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…
Live beneath your means. Stay healthy. Invest in individual shares. Don’t text & drive.
Be consistent. Take money from every pay check and invest it.
Do it by way of a payroll deduction in a 401K and manually in an IRA.
Tell yourself with every deposit that you are buying your freedom.
SAVE! Save as much as you can as soon as you can!
The orthodoxy is that workers should save the most when their career income is the highest. That’s not what I did.
I saved the most in the beginning of my career, and have never regretted it.
Nobody is perfect, particularly when it comes to investing. I’ve certainly made my share of mistakes but three things specifically come to mind. Don’t buy more house than you need and don’t invest too much in your own company stock. I’d also like to highlight something I said earlier about creating as much of your nest egg as you can before you enter your 50’s.
The home we purchased and plan to retire in is bigger than we need. However, when we made the decision to purchase, we did so with the idea that we might have to take our parents in at some point.
Since we moved into this home, we both have lost our fathers but our mothers remain fairly healthy and active into their 80s. We still think one or both of them could wind up with us and we are prepared for that either way.
If I had it to do over again, I probably would have made a better decision on how much we spent on housing, particularly with the benefit of hindsight. However, we do love our home and not every decision needs to be solely about money.
The company my wife and I went to work for on the West coast is a Fortune 100 company with a long and successful track record. We began investing in their stock as new employees and the returns over our first seven years at the company were incredible.
I got kind of lulled to sleep with our success and continued to invest our 401K money exclusively in the company stock. Over the following 16 years, we had a CEO change and the stock performance has been dismal under his “leadership.”
Several years ago we finally stopped investing in the stock and it is now less than 15% of our invested assets, which is still too high but better than it was. It is rumored they will be announcing a new CEO shortly and when that happens I expect the stock to get a decent bump, at which point I will move our money from company stock to mutual funds.
I did benefit from expiring options at much higher stock price points through the years that paid for down payments on homes, contributing to our robust home equity but I can’t rationalize our decision to stick with this stock for 20+ years when we could have probably had another 1M of net worth by simply moving that money to an S&P fund 10 years ago. Oh well, win some lose some but those self-inflicted wounds really do hurt a little more.
Regarding my comment about trying to save and invest as much as you can before you enter your 50s, let me tell you from personal experience, age discrimination is alive and well in the good old US of A. I really believe corporations in America have a designed plan to weed out older workers once they hit a certain point in their careers.
Companies know older workers are more expensive, perceived to have less energy, set in their ways and will begin to tap more of the company’s healthcare dollars as they continue to age, not to mention being able to limit pension exposure by moving these employees along sooner rather than later. You can hire folks at half the age for half the cost so why wouldn’t you try and take advantage of that.
The laws these days are much more favorable toward employers than they are employees so their legal risks are minimal regarding age discrimination, particularly in right to work states. My wife and I both experienced this first hand and so have many of our friends and former colleagues.
We were blessed to be in such good financial shape when this behavior started to impact us. Many others are not so lucky so please do everything you can to save and invest early so you can protect yourselves if and when that time comes.
One last comment, if you have a significant other, it is very important you agree on who is managing the money and also on a risk tolerance you are both comfortable with. In a perfect world, you would share equally in learning, planning and investing your money.
In the real world, generally one of you will take the lead in this area. That is the way it is has been between my wife and me.
She likes to focus on earning it and let me focus on investing it. It works out well because I do enjoy the research and investment side of money.
I manage our budgets, pay our bills and invest our savings. I try and sit down quarterly with my wife and show her where we are and what I am thinking as we move forward.
She doesn’t seem to relish these “sessions” as much as I do. Of course, it is a lot more fun to discuss with her when we’ve had a good quarter vs. a bad one 😉
Good luck to everyone and I wish you happy and successful planning with your ESI and hope you all catch FIRE!
If wealth accumulation is your ultimate goal then my advice is two-fold:
1) Have patience. 99.99% of the time, wealth accumulation is not in overnight phenomenon. To win at wealth accumulation you must have patience. Put the ESI framework in place and let it do its thing.
2) Get out of your own way. Don’t get sucked into an extravagant lifestyle or try to keep up with the Joneses. That will just lead to perpetual lifestyle inflation and prevent wealth accumulation. I see too many people get sucked into this trap that otherwise could build massive wealth and retire early.
I was married at 20 with a kid at 22 and divorced at 25 making $12k per year in 1984 with no college degree. I finally got my act together and decided to get better jobs and believe in myself. I took a job overseas for a couple years and then moved to CA in 1987 and got married to my current wife in 1989. We have 2 kids.
When my kids were born, I opened up CDMA accounts (pre 529 college accounts) and deposited $150 per quarter. Then went to 529 plan when they hit the market. By the time my kids went to college, I had enough saved to pay for it. All my kids graduated from college and are successful in their own careers.
My advice is to teach your kids how to save and invest and how to invest in ETF’s or Mutual Funds or even a target fund.
The important part is start early and keep at it. The second part is to spend wisely and don’t run up debt on credit cards or new cars.
Someone once told me if I don’t spend so much, I don’t have to make so much.
As I look back from where I came from, I think anyone can do this if they understand how to save and invest and spend wisely.
Rule number one: Earn more and spend less.
Don’t do stupid things like invest in an up and coming new technology which is not proven. You are looking for trouble and many of these never pan out. You look like you are going to make a killing but often that is not the case (Son: I should have asked for his advice prior to investing in these early stage companies!).
Take Apple for example, if you would have bought shares in the 1990’s and seen a loss followed by a slight gain, one would have likely sold it and not received the full benefits of where it wound up today after another 15+ years of holding it. That’s usually how things end up working out.
So the focus is not so much on investing but earning and saving.
ESI has it down to the simplest formula. It’s simple but not necessarily easy. The toughest part is having the right mindset.
To be successful in a career you need to have grit and hustle combined with humbleness to contribute to the company and to be able to learn more. I’ve seen so many experienced leaders who are not humble and will never admit when they are wrong and basically stop learning at that point. I don’t ever want to get stuck in that mindset and will do everything I can to shake myself out of it.
Having a high savings rate and delaying gratification is difficult, especially when you are grinding it out so hard to enrich the owners of the company. It only feels natural to treat yourself well but have to resist the urge to increase spending. This needs to be done and again requires the right mindset as it’s not a permanent condition (a decade will do nicely to get you started) but necessary to get started.
And successful investing takes longer than we all think. The unbelievable power of compounding is true but it takes forever to play out. Even Buffett, who had legendary 19% compounded returns achieved over his fifty year career, achieved 99% of his current wealth after the age of 50!
Think about that for a second. Here was a guy who had a great investing mindset and bought his first stock at the age of 11 years old and ran a very successful fund for a decade, achieving his first million at age 30 back in 1960 and it still took him 20 more years before he achieved only 1% of his current level of enormous wealth!
It really takes a long time but if you set it up correctly the relentless nature of compounding will be an enormous boon and friend as you progress through the different stages of life. I only realized and understood this after having a daughter and putting some thought to planning our investments over the course of her growing and maturing life, and the change in perspective has been wonderful.
If only I knew this at age 20 but, alas, at that time I was a different individual and couldn’t see surviving past the age of 30 and was more interested in becoming a rock star or going bust. Fortunately I moved on past this stage and that’s why I’m writing to you today.
Give, Save, Invest. Pick a % for each bucket. Stick to it for 20+ years.
The best time to start this was 20 years ago. But the 2nd best time is to start TODAY.
Read about how people plan their wealth accumulation via ESI website, this is the most practical information I have found and hearing about others is inspiring.
Save more than you spend.
Grow your income and max out your retirement contributions at a young age.
Everyone needs to stop this crazy fixation on consumption. As a nation we seem to feel we are entitled to live beyond our means with no consequences. If you are always in debt you will always have to answer to someone rather than call your own shots. If you’re OK with that then fine just don’t come to me and ask for part of my Social Security because you’re broke and I’m not.
It’s all about choices. Every night after work I climb into that beat up old Kia and smile knowing it costs me almost nothing to drive to the place I don’t want to go anyway, work. The guy parked next to me, making payments on his Lexus, is a fool as far as I can tell.
For me, wealth accumulation was never my primary focus. My family and my faith are the most important things in my life. I think clearly defining your values and sticking to them is critical.
I think it is also worth noting that wealth creation is about the basics of working hard and saving. At one point in my life I felt that you had to have an impressive degree or come from money to be wealthy. I have neither of these, but with a little luck and many blessings here we are.
Finally, be grateful for what you have and treat others with kindness and respect along the way.
You must enjoy the journey and enjoy today. You never know when your life is going to change in an instant. Hug your spouse, hug your family, throw the tennis ball for your dog, and enjoy today. Go for a walk in the morning without music and take in the world.
We had the perfect “plan” in place, then we were working out at the gym and my wife suffered a rare and under researched spine injury that was disabling for the good part of a year. We were getting close to permanent disability and “mystery” chronic illness before the incredible team at Duke University were able to repair it after a number of failures elsewhere. She’s not yet 100%, but we’re attempting to enjoy each day and appreciate what we have.
This has also made us more charitable and realize there’s more to life than just hitting a number and retiring early. I’ve worked hard to develop my “human capital” and can generate a lot of value for a company and be paid accordingly for that value. I can do a lot of good both family and charitable causes and it’s tough to walk away from this level of earnings.
Just hustle and hustle hard, if not for yourself, do it for your kids, grandkids, underprivileged kids.
Try to leave the world a little bit better than you found it.
Stay out of debt.
Live within your means.
Don’t try to keep up with others.
Ask yourself if you really need that purchase or do you just want it?
Pay yourself first — max out on your retirement accounts.
Pick a partner that has this same financial philosophy.
To me, it’s all about discipline and wanting to become a millionaire.
Follow the ESI methods and Earn, Save and Invest. It is simple but effective.
Also, as I mention above, don’t panic when the recessions hit. This bull business cycle will be ending soon (hopefully not too soon) but the bear cycle will last 4-6 quarters if history stays true. Take the down years as opportunities to buy sectors that you know will come back. The “reversion to the mean” principle will hold true over time, you just have to be patient.
Well it’s easy to say but hard to do: Live below your means, save and invest the difference and you will eventually become wealthy.
For young people out there I would say avoid student debt and get an education/degree that provide a skill that is marketable. One of the worst financial mistakes you can make is to take out a boatload of debt and then have a degree in art history (sorry to pick on art majors) that is not marketable/has little earning potential in the economy.
We had a family ask us about sending their child to an elite private school as he got in but did not get a scholarship – the annual all-in cost would end up being ~$75K/yr. I told them that they should send him to the state school (where he got a full scholarship) and invest the $75K/yr for 4 years in the market as after 20 years @ 8% he would be in his late 30’s with that ~$1.25 million, along with what he could save (a similar amount), a pretty good education and likely the freedom to do whatever he wanted from then on.
For the curious ESI readers, they were not fond of my suggestion and he ended up enrolling at the private university.
Lots of good stuff, huh?
To read more on this series, check out part 3 here.
I love these clips! I wanted to keep scrolling. Looking forward to future posts!
These are great! Please keep them coming.
All great reminders and fun to read. Thank you
Loved part 2 also, especially millionaire 31 comment, “Give, Save, Invest. Pick a % for each bucket. Stick to it for 20+ years. The best time to start this was 20 years ago. But the 2nd best time is to start TODAY. ”
Spending is not something you have to instruct and motivate people to do. They’re going to do it no matter what. Most people must be taught and motivated to give, save, and invest, otherwise they don’t do it. Every since we put our trust in the Lord in 1992, tithing and abundant giving to causes that spread the gospel of Jesus Christ and that help meet human needs for housing, food, transportation, clothing, natural disaster cleanup, etc. have been as big a part of our wealth building story as have been saving and investing, as we believe this has opened windows of Heaven over us and poured out blessings that are full measure, pressed down, shaken together, and running over given the trajectory of our life and finances prior to salvation. This includes how compound interest was working against us in our previous debt-laden state to keep us in financial bondage, but has since then been working wonderfully for us to provide exponential growth in our portfolios that help us annually far exceed the pay we received at the height of our income earning years. Glad we took this path and we certainly preach it and teach it hoping many other people will catch the fire and put the work in to improve their financial situations.
So many good things! If this were an illustrated coffee table book with these quotes, I just might buy it 🙂
Leave the world a little better than you found it. Embody the principles of ESI, don’t complicate it.