Through the years, I have interviewed hundreds of millionaires to learn 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 had originally considered publishing collections of these answers in themed e-books and selling them. But instead I’ve decided to publish them here on ESI Money in my Millionaire Wisdom series.
Millionaire Wisdom posts feature a key question I asked millionaires, then share multiple responses from various millionaires, along with a link to each Millionaire Interview in case readers want to read more from that author and/or see the context in which the answer was given.
We’ve completed our first Millionaire Wisdom series (titled Millionaire Wisdom: How to Become Wealthy — where millionaires gave their tips and advice on how to grow wealth) and today we begin the second series with millionaires addressing the following question:
How did you accumulate your net worth?
I love this question because it’s a mini-overview of their entire interview — a short, quick summary of what they did to become wealthy.
Let’s get started…
Our net worth has been mostly accumulated in retirement savings, building an emergency fund and appreciation of our house. My wife and I didn’t really enter high earning years until we were 30 years old. Our incomes have grown substantially most recently as a result of intelligent career engineering. I was lucky in my last 2 career moves in that equity I was awarded appreciated substantially based on large moves in the stock price. I typically sell stock as soon as it vests to facilitate diversification. The majority of my wife and my rollover IRA’s are invested in Vanguard in either total stock market index, REIT index or S&P500 ETF. Since my companies have been large cap pharma, I hold those in the Vanguard funds and don’t see a need to hold those stocks.
Max out your 401K before you do anything else. While clearly have most of our non real estate assets are in retirement funds, if I was aware enough to contribute IRS maximum as soon as I was employed we would probably have >$1.1MM by now.
We do as much as possible ourselves. While we do take out ~2 or 3 times a week, we do cook at home, entertain friends and family here as well. I do all of our yard work, which in this area saves me $3-4000 a year (net of expenses like equipment maintenance etc) and is great exercise as well. My wife does all the planting/gardening, which is one of her hobbies. If we need furniture, I build it (ok, this might not actually be cost effective because I typically need a new tool 🙂 ), but given the long timelines for my work projects, seeing the results of my efforts are really nice…
Always was a hyper saver, just did not spend money frivolously, even when everyone around me did. I avoid almost ALL financial temptations.. I love gadgets and other cool stuff too… does not mean I need to have every one of them, or have them immediately at highest price… My kids all have iPhones now. My parents and friends passed to them as they upgraded to new ones. We don’t ask for hand me downs and don’t act poor, but we often take things that folks just don’t want and it is nice to us… simple folks
Another thing that helps a lot, my wife does all the cooking at home. She does not work now, she stopped working after our 2nd child was born. She was never a big earner, so this made sense. Prior to her leaving work we were living off her income alone though I was making significantly more.
We have just saved a lot and put the money to work: real estate & stock/bond market. No inheritance, crazy get lucky stock picks, or any of that. Really my career is the main reason I have money, but then what I did with it was key to getting “wealthy”.
I learned the concept of compound interest at an early age and really shoveled a lot of money early in my career into investments. I maxed out 401k’s and Roth IRAs (when my income allowed). We also consistently put money into investments. Every week, we automatically transfer money into our taxable brokerage accounts. Every month, we invest in a 529 automatically and every paycheck, we invest in our 401k/SEP-IRAs.
Recently, I’ve been taking advantage of the mega-backdoor Roth IRA which allows me to set aside around $25k additional towards a Roth. The IRS maximum into a 401k is around $53k which include pre-tax, employer contribution, and post-tax contributions. I max it out, then every year convert the after-tax portion to a Roth IRA. My company allows in-service distributions so I’m able to do this while still with my employer. There’s no income limit on the conversion either so it’s a good strategy for a high income earner.
We also bought a rental property about 10 years ago and that has paid off. We have no mortgage on the property so we just collect rental income and pay the property taxes and insurance.
Our net worth has been mostly accumulated in retirement savings, building an emergency fund and paying off our house. We also invested some in mutual funds. But the biggest investment was investing in our sons’ college tuitions so they could well-paying careers and not end up living in my basement with a boat load of debt and no job after a 4 year degree. Guidance, guidance, guidance is the new location, location, location. Education is very important to us. We know this would have been a big drain in our retirement years so we wanted to make sure they were independent and living on their own (someday).
My wife and I didn’t really have salaries that individually went over 6 figures but our combined did. So never more than $200k EVER. I have always been cautious with our investing and also a little aggressive knowing that the wife had a pension. Our failures have never been too much to handle.
I have always paid extra on a mortgage in rounding up to a whole number. If the mortgage was $1488. I would pay $1500. Then I got more aggressive in some years so when the mortgage was $1542 I would write the check for $1750. First bought our current house with a 30-year mortgage of $129K. Paid on the mortgage for 3 years then refi to a 15 year and did not change the payment much. Then started to aggressively pay on the mortgage with extra cash as income grew. This is how I paid off a $129k loan in 12 years (3 years on a 30-year mortgage and then 9 on a 15 year). This strategy was based on the recommendation from another blog that supported this concept and saved me thousands in interest that I am now investing. Then all savings went to college savings to make sure I did not have that anchor of kids’ college debt hovering over them and potentially us.
We have never leased cars as I never could make the numbers work. Always owned the vehicle at least 5 years or until around 100K where max depreciation occurs. The biggest drain on us has been my wife’s work is 25 miles one way while mine is 7 in the total opposite. Biggest benefit is my father has a vehicle discount with a car manufacturer that has saved us thousands and always bought new and now our son has similar benefit working for a car manufacturer.
Always live below your means and keep your existence humble to your wage. Live in a middle class hard working city with a mix of blue and white collar people. Never owned a flashy car or cottage in the woods. We’ve taken mostly simple vacations but we have gone on cruises which are too expensive for my taste. We have been to Disney twice at the resorts and once on the Disney cruise so we never denied ourselves the opportunity. But we never went into debt and never financed a trip and always had enough to pay it off. If we didn’t have the money, we didn’t do it. Our 25th wedding anniversary was a wonderful trip that I saved $25 per pay from hers and my paycheck for 25 months. The trip’s budget was what it was and we had enough left over to continue the savings and make it a priority.
I wish I could give you the “one simple trick” or other clickbaitish catchphrase to give you a shortcut to millions. All I’ve done is put in some time in a high-income position. Early on, I spent far too much money building a home in a town that, it turns out, couldn’t support a hospital. I also invested rather haphazardly, and untangling those investments taught me a few things about taxes and charitable giving.
I am happy to take the market’s returns. While it’s certainly possible to beat the market by picking individual stocks or sectors, most investors underperform. I’m also not interested in the emotional aspects of constantly evaluating whether to buy, sell or hold a particular investment. All that woulda, coulda, shoulda would get to me. I don’t quite have a three-fund or four-fund portfolio, but my holdings are not far from it.
I feel like we accomplished this through brute force. I can attribute about $1.2M of our $1.6M net worth to pure saving discipline, with the remainder chalked up to market tailwinds. We’ve averaged a 50% savings rate throughout our earning period, with it being closer to 75% now. Our net worth really took off the past 5-6 years, and it wasn’t because of the stock market. It was because we maintained our saving discipline and expense budget despite increasing our earnings. I also had a goal to be 100% debt free and cross the $1M mark before I turned 40, and was laser focused on achieving those goals. We paid off our mortgage in 7 years.
One important thing I’d like to point out is that we didn’t feel like we were being excessively frugal throughout that time, because we always tried to spend money each year on a special experience or many little experiences throughout the year. It’s true we could have ‘banked’ those expenses, but we would have also missed out on wonderful trips and memories along the way, which is the point of living.
Slow and steady wins the race. I never made more than $25k a year until I was 28 years old. I made $40k at my first job out of MBA school and felt rich. For a year or so, I got into a little credit card debt but after I came to my senses, I paid off my school loans ($12k) and my recently purchased car ($13k) so I could purchase my first home when I was 31 years old.
Spend less than you make. I’ve always looked at how to save money including purchasing used cars instead of new, living in a less expensive house/neighborhood than a bank would say I could afford and buying things on sale or used. Some would say living on one income in the SF Bay Area is impossible but we’ve done it and still been able to save.
Always be grateful for what you have. I’ve been tithing (contributing 10% of my net income) to my church for the last twenty years. Since my mindset is to live on 90% of my income, it’s helped me be disciplined in my other financial responsibilities.
Take advantage of financial opportunities at work outside of your base income. For example, if your company has a 401k match, contribute at least that much to gain the match. I used to have an ESPP (employee stock purchase plan) at work and even though my budget was tight, I’d buy company stock at 15% below market rate and then sell six months later if I needed to pay expenses.
By 1982, I completed my double major and graduated with honors in a recession only surpassed by the current one this century. 177 resumes sent, only a few interviews but, a secure position one month before graduation for $3.35 an hour with commissions possible from Radio Shack – the old Tandy Corporation. Overtime too! I felt lucky, graduated with no college debt/loans (I emancipated at age 19 for the benefits of financial aid/grants as my “exemption/deduction” meant little to parents who already had enough children to deduct on income tax), working part-time during school and full-time in the summer to pay for school/personal expenses and with a little financial help from Mom and Dad too, I managed to save over $1000 by graduation in 1982, and owned two “paid for” cars, though they were a combined 25 years old.
At age 22, life was to begin again. I wasn’t “cheap” but was raised and still am “frugal”. So a week after college graduation, I began work for Radio Shack and within two months was the top sales trainee in New England, earning a promotion and management responsibility of my first store in just four months. The store was “broke” and I “fixed it”, returning it to profit in just over 60 days. 65+ hour weeks were the norm. I then moved to computer sales, back to retail management and by age 25 was averaging about 60 hours work a week/$36K~ a year (this was 1985) running the last of my three stores in the state of Maine. Tandy matched 40% then 60% of up to 15 % of gross pay deposited in the stock savings plan and I added about another $125~ a month to a high yield money market account. By age 24 I was had over $15,000 put away. I took a car loan in 1983 for 48 months but, leery of debt like my parents had been, I paid off the loan in 19 months. I had to beg the local banker for a VISA/Mastercard and by the second visit to the bank, I got a card with a $500 limit. Financially, I felt great!
RS had great plans for me but, I decided it was time for something different, to give back, to serve and find a career self-fulfilling. I applied for and against the odds, (about a 12 1/2%~ percent chance), was accepted into the Air Force as a Staff Sergeant with an assignment to Officers’ Training School in the summer of 1985. A 45%~ pay cut awaited too! I barely met the challenge against some of the country’s best and brightest officer candidates and was lucky to graduate in the bottom 20% of my class as a 2LT Administrative Officer assigned to Keesler AFB in MS, with a follow on assignment to Vandenberg AFB, CA.
I “cut my teeth” with various positions of increased responsibility but, seemingly the Air Force felt my business acumen was a strength so my assignments were managing people, programs and money. I had two commands at a young age and was selected for the prestigious Education with Industry Program at the end of Desert Storm in 1991. Along the way, I married a California gal after living for 2+ years in an $8K mobile home that I paid off in two years and sold for $7300.
Marriage to my new wife meant travel to Europe, courtesy the United States Air Force as our Honeymoon – to my assignment in southern Italy. Along the way, I always remembered my Dad, never making more than $20K a year in his life but, paying cash and “paying yourself first” by saving something every paycheck.
I became a client of a firm that catered to military officers and was saving/investing almost 25% of my pay by my seventh year of service. We had over $100K+ of liquid assets by 1990 and about $225K~ when the Air Force Reduction In Force of 1992 selected me for separation after 7 1/2 years as a mid-grade captain. I was making about $45K a year. My wife worked “on and off” since we moved almost annually. The Air Force had paid for much of my professional education, about 70% of my MBA and cut a check for about $24K~ at separation.
I started receiving $990~ a month unemployment. I continued on as an inactive reservist for another 7+ years. Of course it was 1992 and yet another recession loomed. Jobs were hard to find, careers even harder, and after little luck job searching, my wife and I decided to take the plunge as “self-employed”. I became an independent contractor for the investment firm that had helped me so much: USPA&IRA. We settled in Vacavillle, CA and I studied hard getting licensed, trained and learning the art of cold and warm calling to get the attention of potential clients. 6 1/2 day work weeks again became the norm and the expenses of running a business had us in a $12,500~ deficit in only a few months. Commissions were slow to build. My bride took a $6.50 an hour assistant manager clerical job that paid for the rent and the local phone connection – much needed so I could make calls to clients and potential clients from home, instead of the office a few miles away – quality home time so to speak.
I worked hard and by the end of year one, I showed a $4500~ profit for almost 4000 hours of work! But, the pipeline was full of clients referring potential clients and by the next year – my first “full year” I showed a profit of almost $190K~ and was the number one revenue producer in the world for the small company that was my parent broker. Two more hard years of work grew my income and along the way, I always maxed my Self Employed pension, our IRA’s and saved additional dollars. Paid estimated taxes on time and usually more than needed.
My wife joined me in the business near the end of year one so we could have some more “time together”. By the end of 1996, our liquid net worth soared to over $750K~ and I took the challenge of managing a new office in Central Texas, outside of Fort Hood. Modest success ensued but, I realized my work ethic was far greater than the folks I hired and trained. My income dropped a bit, to the “mid-hundreds” but, the low cost of living, debt free lifestyle (we rented homes quite cheaply) and internet bubble moved our portfolio to over $1M, all before my 40th birthday.
Unfortunately, the marriage didn’t survive and in late 2000, I wrote a check for about $425K, plus turned over title of the new car to my now ex-wife. In addition, I decided that my work ethic would better be served directly serving clients – instead of management, so I again moved my business, this time to Tacoma, WA to serve our firms growing list of “high net worth” clients. I had net worth of about $750K at this time.
Tremendous success ensued as my income approached $450K by 2003. It remained in the high two to mid three hundred thousand annually and I continued to live a modest – $60K~ or so a year lifestyle. Still frugal but, never wanting for anything. Inflation bonds, SEP-IRA, stock mutual funds, money market accounts, etc., I saved/invested all I could (often over $100K a year) while paying up to $150K a YEAR in federal income taxes. Business costs exceeded $50K a year. Do the math.
By 2007 the parent company, going through internal changes and seeing me as one of the top earners of the corporation in the world, decided that reducing “trailing commissions”, in my case amounting to over $100K+ annually, along with other commission schedule changes would be a better “motivator” AND soon after they decided to terminate the contracts of those high earners like me in masse. So at age 47, but, always knowing the end in the financial services industry could come at any time, I was unemployed.
I had started slowing down my work schedule in 2006, to a leisurely 35-40 hours a week and now had amassed just over $2.8M+. Some of that money wasn’t in “constructive receipt” so taxes were still owed on it (deferred compensation for instance) but, I had always figured, $2.65M~ was my target to be “all done” as far as earning/saving money and work. Most of my peers lived “up” to their income and scrambled to other brokerages/firms for work, I decided – to retire, at age 47! I had over $800K~ in cash, and the interest rates of 2007, still in the 4%+ range gave me plenty of monthly capital. In addition, through a large class action lawsuit, I was deemed to have been illegally separated by the USAF back in 1992 (“reverse discrimination”) and was awarded a full 20 year military retirement as a Captain. So a pension, modest but a pension none the less, and medical care awaited. Why work?
I built a small but very comfy townhome with many amenities for about $250K~, paying cash for it all – outside Portland, OR but, in income tax free WA state. I rearranged my portfolio becoming very conservative and cautious, for example: putting all my tax deferred (SEP-IRA/IRA) monies into a variable annuity with an income for life rider. I booked large tax “losses” during the market meltdown of 2008 but, my true cash losses were far smaller. Paid the taxes on the deferred income and built a very tax efficient portfolio.
Today, I typically show “income” of less than $45K~ annually and pay federal taxes of only $4500~ or so. No state income tax. Modest property tax of $2200~ a year. I travel, play competitive ASA mens’ softball – with folks far younger than myself. Live near the lake and million+ dollar homes but being 3/4 a mile away, I don’t have those kind of taxes/maintenance/housing costs. Now, I’m a bit “looser” with the cash but, my net worth, even in this awful market and ultra-low interest rate environment remains between $2.4 – $2.5M. Whole Life Insurance I purchased young is “paid up”, the “deferred variable annuity” promises me a lifetime of income that can only grow, never drop. Some I bonds STILL pay over 8% annually, tax deferred. Stock mutual funds in a managed account (at a .5% annual fee for rebalancing, oversight, etc.,) should provide inflation proof growth. Still large amounts of cash allow liquidity and a sleep factor.
I have my health and am blessed. Literally, the “millionaire next door”. At 53 years of age, I couldn’t imagine life being better! It wasn’t luck, nor inheritance, nor “hitting it big”. Education, hard, HARD work, living well below my means and avoiding debt were the keys to making it happen. I am making up for “lost time” now. And loving it!
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Lots of good stuff, huh?
To read more on this series, check out part 2 here.
Are people no longer submitting interviews? It seems like you’ve drifted away from millionaire interviews…now it’s more analysis on prior interviews.
We have more coming, but we only publish them if we have them, and we ALWAYS need more.
If you know anyone who wants to do an interview, send them my way!