Through the years, I have interviewed hundreds of millionaires with the goal of learning from their experiences and knowledge.
I’ve published these as Millionaire Interviews, featuring my specific questions and their responses.
After a few hundred interviews, I realized that there was phenomenal wisdom in several of the questions I asked, especially when the responses from different interviewees are read one after another.
I’ve decided to publish these here on ESI Money in my Millionaire Wisdom series.
Note, not every millionaire answered every question and I did change around questions from time to time, that’s why every millionaire isn’t listed below.
Today we continue the series (see part 1 here to start the series) with millionaires addressing the following question:
What advice do you have for ESI Money readers on how to become wealthy?
Here are their responses…
The whole ESI thing is the key.
If you can earn a little more, save a little more, and invest in stuff that goes up or makes an income, it will all go in the right direction.
Time is your friend, figure this out earlier, rather than later, and it will be much easier. You know the old saying, “the best time to plant a tree is 20 years ago, the second best time is now.”
Investing should be boring. If it’s providing you with excitement, you’re doing it wrong.
Keep investing simple, and focus on the long-term picture. Don’t chase the pot of gold at the end of the rainbow – i.e. Bitcoin, Tesla, IPOs or SPACs. You might become rich, but you’re more likely to end up broke.
The same strategy that can make you wildly rich can also decimate your wealth.
Never invest in anything that doesn’t generate free cash-flow. Follow this advice and you’ll never have to worry about going broke.
- Track your expenses for a few months.
- Review your spending, and start cutting out whatever you think was wasted. You’ll end up aligning your spending with your values, and you’ll be willing to work for the extra years to enjoy your lifestyle.
- Reach as high a savings rate as you can while still enjoying a challenging & fulfilling life. If you hit deprivation then back off the savings rate a little.
- Invest in an aggressive asset allocation– at least 70% in passively-managed total stock market index funds. If that’s scary then add investment rental properties or REITs.
Pick the right partner. Talk about money with them long before you get married. Set goals together, have fun along the way, and celebrate your successes.
Talk to friends about money. Talk (abstractly if you have to) about salaries with colleagues. You never know where good ideas or valuable information will come from.
Understand where you add value at work and lean into that. Don’t overestimate how important you are, and don’t get complacent. Immediate dollars aren’t everything – don’t leave a good boss for a marginal pay increase.
Don’t wait for the next year, promotion, or job.
Start before the next paycheck, become well informed, be your own business manager.
Be deliberate in your investing philosophy. Stay true to being disciplined and learning.
It’s not always the sexy approach, but hitting a lot of singles and doubles are typically more productive than hitting the lone home run.
Always put 10-15% in your 401k, get a 15 yr mortgage instead of 30, do not carry a credit card balance-ever!
Purchase used vehicles.
DIY when able.
We had our daughter’s wedding reception in the backyard (catered by Bono’s barbeque) and our son’s wedding rehearsal dinner in the multi-purpose room aka “banquet room” that sat 44 people.
We do not have “keep up with the Jones syndrome” and often secretly chuckle at some of the ridiculous consumerism of some of our friends.
For any of those who are Dave Ramsey fans – he mentions the debt snowball. I’m not sure if he talks about a net worth snowball, but that has been my secret. Save, save, save mixed in with hard work.
I enjoyed taking my passbook savings to the bank as a young child and seeing the interest added to it each time I made a deposit (I was getting around 6%). Every time I had money (birthday, jobs, etc.) most/all of it went into savings. By the time I graduated high school I had already purchased a vehicle and had several thousand saved up for college.
My parents from an early age told my siblings and I we were on our own when it came to paying for college and a vehicle. I had my first W2 paying job when I was around 12 or 13 (de-tassel corn for several years), but was earning income prior to that from working for local farmers baling hay and straw. This was in addition to growing up on a farm and doing chores daily (unpaid). Farmers would schedule their needs around my availability as it was so hard to get good help.
I had severe dust/pollen allergies when I was growing up, but I didn’t know any better. I wouldn’t be able to breathe out of my nose for days after a baling job, but never once turned down a job.
I’ve worked in meat packing plants – yes plural. Worked at a small family run one while going to high school and then worked in the university one while going to college.
A typical summer day as a teenager consisted of getting up at 3 in the morning to get on a bus to ride for a couple hours to walk in a cornfield to de-tassel from 6 AM to 1 PM and then ride the bus home for a couple hours to then go do cleanup at the meat processing plant after getting home.
I’ve tried to encourage my kids to save by enlightening them to compound interest. I review their bank statements with them to show them how the bank “pays” them for letting them “hold” their money. They also have investment accounts and show them how much money they are making by investing in dividend stocks.
When they start having W2 income, I will likely encourage them to put money in a Roth by doing some type of match (so they will understand the value of an employer 401k match in the future). I will likely help my kids out more than my parents were able to but would like them to experience the expense of college and the value of saving and hard work. I saw too many kids in college when I was there that were not paying for college personally and they were not getting as much value out of college that I did.
What is true wealth? Is it money? Or is it time? Or choice? Or relationships?
Figure out what wealth means to you and then align your efforts, time, money and resources to building that wealth.
If we’re talking strictly about money, I reckon JL Collins has the best and simplest advice here. Simple. But not easy mind you, “Spend less than you earn. Invest the difference. Avoid debt.”
Live below your means, automatically save, switch jobs and use a rewards credit card that you pay off monthly. If you don’t pay off the credit card monthly it is a bad thing.
Plan. I once read an article that the average person spends more time planning their annual vacation than planning their finances. Each year on January 1, we set goals as a family on what we want to accomplish the upcoming year. My first goal is always to grow our wealth 10% and this year it includes items such as teaching daughter how to drive, starting to prepare our home to be sold in two years and planning a trip to Hawaii.
If something sounds too good to be true it most likely is. Make sure you research everything. I recently got a call from a family member who had a safe investment that paid 6% in 2021. I asked the question if it is so safe how come everyone isn’t investing in it? Turns out the 6% payout was correct but it was investing in eastern European junk bonds. There was nothing safe about this investment.
The best advice I can give is to change your mindset. I grew up in a $60,000 household that became $30,000 after my parents divorced.
It took me years to get comfortable changing the way I now think. You need to surround yourself with people that are doing better than you. The saying that you are the average of your 5 closest friends is pretty accurate.
Besides that, people do business with people they like.
So, in addition to saving, investing, making money, etc…..read books, listen to podcasts, and network with people that will challenge you to think bigger and encourage you to do more than you think you can.
I’m partial to real estate, but it’s not for everyone. I like to drive to my investments….but that’s my passion. Find your passion and chase it with all the free time you can scratch out.
Learn how to communicate/sell your ideas internally at your company, externally to stakeholders and in your personal life to your spouse, friends, family. Emotional Intelligence is so underrated and helps big time.
I would also say stay ahead of trends. I knew Cloud Computing was going to be big and I’ve done really well selling cloud software/digital transformation.
I got in on sports cards before they blew up and I bought real estate in Austin before it blew up.
I read about 3-4 hours a day across Business Insider, Twitter, ESI and TechCrunch.
I would also choose who you spend your time with wisely. My friends and I text and talk about investments, trends all the time!
My personal advice would be that if you are interested in starting your own side hustle or business, to do it.
I personally recommend bootstrapping your business. This reduces the risk, and allows you to be in control of your future.
And don’t give up if things don’t work out at first. I had a failed business before I found the right fit that ultimately has led to building wealth and early retirement.
Whatever it is you are most passionate about, should be the direction that you go. But also realize that starting a business is a potential 10 year commitment to achieving the type of growth and wealth that you dream of.
And while you are building your business, don’t forget to save and invest as much as you can along the way.
A great work ethic and time are the two biggest factors to building wealth.
Not every effort you put forth and not every time frame will give you positive results, but with persistence over the long-term the odds are in your favor.
There is something to be said for luck, whether it is luck related to where you were born, your family circumstances/connections; or the luck noted in a fairly well known quote “the harder people work, the luckier they seem to be”. “Luck” itself is nothing you can control, but you have to be ready to make the most of every situation.
- Spending less than you earn
- Invest early and often
- Learning to not take money from our savings when things go sideways, learn to tighten your belt
- Invest in yourself and your education so you can earn more income
- Live modestly
- Asking yourself “do you really need this” before you make a purchase.
On the money front, spend less than you earn and invest the different.
On the life front, start investing your knowledge and experience in others.
It has been a wealth building experience for me.
Find a profession you’re good at, can feel accomplishment from, and work a little smarter and harder than your peers.
There is SO much free education out there these days – podcasts, blogs, YouTube videos, that there is no excuse for not becoming incrementally better than everyone else. Even being 10% better at your job will have a drastic improvement in your earning potential.
Focus on acquiring equity in income producing assets. This could be rental properties, owning a business, or equity in a company that pays dividends.
I say this as a mistake that I made. I spent the first 10 years of my career trying to work harder and longer for a salary increase, which is inherently limited. It’s only in the last 5 years I have focused on acquiring equity in a company that I can significantly influence and in rental properties. If I had to start over, I would focus on building an online business that would scale beyond the hours I spent working.
I want to acknowledge a lot of what I describe is a technical path from the perspective of an engineer. However, I follow a lot of entrepreneurs online describing the same path to wealth through ownership in service businesses with low barriers to entry (lawn care, pest control, painting, etc.).
Find people who have successfully created businesses that you have the skills to replicate and do what they do. I guarantee you can find the steps laid out for any path you choose.
Earn as high a salary as possible; save as much as possible; be well-diversified in stocks and bonds.
Take measured career risks; seek out career opportunities.
If planning to remain in one area for eight or more years, buy a comfortable, affordable house close to your employer.
If planning to climb the corporate ladder be flexible and ready to relocate and, if so, renting a place to live might be a better decision.
I wholeheartedly understand that our wealth has been driven through ESI with a big “E.” So, how did we get to this point? We all see people who are making a great salary and wonder how to get there.
I found it through hard work, continual learning, and networking. Learning to me is the big key as I have continued in my career. Our salary has allowed us the opportunities to invest in more passive income that will allow us to reach financial independence.
Financially, I know this is probably something most of the readers already know, it took me a long time to wrap my head around the average performance of the S&P500 index beating out 80+% of the funds out there today. I found Warren Buffett’s bet that over time the S&P would outperform even the best hedge fund managers. I think this is powerful that passively managed funds at low costs will regularly win out in the long run. I just don’t see this enough out there on the web.
I wish I had something useful to offer here, but in reality — my spouse and I were handed every advantage in life. We’re healthy, white, straight, college-educated, and were raised in upper middle class families. Our families paid for our college education (although not graduate school). We have simply taken what was handed to us and not squandered it away.
The only thing we have done that distinguishes us from our privileged peers, is that we rejected the predominant lifestyle and made our own way of living. We identified an opportunity to live a lifestyle that was better for us — personally, professionally, and financially. We made intentional choices, and sometimes sacrifices, to make it work for our family.
My advice to ESI readers who wish to build wealth, or even just live life differently than society expects you to, is to be intentional, prioritize, and be diligent. Living life against the grain is not easy, but it is worthwhile.
Build your skills, whether that be via education or experience.
Be determined to pay yourself first and to start early. The effort pays off. We did not ever earn a ton of $ but we sure worked hard for what we did earn and we saved harder.
Be willing to take some risks and know along the way you will make some mistakes but that is life. Learn what you can from the mistakes and don’t be afraid to ask for help from someone who does not have a vested interest in the outcome.
Figure out what your definition of wealthy is. Driving fancy cars, wearing expensive clothes, having manicured nails, are those things important to you or is having the freedom to get up every day knowing you are 100% in control of what you do without financial stress of greater interest?
The power of saving early and allowing those savings to compound.
Anyone can be a millionaire if they start early enough and earn, save and invest systematically and with discipline.
Focus on your goals and not what others around you are doing. Most people aren’t working towards actually gaining wealth, so if you follow them, you’ll end up in the same place.
Don’t go for the home run when it comes to investing. Slow and steady sounds boring, because it is, but it works. Don’t sell, just stay the course, the market has always and will always bounce back eventually.
Make sure you and your partner are on the same page when it comes to money. Whether you have a lot or a little, if you are too far apart on spending, it won’t end well.
Last one, treat yourself every now and then. You don’t need to go crazy, but we all certainly need to have fun. Don’t miss out on things in life because you are too focused on wealth. Learn to enjoy the money you have too.
Plan your finances so you don’t bumble along like I did before you’re in a position to support yourself on your investments (i.e. wealthy).
Follow the Boglehead principles of buying and holding low-fee index funds and maximize your tax-deferred retirement savings.
Stay the course and don’t panic. We ground right through the 2006 recession and the 2020 pandemic without so much as a single change to our portfolio and it has all worked out.
Money has never meant much to me other than as a means to an end. People have gotten so wrapped up in status and having the accoutrements of wealth that it is starting to corrupt our society.
I don’t want to be a part of that crap anymore, and I would suggest to everyone to come up with their WHY (Simon Sinek anyone?) What is the reason you are trying to become FI?
If you don’t know or your only goal is to have more than someone else or to tally a number on a sheet, I don’t believe that is a compelling enough narrative to motivate myself.
This may seem weird for a site about money, but my advice would be to enjoy the process of becoming wealthy. The process is more enjoyable than any end result.
Furthermore, even once you reach an objectively high level of wealth, you’re likely to shift the goalposts on yourself and say to be truly wealthy you need to achieve some higher level of wealth.
I see this a lot in my line of work – objectively wealthy people thinking more money would make their lives much better. At a certain point (like $300,000 per year), diminishing returns kick in big time. Unfortunately, when wealthy people say they wish they earned X amount more money, they tend to be thinking in relative terms. They are comparing themselves to other wealthy people, and believing they should make more money than their neighbor or colleague.
The common advice I hear is you can’t get rich by working for someone else and that isn’t necessarily true. Having two good paying jobs in the family and then saving when you are young will allow you to become financially independent in time.
You must stay consistent with your saving and investing and avoid unnecessary risk.
I also think it’s important to do work that is meaningful for you and benefits society. There are plenty of jobs that pay well and, also contribute to your community. That knowledge makes it easier to get out of bed every morning when you are faced with life’s struggles.
I am a huge believer that real wealth is created outside of a “normal” W2 job for the vast majority of people. There is certainly a portion of people that can earn huge W2 income, but the vast majority of people will not.
For many people, the route becomes to invest in real estate as a side business. This is where I started, and it is an avenue that I believe strongly in. I remain an active real estate investor today.
The final step that only a small percentage of people take is leaving the security of a W2 job and owning their own business. There are certainly financial benefits that come with doing this if it is done well. But the mindset shifts that come with owning your own business are tremendous.
For example, over the years I found that many W2 employees have somewhat of a victim mindset – the “company” is out to get them, their “boss” is not paying them well, etc. I am not outright dismissing these complaints. However, I think that many employees feel a lack of control that leads to significant day to day unhappiness.
Business ownership has a way of disproving many of these previously held notions. When you are the owner and the boss, suddenly you realize that it is just much harder than it looks, and resources are rarely as plentiful as they may have previously appeared to be.
All of that to say – owning your own business can certainly be a path to financial wealth – but most importantly for me, it has been a path to emotional wealth. It has led me to see the world differently. It has led me to being more confident in forging my own path and creating the life I could only dream about previously.
——————————
Lots of good stuff, huh?
To read more on this series, check out part 12 here.
this is such a gem of a series, thanks for keeping it going! Love the variety yet the ESI principles still resonate.