Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
This interview took place in March.
It’s a long one (which I love!) so I’m breaking it into two separate posts. If you missed part one, you can catch up by reading Millionaire Interview 476.
My questions are in bold italics and their responses follow in black.
INVEST
What is your investment philosophy/plan?
As I write this I realize it is almost 20 years since I stumbled upon it…but I read an article in Money Magazine (back in 2008 according to the internet) about “the best financial podcasts”. “Sound Investing” was the podcast voted the best.
I started listening each week (I even made it on the podcast as a caller in one episode to discuss my ‘worst investment’ down below.) One of the members of that podcast is Paul Merriman.
Others have mentioned them in their interviews on this blog.
I loosely follow his “Ultimate Buy and Hold” portfolio strategy. I say loosely, because I show in the table below what his recommendations are, and what my current allocations are – due to a low frequency of rebalancing.
I know there is a debate of how much to put in US vs. International, which is something I am always pondering.
What has been your best investment?
There’s no physical investment I can mention. I would say stumbling upon the article in Money Magazine as mentioned above – which then introduced me to the portfolio mentioned above – probably had the biggest impact on my financial life.
It taught me about diversity – and reinforced the reasons we should stay the course once we develop a plan that is aligned with our risk profile.
What has been your worst investment?
This happened to me early in my adult life. In the grand scheme of things – it’s probably not even that bad of a ‘worst investment’ story – but there are definitely lessons I learned.
I had recently opened a credit card. I think it might have been for my first job out of college.
It was one of those cards that had a decent rewards perk that I could take advantage of by expensing travel expenses from my new job.
There’s the old saying, “There’s no such thing as a free lunch.” That applies here.
I received a cold call from the investment arm of the credit card company asking if I wanted a free consultation to start investing.
I was young and inexperienced, and thought, “Hey it’s free, why not?”
During the process I asked how he gets paid, and while he wasn’t dishonest about anything, it wasn’t clear to me at the time what a “load” was, what “A-Share” or “C-Share” type funds were – and how there were fees paid when investing in these funds.
I also wasn’t aware at the time that all mutual funds have fees, and that some were in the 1-2% range, and others were much less.
Last but not least – I wasn’t aware that it wasn’t a good idea to have a variable annuity – and worst of all – a variable annuity inside a Roth IRA. The more I looked into it, the more I learned that having a variable annuity in a Roth IRA is a really, really bad idea.
The good news – The account balance was less than $3,500. It felt like a fortune at the time. I bit the bullet on whatever the surrender fees were and transferred my money to Vanguard.
Whatever I paid in fees & expenses I chalked it up to the price I paid to learn more about investing and keeping more of what’s mine.
What’s been your overall return?
- Vanguard says my 10 year rate of return is 10.9% (Roth IRA).
- Vanguard says my wife’s 10 year rate of return is 9.5% (Roth IRA).
- Fidelity says that my return since initial purchase is 10.02%. (401k)
Quicken has a different/higher number for all three accounts. I’m not exactly sure why that is.
Perhaps it’s taking into account employer contributions or something along those lines, so I decided to report only the returns from the websites directly.
How often do you monitor/review your portfolio?
Monitor: I track my net worth on a monthly basis. I use a spreadsheet and enter in all my totals each month. (I know, “It’s already in Quicken. Why do you do this?” Similar to what I mentioned above, I like to see the changes.)
Review: I probably do a deeper dive every 6 months or so to see how things are doing. But as I’ve mentioned above, I rarely take action on rebalancing.
I sometimes change future allocations to try to get back into balance, but rarely do I exchange funds to get back into balance.
NET WORTH
How did you accumulate your net worth?
Slow and steady through monthly contributions from my income. I know our incomes are not insignificant, but they are also not out of this world either.
I think we invested well in choosing a diversified mix of index funds.
To date we haven’t received any inheritances or gifts that would have had a significant impact on our net worth.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
I would have to say Invest by process of elimination. As I mentioned above, I think we have a modest income – but I also feel others earn more than we do.
I think I save decently, but my percentages are probably within the norm. That leaves Invest. And for me, I don’t think it has anything to do with ‘choosing a particular fund’ or anything like that – but perhaps my willingness to ‘stay the course’ within my risk tolerance, keep the money invested, and let it grow.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Nothing major. The only thing perhaps – is that while my wife is not a big spender, she may not be as eager to save/invest as I am.
If she were more into the FI movement we might align more on making conscious decisions about spending/saving to try to speed the process. We make it work.
Other things that may have been bumps in the road relate to major purchases. In the 25 years we’ve been together, we’ve each had to purchase a new car.
While we’ve been careful on finding the best deal for the car and then financing it as efficiently as possible, they’ve always resulted in 3-year loans that we had to pay down. And then most recently – we did a major kitchen remodel that was a significant hit to our net worth.
We previously invested in I-Bonds when the rates were very good. We used the money from that to pay a decent portion, but ended up taking out a HELOC for a large chunk as well.
Now we’re chipping away at paying that down.
What are you currently doing to maintain/grow your net worth?
I probably sound like a broken record – but staying the course.
Continuing to save for retirement through my employer, paying down the HELOC, and trying to put a little more in our available cash.
Do you have a target net worth you are trying to attain?
In my head the number is $2.5 million. Using the rule of 25, and assuming we’ll have ~$100k in annual expenses, that results in $2.5 million.
I’d be happy for feedback on this – in case I’m wrong. I assume our child expenses will reduce once the kids are older (in another 10 years.)
Optimistically I think I can hit this in 10 years or around age 55. The Fidelity Planning tool associated with my 401k says it might be 1-2 years sooner.
A less ideal scenario: I continue to work between the ages of 55-60. (The Fidelity tool says it is likely I would have $3.8m if I did this.)
How old were you when you made your first million and have you had any significant behavior shifts since then?
It was something I thought I would have more excitement for, but once it happened, it was more like “Oh, look, we did it.” But I realize it’s a milestone toward a larger goal.
And it was a very important milestone. But we have work to do.
I discovered it when I was updating my net worth tracker in July 2023 – I realized we crossed the threshold for the first time. I don’t think we’ve changed any behaviors significantly, because I still focus on the long-term goal of wanting to be FI.
I may have loosened the reins a little if there’s a purchase we want to make.
For reference, I included a table of our net worth from year to year. I always enjoyed seeing this from others.
What personal habits and/or traits have you developed that have made you successful at growing your net worth?
I think patience has worked for me. And continuing to educate myself on good investment choices.
I still have more to learn. But I’m comfortable with what I’m invested in, and I stay the course.
What money mistakes have you made along the way that others can learn from?
I can think of three examples. One is already mentioned above in the worst investment section.
There’s no such thing as a free lunch. I learned to work with fiduciaries who make sure they have your best interests in mind.
The second example – When I was much younger, one of my great uncles gifted me and my two siblings stock in K-Mart. I believe it totaled something like $1,500.
I didn’t know much back then, but would keep track of the price. I started noticing that the stock was dropping.
When it got to around $900, I told my mother that I didn’t think it was looking good, and we should sell. She told me we should hold onto it and see if it rebounds.
As time passed, I kept reading articles about potential bankruptcies, etc. Long story short – we never sold and lost out. While I agree with staying the course in most cases, in this instance my gut told me we should have sold.
The third example – Use your gift cards! After we got married we had a gift card to Pier 1 Imports for a couple hundred dollars.
Again I heard they might not be doing well, and told my wife because I thought we still had the gift card with them.
She told me she thought we already spent it. Fast forward several months – Pier 1 files for bankruptcy, and then my wife finds the gift card in her purse.
I usually keep track of all our gift cards for reasons like this – because I’m paranoid it will happen with other companies.
What advice do you have for ESI Money readers on how to become wealthy?
I don’t have a magic formula. I don’t have any get rich quick schemes.
Everything I’ve done has been slow and steady. But in order for that to work, you still have to make smart decisions.
Try to be reasonable with your spending. Try to make as much money as you can.
Try to save as much as you can. And last but not least, make smart decisions when it comes to investing.
Limit your expenses as much as possible by investing with companies and funds with low expenses. Keep more of what’s yours than having it go to someone else.
FUTURE
What are your plans for the future regarding lifestyle?
I would love to retire as early as possible. I feel like I am consciously holding off on some things that could bring joy in order to continue to work and hit my FI number sooner.
Once I hit my number, I may continue to work, but if I find it too stressful or time consuming, I would re-assess. If I still wanted income, I could see myself taking a part-time job for extra cash. (Something less stressful – I fantasize about working at a bookstore.)
But until then, I think my lifestyle will be about what it is now.
What are your retirement plans?
When the time happens – I would want to do things to enjoy life more. My wife would like to retire at the same time as me.
I don’t know if it will be possible, but we can try. She is a schoolteacher, and I would hope to try to max out her retirement benefits.
Once we both retire, or if I am retired but it’s summer – I would love to explore travelling both domestically and internationally. At this point in our lives with work and younger kids, it’s been difficult to even think about.
My wife doesn’t like the things that revolve around travelling (such as getting to/from the airport, flying, etc) but I hope that would lessen if we didn’t have to worry about work and keeping track of the kids.
I am also open to moving to a warmer climate. I have a sister who lives in Vero Beach, Florida.
I could see my other sister moving down there to be with her. North Carolina also intrigues me – specifically Asheville. I’ve heard great things – but have yet to visit Asheville.
Activities – I think I would ramp up all the things I enjoy. I would continue to read, play video games, go hiking, and work out.
I would take advantage of what’s available to me locally. We joke that we’ll eventually start playing pickleball like everyone else.
I volunteer a bit now, and I could see myself maintaining that but possibly in different ways.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Some of my concerns are about leading up to retirement as well as retirement itself. We are on my wife’s benefits because back in the day we chose her plan.
It’s not bad by any means, but it’s a traditional insurance package with co-pays. My employer offers an HSA option.
One of the reasons I never switched is because we have different open enrollment periods, so for about a half a year I assume we’d have to be paying for both. I hear great things about HSA’s and wonder if I am missing out by not using it.
I worry about healthcare in general. If I stay with my company until I am 55, I can get benefits through my employer.
That may be one perk to working until then (if I am able to stay with the company.)
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
I don’t know if there’s anyone specific that I can say taught me. I felt like it was (and continues to be) a slow growth education over time.
The great uncle I mentioned above always instilled ‘invest in the stock market’ when I was a little kid, and I’m sure that stuck with me.
I also remember a co-worker from my first job mentioning “Index funds” and “The Motley Fool” which may have been my first dip into index funds.
Last but not least – working in my teenage years – I used to see people take out credit cards and hear stories about paying the minimums over time and how that $200 stereo ended up costing much more with interest. These stories stuck with me.
Who inspired you to excel in life? Who are your heroes?
I don’t know if I have any ‘one’ specific person. In the above, I always tried to learn something from other people’s stories.
The coworkers using the credit cards taught me not to make those mistakes. The great uncle taught me that investing is important.
I probably learned my frugal ‘finding the best price for something’ from my coupon-clipping mother.
In terms of more well-known folks – I previously mentioned Paul Merriman. I also enjoyed the advice of John Bogle, and Clark Howard.
Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?
The only money book I can 100% recommend is The Simple Path to Wealth by JL Collins.
I am currently reading The Psychology of Money. I would say it is very good – but definitely not perfect. I feel like the author glosses over some concepts that I would have liked to see him go into more detail on.
I read The Millionaire Next Door many years ago – and want to give it a re-read as an adult. I recently read Fooled by Randomness by Nassim Taleb, and his comments on the book seem to differ from what I remember reading. (He didn’t have positive things to say.)
But I read it such a long time ago, I feel like I need to give it a re-read and re-analysis.
As much as I mentioned Paul Merriman, I never read any of his books – and include them in my backlog. He also recommends Larry Swedroe’s books as well – which are also in my backlog.
For Podcasts – I really enjoy listening to Paul Merriman. I will admit it can be dry at times, and he throws a lot of facts/tables into the podcast, but I really like his philosophy and investment style. I also enjoy the ChooseFI podcast.
For life in general – I recently re-read The Road by Cormac McCarthy as an adult and a father. While it’s a very dark book, it hits differently now and would recommend it.
Also Meditations by Marcus Aurelius for having a deeper appreciation of life. (Side note: This is repeatedly recommended by different podcast hosts I follow- The Art of Manliness (Brad McKay), Daily Stoic (Ryan Holiday), and Tim Ferriss).
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I don’t intentionally give to charity. I volunteer often.
Our work has a perk where they will give us ‘money to donate to a charity’ for volunteering. At the end of the year that could result in a couple hundred dollars that I can donate to a charity of my choice.
Last year I donated to my elementary school’s PTA, and an old friend is on the board and recognized me.
I volunteer on the board of our local daycare. I’ve been doing it for the past 10 years or so, but I am looking into passing the baton.
I also volunteer for any mentoring opportunities when work, my undergraduate university, or graduate university come calling. About once or twice a year I visit my undergraduate university to participate in mentoring events.
I recently also volunteered as a judge in our state science fair. I felt underqualified, but they asked me to come back next year so I can’t be that bad.
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
I will likely have an inheritance. Based on the Fidelity Tool mentioned above, in some of their scenarios I could have millions of dollars later in life.
(Maybe there’s something wrong with the inputs?) But if correct, there will be money going to my children. I would likely split it evenly between the two of them.
I haven’t thought of anything beyond that (e.g. donations to charities) but wouldn’t rule it out either.
If you’ve made it this far – some outstanding questions I have:
- Should I keep my current portfolio mix between US and International? I know International hasn’t done as well in the past decade or so, but if I pull out now am I ‘timing’ and should I stay the course.
- Should I look into the HSA through my employer? Is it too late, or is it never too late?
- I know I need to increase my cash reserves. Are they too low? (My thinking is I have the HELOC in an emergency, but would like more cash on hand, but that might mean less cash goes into saving.)
- I feel like I am all over the place with how close or far I may be from FI. Whenever I meet with the advisors through my employer, I never leave with any more clarity than what I had when I walked in. I’d be happy for any input/insight.
Thank you for staying until the end!
