlet for that energy.

I still think about owning a small business, but I would like to balance the level of work required versus optional and I don’t think I could effectively pace myself if I dove into business ownership.

How has this changed since your last interview?

My income is up as a result of a promotion and annual increases.

I am not doing anything to actively grow this source of income.

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

Yes, adding two rental properties. I pay myself $250/month for property management and then assume 5% each for maintenance, capital and vacancy.

After those set-asides and other expenses, the first property currently cash flows about $1200 per month with potential to be $2400 of cash flow if rents were at market rate.

The second rental property cash flows about $800 per month; rents are close to market rate but it is in a much better area to expect good appreciation. I have been using the cash flow to improve and reinvest.

SAVE

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

Well this has also changed a lot since 4 years ago. Four years ago my base spending was about $40k and additional $30k for college.

Now my base spending is about $80k with an additional $5k for college expenses.

This is broken down into household joint spending contributions of $35k (health insurance, mortgage, subscriptions, utilities, groceries, some restaurants) and an additional $45k of personal spending.

This includes $600/month to help my older child with rent. It also includes miscellaneous, clothes, travel, some eating out, home improvements, car expenses of gas insurance maintenance, charitable giving, etc.

What happened along the way to make these changes?

Three main changes:

#1: The more recent change was getting married. Prior to that my house was paid off and I lived a pretty simple life – camping, travel hacking, cooking at home, etc.

I worked hard to achieve financial independence. My husband also makes good money, but did not pursue FI and questioned the reality of it due to the financial hits of divorce, child support, alimony and general lifestyle decisions that are similar to many people.

When we got married, I felt it was important to have a portion of our finances and financial goals be joined. I have no reservations in paying a portion of the mortgage as well as other expenses.

#2: The end of covid and a backlog of activities, concerts and travel destinations. I do more of it now than before covid because I appreciate it more and the timing aligned with my kids being independent.

#3: The not-so-good: The third change was another dose of the reality of life; within a couple months of my millionaire interview, three coworkers/friends passed away unexpectedly.

I had spent enough time with each of them to know their ‘someday’ goals and plans for retirement. Each one was a shocking reminder that you need to balance the present and the future.

There were many things that were on my ‘someday’ list. The reflection and soul searching that went into my last millionaire interview showed me the reality that someday could be today and I was coast FI.

I didn’t have to save at the rate I had been saving. I bought a camper. I became a borderline Bruce Springsteen groupie and traveled around the US to see him FIVE times in the past two years.

I took my kids and their partners for a long weekend in Italy and we had a blast.

I am not a full Dave Ramsey follower, but I do absolutely agree with the idea that if you live like no one else now, later you can live and give like no one else.

Despite all these changes in my spending, the key to my success has remained the same as it was during my 2020 interview – “Be deliberate in each dollar you spend and save to ensure it is building toward the life you want to lead.”

INVEST

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

I detailed above my diversification into rental properties. When I sold my house last year, I netted about $580k.

I put half into index funds and the other half into CDs. I wanted to take some time to find the right investment properties and I could not bring myself to put $580k in the stock market in one day.

I have 3 CDs that matured in 3 months, 6 months and 12 months. As each one expires, I will either look to purchase an investment property or put it into index funds.

The interest rate on these CDs being 5.25% brings me joy and no FOMO. My Roth accounts are 100% index funds, my pretax 401 and brokerage is a mix of index stock and bond funds.

What happened along the way to make these changes?

Not much that I have not already discussed.

MISCELLANEOUS

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

The marriage tax for two high earners was a shocker this year. I keep reminding my husband taxes are a privilege and now we can put a dollar amount on our love. 🙂

It’s not easy navigating a midlife semi-merging of financial lives with 4 kids in various levels of support. Open communication has been helpful and I like to believe we are getting a little better each day.

I remind myself every day that my family and I are very blessed.

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

Just about everything is better. My family is healthy and has survived all the changes and traditionally stressful events of the past 3 years (covid, graduation, marriage).

Probably the best change has been the ability to relax. As long as we all have our health, not much can shake my world.

When we did our taxes this year, it was an additional $13,000 we owed. Gulp. A few years ago, an unexpected $13,000 expense would keep me awake for a weeks.

Now, a bit of panic sets in until remind myself that my net worth can vary by 3x that amount in any given month depending on how the market is doing.

One thing that I suppose is worse, would be an increase in some financial guilt, especially with my rental properties. I have a couple tenants that (most likely) have significantly less money, family support, leg up in life, than I have had.

I still struggle with the balance between running it as a business and guilt over my privileged position. When I bought rental property #1, one of the tenants was paying $800 a month versus market rates closer to $1800.

I have raised the rent $100 per month each of the last two years. They have hugged me with each of these rent increase announcements (expecting much worse) but I feel uncomfortable to be increasing my profit on the property.

What are your plans for the future?

Three years ago, the plan was to stop working around this year. Now, its most likely pushed out 4 years.

With my husband’s younger son, we are pretty tied to home – no traveling around the US or Europe on extended vacations or wintering in warmer weather until he is off to college.

I do like my job, my paycheck, and watching all the high school sports again, so I am very happy with this change.

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

I will stick with the same recommendation from my first interview – make sure each dollar you spend is building the life you want to live.

You never know what the next day will bring, so enjoy the journey along the way.