Millionaire Interview Update 68

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 January.

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

OVERVIEW

How old are you?

My wife and I are both 41.

We’ve been married for 16 years.

Do you have kids?

We have three daughters – 6, 4, and almost 2 years old.

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

We live in a large city in the south.

What was your original Millionaire Interview on ESI Money?

I was Millionaire Interview 263.

Is there anything else we should know about you?

I recently had a liquidity event that hit my FIRE number. I’m following the advice of those I respect that have gone through this and am not making any changes to my lifestyle for at least a year.

My wife and I are taking a small amount (<$10k total) to buy something special to acknowledge the occasion, but that is it. Otherwise, we are letting the dopamine reset while we get used to nothing being different other than the digits on a screen.

Although I hit my FIRE number, I don’t have plans to immediately retire. This does provide a level of freedom and flexibility to walk away if needed.

NET WORTH

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

My current net worth is $6.2 million. This is up from $1.9 million in early 2021.

Here are my year-end totals along the way:

• 2021: $2.2 million
• 2022: $1.8 million
• 2023: $2.7 million
• 2024: $6.2 million

What happened along the way to make these changes?

The bulk of this change happened in December 2024 as we closed on the sale of a fund that our company managed.

My net worth nearly doubled overnight. While I’m still feeling the high of the sale, it’s been an emotional roller coaster getting to this point.

We have been trying to sell for 2 years and the financial outcome to me personally has swung dramatically along the way. The feeling that dominates is a sense of relief that 1) it is over and 2) my family is provided for.

I don’t know the exact value I will clear as the taxes owed have not been finalized (net worth assumes worst case) and 10% of the purchase price is being held in escrow for over a year ($0 included in net worth).

The rest of my net worth has tracked the market for my asset allocation. Crypto is now well above my starting target allocation with the latest run as I have never sold a material amount.

I plan to derisk 50% of this at some point in 2025. Part of the proceeds will go towards upgrading my home as we are now bursting at the seams with three kids in a 3 bedroom, 1,800 sq ft house.

Here is our current net worth breakdown:

• Retirement Accounts: $1,200,000
• Brokerage Account: $300,000
• Cash: $2,500,000 (estimated net proceeds after taxes; will be invested over next 12 months)
• Rental Property: $0 (sold in 2023)
• Commercial Real Estate: $85,750 invested (no value given to projected return above cash)
• Home: $250,000 of equity
• Crypto: $1,720,000 (35% BTC, 60% ETC, 5% De-Fi)
• Equity in company: $187,500 invested (no value given to projected return above cash)

Total: $6,243,250

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

We are managing another fund so I’m still employed and am committed to running it for the next 2-4 years. The greatest opportunity for growing my net worth is to increase the value of our company.

From a traditional investment perspective, I plan to fully invest the proceeds and let time work its magic. My investments are at a size where it will compound to fatFIRE by the time I would 100% retire.

Regarding maintaining my net worth, the key to this is managing lifestyle inflation. Did I mention I have three girls? 😅

This will be most evident in how I approach buying a larger home for my family. While I watch my business partner build a $4 million custom home, I intend to buy something that gives us the space we need but is modest for our net worth.

The budget will remain the same as we intended before the sale. The governing item for me now is to make sure our go-forward living expenses are <25x my liquid net worth. Don’t risk losing financial independence with the 4% rule being the rough guide.

EARN

What is your job?

My title and position are the same as my interview three years ago.

I am a VP of Engineering and my responsibilities include data analysis, financial modeling, and underwriting investments.

What is your annual income?

My base salary is $230k with a target bonus of 75%.

How has this changed since your last interview?

I am part of a management team that took over the company I work for in 2019. At that time, we took base salaries below market but with the agreement from our investors that we would grow total compensation if we hit our goals.

The increase in base salary is a result of getting to typical industry rates for our role. The bonus we now receive brings our total compensation above market rate and has been tied to performance.

I’ll add that each person in the management team covers a wide-array of responsibilities that most companies hire multiple people to fulfill. It is a win/win for our team and the investors in that we are paid above market but our total G&A is lower than our competitors.

This is also a red flag or opportunity for others as they think about career development. Learn the skills and tools to be the person that can cover multiple roles.

White-collar career risk from software, automation, and AI is real. As an example, we run our business with ~25% of the staff and our total G&A is ~50% of our competitors running a similar-sized business.

To be fair, we outsource our accounting and IT at a fraction of the cost of hiring and have recently picked up skilled overseas talent for 1/10th of what it would cost to hire here. This is your competition.

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

Overall, I have no new sources of income from my career and investments.

I did set up an Amazon online arbitrage business in 2023. I made money on the products themselves, but I struggled to get the scale needed to run it profitably with the time I had available outside of work.

I shut it down in early 2024 and ultimately lost a little due to startup and carrying costs. I share this as an example of being willing to try new things and not being ashamed to fail.

I viewed it as an opportunity to learn about a different aspect of business as I was seeking a new avenue to compound capital if it worked. It also gave me a unique perspective into the Amazon machine.

Fees for third-party sellers continue to go up and many long-time sellers I met were concerned about the longevity of their business. Part of my reason for shutting it down so quickly was seeing this and not trying to compete with Bezos who has been quoted as saying “Your margin is my opportunity.”

SAVE

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

Our annual spending is ~$170k/year. This is an estimate as we essentially live off of my base salary, which nets us $14k/month after taxes, 401k, and benefits.

This has gone up from $120k/year since my last interview.

What happened along the way to make these changes?

The biggest change is the addition of another child and the increase in expenses for all three as they get older. Inflation is another component that I estimate is $10-15k of the delta for food, insurance, and utilities.

Our giving has also increased with compensation as well.

INVEST

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

My real-time asset allocation is roughly 30% crypto, 26% stocks, 43% Cash, 1% real estate (excluding primary residence). This is out of whack due to the sale.

My target allocation is 15% crypto, 75% stocks, 2% cash, and 8% real estate. I will work towards this over the next 12 months.

Yes, I realize “time in the market beats timing the market” for the cash but there are unknowns I’m managing as part of this plan. I need to know my final tax liability before fully investing the cash.

Also, I haven’t decided yet, but I might keep enough to buy my next house with cash and get a mortgage after selling my current home to make my offer more competitive. Lastly, I’m overallocated to crypto but am comfortable with the volatility as I view cash as the hedge.

If the broader market goes down, crypto will likely go down more, but I will more aggressively buy stocks. This is my barbell until I derisk.

I’ll address the crypto allocation here as it is likely different from the portfolios of many reading this. Crypto swelled to 50% of my portfolio prior to the sale due to the price increase in the last three years.

Going back to my first interview, I described finding successful people and following their lead. The people I have found that are the highest quality signals of where the world is moving all have an allocation to crypto and believe it will continue to grow in the next 10 years.

I agree with this having spent significant time researching the applications of the technology. From a market allocation perspective, the inflows into the BTC and ETH ETFs show strong demand and Blackrock has just turned on the marketing machine.

I will have an allocation as long as the crypto market cap is less than gold. My plan is to derisk during times of mania and increase leverage (can track onchain) but won’t go to zero allocation.

What happened along the way to make these changes?

At the time of my first interview, I had two rental properties, and every intention of adding to the portfolio as my FIRE plan was to buy rentals to generate income. Housing prices increased significantly since then and the returns I was planning on are no longer available in the markets I know.

I have since sold my rental properties and have no intention of buying others unless the market changes.

My allocation plan has evolved as my net worth has increased with the goal of being able to walk away from my career if needed. The prior real estate plan was based around achieving enough cash flow to retire with $2-3 million.

Now that my net worth is over that level I feel more comfortable relying on equities and the 4% rule as my exit plan. Moving forward I will be conservative in the allocation and keep liquidity for the amount needed to maintain 25x my spending.

Anything above this level can be used for higher risk or illiquid investments if I want, but I also question if I will do that when the time comes as the current plan will give me more than enough. I see that I’m valuing simplicity and liquidity more as my net worth goes up.

Another change in my perspective is I only include liquid non-retirement funds for the 4% rule as opposed to net worth. I’m not opposed to including an after-tax amount for my retirement investments, but I view pulling retirement funds early as a last resort.

My current real estate cash flow is minimal but any generated in the future would get 1:1 credit towards replacing living expenses for my FIRE needs. These adjustments give a better representation of the level I can FIRE as it removes my primary residence and illiquid investments from my net worth.

MISCELLANEOUS

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

The biggest challenge was dealing with the emotional aspect of selling the company. We were close to a sale several times with other buyers before it actually happened.

By the time we were negotiating with the final buyer, I didn’t want to talk about it or think about it outside of work until the day we closed.

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

The most significant improvement in my life is being a parent. My girls bring me the most joy and are my motivation for all that I do.

The addition of another child and watching all three grow up is the most rewarding thing that’s happened in the last three years.

On the other end of the spectrum, in 2023, my dad and stepdad both died in the same month. In 2024, both of my grandfathers died in the same week.

This loss has been the worst thing to happen in the past few years. I have one grandmother and my mom remains above me.

Reflecting on the good and the bad, in my first interview I stated a motivation for retiring early was to have control of my time so I could spend more time with aging grandparents. While I didn’t have the flexibility to be with them for weeks at a time, we were able to visit each other multiple times as we knew the end was near.

I have no regrets for how we managed that as a family, including how we shared the experience with my children. Looking forward, I want to ensure that a job doesn’t interfere with me being able to give my mom and in-laws the care they deserve when that time approaches for them.

I have great comfort in knowing I can walk away anytime to take care of them if needed.

What are your plans for the future?

My near-term plan is to change nothing and keep working in the fund I’m committed to until it shuts down in the next 4 years. I will use that time to let my investments grow and plan to potentially exit my career at that time.

At that point, I would be 45 years old and my girls would be 5-9 years old. I resist using the term FIRE because I believe I will always do something to generate income while my children are young, even if it’s part-time work for a cause I support.

The following considerations come to mind as I think about that point in life:

• Spending quality time with my girls while they live with us.
• Providing my children with an example of a good work ethic and creating value in the world. I don’t think it would be good for them to not remember me working if I FIRE’d today.
• What good could I do with the income I would walk away from? Going from my family outward this could be increasing opportunities for my children as they get older (greater help with college, wedding, and first home), helping extended family, or giving to causes I believe in. I believe I can do more good with the income I can generate than the time I would spend volunteering to organizations we support.

I don’t think my financial goal post is moving but rather my financial purpose is expanding. My FIRE financial target is based on maintaining the lifestyle of my immediate family, which I have no intention of upgrading.

However, it does feel selfish to quit this young when I can meaningfully help others outside of my home. My motivation to FIRE is to have freedom of time to spend with those I care about. I suspect the answer will be starting an online business that gives me the flexibility to work anywhere on my own schedule.

This would give me the platform to show my children the values I hope to instill and hopefully generate income to make a difference to others. I have no desire to be a 45-year-old playing golf every day.

These are my first thoughts within a month of hitting my FIRE target so I’m sure it will evolve over time. I have already met with my therapist and sought feedback from others who have gone through this to help with the process.

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

I’m obviously biased by my recent experience, but I stated this in my original interview – “Focus on acquiring equity in income-producing assets”. I believe that this is the highest probability path to financial freedom before retirement age.

There are a couple of points I’d like to emphasize.

A single liquidity event can be worth a lifetime of traditional savings. Using me as an example, the sale of my company was equal to 25 years of my current yearly savings at my peak career income level.

This was equal to what I was able to accumulate from saving and investing over the last 20 years of a high-paying career track.

The second point is realizing the career risk for the white-collar career path to obtaining wealth. I’m starting to believe more strongly that starting your own business is less risky than relying on a career.

I’ve seen a lot of people lose their jobs and not be able to replace their income. Many have had to change industries late in their career.

A lot of this is due to the AI/automation risk I mentioned before.

Combining the above, when I think about the advice I would give my children or someone early in their career, I really believe starting a business gives a higher likelihood of success than a traditional career over a 30-year period. The world is changing so fast I have little confidence in what skills/experience will be valuable over that amount of time.

Starting a business is risky as well, but technology has greatly reduced the barrier to entry, including startup costs. You can keep taking shots on goal and it only takes one to be a success.

For someone further down the career path, I would pursue the skills needed to be a part of the AI/automation solution in your field. The good news now is this doesn’t require learning to code.

Learning to utilize tools like ChatGPT, Gemini, and Claude will put you ahead of most people outside of the tech industry. At a minimum, you will be more efficient in your job which will make you more valuable to your company.

With time, you will see how to apply the tools more broadly and become highly valued in your company and industry.