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…
Millionaire 97
We paid ourselves first!
A Key to Success was setting up automatic deductions or automatic transfers! If you never see it in your routine bank account, you have a difficult (though not impossible) time using it. In the expense section of the interview I mentioned we saved on average 33% of my income every year.
Even when starting out, I at least contributed to a 401K plan (to get the employer match). As my salary grew, the goal was to hit the IRS maximum every year. When you get hired the first thing to do is set up an automatic amount for your 401K).
As my salary grew, we also saved in IRA’s and Roth IRAs. When income restricted this, we just put the savings into our taxable brokerage account. These took the discipline to set up automatic transfers to the accounts involved. I set up automatic transfers for all these investments and treated it like a routine “expense” for budgeting.
At this time we have inherited no money, though I do know through managing my mother’s finances there is an inheritance probable – but we are not considering that in any financial planning.
Millionaire 98
Learned to live on one income and as salary increased we did our best to control lifestyle creep.
Automated savings so that we did not spend what we did not see and stayed disciplined.
We paid off our mortgage on our primary home and it felt so good we decided to hunker down and pay cash for remaining properties.
Sent our children to State Universities as unless a specific field of study is desired, or they receive a scholarship or significant aid I did not understand expensive private tuition.
Married the most frugal partner on the planet. She keeps me in check.
Millionaire 99
As an African-American single mom earning less than 6 figures, I don’t exactly fit the typical millionaire profile. Even though I came from humble beginnings, I believed that education was the great equalizer and was the first in my family to earn a college degree. This was my first step in moving into the middle class. I was tired of hearing the limiting belief that the poor stay poor.
The way I accumulated my net worth is living on less than I earned and consistent saving and investing. I didn’t make a 6 figure income, but managed the money I made pretty well. I always had a healthy curiosity about personal finance and there was no shortage of resources to learn about every aspect of my money I wanted.
I realized that having very little debt starting out helped me a great deal. I worked the entire time I was in college and also earned scholarships and grants. After college, I only had a small student loan and a very low used car payment; so I was not drowning in debt I couldn’t afford. This meant that I could direct more of my money towards spending on things I valued, saving and investing.
When I first started with my current employer, I contributed up to the company match which was about 6%. Once my income reached over $60k, it was pretty easy for me to max out all of my tax advantaged accounts (401(k), HSA, and Roth IRA) which came to about $31k. I also invested about $1,200 a year in a stock market investment club that I am still a member of.
I made these investments for the past 10 years using dollar-cost averaging and staying invested in the market. Most of my investments are in low fee total stock market index funds with an average expense ratio of less than .07 (very easy to find these days).
I had all my contributions on autopilot and just lived off my remaining pay, less about $10k in taxes. The automation part is a big deal for me because I didn’t see the money and was not tempted to spend it otherwise. Maxing out my pretax accounts also helped lower my taxable income, further adding to the efficiency of my money.
One of the greatest impacts on accumulating my net worth was educating myself about finances. I am not really a big reader of books, but I love consuming information. I like listening to podcasts and audio books which allow me to multi-task. I also learn a great deal from reading personal finance blogs like these millionaire interviews on ESI Money. I am still learning how to optimize my money as I get closer to FIRE (financial independence/retire early).
I did not inherit any money and didn’t receive any financial assistance from my family.
Millionaire 100
As you’re probably guessing, I did it by taking three steps:
Millionaire 101
It has been thru saving and investing from our salary incomes. We have received no inheritances.
Being in company super funds has helped as company has contributed as well as ourselves.
In addition we have never taken the income from our investments to spend. It has been reinvested so we have had the benefit of compounding interest/returns.
Also we have minimized the debt we had, only ever having debt to purchase a house.
We paid more than we had to in order to pay it off as quickly as possible.
Interest rates during the period we had a mortgage were around 8% to 9%. Every extra dollar we paid off our mortgage was a guaranteed tax paid return of 8% to 9%.
The benefits are not so great now as interest rates are around 4% to 5%.
I have clients who earn very modest incomes who have savings (albeit relatively small) and those which have six-figure incomes who are up to their eyes in debt with no savings.
Millionaire 102
The primary source of our net worth comes through earning money from the business.
I’ve been able to maximize profits by keeping costs way down.
I attribute my quick growth in wealth to how I structured my business. I have many friends who run similar businesses but with lots of overhead. I built my business with very little overhead — no offices, no employees, very little equipment.
I have a team of contractors and we work on projects “as needed”. Because of this model, I have been able to generate much higher profits than similar businesses.
Millionaire 103
As I mentioned before, I have always been a saver.
When I was a kid and getting a $5 per week allowance, it was typical for me to have >$100 saved at any given time.
That carried through into adulthood and morphed into being very conservative with my spending.
When my wife and I met, she did not have great spending habits, but as we became engaged and later married she got on board and was quite a quick study. Now it is second nature for her.
The bulk of my wealth was made through my salary and saving/investing. We seldom took vacations and tended to live frugally. Instead of going to the movies frequently, we instead purchased a nice flat screen television and sound system for our house.
I am good with my hands so tend to do most household repair work myself (though I find as I age I am no longer as eager).
When my poker business was more active, I bartered a lot for services I couldn’t or didn’t want to do.
I was fortunate to be a good enough student to get an engineering degree. I’d say that was the biggest factor in building my wealth.
Millionaire 104
I was 22 years old when I went to an investment class on “how to become a millionaire.” I walked in and I was the youngest person in the class of about 30 people in the room.
The broker/presenter looked at me and said the only person in this room that will be a millionaire is him and he pointed to me.
I remember this moment like it was yesterday as he explained the time value of money, the rule of 72, how to read a stock report from value line and the huge advantage I had of time being 22.
I remember thinking to myself that this all sounds great but I don’t make much money. He said start small, if you don’t start you will have to catch up later and it will cost you more. He gave me a copy of Peter Lynch’s book, “One up on Wall Street” and I have been hooked on stocks and investing ever since.
I bought my first stock the next day for 80 dollars – about 4 shares (I continued to invest $80 a month for 5 years in this stock. My $4,800 dollar cost basis is now worth $62,000 and pays me $1,800 a year in dividends. Not too shabby).
Millionaire 105
I had a huge head start.
- Gift from dad at age 21 (UTMA acct) — $23,000
- Leftover college/trust fund from grandparents at 22 — $230,000
- Total Annual Exclusion Gifts from grandparents in 20s — $65,000
- Early inheritance gift from mom (LLC) late 20s — $65,781
- Annual Exclusion Gift in 2013 (dad’s parents) — $13,000
- Wedding gift from parents 2014 (wedding/house) — $50,000
I’m very grateful for this financial assistance, but I’m also proud that I have protected and grown those funds.
I have maxed out a Roth IRA at Vanguard since I turned 18 and got my first job; today the balance is $215K (7.6% annualized return over the last 10 years – not sure why Vanguard won’t let me go further back).
I always contributed to my 401k, starting at 6% when I got my first full time job at 22 and moving steadily up with each raise until maxing it out at age 29 or 30. My 401k balance today is $265K (it’s been rolled from employer to employer).
DH had $40k liquid and about $150k in retirement when we got married, along with a
Millionaire 106
I set a goal in business school to have a net worth of $1 million by the time I was 40. I made it right at 40, and it doubled less than four years later. It’s true what they say about the first million being the hardest.
Here are some tenets of our basic formula:
- Set goals and meticulously manage your cash flows.
- Participate in the market, and stomach the ups and downs. I did not change one habit or allocation or behavior during the Great Recession, and it paid off big time.
- When you get a windfall, pay yourself first. We made a killing selling houses, and 90% of our equity gains went to building Net Worth.
- Aggressively pay off debts, including the mortgage. The positive vibe of being debt free cannot be overstated. Beholden to no one, you feel completely in control of your financial fate.
Millionaire 107
Except for my father, our parents are still living, so we’ve not inherited anything.
Both of us graduated from college/med school/residency essentially broke.
By some miracle, I graduated from college with no student loans. I attended a relatively low-cost public university, had some scholarship support, some support from my parents, and I worked part-time in college.
All of that helped me graduate with a net worth of roughly $0, which is better than a negative number. My wife had about $100,000 in debt from medical school when she started out.
As I mentioned above, we both work in fields where the pay is good and our skills are in demand, so we’ve never had even a brief period of unemployment.
We both come from middle-class families. We certainly never felt like “rich people” growing up. I think that helped us develop the relatively simple tastes we have now.
As a result, we’ve been able to save and invest a high percentage of our income, consistently, for 15-20 years.
Our investments are on auto-pilot and we’ve forced ourselves to live on the portion that lands in our checking account. Only 1/3 of my gross pay goes to my checking account, for example.
We have kept debt under control. We paid off my wifeís student loan when we refinanced our mortgage to a 15-year mortgage several years ago. The only debt we have at this point is a low-interest, 15-year mortgage (which has about 10 years left, and on which we are paying extra principal each month) and a very low-interest auto loan that I am considering paying off early.
We never carry credit card debt or any other kind of revolving debt.
Ours has been a pretty boring, straightforward formula: Spend a lot less than we earn. Invest the difference in something sensible. Rinse and repeat for a couple of decades.
Millionaire 108
My net worth growth is primarily due to my high income.
I didn’t earn much before 2010. NW was still growing back then, but on a smaller scale
I didn’t invest until 2016. Investing in last 3 years may have contributed ~100k, barely compensating other mistakes in my life (like buying my apartment).
If I could go back I’d fix 3 things: grow my career faster, start investing earlier and not buying the apartment.
Millionaire 109
When I arrived in Texas for pilot training at age 22, I had no debt, a paid-for car and $1,000 in the bank. That’s when I started regularly investing in growth mutual funds.
My wife began investing when she was 23 (before we met). We made automatic contributions as long as we were employed.
We bought only one new car. It was a Volvo 740 Turbo that we kept for 10 years before it was totaled in a wreck.
All of our other cars have been pre-owned. This let us buy several cars with cash. One can drive some pretty nice cars for a lot less if you buy used. We also keep our cars for a long time. Our “newest” car is a 2009.
When we bought our current house, almost 20 years ago, we purchased a modest home with a mortgage payment that was well within our means. We made extra monthly payments and paid off our 30 year mortgage in 15 years.
Millionaire 110
We accumulated our net worth from making money from my career, saving a significant portion of the money, and investing it well. See answers above for specific details.
We’ve never inherited any money.
Millionaire 111
My net worth is simply a result of making a pretty good salary, living below my means, and investing in the stock market through my retirement account.
I grew up in a working-class family. I’ve never inherited a dime.
It’s a basic story of spending less than I earned and investing the “leftover” money.
Millionaire 112
I cannot stress enough the power of compounding. And it can be done at most income levels with a strategic focus on lower spending.
Arbitrage your level of income with your level of spending and save the difference.
Second, invest in yourself and build skills that are valued in the marketplace.
Millionaire 113
Our net worth has come from my online business.
My wife has been a stay-at-home mom for almost six years. Prior to that she had a decent income working in finance.
But ten years ago when I was leaving my full-time job I think our net worth was only around $50,000. Part of that was because we bought a condo shortly before the market dropped, so we were upside down on that. And the net worth was also low because neither of us had anything of significance before we were married (although we didn’t have debt either, so that was good).
My business has done ok over the past 10 years, but lump sums from selling websites has accounted for a big part of our growth in net worth.
The website sales have been:
- 2010 – $50,000
- 2013 – $500,000
- 2016 – $500,000
- 2017 – $225,000
- 2018 – $216,000
For the two bigger sales I got 80% of the sale price in the year of the sale, and I got the final 20% a year later.
Of course, those websites also brought in money on an ongoing basis before I sold them, but the lump sums have made it possible to grow our net worth faster.
When we have one of those lump sums we pay taxes, give a portion, and try to save the rest.
After I sold a blog a few months ago I spent about $50 at the liquor store and I think that was our biggest splurge to celebrate any of the sales (I take that back. My wife bought a $200 blender after we sold a business last year for $225,000.)
A website that sells for $500,000 is pretty good, but nothing exceptional. In 2013 when I sold a site for $500,000 after making a six-figure annual profit from that site for several years, I realized if I could duplicate that only a few more times over the course of my career I could have a pretty good retirement.
I haven’t tried to build huge websites that make millions of dollars. My approach has been to try to have several small wins over the course of my career to reach my retirement goals.
Millionaire 114
We got a major leg-up by standing on the shoulders of giants.
Both sets of parents took big steps to fund our undergraduate and post-graduate educations, and between parental help and scholarships we graduated without educational debt.
That allowed us to maintain a fairly high savings rate and invest everything else.
We got another bump through inheritance, and another through owning properties in two fairly hot housing markets.
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Lots of good stuff, huh?
Stay tuned, we’ll be adding to this series in upcoming future posts.
