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:
How did you accumulate your net worth?
Here are their responses…
I look back and I think we had a lot of factors that helped us along the way.
My wife and I eloped and as a result my father in law said he would help us on a down payment for a house. He jokingly said that a wedding or a house payment would be roughly the same so we took the money and purchased our first home.
A few years later we built a home where we did the contracting ourselves. This is a great way to make money if you have the energy and stamina to go through the process. We probably gained at least $40,000 in equity with just that one move.
The rest of the time, we just saved the old fashioned way. We just kept plugging away. We never viewed that as an option; we just did it.
A piece of advice I can offer is that no matter what always commit yourself to saving. I wish that we could have been able to save more sooner.
The other thing is that if you save when you are young, you have the power of time to have compound interest do its magic.
My parents gave me $50K to go to college up front. I stayed in-state where tuition was covered for all residents as long as you earned good grades, I also received some academic scholarships which when you add all that up allowed me to graduate debt free – which I’m super thankful for.
I received some academic scholarships for business school and paid at least $100K out of pocket, but only graduated with $20K in debt since I had a healthy savings balance prior to enrolling. I paid that off within 1 year.
Wife attended an expensive private college which her mother helped her with and she graduated with about $20K in debt which she promptly paid off before I met her.
Other than the help with undergraduate education from our families, we both started at negative or zero upon graduation and all our accumulated savings has been from working and investing.
I have always tried to turn hobbies into money.
This included an early interest in archaeology, which produced a lot of writing, which led to publication of a book.
The same interest led to the second income of teaching online. After completing two master’s degrees, I was feeling overeducated, and decided I wasn’t going to waste the results of any education I had received. So, I was managing environmental science and archaeology contracts during the day, and teaching pretty much the same subjects online.
My original plan was to save everything that I was making from teaching and apply it toward retirement. Life became very expensive, however, and the direct separation of the two incomes did not occur cleanly. It did, however, allow my wife and me the eventual opportunity to more effectively focus on maximizing 401(k) deductions for each of our primary jobs.
I stuck with my early U.S. military career guidance on financial independence principles. I learned to live within my means.
As my income has increased, I saved something proportional to my age and saved 50% of every salary increase.
We have been very lucky.
I graduated medical school with no debt and we paid off my wife’s college debt quickly. Thus, we were able to save a huge percentage of our incomes from the very start.
We generally live well below our means compared to others in our income category. We are frugal but willing to spend money on what we care about.
We also, very early in the game, got the real estate bug and took advantage of the downturn and bought a few properties in foreclosure.
I spent a long time on education and had to catch up quickly once I started making a six-figure salary.
After paying off school loan debt I started investing most heavily in index funds. Other successes include investing in single family homes, making a profit on one of my personal residences and one commercial real estate investment.
The greatest reason I’ve accumulated a net worth over seven figures is saving early relative to my salary allowing it. I wish I had started earlier because time trumps the amount invested when it comes to compounding interest. Since I didn’t do that, a high savings rate was the next best thing.
Readers will find this interesting: $1 million of my net worth was from an inheritance.
The remainder of our net worth is from saving a portion of our income over the years. Combined we have earned $230-270k per year for a number of years which goes a long way in a state like TX. We indulged, we have nice things, but we also SAVED.
To your readers: Many of you stand to receive an inheritance (or some other windfall) whether you realize it or not. It may come as a surprise one day. Who would have thought Grandpa who lived on TV dinners and peanut butter sandwiches had millions socked away and YOU are in his will! This stuff happens. I want to impart some very valuable wisdom to your readers; this actually happened to me. It can happen to you.
My advice is DO NOTHING FOR ONE YEAR. DO NOT immediately buy that a new car or house, place the money in a brokerage account and spread that wad of cash over several 6 month, 1 year and 2 year CD’s.
Furthermore, DO NOT share this information about the inheritance with anyone! Don’t tell your closest friends or else they’ll resent you. Don’t tell co-workers, they’ll be out to get you!
DON’T place your trust in anyone.
Final piece of advice, NEVER loan money to friend of you’ll destroy a friendship.
Is it hypocrisy to be a Christian and follow-though on this advice? NO! The inheritance was a blessing and one should pay a tithe offering if one feels compelled, but it’s not an obligation to help everyone out. You loan out money to everyone who requests it of you, you’ll destroy those friendship AND you’ll end up like all those unfortunate lotto winners who gave all their winnings away and ultimately ended up living in a trailer park, destitute.
I could go on and on about this but I believe your readers get the point and I hope those that inherit, heed my advice.
We earned, saved and invested with the most success in recent years after learning the lessons of life and maximizing our income while living within our means in an inexpensive location with no debt.
If I’d done the same in Los Angeles or San Francisco-like cities we’d be working into our 70’s to get where we are.
We have never been exceptionally high wage earners so it has been the slow, consistent investments in our 401K.
We are proof that by living below you means and methodically and intentionally moving forward you can become a millionaire.
We don’t feel like millionaires, and we don’t live like millionaires.
The secret is just to stick with it. Invest what you can, when you can, increase your contributions a little at a time until you max them out so you don’t feel the pain all at once.
We do buy new cars but drive them 15-20 years or more if they will still keep going. That makes the new car feel that much nicer. Oh, and we don’t buy fancy cars. A pickup truck with a low level trim package and the new car for the spouse was a $20K Hyundai. Nice car but it does not break the bank.
We don’t live in the best house on the block either. It is just enough for us and we don’t have to impress anyone.
We accumulated our net worth with a combination of a good job, good market timing, and a small inheritance. As previously discussed I am an engineer. That degree has played a large part in giving me the foundation to earn a high income. I then managed to leverage that up into a very high income by becoming very specialized in my field.
I graduated college in 2009 with a small amount in the stock market so overall my losses were small. I then proceeded to save and invest diligently as the market rebounded over the last 8 years and that has done well for me. I started out by picking individual stocks but now exclusively use index funds to invest. I do not have any “alternative” investments at the moment but I am interested in some of the solar funds that both help the environment and yield 6-7% return.
Last, about a year ago we inherited our cabin. We love our cabin but as I said it was a bit of a mixed blessing for us due to all of the cost and work we inherited with it. If it were not for the emotional angle we would much rather have the value of the cabin in cash.
We always made a good income, but were not always good at saving and investing – although we have always loved real estate and it has served us well. While we never got into trouble with debt, we did tend to spend what we did make. It wasn’t until we turned 45 and 50 that we woke up to what a dumb idea this was. We reassessed our budget and got to work saving and figuring out how our money could work for us, and not the other way around.
This should be encouraging to others who feel like it’s too late. It’s NOT! If we can do it, so can you. I only wish we had gotten smart much sooner. Having no debt was a big advantage, but nothing beats paying attention to where your money’s going, then saving and investing it. For us, using a budget was key. Seeing in black and white how much money we were wasting on things we didn’t really care about made a big difference.
Without sounding like I’m pandering…we used the ESI method before there was an ESI. 🙂
We focused on our careers, made some good decisions in that regard, saved a ton, and frankly had some good fortune with our investments along the way.
As you can see from the above, we started with literally nothing at ages 27 and 25, and never really made big salaries (although if someone had told me when I started out that I’d be making 6 figures someday, I would have told them they were crazy). We had some luck selling homes at the right time and made a few dollars as we were forced to move a couple times. But there was certainly nothing strategic about the timing.
In all honesty the biggest moment in our financial life came when an older co-worker literally walked me up to HR back in 1992 and made me sign up for this thing called a 401k. If he hadn’t been so forceful and insistent, I might not even be answering this interview as a millionaire.
We built our net worth, by saving (investing… in the market); not through inheritance.
The absolute most importance principal is to “pay yourself first”. That is one of the best lessons my parents taught me. Starting with my first job out of college….We have a lot of disposable income (versus being a college student) – so at that point you need to make a decision on how your savings versus ‘life style’ will go.
Always, always max out your 401k. Don’t just put enough in to get a company match; it’s about you – not the company. The compounding of principal can be amazing after 20 years of savings. Start early and never let up. There are always tons of excuses, but I don’t buy any of them.
Don’t let yourself get into the typical realm of buying a bigger house, vacation home, etc.; unless you truly have fulfilled your other primary goals (rainy day fund, no debt, retirement savings max’d, college savings, etc.). Otherwise….You’ll never get there and be stressed in your later years.
By the way…pay off your credit cards every single month.
Wait! – one more…We had a 30 year fixed mortgage at 7.25%. At the time, it was a good rate. Sitting in traffic I listened to one of those annoying mortgage commercial (before the mortgage crisis). We refinanced to a 15 year mortgage at 3.25%. That was probably one of our best decisions. We paid off the house with new 15 year mortgage fairly quickly even though the new mortgage payment was a little more than the previous 30 year mortgage. That feeling is… amazing!
In 2001, we bought our first house. It was dated and needed painting. We did as much work as we could ourselves to make it look presentable. We also tried to save wherever possible on materials.
In 2002, we had the first three of many homestay students come to live with us. Although there was effort involved in hosting and we lost some of our privacy, the income we received covered our mortgage payments. We also bought items they would need or could use from the profits of having them. For example, we bought beds, tables and heaters that we didn’t have before that benefited both them and us.
Later in 2002, we decided to focus on becoming financially free and we bought another house. We didn’t have an exact plan, but rental property was how we wanted to get there. We rented out the house furnished to university students. This helped us to make the property cash flow positive, rather than if we rented it as unfurnished.
In 2004, after talking with some of our Chinese homestay students, we decided to go to China. We taught at an English training company associated with a church in Guangzhou for six months. The company paid for our accommodation. The wages were low compared to New Zealand, but the cost of living was cheaper. Although we spent all our wages, we saved all the income we received from the properties back in New Zealand.
In 2005, we went back to New Zealand for a few months. We converted our house into an upstairs three bedroom unit and a downstairs one bedroom unit. We did a lot of the work ourselves. It took three months to complete and cost around $20,000. The cost of developing it was covered by the rent in just over two years.
In 2006, While we were in China we found an opportunity to export furniture to our home country. The furniture sold well, so that in a couple of months I went back to China to source more. We initially stored the furniture in my parent’s garages. After a few months, we decided that we would move to our first property on the North Shore. We filled up our big double garage, a bedroom and some other space in our house.
In 2007, in our second property, we cut a doorway into a large room to make another two bedrooms. We then rented the house on a room-by-room basis. While it provided a higher profit for several years, we found it taxing, so we went back to renting out the whole house to one tenant.
In 2008, an opportunity came up to lease a showroom, warehouse and apartment for a bargain price in West Auckland. The apartment was very basic, and we had to paint it to make it look livable. We saved a lot in accommodation costs by living there. The business did quite well for a couple of years, but then the Global Financial Crisis hit, competition increased and sales went down.
In 2011, I was looking at a place on the internet, for ideas on making money online. I had a friend make a simple software app and it sold pretty well. We made a few more basic apps before we decided we had enough to retire in 2012.
In 2015, the rental market prices had risen significantly. We decided to reconfigure the layout of the first property to maximize profit. In the upstairs flat, we installed large french doors to divide a section off of a large living room. This area can now be a bedroom or multipurpose room. Downstairs we did the same.
By 2015, we had paid off the second property, so the rent came directly to us. While we were living in Fiji, we sold the house near the peak of the market. By simply putting the profit in term deposits, we receive a similar income from interest as we did from rent.
I did not inherit any money. I was lucky enough to have frugal and money-conscious parents. My dad made 30k in the mid 80s yet he paid for a family with stay at home mom, a house and paid for two college educations.
After college, I was on my own and took out my graduate school loans. My dad always told me: “there will be people smarter than you. There will be people better than you. But we live in a world full of opportunity and information. You can always work harder than anyone.” I later adopted that to working smarter than anyone.
Life is what you make of it. If you want to succeed, go for it. No one holds yourself back except yourself.
Well my/our income is above average, but not crazy high. We have made a steady climb northwards year after year.
My investments have also done well because I have always had a pretty good head for risk. I am not overly adventurous and I like to have piles of money stashed in many different pots. Besides the usual stocks, bond, cash, retirement, property, I even hold precious metals to be well diversified.
We did inherit some money when my in-laws died unexpectedly. We used this money to do 2 things. First, secure my kids college education ($100,000) in prepaid tuition. Secondly, a beloved lake house was going to be lost due to relatives that could not agree. We used our inherited interest in that cottage and took out a new mortgage to buy out all the other relatives. It is now safely ours.
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Lots of good stuff, huh?
To read more on this series, check out part 6 here.
Lots of comments on lucky timing with RE, can’t wait for the next “opportunity”!.
Thanks for keeping these coming!