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…
Spend less than you earn, regardless of how much you earn, and whatever you do don’t get caught up in lifestyle inflation.
As you make more, and as your assets grow, try not to inflate your expenses and over time you’ll see an enormous amount of space between what you make and what you need—and all that space is filled with money that is yours to invest and buy back your time to do whatever you want.
Save something every single check.
Consider the greatest revenue harvester in the world—the federal government—and how they get their money. They don’t wait for you to do whatever you want with it and then let you send in what you have left over. They take it off the top, before you get yours. That was always a powerful example for me, so we always moved it from our checking account to our savings/investment accounts the day I got paid.
Without exception. If you wait a couple days to do it that money will find somewhere else to go. You have to do it the day you’re paid.
Also give—whether it’s because you’re called to by your faith (which my wife and I are) or because you believe in karma, the reciprocity principle, or just plain leaving the world a better place, you’ll do better if you give regularly as well. I’ve seen this proven out too many times to doubt it.
Avoid debt whenever and wherever possible.
Start saving as early as possible.
When kids come around, things get expensive real fast. Do your very best to maintain your spending level when they are in their high cost years.
Build cash savings, so when larger expenses (new-er car, new roof, etc) come up, you can pay cash.
Save early and safe often.
Minimize debt.
Be educated about your finances.
Trust no one. No one cares about your finances more than you.
Don’t stop learning. Ever.
Read “The Millionaire Next Door” — “Rich Dad, Poor Dad”.
Get a good mentor and tax accountant.
Understand the power of compounding interest.
Stay fit and active and take care of your health.
Hang around people who enjoy what you enjoy. It’s good for your brain and body.
My biking keeps me grounded because my buds and I like bikes. We don’t care about Ferrari’s. A bike probably won’t break the bank — even though they cost $6-10k now.
Don’t assume that “you can’t”. Try it.
I wanted an office building for my business. We settled for a small house and converted into an office. It was a stretch financially. A client of mine encouraged me to “do it, just buy it”.
I couldn’t believe that I was able to have a building in the location I found this one. Amazing!
We sold for a huge profit and I have a better building! And it’s paid for.
The point is that you can. Eventually. But you have to try.
I don’t know if my way was the best or only way, but my advice is:
- There are no short cuts.
- Maximize your income early in your career.
- Save consistently and tie up your money in solid long-term investments.
- Don’t do what I did and try and learn to time the market or play individual stocks.
- Don’t sell real estate unless you have to – when you outgrow a home, try and keep it as a rental if you can afford to.
- Track your expenses – this is critical – probably the single most important thing you can do.
- Spend on things that really matter to you – when you review your expenses you will know If something was expensive but well worth it, or whether it was something you could have done without.
- Push yourself in your career as much as you can – you are probably capable of more than you think.
- Don’t even think about getting into debt other than mortgages – absolutely no credit card debt or other loans.
- If you lose money, don’t focus on it too much. Focus on what you do have, and where you want to get to.
- Keep a balance between living a good life now and delaying some gratification – you don’t know what the future may hold so you may regret not spending on things that are important to you.
- Be humble, grateful and live within your means.
I worry about the nonsense being feed young people 7 x 24.
Don’t believe all the propaganda being disseminated by the media who would have you believe the game is rigged, only the 1% win. Capitalism is dead, socialism is the way forward. It’s not your fault, you’re a victim, you can’t do this on your own, on and on and on. This is pure unadulterated poppycock.
I came from nothing, knew nothing, had no advantages, and yet I have achieved financial independence.
This entire pity party is nonsense.
Work hard, apply yourself, ESI, and you too can achieve whatever you put your mind to.
This is the greatest country in the world for just that very reason. The only limiting factor is you determining…are you a victim or are you going to be your own hero?
- Work your ass off.
- Life beneath your means.
- Take stretch roles at work.
- Add value.
- Learn an industry well; better than anyone so you become very valuable to many companies.
- Save more than 50% of your income.
- Own multiple properties. Buy at the bottom; not before.
- Invest aggressively when you are younger.
- Read. Listen to podcasts. You can make $20K a year from lessons learned through reading or listening to a podcast. Dedicate the time to learn and grow.
- Surround yourself with smart, self-made and independently wealthy people.
The reason I volunteered for this interview was to share my story about how anyone can be successful in real estate.
When I was a child one of the things my father said to me that still sticks in my mind is “I know a lot of people with less smarts than you who have done very well in real estate”. Now I will be the first to admit I am no genius. If anything I would say I am average.
To me real estate offers so many opportunities to get ahead and become financially free that you miss out on with stocks, and bonds. Adding value and using leverage you can catapult your net worth into something you can easily retire off of.
There is a lot of negativity on these boards about the headaches of property management and the risks of real estate investing. Everything in life takes some degree of work and risk. I do not believe that the risks and headaches are greater than with stocks. Sure it’s more hands on, but I like to be in control of my destiny and not leave it up to a bunch of people who I have never met.
Put your time into learning how to make money with real estate, act on what you have learned, and if you are careful and pay attention to all of the details you will likely do very well.
While it’s certainly easier to save a lot of money if you earn a lot of money; I’m shocked at the number of people in the United States that live beyond their means and have almost no savings.
The best advice I can offer is to “pay yourself first” and live on the rest.
Live below your means.
Max your 401K plan out and take advantage of the company match.
Pay cash for your cars.
1) Hustle Hustle Hustle…Don’t be afraid to fail. Failing is learning. Trying things that others are not doing can often lead to some of the most profitable ventures. Of course be aware enough to realize when something new is not working out and when to move on.
2) Talk with people who are doing what you want to be, ask them questions, show them you want to learn, see what you can do to help them in their lives and business. My best investments, career development, or investment decisions can usually be attributed in some way to my network.
3) Come from contribution. People want to help people. If you are a good person and show genuine interest and drive in what someone is doing they will have no choice but to root for you and do what they can to assist. Learning what is working from exceptional people and copying those habits and strategies is 100x easier that trying to pave your own way from scratch.
Lastly, coming from experience, don’t let your ego/insecurities hamper your progress.
I think there are so many more tools available to people today than there were when I started out.
I didn’t have any good mentors to teach me how to invest, so I had to stumble for several years before getting any good focus. Now there are so many awesome resources on the Internet (the Internet didn’t exist when I started). Blogs such as ESI are such great sources for knowledge and inspiration.
Websites like Bogleheads.org offer so much wisdom. Listen to Jim Rohn seminars. I found out about Jim about a year ago and he has so much valuable inspiration to share.
My mistakes were caused by ignorance. I didn’t understand investments and the true power of compounded returns early on.
Avoid debt as much as possible. Better yet avoid it all together.
It may be necessary for most people to have a mortgage to purchase a home, but additional debt reduces your choices and freedom. It holds you captive to your past spending instead of allowing you freedom to spend and save as you please in the present and future.
Focus on optimization and efficiency, which comes in many forms.
Live near work; don’t waste time and money commuting.
Be as productive as you can within a 40 hour work week.
Get your expense ratios as low as possible. Do it now!
Get your work done and get home so you can spend time with your family and read FI blogs.
View your career as a journey and have a strategy to navigate to your destination.
Live within your means.
Save and invest part of what you earn – no matter your income.
Take a slow and steady approach to investing. Be satisfied with market returns.
Start saving with your first paycheck.
Have a plan with realistic and achievable goals for each year.
Have some guts to keep going during the down years
Track everything so you know how you’re doing.
Diversify your investments.
- Our advice would be to keep things simple. Spend less than you make.
- One of the things that we are happy we did is that we purchased less house than we could afford. A smaller house gives you less room to put stuff in (less furniture to buy) and you will have more money to spend on other things or save.
- It becomes exponentially easier to save money if you make more money. It sounds obvious, but increasing your salary but not your lifestyle makes a huge difference.
- We try to keep fixed monthly expenses as low as possible. We try to avoid monthly payments or memberships/subscriptions as much as we can. This way we consciously spend on things we want. We like to purchase used cars that are in good condition with cash because we don’t like the idea of a car payment.
- Automating your savings makes a big difference. If allows you to consciously make the decision of what is important enough to put money towards.
- The last thing we would say is that it is okay to use the phrase “we don’t want to afford to do that”. If friends want you to go on an expensive vacation with them, it is okay to say that you have other priorities. Have confidence in what you are doing and be deliberate in the choices you are making.
Earn a college degree in a high-demand field, such as STEM, to boost your income.
Save aggressively, invest early and regularly in Vanguard index mutual funds such as VSTAX or S&P 500.
Learn how to do things yourself (e.g. cooking, cleaning, fixing things) so you don’t have to spend money throughout your life to hire someone else to do it for you (i.e., until you are wealthy enough to do so).
Pay your bills, especially the credit cards, in full and on time every month.
Live well below your means and try to save money to buy things with cash. I still drive a 16-year-old minivan. I bought for my wife a new luxury SUV on our 25th anniversary with cash.
If you are young and thinking about furthering your education to improve employment options, do it before you have babies, if you can, because having time to study and think becomes rare once kids are in the picture, especially when they are small.
Save early. Save as much as you can and then a little more. Squeeze it.
But don’t just save money; invest it.
Money in a money market grows at a glacial pace.
Don’t be afraid to take calculated risks. Don’t be afraid of the stock market.
In your working career, if asked to take on “dirty” jobs or ones that others won’t do, take up the challenge.
The most important thing is to marry well and always spend less than you make.
My greatest strength as an investor is I love buying stuff on sale.
2009 and 2010 were amazing years for me in the stock market.
2011 to 2015 had incredible opportunities to buy bank owned foreclosed real estate.
The opportunities in residential land development in Florida are very good now.
The timing to build a IT consulting firm in 1999 was incredible.
I am very good at identifying rising tides and investing my time and efforts there. I need to improve on being 100 percent out when the tide goes out but I think I am getting better, only time will tell.
1. Marry well.
This is easier said than done.
I managed to fail in this department despite my best efforts, so I am convinced that a large percentage of this just comes down to luck. Pretty close to 100% of the people getting married don’t think they will ever get divorced, but basically 50% of marriages end in divorce, so you don’t have to be a genius to do the math.
If I would have had a supportive spouse, retiring with an 8 figure net worth would have been very likely, not to mention life would have been a HECK of a lot easier. But, like with everything else, you have to get back on the horse!
My girlfriend is amazing. When I first met her, she was great at defense. She had zero consumer debt and had her cars paid off, all her friends considered her to be great at money stuff.
But she didn’t know where to start as far as investing and how to put surplus money to work. Once I started showing her my investing results and teaching her how it was done (which is really not that complicated once you understand the basic principles,) she and her two boys have taken a big interest in investing.
So now we all discuss it and share our stock picks and results together and it’s great!
2. Read, read, read!
Whatever formal schooling you have had (or not had) was just a foundation to teach you how to learn. All the important stuff, you need to teach yourself. Read every financial book in your local library. Look at ESI Money’s “best personal finance books” and read every single one.
3. Limit your spending and maximize your income.
This is so obvious but so few people actually do it. There are endless resources available out there on how to do both of these things.
4. Get out there and actually start investing!
You can read until kingdom come, but if you don’t actually go out and put some money into something, you won’t really learn what it’s like, and you won’t have an opportunity to get better at it.
Imagine trying to learn a sport, like playing football or something, and reading about the game, but never actually knowing what the ball feels like in your fingers, or what it feels like to tackled by another player. If you want to become a skilled player, there is no substitute for actual time in the game!
5. One other side note is: pay attention to your taxes, and know how taxes work and what you are paying and how you can legally do things to minimize them.
The saying goes, “It’s not how much you earn, it’s how much you keep.” And taxes are a big part of the equation of how much you keep.
We moved out of California in 2013, and the state income tax rate in CA is basically 10%, and an ungodly 13% on income over 1M! And Nevada has exactly ZERO state income tax, period.
So over the last 7 years, because I have such a high income, hundreds of thousands of dollars that would have gone to the state of CA have remained in my pocket due to the move. And my house is literally less than 12 miles east of this “invisible” state line.
Just the one decision to move over that invisible line has more than made up for the huge real estate losses I took, and made a HUGE difference in my net worth. Not to mention, every year going forward that “avoided tax” amount just gets bigger and bigger, and instead of being swallowed up by some massive government bureaucracy, it compounds in my investments.
Getting “divorced” from California should be added to the list of the best investments I’ve ever made.
Shocking headline: live on less than you earn, save and invest all the rest.
Don’t take huge risks, especially as you get older.
Live below your means but not to a point where you’re miserable. There’s a happy medium.
Yes that painting on my wall that cost $3k could be invested in something else that makes more money and then makes more money later but when I look around my house and look at that painting every day, it makes me really happy.
Saving is important, investing is important, but so is living the life that you have and its always been important to me to find that balance.
It’s really simple, but not always easy. Live on less than you make and grow that gap as much as possible.
Then buy investments whether that’s in the stock market or other forms of investment.
Continue to educate yourself about investing and keep investing regardless of what others are saying especially the media.
Fail faster! You will inevitably make mistakes, so make them early and push forward. You will prevail with enough persistence.
Had I listened to my own advice I probably would have owned double the real estate now vs what we have today.
Save consistently and invest it.
Learning how to increase your earnings also helps tremendously – as I discovered when my earnings started to grow 25% year on year. This allows you much greater freedom and enables you to accumulate wealth much faster (assuming that you don’t allow your spending to increase at a similar pace).
I would first question what it actually means to be wealthy. Does it mean $1 million in net worth? $5 million? $10 million?
In the eloquent words of Dave Ramsey: “If you eat enough lobster, it starts to taste like soap.”
There are lots of people worth $1 million that are miserable and don’t feel like they’re wealthy. Heck, there are billionaires that hate their lives.
For me, becoming wealthy should never be the goal because the goalposts will move on you. If you make it to $1 million, then you’ll want to get to $5 million. Once you hit $5 million, then why not try for $10 million? The human mind is hardwired to always want more so you have to break that type of thinking. Using my wealth to help others and provide for my family is the goal. What good is your wealth if it doesn’t help others?
We earned higher than average incomes, but not exceptional. We saved and invested a high percentage of our incomes. We lived below our means.
We also figured out where we could excel, and we took advantage of relational opportunities we had developed.
Know what you value, and build your life around that.
Money is not an end in itself, so if you focus on it, you’ll end up somewhere you don’t actually want to be.
Sacrificing when you’re young is worth it.
The more you sacrifice and save while you’re young, the more time it all has to compound. Money invested can safely double every 7-10 years. The younger you start your doubling, the more doubles you get!
Live within your means. Don’t buy something unless you are able to pay for it before the next credit card bill.
In 1996, when I met my wife, we had a net worth of $30,000 combined. I told her that if you took her apartment rent, plus my apartment rent, and deduct the tax deductions for a home loan, the monthly payment would be about the same a two rent payments. Best financial decision was buying our home, along with always saving 15% of my salary in a 401(k).
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Lots of good stuff, huh?
To read more on this series, check out part 8 here.
I remember in the early 2000’s when our sons were teenagers that the book “Rich Dad, Poor Dad” made such common practical sense that they should read it; so I bought a copy for each son and taped a $50 bill inside the back cover and included it under the Christmas tree and told them the $50 was theirs once they read the book; good book as part of a practical financial education; good to read others had a positive impression as well;
I love the variety in these posts, part 7 still continues to churn out great advice!
For the passionate real estate owner, I would love to learn your process to identify a property to buy, or the best book that helped you find properties that met your criteria. Would be amazing to hear from commercial property owners as well, that’s a world with not much discussion here.
For the person who is good at identifying rising tides and acting accordingly, how do you know? For example, many people who say buy real estate at the bottom, continue to think today is a good market despite rentals not cash flowing as before.
Finally, kudos to the person who values the $3k painting. Some things in life are worth splurging on, especially when it makes you happy on an ongoing basis!
Liked it all, but this one speaks something special to me during this reading, “Don’t believe all the propaganda being disseminated by the media who would have you believe the game is rigged, only the 1% win. Capitalism is dead, socialism is the way forward. It’s not your fault, you’re a victim, you can’t do this on your own, on and on and on. This is pure unadulterated poppycock.”