Millionaire Interview Update 62

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 October.

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

OVERVIEW

How old are you?

I am 38 and my wife is 37.

We have been together for 9 years and married for 7.

Do you have kids?

YES! Now we have 2, a 4-year-old and a 3-year-old (13.5 months apart 🫠), and my wife is pregnant with our third that will be due in March.

We chose HARD mode for parenting 😂. They have been such a blessing in our lives.

They really force us to think about the things we want from life, and the addition of the third one is just going to increase that chaos/loving atmosphere. I’ll talk more on it later, but that’s why in 4-5 years when we have the opportunity to retire, our kids will be at great ages to settle down into some deep roots.

We have a lot of family decisions to make around that time, but for now, it’s just nice to stop and smell the roses!

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

We live in North Central California between Sacramento and San Francisco. It is suburban.

We just moved from the Southeast after four years of stability. Before that, we had 3 moves in 3 years.

I’m hoping we get at least 3 years here to help. I’m really kind of over moving at this point!

What was your original Millionaire Interview on ESI Money?

MI272.

Is there anything else we should know about you?

I have greatly enjoyed being part of the ESI family for years.

I haven’t been here since the very beginning, but I was early enough to be part of the forum when it began, and I have loved it ever since.

What a great community!

NET WORTH

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

$2.235M. Just about $1M more than my last update.

$1.3M in investments (both retirement and portfolio).

$1.4M in property. We own three homes and rent all of them out. This is probably not something I want to do long term as the management of rentals just gets aggravating.

My ETFs don’t have broken furnaces, AC units, and tenant problems on the way out. I’ve had two renters move out and it cost $4K each time they did so.

Just frustrating when it’s a home you once shared with your family to see it treated so poorly. I’ve done a lot better removing the emotion from dealing with rentals, but it’s still hard to see people treating your property like junk.

I think in the future I will look to sell off these properties to either finance our forever home or invest in syndicates (if for no other reason, this is a fantastic reason to join the forum.

The collective knowledge in the real estate syndicate discussion rivals anything you can get on the internet, paid or otherwise. If you are at all interested, I suggest you join the MMM forum!).

-$500K in mortgages. This doesn’t include the kids’ 529s, which are over $50K.

What happened along the way to make these changes?

Honestly, not much has changed other than snowball got bigger. There are some business-related changes that I have not included in the calculation, but I will detail that later.

I would say the “good” of anything was just the slow and steady saving and investing. Our earnings haven’t changed too much, so it’s been the rental properties and stock market that have made about 2/3 of the difference (the other 1/3 is savings).

If there are any “bad” things it would be the excessive spoiling we have done with our children. When we moved to California we purged a lot of stuff, and we have resolved to focus more on experiences and “1 in and 1 out” with toys.

We have also requested that future birthday parties will no longer incur gifts from family, but take the kids to do stuff with the member. Decumulation in terms of stuff and pesky subscriptions is the name of the game!

We have sadly lost a few family members, including my father. I would say that has had the biggest impact on me personally.

He was relatively young (early 60’s), and it was such a brutal loss. It really reminds you how precious our time is and how much we need to be spending our time in places where it matters most.

I would be lying if I said it materially changes my view on FI. I’ve always wanted to be FI for the freedom it provides.

I would say it has focused our family’s views on what is important, and what we want to provide for our children. I will also say it has highlighted to us the importance of our health.

We have always maintained a decent lifestyle, but these events have made those requirements more important than ever.

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

Our goal is to continue investing and reducing our expenses. California is making this quite difficult with childcare, utilities, and gas being at least double what they were in the South.

Gas and utility prices are truly egregious out here, and I would be far more upset with the powers that be if I were a permanent resident. I have also started a company with a friend, which I will touch on a bit later.

We have already been quite successful, so I’m optimistic about where this is going.

EARN

What is your job?

I am an Air Force officer still, Lt Col now. I’m the equivalent of an operations manager for a business.

I lead about 160 people with a $5M budget for ops (I don’t control their pay and benefits which would roughly double that). Our equipment is probably in the ballpark of $10-12M.

What is your annual income?

I’ll break it down by source:

W-2 income (plus retention bonuses) for me and my wife is $260K/year after taxes. This is $30K/year more than just a few months ago due to moving to a higher cost of living area.

The promotion helped a little bit too, which has been a welcome addition.

Rental income is now $30K/year after mortgage. So the total is $290K/year after taxes.

How has this changed since your last interview?

Looking at the last interview, our yearly income has gone up $55K/year, but I would say ~$30K has been cost of living adjustments and new rent from leaving our house. Probably closer to about $10K/year additional since the last interview.

The change is mostly moving and natural progression in the military. My wife has one more rank to obtain, and then we will add another $1-2K/month until we have to make a big decision in 4-5 years on retirement.

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

Yes, I have started a renewable and alternative energy business. We do pairing deals and land development where we buy land and then develop projects.

So far we have done about $1M in deals (about $400K of which is mine, but it will take 2-3 years to pay out). We also have development deals that are worth about $2-3M and will do initial payouts as well as yearly payouts for 15-20 years.

About 1/3 of that revenue is mine. Additionally, we have several projects that are 3-4 years out that are worth at least 3-4X the above amounts, but they are too new to really go into detail.

In about 3-4 years I will do a longer post in the forum on this business, but that’s all I’m comfortable with sharing for now.

SAVE

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

Total spending is $163,600/year.

Mortgage and rent spending is $93,600/year ($48,000/year for the 3 homes we rent, but we make money on those so…technically it is a positive? Instead of tracking everything with the homes, I just track equity YoY. And rent is $45,600/year).

Utilities and general spending (gas, groceries, electricity, water, etc) are $24,000/year. Daycare/school is $24,000/year (this one really hurts).

Gymnastics, swimming, and activities for the kids are $12,000/year (2 kids, 3 events each week, $250/per week…have I mentioned how expensive California is???).

$10K in furnace and AC problems with two of the rentals. This was obviously unexpected.

The furnace was about 10 years old, but it started sparking. The AC is one that popped up just this week.

We previously had problems with the AC in that house due to the location (Deep South) and the fact that builders seem to be cutting corners everywhere with HVAC systems. It’s amazing to me how builders can underpower HVACs and put in inadequate systems for homes. It’s a good reminder for me when I look at building my own home in the future.

After all this we save the rest, so about $130K per year. This doesn’t include the $24,500 my wife puts into retirement or the $20K in equity we build every year with the basic mortgage plus extra we put in on top (the extra payments I also don’t calculate as part of our rental “profits.”

These show up in investment growth and equity growth at the end of the year with house value increasing/the decreasing mortgage balance). So depending on how you slice, we save about 40-50% of our income every year.

What happened along the way to make these changes?

The kids primarily. It ain’t cheap!

They account for over half of our non-mortgage spending including gas and groceries, but I don’t hold that against them. They are too cute!

We have a third one on the way, so another $12K per year hit is coming in March! Saving has always been second nature for me and the wife.

It’s why we don’t use budgets. Reflexively, we just have a sense for how much we are spending on a month-to-month basis.

I equate this to exercising. Some people can just sense when they have eaten too much or aren’t doing enough activity.

Their bodies compensate by fidgeting or moving a bit extra to burn off the imbalance. Just so, we reflexively will spend less or find other ways of getting after what we are trying to achieve.

INVEST

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

I have moved to all index ETFs. VOO, VT, and VTI. 1/2, 1/4, 1/4.

I am so bad at picking stocks I abandoned everything in the last 3 years.

What happened along the way to make these changes?

Honestly just growing up and getting over my own hubris.

Plus, I just don’t have time to make moves anymore. Set and forget.

MISCELLANEOUS

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

I talked about my business. That’s been pretty cool.

Just takes time on the weekends and in the evenings after my primary career.

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

Everything is better. I’m so happy with where my life is.

We’ve lost a few family members, which is just the reality of life, but I look forward to the future and definitely the present!

What are your plans for the future?

In about 5 years, we will sit down as a family and talk about the retirement button. We won’t make decisions until then, but we will focus on what is best for us, what the future would look like, and where we might want to live.

Got lots of plans for when I hit the button, just glad I don’t have to make that decision soon!

I really want to become a professional storyteller. My business and pension from the AF will give us a lot of freedom to pursue whatever goals we have going forward.

I’ve always loved writing, and I want the chance to continue pursuing that goal. Not only do I want to write books, but I want to develop audio dramas, make video games, and other media to tell stories and build out worlds.

Additionally, I was selected to get a PhD, so ideally I’d like to do some teaching or strategic consulting on wicked problems facing our national security apparatus.

Last, I want to build up my community. With the money and resources we have, I want to build out things like community centers, playgrounds, renewable energy projects, maker spaces, rails to road (bike paths and running trails) aquaculture set-ups for schools, food banks, and gardeners.

I find it amazing how much our collective sense of civic duty and pride has fallen in the last few decades. If I can make a small difference, I would love to be part of a change.

Once again, I’ll make a forum plug. There’s a lot of very smart, engaged folks in there.

I’ve spent many hours discussing their own projects and small government pursuits in communities, towns, counties, and cities. The breadth and depth of experience have really shaped the way I pursue things now!

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

Honestly, just be smart. The market will do market things, and the world seems determined to catch itself on fire (talking conflicts).

It’s going to be an interesting decade (thinking of the curse…may you live in interesting times), so the smarter you can make financial decisions, the better postured you will be.

That doesn’t mean I think you need to bury your money in the backyard or buy only bonds, but becoming FI as soon as possible is the best strategy to prepare for the onset of AI, global conflict, and the demographic challenges that we will face as the world population quickly levels out.

Don’t indulge in partisan political media, spend time with the people you care about, and live the life you want with dignity.