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…
Follow the ESI model – it works!
Be sure to nurture your professional connections. Every career opportunity I’ve had has come from talking to peers and leadership to let them know what I’m looking for. When opportunities arise, decision makers should know your interests, what you’re good at, and that you’re interested in trying something new.
Also, don’t hesitate to ask for help. I reached out to about a dozen short term rental property owners in the area I wanted to invest before one agreed to meet up and talk about it. I ended up buying my property from him and it’s been a fantastic investment. While we don’t know the future and what will happen to us if we make certain decisions, we have the unique ability to talk to folks who have made those same decisions and learn their lessons ahead of time.
Start today! Early is better than late but just do it.
If you are an average Joe or Jill, like me and want to get to a point where you are no longer stressing over finances, I recommend you always keep the end in mind as you work on your financial goals.
Your physical health matters, so if you are able, take care of your physical, emotional, and spiritual health.
Financially, always set goals. I got started in my early 20’s after being fed up with my bad habits. I didn’t know what to do so I sought out resources in the library. Today there are an abundance of readily available no cost options like articles and YouTube etc., to give you a start.
Be diligent. Be vigilant. Be wary of charlatans that promise a better mousetrap! “If only you invest with them, you’ll be rich!” Don’t get caught up in the noise.
Don’t overpay for advice!
Finally, and most importantly, always believe in yourself. Your human capital is your best resource.
Never let your start define where you want to end up.
If I talked to my 18 year old self I would have never thought I would be in the financial position I am in.
Even the smallest amount can grow over time. As soon as you start a job with a 401k and a match start putting money away.
Time is on your side. Start early. Set goals. Educate yourself.
Find blogs like ESI Money and soak it in.
Do not make rash decisions that are not well thought out and grounded in your plan/strategy!
If you don’t know what a company does, don’t buy the stock, you might as well go to the casino, your odds are probably better.
It gets easier as you go! Put a plan in place and keep working on it.
Don’t let money be a source of contention or stress. Before you know it you’ll be at your goals.
The internet is a vast resource in learning how to build wealth. We did not have its modern day breadth to tap years ago, but we had the behaviors and most of the techniques now described in several blogs.
We recommend this blog and “Root of Good,” “1500 Days to Freedom,” “Stop Ironing Shirts,” “Living a FI,” “Afford Anything,” “Financial Samurai,” whatever Steve Adcock calls his blog, “bogleheads.org,” and “early-retirement.org” as places to find people who have the behaviors and investing advice you need to build wealth.
Ignore the mainstream media — always. They are pure charlatans.
Find a profession with high earnings that you find interesting and suits your skillset, find a niche, work your butt off, network, keep your eyes open for opportunities, and keep a long-term focus on your career.
For me, the long term career focus kept me from leaving my small firm for a $50k raise as an associate attorney would likely have cost me millions of dollars in future earnings because the odds of me making partner as a lateral associate were extremely low. Becoming a partner at a big law firm generally takes 10-12 years, and there are multiple levels of partners with the most senior partners often earning much more than the younger partners who work the most.
I feel like I’ve skipped over a lot of that with my work situation and my compensation is directly tied to the value that I bring to my firm in the form of originating work and collecting fees.
1. Buy assets not fools gold.
2. Use the cash flow from your assets to buy more assets. The velocity of money.
3. Get a great career going, but always be looking for that business ownership opportunity. There is no greater reward in life IMO.
4. Start investing in your 20’s. 1.00 invested = 88.00 in 40 something years. In your 30’s 1.00 invested drops to 23.00. Still great but time and compounding interest is one of the greatest wealth building machines in the world. Second to building a successful business.
5. Don’t be afraid to use debt wisely. Credit card debt, auto loans with long term financing, are bad and will weigh you down. I leveraged all my businesses with debt. I consider that good debt. It allowed me to grow to 10 locations. If I waited to save money to pay cash for each location, I might not have done more than 2 – 3. Even big mortgages can be bad if they prevent you from investing. You don’t want to be house broke.
6. Build multiple streams of income. Diversify. You don’t have to buy rental properties if you are afraid of the hassle it can be. Instead invest in REITS, Real Estate stocks, syndicated real estate deals. Learn what an Accredited Investor means and how that title can open up opportunities for you.
7. Rental Properties are a long term play just like stocks (unless you are in the flip business).
You have to have cash on the sideline, or you will get crushed. I had a friend who bought a rental with 90% debt. There can be very little cash flow in a deal like this initially and he didn’t have cash in the bank. As soon as the tenants stopped paying, and he ran into maintenance issues, he couldn’t afford to keep it and had to let it go.
I bought a house in 2007. I also used 90% debt, but I structured it to be paid in full in 15 years, I had cash to cover the mortgage during evictions, releasing phases, renovations, when it was time to replace a roof, the HVAC unit, a fence in the backyard, or replace appliances and water heaters. Today I only owe 50,000.00 and it’s worth 167,000.00. My tenants have paid for this house for me.
Once paid in full I will have options….I can refinance and take out a bunch of cash tax free, I can sell it and realize a large long term capital gain, I can just hang onto it and enjoy 12,000.00 per year in cash flow. I could even leave it to my son and through a legal step up in basis, he could have all that equity tax free. I like options and you should too.
8. Finally, go to school, get a degree in an industry where you can make good money out of the gate. Keep your student loan debt to no more than what you can make in salary your first year after graduating.
Grow your income by being diligent, working hard and continuously learning.
Create a gap between your income and spending by keeping your lifestyle inflation in check and spending on what you value.
Invest the gap into something simple, like total market index funds.
In other words, ESI model works!
A lot of what many of the other millionaire interviews have said.
It’s hard but try not to keep up with everyone else. There will always be people with more money than you. At your death people are not going to talk about how big a house you had or what kind of car you drove, they will remember what kind of friend, mentor, spouse, parent, sibling you were.
It is not about how much you earn, it’s about how much you spend.
Definitely invest in yourself through your education, skills and career growth.
Don’t get an education that has no marketable value in the business world – there are certain degree programs, whether we like it or not, that just have a very low / negative ROI. Study something that will make you marketable – if you like an area and it has no marketable value in the business world, make it a hobby, not your intended career.
Invest in creating lasting relationships with colleagues. In my experience, it is amazing what a few really good relationships can yield – quality over quantity of relationships is best. Always try to do for others with no expectation of anything in return. Usually, your deeds will come back 10X in the future.
Live below your means by not inflating your lifestyle as you grow your earnings.
Keep your saving and investing on auto-pilot as much as possible.
- Maximize skill set. Learn something new each and every day. Expend your potential
- Cultivate goodwill wherever you are. Don’t burn any bridges. You never know when you need it.
- Be debt-free as soon as possible, whatever it takes to get there the fastest. When you come across a penny on the ground, what will you do? Pick it up or feel too embarrassed to do that or afraid someone may see you do it. In our daily 2 miles walk, we came across pennies, dimes, quarters, $20 bill, and a $100 dollar bill down in the street gutter. Not only do we pick up money, we also get paid to recycle cans and metal. Like the saying goes, every little bit adds up to a big deal.
- Save like no one else can, so that you can be ready for anything. My wife loves to cut out coupons from newspaper, but now she has digital coupons. We don’t buy anything unless it is on sale or is discount, or some promotion.
- Invest like no one else can. Always STAY IN THE MARKET. Above all else, invest in your health, invest in your mind, invest in your soul/spirit. I can work circles around my much younger co-workers. When our near by city grocery chain promotes senior discount on one day each week, the cashier asked for my driver license to make sure I am of age. She said I didn’t look old enough to be a senior.
Take calculated risks as early as reasonably possible. First, if it does not go well, you still have a long time to recover. Second, if it goes well, then your long time horizon will allow that early success to compound, to your benefit, as it did for me.
Georges Danton, a leader of the French Revolution, is credited with the saying “Audacity, Audacity, Always Audacity!” This works in war (it was quoted in the 1970 movie Patton), and business is its own kind of war.
So, believe in yourself and try something! Stick with it for a while. Have you heard of the story “Three feet from gold?” Napoleon Hill tells this story in Think and Grow Rich. Moral: Don’t be the one who stopped too soon, so close but not quite close enough, to your dreams!
May you have great success in life, not just financial ones, also the ones money doesn’t buy!
And, may you have the wisdom to tell the two apart!
Based on our journey, hard work and dedication to your career will pay off down the road. For us, earnings and saving are what got us to where we are today.
But, my biggest realization is that the quickest way to becoming a millionaire is to build a business that is sellable and run it lean and mean. In a job, you only have so many hours that you can sell/exchange for pay. In a business, you can scale the number of hours that you can sell by having employees and you make the skim off of your employee’s hours. If you make a few dollars off each employee’s hours, those dollars really add up quickly.
For example, in a law firm the formula for each lawyer working for you is 33% of each billable hour goes to overhead, 33% goes to the attorney’s pay and benefits and 33% goes to profit. In my opinion, a scalable business will get you to millionaire status faster than any other method.
Invest early and often. I wasn’t able to max out my 401k or Roth IRA for a few years but every time I’d get a raise I would try to add more until it was a little uncomfortable.
Also, if you get bonuses or any other lump sum payments throughout the year, plan to use those to invest or pay down debt instead of spending that money.
Finally, even if you just do a little bit here and there it can add up—some days, especially if I feel like spending has gotten out of control or I just need a little pick me up, I’ll transfer $50 to my brokerage account or $25 to my mortgage to pay down principal. Those numbers aren’t big but if you do them often enough they can add up.
Consistency, discipline, power of compounding interest and take time to celebrate the little victories.
I work with clients all the time on large projects and I always promote, you need quick wins and little victories on the journey to be successful. No difference in your personal finances. Have yearly goals and long term goals.
Take everyone out for ice cream when you achieve a milestone, but don’t lose track of the big picture.
Not everyone has what it takes to run a business or be an entrepreneur, and that certainly isn’t the only way to become wealthy, but it’s the only one I know.
But I do know a lot of people who do have what it takes and are scared, or just won’t take that leap. I recently had the opportunity to encourage a friend of mine to buy a landscaping business where he had worked for 10 years. I knew he had what it took, but he was nervous. After a little pushing and encouragement, he did it last year, and if he isn’t a millionaire already, he will shortly, as the business has really taken off under his leadership.
I know there are a lot of people in similar positions, who just need that nudge. So if you got the skill set to do it on your own, do it. If you’ve made it, look for opportunities to mentor others.
I guess wealth determination is subjective. I know that my wife and I are doing the same positive financial habits as we did decades ago. We will most likely continue to do the same over the coming decades as well since our process works…if it isn’t broken, why try and fix things?
Have the Rand McNally investment road map pre-populated to your own circumstances. I had one of these large paper map books tucked under the seat of my Mazda 323 (first car) so I could get to where I wanted to go when driving in unfamiliar territory. If you don’t know where you are headed, how the h@$l are you going to get there and if you don’t pick up your own boot straps, who is going to do that for you as well?
Track your spending and savings for at least three years in honest detail. If after year number one, you determine that you are spending within your budget and saving a bit until it hurts then keep doing the same for your second year of tracking. Try and actually increase the savings amount by at least 2-3% more. Rinse and repeat for the third year.
I have yet to read or talk with someone about personal finance that they were upset that they saved too much. Determine a realistic retirement goal, now work backward and start socking it away. The sooner you determine these few sub steps of the main goal the less that we actually have to save. I learned this concept at a young age with a passbook savings account but got distracted during my first few years of independent living.
The chart is an example of what I culled together after devouring Karsten’s The Safe Withdrawal Rate Series published on the Early Retirement Now website. In the goal chart below, you will see a few realistic options for my wife and myself to consider.
Realize that time is your friend and starting is the hardest part.
We added a little bit every month and every year from about age 35 onward. I wish we had started earlier but we were in survival mode until about age 35.
In our early, low income years, I started on my spreadsheet habit (before Excel was available!), monitoring cash flow. With that as a key tool, we were able to slowly accumulate enough savings for our first home at age 30, then upgrade to our current home at age 37, save more than enough for college for both children, and now to retire early.
Always being aware of your cash flow and, as Millionaire 280 recently said, knowing what gives you joy and applying your time and money in that direction, is essential.
I would go back to one of my earlier points and say “know thyself”. Determine what wealth means for you first and foremost.
Recently I have become more active in my church, and my wife works for a non-profit organization that does tremendous work. I could be financially much wealthier than I am today if I had made some different life decisions that were non-financial, but I wouldn’t like myself and would face regrets that could not be remedied. Wealth was less important than time with my kids.
While I was always financially savvy, I pay a lot more attention now to TIME and HEALTH. Aging parents struggling with their health really humbles you, and makes you realize that money cannot truly solve some of life’s challenges. So, measure your wealth wisely and don’t let it solely be determined by numbers following a dollar sign. I am wealthy beyond measure in family, friendships and faith. I also invest a lot more time in ensuring that physically I will be able to enjoy my future.
- Pay yourself first.
- Always save more than you spend.
- Live within your means. If you get a promotion, save the extra money instead of spending it.
- Invest in low-cost index mutual funds at a reputable brokerage firm. We use Vanguard but there are others such as Charles Schwab.
- Don’t pay attention to what the stock market is doing. Put on blinders and keep going no matter what.
- Stick to the plan!
First of all, be grateful.
To be in a position where you can even contemplate this question, you are better off than most people. Both my wife and I started from very modest beginnings, but we benefitted from parents that instilled good values and modeled good behavior. We both benefited from mentors and good luck in our careers. Yes, we worked hard and made good decisions over the years, but most of all at this point, I am just grateful for the good people and good fortune we’ve had to help us out along the way.
I would offer some specific advice to young people starting out in one of the professions (doctors, lawyers, accountants, architects, etc.). These all seem like lucrative professions, and they are. But income is not the same as wealth. If you spend too much money trying to look the part of the successful attorney, you will just be another highly paid working stiff – never truly wealthy yourself.
In the book The Millionaire Next Door, they call that “All hat, no cattle.” I realized that a lot of people I thought were financially successful, were really just living paycheck to paycheck, even if they were pretty big paychecks. Some of the richest people I’ve met, and they were VERY wealthy, lived in modest houses, drove plain cars and practiced “stealth wealth.”
Second, you face a lot of risks as a professional that you need to be aware of:
- You will likely be totally dependent on one source of income. Many professional jobs will either expressly prohibit moonlighting or will take up so much of your time that having a side income is too difficult. Don’t be fooled into thinking that doctors and lawyers are immune from lay offs or career trouble. Nothing could be further from the truth.
- Your student loans are a financial time bomb. Pay them off as soon as you can. Do not buy a luxury car when you get your first full time job. Do not buy the biggest house you think you can afford. Pay that debt off – quickly!
- It is very hard to shelter professional service income from taxes. You will pay a lot of taxes over the course of your career. Use any available legal means to reduce your tax burden: 401ks, qualified deferred compensation plans, non-qualified deferred comp plans, IRAs.
- Don’t get caught in trying to project the “image” of a successful professional, whatever that is. It’s not worth it. You won’t get clients or patients because of the car you drive or the size of your house. You will get patients and clients by being a skilled professional who knows how to treat people with respect.
- Learn about investments and money. Don’t just give up and hire an investment advisor, you need to understand this yourself. You’ll make mistakes, but constant saving and staying in the market make up for a lot of errors.
4000 years ago King Solomon said “Steady plodding brings prosperity.” That hasn’t changed. Wealth accumulation is very simple and boring, but the consistency is what is hard to master.
Spend less than you make, invest the difference, avoid debt, and do it every month for the rest of your life, and you can’t help but become wealthy.
Avoid all flashy fad investments. The current fad is bitcoin, which is not an investment, but a currency. Don’t risk your future on getting lucky.
You will not get wealthy trying to use debt for personal items. Many people try to justify buying something with a low interest loan so they can “keep their money invested for higher returns.” Don’t play that fool’s game. If the thing you are buying is not directly producing enough money to make the payments itself, then don’t go into debt to buy it. If you really want to keep your money working for you, don’t buy it at all and leave the money invested. Pay cash for all your purchases.
Have a clear vision of where you want to get to, work hard, and be really good at what you do.
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Lots of good stuff, huh?
To read more on this series, check out part 13 here.
For the one’s who started/suggest starting a business, how did you take the first step? What business did you end up with?
Investing index is fairly straightforward, but business is a different animal, unless you’ve had first hand exposure to it.