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…
I think I’ve covered it pretty well above, but I’d say this: grow your income, buy (or rent) a reasonable house, start investing ASAP, and track your numbers.
Anyone can do it. Fortune favors the bold (however you define that). You read stories from all walks of life. There are many ways to do it but nothing outweighs your own sheer will and determination. You have to dig deep to make the commitments to become wealthy by whatever definition you choose to put around it.
I learned the most from the FIRE movement. The Mad Fientist (Brandon), Financial Mentor (Todd Tresidder), Retirement Manifesto (Fritz Gilbert) and ESI Money (John) to name only a few.
But in the end, no one can teach you to “want it”. For whatever reason that may be, only you can answer the question of what you want out of life.
For me it has always be the ability to provide for myself, own my decisions and walk a fairly fine line between enough and too much. Pulling back on your own reigns is not as easy as it sounds.
Start small – savings automation couldn’t be easier in today’s environment.
Set yourself up so the money comes out of your account the day you get paid. Never see the money – and whether it’s $25 or $250 put it away. Month in and month out, it’s the clearest path to financial freedom.
The book that had a big impact on me is Think and Grow Rich
. I had just graduated law school and was starting my practice when I read it, and it had a tremendous effect on me. I realized that if I wanted to be wealthy, I had to re-program my mental software and start thinking bigger.
Find people who you admire that are successful and try to learn as much as you can from them.
Always take the long-term approach.
Be disciplined with keeping good habits, and be intentional with your time. Do everything you can to stay motivated, and enjoy the ride along the way too.
And I would recommend starting a business, or else find a position with a high income ceiling and be willing to speak up and let people know you want to move up at your company.
Our experience has been earn, earn, earn in any and all ways that you can.
We have reached over $1 million in net worth because we bought homes so clearly you have to invest your extra money in stuff that appreciates.
Maybe the stock market or businesses work as well, but I don’t have any experience in that.
My #1 would definitely be investing in real estate.
Investing early in a 401k is also a definite but it would be second.
Unless you have a high income allowing you to save more, there is no better way to become wealthy than by using leverage to purchase real estate. The tax incentives are also fantastic and once you build equity over time you can tap into that equity to make additional purchases.
Try to avoid living above your means and hopefully your spouse is also frugal.
Do not accumulate credit card debt and pay any balance off monthly.
Avoid leasing your cars and possibly buy cars a year old or so and hold on to them for 10 years or longer. I have never owned a new car in my life. I have always owned nice cars but purchased them slightly used and held on to them for 10 plus years. Proper regular maintenance though was important to getting that much life out of the cars.
One of the ratios I track judiciously is the percentage of earning assets to total assessments.
The old adage is that your money is working for you…..well how much of it is actually working or earning through time? I’d like to get into the 75%-80% range. Today we are at about 77%.
To be clear, this does not include our real estate and shouldn’t for others calculating unless the asset is truly an investment.
The only other thing I’d say here feels a bit redundant. Maximize your earning power and potential early and often, take calculated risks, save at least 15% and invest using appropriate asset allocation for your life stage.
- Hang around people that make you better and lift you up!
- Marry the right partner. This is key in my book. Someone who is a good friend and who you can grow old with and has a good soul that will take care of you if needed.
- Don’t buy into the social norms. We don’t need new cars, new clothes, latest and greatest gadgets, etc. As Dave Ramsey says, “live like nobody else so later you can live and give like nobody else.”
- Invest in yourself before anything else. Sharpen your saw daily. Have great habits. There is a great book by Charles Duhigg called The Power of Habit
. - Have written goals. Daily, Weekly, Monthly, Quarterly, Yearly. Put your vision of yourself and your family on paper and it will come true!
.Strive to get all three facets of the “earn-save-invest” trifecta into the “above average” category. You don’t have to be exceptional at all three, but you MUST be better than average at all three.
For the younger readers out there (folks in their 20s) – budget and invest; figure out what “live within your means” really is at an early age; pay yourself first; find a good earnings path and career field that you enjoy.
If you’re in your 30s and just discovering the FI and FIRE culture, you can probably just do the same things as I outlined for the 20 year olds above.
For those in their 40s, it’s all about achieving and extending your peak earning years, not letting lifestyle creep erode your savings rate, and investing for the long horizon.
For everyone in their 50s, 60s, and beyond….you’re older and wiser than I am, so I’d be seeking your advice!
Also, read all those books that are on everyone’s “best of the best” list for financial education and personal finance IQ – The Millionaire Next Door
, Rich Dad Poor Dad
, anything by Warren Buffett.
My advice is from a middle income lens. I never made a lot of money and still don’t.
Our financial life feels like a unorganized mess compared to other people that have been interviewed. But we still managed to hit our goals so I know others can do the same because they can easily do it better than me.
I don’t feel qualified to give much advice here but I’ll do my best.
- Sacrifice where others won’t. (Mine has been cars and housing)
- Invest as much as you can until you feel broke. (I still feel broke every week)
- Once costs are as low as possible, increase your income as much as you can.
Profit x Time = Wealth
I don’t feel wealthy yet because of all the debt. I have come to abhor debt and so the only advice is know when to draw the line of not having to keep up with others. That hindered me for quite some time. Now, it’s just about me, my wife and my kids and how to live comfortably. The only reason we bought a car is our old one wouldn’t fit 2 kids. We otherwise drive moderate cars for 10+ years until they stop working.
We don’t buy a ton of stuff. Our house isn’t cluttered, even with toys.
We buy quality items, but not unless we need them.
We eat at home a lot and go out as a treat once a month.
Isn’t one definition of wealthy just being able to afford your lifestyle forever? If so, then just have a moderate lifestyle. Then that goal becomes easier to achieve!
I have read all 150 interviews that ESI has done trying to find someone who had a similar story to tell but couldn’t find one. I get jealous reading about all the highly educated readers that flock to this website. I wish I was at the same level as them.
No matter how high of a net worth I get I will still always feel inferior to the rest of the readers of this website so trying to advise them on anything seems silly to me other than my work ethic which is very strong.
There’s more than one way to skin a cat.
In my case continuous education, long-term commitment to one employer, prodigious savings and prudent investment strategy did the trick.
If one has entrepreneurial spirit and opportunity, having your own small (or large) business is a good way to build wealth.
Above all, invest early and often.
Try to win from multiple avenues, create multiple paths to success and once you are well on your way to succeeding through a low risk method, take that additional risk and really go for it.
That could mean starting a business for some, building up a real estate portfolio for others or trading Bitcoin or triple-leveraged ETFs in your IRA.
It’s really a matter of your strengths, the opportunities in front of you and your risk tolerance.
Keep your eyes on the prize. Life may/will hand you all kinds of problems, but always keep on going. Visualize the life you want and be confident that you can achieve it. Financial independence has many versions. Create the one that works for you.
Keep an eye on your credit score. You never know when you might want a bridge loan or see a property you want to buy right then. Keep your score as high as possible by paying down debt on time (or ahead), not overusing your credit, and keeping old credit card accounts open (but don’t use them).
Learn, learn, learn. Read and analyze. Understand the fine print. Incorporate the financial advice that applies to you and leave the rest. Understand your emotions around money and how that influences your decisions.
Estimate your taxes yourself even if you use an accountant. It’s not how much you make, it’s how much you keep.
Be bold sometimes. Especially when you are young enough to recover.
Live below your means.
Save and invest part of what you earn no matter your income.
Become a lifelong learner. Add to your knowledge in your profession.
Educate yourself about money. I do not use the services of a financial planner. Remember that no one cares about your money more than you.
In addition to earning, I think learning about finance, investing, and ways to make your money work for you most effectively. It comes natural to me, but I think a lot of people don’t take advantage of little ways to get better financial results with minimal effort. It doesn’t take a lot of knowledge to make a big difference.
Some simple examples:
- A simple financial portfolio will do basically as well as an advisor, without paying 1% or so in fees that eat into returns. I manage my mother’s $900k portfolio with about 4 hours of effort each year, and it approximates the market. Easily saves her $5-10k of advisor fees.
- My state now allows you to use 529 plans for private school. So I put money into the 529 this year that I’ll take out next year to pay for private school. It took me 15 minutes to set this up, and I’ll save $1,200 in taxes next year.
- While I was married, my ex didn’t have an IRA, so I would max out her IRA each year and convert it to a Roth, even though we made too much to contribute to a Roth. That backdoor Roth was a great strategy for tax free gains.
- I eat at Panera a lot. Last Christmas, I bought myself $500 worth of Panera gift cards and got $100 in bonus gift cards during the holidays for doing so. Added them all to my own Panera account, so every time I eat there this year, it’s 16.7% off. Took maybe 5 minutes of effort for $100 of value.
There are a lot of examples like this out there with a little bit of research.
Read about what I did, and then do the exact opposite!
All kidding aside, I do not feel like I have any unique or original insight. Everything we have to say has been said more articulately by someone else. But here goes:
Earn: Do whatever it takes to maximize your earned income, as early as possible in your career. For most people, this means lots of education and training. Studying and adopting the habits of respected people in your field of expertise usually pays off as well.
Save: Always live beneath your means! Once you have paid for your living expenses, you must aggressively pay off all debt while optimizing your emergency fund (6 or more months living expenses). Never miss an opportunity to maximize your tax-free and tax-deferred accounts, especially any matching funds from your employer. Having accomplished this, you then pump as much money as you can into your taxable investment accounts. Anything left over after that is disposable income.
Invest: Apart from occasionally rebalancing our portfolio, we try to ignore current trends in the stock and bond markets. There is an urban legend that Fidelity studied the performance of their clients a few years back, and discovered that their best-performing clients were the ones who were dead, while the second best performing set of clients were those who simply forgot they had Fidelity accounts. I don’t know if this is true, but I like it. I have seen charts which demonstrate that the average investor is so bad, that we even underperform inflation!
Sometimes, just for a laugh, we watch a few minutes of one of those TV shows with all the experts, like “Mad Money”. This reminds us that what works for others does not necessarily work best for us.
My final piece of advice is a quote from Joseph Kennedy, shortly before the 1929 stock market crash: “You know it’s time to sell when shoeshine boys give you stock tips. This bull market is over.”
Marry well? Worked for me!
Seriously, I have seen that the ESI principles do work by observing my father-in-law. It’s not quite a Rich Dad Poor Dad thing, but by contrast my parents never were able to accumulate any wealth, mainly because they constantly subsidized other family members (not me – I was self-sufficient).
We have been very generous to my family over the years, but not at the expense of our own well-being.
Also – “buy low/sell low” is not a good strategy. We never intended to do that, but that’s what happened. So if you can’t be disciplined with stocks, better to stick with an age-appropriate allocations, long-term index funds/ETFs, diversification and bonds.
Stay out of DEBT. We have 529 accounts for our kids so they should start out young adulthood debt free, but we teach them to tithe, share the blessings they have and always LIVE BELOW YOUR MEANS.
Others have said this but don’t try to impress people. Even if they care about what kind of car you drive or how big your house is, it’s the guy with money in the bank during tough times who can have peace and sleep soundly at night, which is priceless.
If you go to college seek a major that will yield a high paying job.
If college isn’t in the cards, then seek a job with good income and benefits, such as civil service ones working for the federal government or a municipality. Those usually come with great benefits like insurance and pensions.
Other well paying occupations could be found in the trades. Jobs like electricians, plumbers and mechanics. These usually pay well and could even give you the opportunity to start your own business and make you wealthy.
Once you have earnings, then you must save at least 25% of your gross income and more if circumstances allow.
Invest this money aggressively in a total market index fund and don’t get discouraged. The journey you’re on to building wealth is not a sprint but a marathon.
You must from day one save a portion of your pay and pay yourself first. Always treat yourself like a bill that must be paid.
Avoid consumer debt and spend your money intentionally.
Keep a healthy gap between what you earn and what you spend.
Do not keep up with the Joneses and do not compare yourself to others, be in competition only with yourself and strive to better yourself through hard work.
When I observed acquaintances who were better off than I, at least through appearances, I became frustrated at how slowly my wealth was coming along and this made me consider doing what they were doing in order to make more money.
They owned various businesses. Car washes, fast food and apartment buildings.
What I didn’t fully appreciate then that I realize now, is that those are all fraught with risks that they overcame while others did not. I was looking at those that succeeded and not realizing how many went before them that failed. I thought I could just buy a business like theirs and replicate their success.
Know your limitations and excel in what you know. As comedian Kevin Hart says in one of his standups, “stay in your financial lane”.
Educate yourself on the tax code to learn how to minimize taxes.
Keep investing simple with index funds and watch out for the fees you pay. Unlike other areas in life, where you usually get what you pay for, this doesn’t hold true in investing and it’s the opposite. More fees do not get you a better mutual fund or performance. More fees usually means less money in your pocket.
Keep reading. Whether it’s financial blogs or books, continue to learn.
Find a spouse if you can with a similar financial mindset, and most importantly work on your relationship to stay married. Divorce is expensive and it’s financial ruin for many.
The stock market is a wealth generating machine but many don’t achieve said wealth because of their very own behavior. The person that is often keeping you from becoming rich is in the mirror.
Adopt an asset allocation and stick with it, no matter what, you need to stay the course through the good times and the bad. If you allow emotions to become part of the process you’ll find yourself buying high and selling low or sitting on the sidelines with cash wondering when to invest. Remember, the right time to invest is when you have the money according to your asset allocation which will be based on your need and willingness to take risk.
Be disciplined and do not try to time the market. Some investors try to keep cash referred to as “dry powder” to invest when the market tanks but it seldom works. When the market does tank, you won’t invest because you’ll imagine tomorrow might bring another dip. You’ll repeat this process until the market begins to recover and then find yourself on the sidelines holding cash as the market makes new highs.
Have a millionaire mindset. Most middle class/working class people are constantly buying liabilities keeping them from amassing wealth. Things which drain their bank accounts every month car payments and boat payments. Think like a millionaire and aim to buy assets. Things that will appreciate in value, might generate income and boost your net worth, not subtract from it.
Constantly look to keep your capital working for you, optimize every dollar. The easiest way I have found to do this is by buying a Total Market Index Fund. Like Jim Collins states in his book, The Simple Path to Wealth
, by owning the companies within this index, you’ll have everyone from the janitor to the CEO working to make you richer.
Start young. Understand WHY we NEED to save (e.g. all the many future financial needs in life). Understand WHY we should WANT to save (e.g. money can grow! You should want to enjoy the benefits of compounding for decades).
Also keep yourself IN POSITION to save by avoiding debt (especially college debt) and remaining employable (embrace the change around you and keep investing in yourself to adapt to the world we live in).
And finally have a mindset and method of HOW to save. Again, mine is to save first, then live off what remains.
I don’t feel wealthy. I feel comfortable, but that could change should we go into a correction right before I retire or while I’m in retirement.
I consider myself an average person. I never achieved any great career success or any high 6 figure salary, but I’m happy.
What I would tell anyone just starting off is to start a savings/investment plan and depending on your age, don’t be too conservative in your investment strategy. In other words: Invest appropriately for your time frame, financial situation, and your risk tolerance.
I’m not here to advise anyone to go into a self-managed account or a managed account. I’m not advocating one way or another. Know who you are. If you don’t have the time and energy to follow and understand the markets, then find a really good FA – do your homework – and invest your money.
Always contribute to your 401k at least what your company matches. Why would anyone walk away from free money – you would be surprised.
Challenge yourself to see how much you can contribute to your 401k – you can always change it back. Add 1 or 2% – or more – to your 401k contribution and see how that affects your paycheck. You might be surprised that you won’t see such a drastic difference in your pay and you might just keep your new contribution. Add your annual raise to your 401k.
If you have decades in the market before you retire, don’t be scared and don’t panic when the markets correct. If you don’t start a savings plan early enough, I’m not sure how one can recover if you start saving for your retirement too late.
Get as smart as you can on finance and investing. Goals. Focus. Tracking.
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Lots of good stuff, huh?
To read more on this series, check out part 9 here.
Had to laugh at Interview 168, as I clicked on their full interview and saw $11 million net worth. No reason not to celebrate or feel inferior about that!
Really enjoyed the thoroughness of #177. Investing in RE seems to work for some, and I would love to keep learning about how those who did it avoided over leveraging themselves or command rents with high purchase prices.
Liked all the comments, yet the following speaks reams of wisdom to me, “Stay out of DEBT. We have 529 accounts for our kids so they should start out young adulthood debt free, but we teach them to tithe, share the blessings they have and always LIVE BELOW YOUR MEANS.”