Who would have ever thought we’d make it this far in the Millionaire Interview series?
Back when I began with the very first interview I had no idea that these interviews would be as popular as they are.
Here we are three years later and a century and a half of interviews completed.
There are many more lined up, so we’ll be at this for a while before we run out of steam (if we ever do). That said, we can always use more, so email me if you’re interested in telling your story. đ
I like to take these milestones to stop and pause (like I did when we completed the first 100), to look back at what we’ve learned so far. That’s what I’d like to do today.
Millionaires Are What I Expected
Before we get too far, I have to acknowledge that the findings from these interviews don’t surprise me much.
This is because these are my people. I’m one of the group (now over $4 million!) so I knew what to expect. How else do you think I came up with E, S, and I? đ
That said, there are some nuances that did surprise me a bit.
So I’ll break this post into two major parts — findings I expected and the ones that were at least partial revelations to me. I’ll also compare and contrast what the millionaires have done to the actions we’ve taken in our lives.
Let’s get started…
Expected Millionaire Habits
Here are the findings I was pretty sure of:
1. Millionaires earn high incomes.
Not a shocker as we all know it’s easier to accumulate a high net worth if you make more.
As we’ll see below, millionaires didn’t always earn a ton (they didn’t come out of the womb pulling down $300k per year), but most built their incomes over two or three decades by focusing on and growing their careers.
This is exactly what I did during my 28-year career which had major positive impacts on our net worth.
This is why I talk about careers so much on the site. Growing you career is a HUGE part of the E in E-S-I.
Some people seem to avoid career-related posts but they do so at their own financial peril. For the vast majority, their career is their biggest asset and deserves a good amount of attention and care.
2. Millionaires save a good amount of their incomes.
Saving is listed as my #1 money move anyone can make, and millionaires certainly use it to their advantage.
Back in the day, saving 10% was considered good. If you saved that amount for 45 years, you could have a decent retirement at 65.
These days people in the FIRE community are saving 50%, 75%, or even more of their incomes. So that 10% looks kinda weak.
Millionaires are in the middle of these two. My estimate is they save 20% to 25% of their gross incomes. I don’t yet have a great handle on the absolute savings since some measure by gross income, some by net, and some offer contradictory savings rate information (i.e. two separate questions seem to reveal different answers).
In the end, I think 20% to 25% is a pretty good estimate. It’s also a decent level of savings, especially given their high salaries. When you couple solid savings with strong earnings, you get a great one-two financial punch.
We were a bit higher than average millionaires, saving 36% of our gross income during my 28-year working career.
3. Millionaires focus on simple investments.
When I was younger I used to think that millionaires had complicated investment strategies that were simply not understandable by the common man.
Then as my wealth grew I learned that investments didn’t have to be complicated to work.
Millionaires have found the same thing. While they have tried a wide variety of investments, they come back to the blocking and tackling of investing — index funds and real estate.
This is exactly what I experienced. I started thinking I had to be an awesome stock picker. That didn’t go well. Thankfully it was short-lived and I quickly found index funds as a replacement.
Then, once I had a much larger net worth and had built up my courage, I got into real estate. Doing so has been a very solid investment and we’re experiencing one of our best years yet in 2019.
4. Millionaires became wealthy by covering the money basics and avoiding huge mistakes.
I don’t think I’ve interviewed a millionaire yet who has become wealthy from one single event over a short period of time (like the lottery, inheritance, etc.).
They grow their net worths the old fashioned way — they earn, save, and invest, covering the basics. Then, over time, they become wealthy.
It’s pretty boring stuff if you compare it to the get-rich-quick stories often in the media. But it works. The process is tried and true. Slow and steady wins the race.
This is what has worked for us too.
We had some mini growth spurts like stock market surges, buying real estate, and big bonuses from work, but none of these were life-changing. We did it like everyone else, over a long period of time with the basics.
5. Work-life balance is often an issue.
As you might imagine, working yourself up the corporate ladder isn’t a 9-to-5 job. Many millionaires work long hours and have since a young age. As a result, their family life often suffers.
That said, one of the first things people do when they accumulate some wealth is begin to dial back on the hours and have more family time.
Millionaire after millionaire has told me that work-life balance “was an issue when I was younger, but is much better now.”
I will be posting on this issue in an upcoming post, but for now let me say this was pretty much my experience as well. Thankfully I was able to find a job mid-career which helped balance work and life while also paying me a great salary.
It was a true blessing to our family and something most don’t have the luxury of.
6. They have multiple sources of income.
In addition to their incomes, many millionaires have other income streams as well.
The most common are dividends, real estate, and side hustles.
Our multiple streams of income have built over the years as well.
We first added side hustles which helped us pay off our mortgage.
As our net worth grew, we generated more dividend income, which we always reinvested.
Then we got into real estate as I moved closer to retirement.
These days we have this site, our real estate, loans to another real estate investor (earning 10%), interest on cash held, and my wife’s part-time job. All that adds up to much more than we spend, so our net worth keeps growing.
7. Healthcare is their largest retirement concern.
No surprise here as the U.S. health system is designed for employees — with insurance tied to employers in most cases.
So what happens in retirement? People are left to figure that out on their own. There’s no really great solutions and hence millionaires are as concerned about retirement healthcare as everyone else.
We struggled with this as well, though it didn’t take too long for us to find Samaritan Ministries. They have been great for us through three rounds of skin cancer/mole removal and I can’t imaging not using either them or Medi-Share.
8. Travel is their favorite splurge.
Who doesn’t like a good trip? Millionaires sure do!
And the ingredients are right for them to make travel their top splurge — they have both the time and money to make it happen.
For us, Grand Cayman in January is a staple. It is an awesome place in so many ways, relatively easy to get to (now that there’s a direct flight from Denver), and really breaks up the winter with a nice warm spell.
This year I’ve convinced my wife to go for an entire two weeks, so I’m slowly inching her up to a month. đ
We also have Florida (October 2019) and Hawaii (2020) trips planned so I think we’re doing well this fall/winter.
Unexpected Millionaire Habits
While there was a lot I knew about millionaires, there were some surprises. Here are the findings I didn’t expect:
1. Millionaires started out with low incomes.
As I said earlier, millionaires weren’t born making the big bucks.
Many started with very minimal paying jobs out of college and through hard work and talent grew that into a very sizeable income.
People will often comment something like, “I’d be rich too if I made that income.”
First of all, they probably wouldn’t since income is only part of the equation. The averages show that most would spend whatever income they’d make, even a high one.
Second, it’s not like the millionaires have been making $300k for 30 years. Most began with minimum wage jobs (or close) and worked up from there. What we see are the results two to three decades later after a lot of hard work and dedication.
I had a similar experience but did take a bit of a short cut. In my senior year of college, after I realized I didn’t want to be a lawyer (an internship my junior year confirmed that), I discovered my employment options with a degree from a no-name college were quite limited. So I went to grad school to get an MBA. Two years later my income options had more than doubled and the rest was history.
2. Millionaires save less than I would have guessed.
If someone had asked me prior to the interviews how much I thought millionaires had saved of their incomes, I would have guessed 30% to 40%.
I am biased a bit towards savings and thus would have expected other millionaires to be as well. But the truth is they save far less than I imagined.
That said, I wouldn’t have thought their incomes were as high as they were either (I would have guessed $100k to $150k), so in the end the absolute amount saved is probably the same.
3. Millionaires have made common investing mistakes.
You would think that millionaires had it all figured out, right?
Most people believe that millionaires don’t make money mistakes. But they do (and have). Turns out they make the same mistakes most other people make.
And the #1 millionaire money mistake is in the area of investing.
Just like many Americans, millionaires thought they were smarter than most others and thus made a lot of investing stumbles (mostly in the area of picking individual stocks).
I know how they feel as I did the same thing. I was a know-it-all investor until I found out I knew much less than “it all”.
Thankfully we all came around to our senses fairly quickly, jumped on the index fund train, and the ride has been great.
4. Few have budgets.
This was a big surprise for me…and it kinda wasn’t.
The vast majority of millionaires don’t have budgets.
Many sort of track spending and saving, but they don’t estimate and pre-determine spending in a budget.
The reason? They don’t need to.
They make good incomes, save a decent amount, and have plenty left over. They are naturally self-controlled and don’t let costs get out of hand. So why would they need a budget?
I get it. We didn’t have a budget for many years. We did start out with one early in our marriage and it was a key reason we got off on the right track.
But once we got into a rhythm and developed our spending self control (plus our income rose), there really wasn’t a need to have a budget. That’s why we didn’t have one for many years. Then when we retired, I wanted a bit more insight into where our money was going, so we have one again that I update monthly.
That said I always did track spending in Quicken, so we had a good handle on cash flow if we wanted to dig into it.
For these reasons I recommend people have budgets at the beginning and end of their careers, but don’t necessarily need them as they get settled — which is what we see with millionaires.
5. Few have wills.
Again, you’d think that millionaires would be on top of things and have estate plans — especially given their level of wealth.
But they appear to be right there with the averages (almost 60% of Americans don’t have wills) — most millionaires don’t have wills.
I’m right there with them. Or at least I was. We had a will done 20 years ago. It had been so outdated for so long that it was probably useless.
But we remedied that recently and updated all our estate plans. I’ll give details in an upcoming post.
That said, for many years we were one of the majority who didn’t have a will.
6. Charitable giving is low.
This is one I really don’t get.
Millionaires are in the position to give substantially, even doing so while they accumulate wealth.
And yet most don’t.
I’m really not sure why. Perhaps some of you will have an explanation or two.
I will be discussing the issue in an upcoming post, offering reasons people should give on their way to financial independence.
We chose to help others while we worked our way towards FI, giving away 26% of our gross income.
These days we contribute assets using our donor-advised fund, also an upcoming post. đ
7. Most check their portfolios daily.
Experts will tell you that one key to investing success is to not watch the markets that closely (or else most people tend to make moves detrimental to their results).
Millionaires buck this trend with many checking their portfolios daily or at least weekly.
And somehow they keep on the right path.
I hardly pay attention to the market and only hear about it from others when something really good or bad happens. I’ll hear comments at the gym, on the pickleball courts, or at church. Otherwise, I don’t notice much.
I do update my net worth once a week via Quicken, downloading my index fund values automatically, but I don’t look at individual funds, I simply check the total.
Looking at values for each fund would be too much work/stress for someone trying to relax in retirement. đ
General Thoughts on Becoming a Millionaire
Based on the findings above, I have some conclusions that could help those who aren’t yet millionaires become one.
But before we get to those, let’s quickly review the roles E-S_I play in becoming a millionaire.
Generally, here’s the pattern of things with millionaires (at the time they are interviewed):
- Earning is more important than I thought.
- Saving is less important than I thought.
- Investing is more important than I thought.
The data show that millionaires focus more on earning, which means they need to save a lower percentage of income to still be socking away a ton.
They then invest the savings to grow their net worths.
However, that’s more of the long-term results. On the way up/early in their lives, the focus is as follows:
- Earning is less important.
- Saving is more important.
- Investing is equally important.
In the beginning, they earn little, so there’s more focus on savings, which they then put into investments.
Those investments earn and grow for two or three decades after which time compounding makes them worth a healthy amount.
Given all this, here are some suggestions for those wanting to become millionaires:
1. Focus early on getting your earning ability ramped up.
It takes time and effort to make the big bucks, so the sooner you get started, the sooner you’ll reap the benefits.
This means considering both growing your career as well as developing a side hustle.
Over time they will both increase and be what fuels strong net worth growth.
2. Control spending using a budget from the get go.
Developing a spending self control is vital to becoming wealthy and a budget is the best tool for doing so.
Even if it’s just for the first few years of your financial journey, develop and live on a budget at least until you know you can manage your spending impulses.
Over time you can do without one if you like. And if things ever begin to slip spending-wise, you can always come back and create a new budget.
3. Invest early and often.
If you do #1 and #2, you will create a good amount to invest.
Before you dive in completely, learn about investing in index funds by reading The Simple Path to Wealth
. Then read How to Invest in Real Estate
since one day you may want to get involved in real estate (and the sooner you begin learning, the better.)
Sock away as much money as you can as early and as often as you can to get compounding working for you.
Over time you can keep at it or look to expanding into real estate depending on your goals and interests.
After that, it’s simply time. Give it long enough and one day you wake up wealthy. đ
Those are my thoughts from the first 150 millionaire interviews. Thanks to those who have completed the questions and all of you who read and comment on them.
Here’s to the next 150!
Thank you for providing these insights and personal experiences that highlight the paths many of us seek to enjoy. Bravo zulu, and please continue this endeavor.
I pretty much fall in line with the majority in this series as well.
I really have never budgeted, my investments are solely in real estate and index funds, and I have made mistakes early on but have course corrected and made it to where I am now.
As a physician I had to really up the savings rate as I got a late start and had more debt than most. It is advised that you need at least 20-25% savings rate if you want to retire early because of the late start.
Great summary!
Great post, and thanks for the insight.
I think you sort of missed an important point that needs to be addressed. The higher up the millionaire stack you rise, the more comfortable you need to become with taking risk. You can earn your way through salary to reasonable levels of wealth, but, to become super-wealthy, the top 1%, or the top 0.02%, requires that you make big dollars. The higher up the stack you go, the more risk you need to take, and the more comfortable you need to become with failure. Yes, saving is important, but, increase the numerator, and the reward gets bigger. To achieve that, you need to take larger and larger risks.
I believe your comment is relevant if you want to break into the upper 7-digits and beyond category, but not very relevant for the $1mm – 3mm NW audience where ESI principals can get you there over time with relatively low risk of failure. I’m in upper 7-digits, and yes, have taken more career risk and investment risk than many would be comfortable with – mostly in terms of using substantial amounts of debt to invest in high-value r.e. As a result, the out-sized returns have probably added $3mm more to NW than would have otherwise been the case. I hope to breach 8-digits someday, but its dependent on how much longer I keep working and not drawing on investments. Now having established a nice base, appreciation will be less a function of high-risk investing, and more a function of normal r.e. and stk mkt returns.
Many of the truly wealthy, to whom you refer, are business owners. Business owners take different kinds of risk than do many investors (and certainly far different than what most people actually do – that is, “speculation”) and the risks we take often scale up over a long period of time. As such, we don’t really feel it; it feels natural, like part of a progression supported by experience, competency build and resiliency.
Biggrey, I love the way you put that… “the risks we take often scale up over a long period of time. As such, we donât really feel it; it feels natural, like part of a progression supported by experience, competency build and resiliency.”
That is so true.. if anyone had told me 40 years ago that I would have the responsibilities I have today or had taken the financial risks I have, I would have excited but maybe a bit freaked out too.
But, I have “scaled up” to being comfortable with a high level of responsibility in career and financial decision making in personal life. The risks, and numbers, and consequences, and expectations have gotten much, much bigger over time.
But so has my knowledge and experience to the extent that now its like walking in the park… like an athlete going from a novice on the playground growing into to an elite professional level competitor.
This is an instructive piece. Quite actionable points ! However, my circumstance is a bit different in my own space. I live in a country where inflation rate far outstrips returns from several investment options e.g real estate, mutual funds etc. This makes the financial journey precarious… I am yet to figure how to grow my investment returns at a rate higher than galloping inflation rate, thereby enhancing my NW. Any advice?
Echoing Xrayvsn… I fall in line with most of the characteristics (but not a physician)
Budgeted intensively early in marriage, but only for a few years – once student loans paid off and purchased first home, only budget for big categories (ex. travel, charitable giving, etc.)
Income has well above average most of career(s) (I’ve worn many different hats) and have been fortunate in several windfall events (sale of greatly appreciated r.e., stock options, that sort of thing).
Investments mostly in real estate and index funds, have had a couple of wipeouts with highly speculative angle investments but nothing big enough to dent NW.
Got a late start on career, and pay is quite volatile (bonuses, commissions, stk options, etc.) but on average have probably saved in that 20-25% range – in good years more, in bad years less.
Work/life balance has been a huge issue much of my working years, but finally cutting back a bit if you can call 50 hour weeks, and being perpetually on call cutting back. I am most certainly under less stress having reached multi-mil FI.
Where I differ radically is that charitable giving is important to wife and I – we are reasonably generous. And we have comprehensive estate plans in place – majority of our wealth, whatever is remaining, will go to charity.
I think I am doing OK with saving and investing. What I am struggling right now is going up the ladder. I am at mid-senior level and I am figuring out how to grow my career by learning the skills.
@ESI, do you know if majority of the millionaires held top management positions or are there any who are in R&D, technical positions who were on par? Thanks.
In the first 100, I recorded sources of income (I’ll do the same once we reach 200). By far most of them were in “business” but I did not break those down by job type (i.e. marketing, finance, R&D, etc.)
From a sample size of 1, I can tell you it’s possible from a technical career. I’m at a crossroads where I need to decide if I want to lean into the management/business development side of things (the part of the job I dislike the most) to get to the next level, or coast for the next 3-5 years and say so long to full time employment.
I never considered myself high income 80-100k a year. Great insights but now at 4.8 million including house. Interview #82. Saved a lot the rest falls in line
Once again, I appreciate this information and only wish I wouldâve been introduced to this ESI concept earlier in my life. Thank you!!!
In saying this, interestingly enough, almost all areas in the expected and the unexpected fit in to our world. However, we do have an up to date WILL, but we do need to increase our giving plan â- thx
My wife and I (both educators) have been together for 40 yrs (and a few months) â we finished our first year of marriage with a Net-worth of $25,000 and in 2019, we just crossed over the $5,000,000 mark, for our current Net-Worth â-
So blessed â-
While going through an elder family members assets after death I found a note attached to a group of bonds, “Dear ___, these bonds are not to be used for wine, women, or wheels (cars). They are for my use if needed in my old age.” Which I believe may be the reason your survey didn’t find a lot of giving. The concern with running out of assets is there. You can always give at your death.
Iâve only been reading for about 50 of the series, but I have been impressed with the analysis and questions from the comments.
Iâm surprised nobody mentions the Personal Management merit badge pamphlet. Itâs geared towards teenagers and was my first exposure to saving and investing.
Thanks, Joe, great resouce. The Personal Management merit badge pamphlet is really useful from about age 12 to 18 (or even beyond). Solid advice, teaches terminology and concepts. Has projects that work starting at age 12 thru age 18. Covers Money management (Earning, Saving, Investing) and Time Management. And puts it all into the context of having a good life.
Can be read in a Just in Time way (specific chapters) or from start to finish (about 60 pages). And then reread when a certain topic comes to the forefront of someone’s life (e.g. planning a trip, buying a bigger ticket item, etc.)
Just Google it to download a copy. I sent on to the parents of my grandkids already.
My husband works in probate law, and I handle marketing for an estate lawyer, so you can imagine how I appalled I am that wealthy folks do not have wills and are not generous. I just heard on NPR about the individual donor who provided $3M of the cost to refurbish the Washington Monument. He commented that $3 million left in his estate wouldn’t make a difference to his life, so he preferred patriotic philanthropy. He was surprised how few of his wealthy peers would participate.
I have read every millionaire interview and continue to be distressed by the lack of giving. Looking forward to future articles on the subject.
I always look for that as well and am frequently disappointed. Charitable giving is mentioned so infrequently I am surprised when I do see it mentioned.
That said, I do appreciate ESI running the series!
Great summary and I’m fairly in line with the things most millionaires do. I don’t regularly check our net worth. I do an end of quarter analysis and keep that on a spreadsheet but I purposely don’t worry about where we are until I check again 90 days later.
We did a full estate plan 7 or 8 years ago but it really needs to be updated as our daughter is now 21, my father passed away during this time, etc. so everything needs to be looked at again and some things modified.
In April 2018, my wife and I made a firm commitment to tithe to our church. Actually, we split our 10% tithe among 3 churches that we attend and go to weekly bible studies. Up to that point, I had always been a “tipper” instead of tithing the right way. You know, the guy that throws a 20 in the offering plate each week when they pass it around. We finally decided that we were so blessed it was time to do what we knew was right and we have no regrets about our decision.
In addition, we do other things for donations like monthly support for 3 children in India, 1 in Columbia, an adult missionary in Africa and a horse ranch that has a program merging at-risk horses with at-risk children. We give some volunteer hours to this cause as well.
Last, we send a monthly donation to Christian radio and a handful of one-off checks to various charities.
I say all of this only to illustrate that I was a very fortunate person who had been putting off doing more for others. I finally just decided it was time to fix this and so my humble advice to others would be to not wait too long if you are so inclined. We didn’t do everything at once. We started with a couple of things here and there and just found that the more we gave, the more we liked it because it brought the joy of giving into our family and helped many others in the process, probably more than we will ever know.
It kind of makes me feel less guilty for feeling so blessed in my own life!
Love this story and great advice IMO!
Why just monetary giving is given a preference? Can’t it be that they give their time and effort to interact and share the knowledge with many people counts the most? In turn, those at the receiving end would be inspired to do their part. One person giving a lumpsum charity is less inferior than 1000 people giving moderate donation IMO.
In short, they are giving, i.e. giving their time, but we don’t see that as it’s not physical.
I would agree and would add, why not do both. However, I know for many, the luxury of time is not available to them for volunteering where busy families and busy careers seem to occupy so much of it.
However, it doesn’t take much time to write a check đ
First of all, let me clear up an error. They are not giving their time either. To say they are is inaccurate. So I’m not sure why you’d say that other than to create a false sense of reality for some reason.
If you read the answers, some will say they give money and some will say they give time. But the majority give neither (and they say so).
Second, I agree that time can actually be more valuable than money. If it’s the right person, their time and advice can be worth a vast amount.
That said, statistics from churches, non-profits, and all sorts of charitable organizations will show that the vast majority of those who volunteer also give. In fact, a major source of giving for many organizations is their volunteers. This is likely because these people see the needs the charity is meeting more than anyone else and they are compelled by compassion to give.
So while volunteers are often givers too, givers don’t necessarily volunteer. If people did give their time, odds would be they would give money too.
Third is the time factor mentioned by Paper Tiger. I ask millionaires how their work-life balance is and many say it’s not great. That’s probably an understatement. These are high income individuals in top jobs and most are not working only 40 hours per week. To volunteer time is probably very difficult given their jobs and family obligations.
Finally, there’s the question of capacity to give. I think the fact that we’re talking about high net worth individuals shows that they have the ability to give if they want to. So that’s not an issue IMO, but still worth mentioning.
In the end, whether people give or not is not really part of my personal concern, I don’t condemn them for it, and the choices are entirely up to them. That said, people read this site to hear my POV on money topics and I am an advocate for giving to charity to help those who are less fortunate. If you have a problem with that, then we’ll likely just have to agree to disagree on this point.
Hi ESI – I don’t disagree. In fact my intent was to support many millionaires here who are already sharing their stories and inspiring many on this digital platform. It’s laudable to witness even this much time spent by them to share their POVs.
I certainly see your point now on how a rough work-life balance doesn’t allow to spend time, but writing a check should be easy. And most importantly agree with having the capacity to give as high net worth individuals.
Not sure if there are any statistics to show how millionaires gave way money in the last 5 decades. But as you said, it’s not of anyone’s personal concern.
There have been studies on giving by income brackets (not net worth — as far as I know). If you do some Googling you can find them. I think the general conclusion is that the lowest income people give the most as a percent of income.
I’ll be writing on this subject a few times in November/December (including launching my own giving effort — stay tuned!) so we’ll have plenty to chat about in the next couple months. đ
While people can give their time (and that certainly makes a difference to organizations and makes them feel good), it is often far better for people that have the skills to become a millionaires to give money.
One of the more influential thought leaders on charitable giving is a professor from Princeton named Peter Singer. Here is a discussion about how becoming a high paid banker and contributing large $ to charity may be the best way to change the world:
https://www.reuters.com/article/us-global-charities-altruism/young-smart-and-want-to-save-lives-become-a-banker-says-philosopher-idUSKCN0Q10M220150727
ESI, I look forward to your upcoming posts about giving, and have always been impressed with how you have discussed this topic.
Wow. That is an awesome article!
Th a lovely you for sharing that excellent article on â effective altruistsâ. This articulated well the approach to charity I suspected was most effective.
That was supposed to read âthank youâ. Sorry, itâs early and Iâm not keeping up with the iPhone correction shenanigans.
I fall in line with your post as well.
I started out with a pretty high salary right out of school and it hasn’t grown that much because I’ve favored more work life balance over more money (that, and we’re living the laffer curve as my husband’s income is higher than mine, so there is not enough marginal utility in being super hardworking and paying 42% in taxes on the additional earnings).
Best thing I’ve done is always max out 401k from day 1 out of school at age 25, invested 100% in an equities index, and I get a decent company max, and will be a 401k millionaire by the time I’m 40.
I bought my first house with 20% down pretty soon after I started my first job, and then traded up from there, but I was lucky because I graduated during the recession when everything was cheap.
I bought 2 rental properties before having kids and have 1031’d into better properties more recently that I could easily own and self manage until I die as they are in a beautiful location that will always be desirable. They cash flow nicely and I’ve always reinvested 100% of cash flow into mortgage pay down and capital improvements. I don’t intend to buy anymore physical real estate.
I started 529 accounts at the birth of each kid and invested aggressively for first 5 years then stopped by age 5 (for the oldest) as that one is fully funded. Still working on the youngest.
I plan to start giving more now that I feel better about college and retirement savings. I hear what everyone says about giving but I felt the need to prioritize financial security for my family first, and then focus on giving once that is covered.
I need a better estate plan, but at least I have a will.
We’ve always given 10-15% of our gross income away. As an exercise I ran the numbers and what we have given so far would be worth over $2 million had we invested it instead. That would be a significant increase in our net worth, but still a small investment in what we believe benefits others. It is shocking that you’ve found so little charity in the hearts of millionaires. Perhaps focusing too much on money can actually increase greed in people’s lives? But not in yours, what an inspiring example you are!
Haha! I’ve done the same thing. I think we’d be several million dollars richer if we’d not given but 1) what do I really need more for anyway?, 2) others needed it more than we did, and 3) I am not personally in favor of becoming wealthy without at least trying to help some others along the way.
Ok, let’s take this further…why not propose everyone live a minimal low cost lifestyle, i.e. MMM, and divert more resources to the needy. No one needs to be a millionaire. (Insert pregnant pause here) Because life is about freedom of choice. With less judgement.
What?
There is always a balance — in money, life, and pretty much everything else.
I’m not against wealth (of course, I have it and write about it) but there needs to be a balance IMO and this includes giving.
Fully concur with balance. With the “level of balance” determined by each individual. BTW we have similar NW. I just wanted to point out that there should be less judgement and more freedom. We’re good đ.
Of course. It’s up to each person to determine what works for them. But you know, I do have my opinions. Ha!!!
I really don’t see it as judging any more than when people offer suggestions for how to do this or that in retirement, how to buy a car, etc. That said, I do get what you mean. There’s a whole lot of “you should do this with your money” advice going on today.
Hopefully readers know I am providing a perspective on a wide range of money issues which they can take or leave at their discretion. I try and do this without judgment. Whether others are judging or not…I can’t be sure.
And yes, we’re good. đ
Maverick, I understand your point that Giving is a personal decision and no one should be judged on this but I also agree with ESI that Giving could be another part of the formula that is actually a net positive for investors and not something anyone should be defensive about.
For me, and I was like this most of my life, not giving more than I did actually cost me in terms of experiencing the joy of giving. I feel so strongly about the positive aspects of giving that I would even vote for adding a “G” to ESI as Giving should be a part of our Net Worth because of how much it adds to our Self Worth. Investing in others is such a great investment because it really is the gift that keeps on giving in so many ways. As ESI commented, it’s just an opinion and others have a clear right to disagree but I’m glad I took the leap of faith to make Giving a greater part of my life and continue to be blessed to have the ability to do so and that really is all I wanted to share, rather than judge.
Bias means prejudice, that is, judging before you have enough information in an unfair way.
Here is an example. Many years ago the President of a company took me to lunch in a final interview. He watched to see if I tasted my food before adding salt or pepper. [For if you jump ahead and immediately add salt or pepper without tasting he assumed you to have a bias. Judging before having enough info.]
We ALL have some signs of prejudice; we are human…politicians, church members, CEOs, including myself.
I try not to judge…not to interject my bias.
FYI, I’ve always hated that interviewing trick and thought it has nothing to do with a person’s actual performance.
It’s an old-school idea that I think people are mostly dismissing these days.
Great post – I read it after seeing it referenced in this one: https://esimoney.com/what-ive-learned-from-150-millionaire-interviews/
I can think of specific examples of making several of the mistakes you referenced:
– individual stock picking fails (can anyone say “Dot Bomb?”)
– late to the game of index investing
– failure to establish rental property income stream
– no trust (we have a basic will, but it’s pretty inadequate for us)
That said, I think we did a good job of avoiding many of the ones you cited, so I feel pretty good about how things have worked out for us (so far!!).
The one area I’m starting to feel some regret about now is regarding the house we currently own and live in. We bought it in late 2007, and moved in at the beginning of 2008, at the very peek of a long housing boom. We benefited from selling our previous house with a very nice increase in equity, but because we moved to a much more expensive area, our next house, although more modest in size, was a lot more expensive – the mortgage was more than the purchase price of our previous house, even though we plowed in a bunch of equity!
Then, of course, things went south – big time. And although we didn’t go down as far as some, we still declined a good 30% or so from our purchase price. Since we had just gotten in, this didn’t feel like the paper loss that it was for many others who had been in their homes for a long time.
We had neighbor friends who bought their house years before we bought ours, but they kept chasing refi’s on it using interest-only ARM loans. They sold their house about two years ago and moved out of state, taking with them a nice chunk of equity appreciation.
When I look at where we are after owning for 12 years, I can’t help but wonder whether we would have done better off investing our equity in the market, rather than in our house. As it stands, I calculate that we’ve seen about a 1.6% appreciation in our equity investment. I don’t even want to backtest what would have happened has we invested in the market -but I’m guessing we would have netted out pretty far ahead.
I am in a similar situation. I bought too big of a home in one of the fastest-growing areas in the SW in March 2004 and of course, it got hit the hardest when things went South a couple of years later. I’ve recovered some and over the last 15 years, we’ve realized an average annual gain of 1%. However, we do plan to retire in this home so, in some respects that helps but as an investment, I can’t say this was the best use of our money.
I do think this area of the country stands to see healthy gains over the next decade+ so if we ever downsize at some point, we should do OK. In 5 years we’ll have the house paid off and about 2M in home equity so I guess it could be worse.
Great summary. The simplest advice I would give to anyone straight out of college is pick X amount and invest it every single month into an index fund without fail by paying yourself first. X should be as much as you can afford. X should never go down, only increase as your salary goes up. Then fully concentrate on your career. It’s that simple. I fully agree that one’s career is their greatest asset when it comes to making money, until you have a sizable enough portfolio earning money for you. Or simply put, E-S-I đ
This was my strategy (well, less explicitly planned, but it was my general practice) – right up until kids came along. Those pesky buggers have made it impossible for our number not to go down. Higher insurance costs, daycare costs, school and activity fees, air travel…Fortunately, we made a lot of progress before kids and are well along the path to financial independence!
I concur with the fact that millionaires like to splurge on travel and adventure. We do 10 trips per year (currently touring New England and beautiful leaf season) and spend $125k – $150k per year on vacations, mostly on 6 luxury cruises per year and first class air…and our net worth still grows.
Good summary. On charitable giving. I donate my time and skills. But I have donated less cash as my tax bracket has climbed and as the government has raised those taxes and introduced new ones. I have viewed this and all of the social programs those taxes support as significant pressure on my charitable giving and has replaced what would otherwise be a higher rate of giving. I have viewed that as forced giving over the years.
So did you give more with the recent (year or two old) tax cuts?
With a higher tax bracket and new taxes, you actually get a bigger benefit from giving (i.e., a bigger tax deduction). Of course, you don’t get rich off of write-offs…But it is nice that as income rises and pushes you into a higher tax bracket, you can give more money to favorite causes for the same cost due to the larger associated deductions.
I have a different take, largely negative. The struggle is great for any American. If you have 4 million + in an LCOL region, you should be fine. Cash for medical as necessary, neverending nest egg spitting out livable dividends . . . that’s the life.
A lack of charitable giving I chalk up to rationality or native intelligence–the landscape is horrific out there, both major players and lesser ones, generally untrustworthy, always plagued by humans. Family first, then others, maybe, also wisely, which means virtually nothing if your eyes are open. Overlooking various issues, pushing money into the shadows? Now that’s charitable.
I have been disappointed with the lack of charitable giving by my fellow millionaires in this series. I have made giving from every paycheck part of my life since college (not much to give from my waitress tips as a student, but I still gave). My giving is my favorite part of my biweekly ledger balance exercise!
Paying taxes doesnât âmake up forâ not making charitable contributions. So much of our tax dollars are squandered on corrupt political takers and inefficient administration that the two acts arenât even comparable. Furthermore, government âwar on povertyâ programs can cause more harm than good – inter generational dependency and personal despair. I prefer to help folks in need through organizations I trust.
Letâs be honest: Even if I didnât have a charitable bone in my body, I would enjoy using my money toward asserting my will through finding political and charitable organizations aligned with my view of the world.
Last but not least: it doesnât hurt from a PR perspective to be a generous wealthy person and not a miser. Donât point your pitchforks at me, angry populists, Iâve been giving all along. đ
Really interesting analysis. Good work! It is always interesting to read about someone that is already in a position you want to be inl
Yeah, as far as political contributions go, game on. Maybe crumbs to others, but I liked the 5% tax rate cut, now going directly into savings and investments like a raise. Only to iconoclastic rabble-rousers, so you know my guy. In the past, by that light, no one else but Ron Paul; cash twice for his illuminating counter-rhetoric at a desperate time. No Democrat, ever; they cost all of us. No cash to the RNC due to their incompetence and dysfunction. These days, it’s no more cash, period–only hard goods I desire directly from one particular campaign (Space Force shirts, pint glasses, etc.), and if I agree with the price, they can do whatever with their percentage. So there’s a bit of self-serving charity, possibly benefitting all, however, if you respect money, common sense and low taxes. Outside of that, I contribute excess hard goods to a local Xian thrift shop. They are honest brokers, strictly using cash sales to buy goods for their food bank, not missionary work or anything, so we’re cool. These two fronts I can get behind, and no other, beyond the beloved gf who may indeed outlive me. Illumination or bust . . . HL.
Look who’s overlooking various issues, pushing money into the shadows (lol) . . . except there are no issues to overlook; I have no complaints. I like real people. No shadows, either; I enjoy them, buy my guy stands in the sun, loudly.
Great summary, thank you for putting this together.
Your comments about ‘simple investments’ has reminded me to keep my portfolio simple. I had been considering branching out into a larger number of riskier options, and I’m going to stick to basics now.