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 137
100% this is from earning more than we spend. No inheritances.
And as best as I can tell, only mediocre investing.
Millionaire 138
Christmas club (just kidding).
Came out of grad school with two degrees, a good job and $11,000 in student loans. Started from there.
Made good money although not stratospheric amounts.
Wife made a good steady income as well.
Then – invested in equities like clockwork. Month in, month out, in good markets and in bad.
As 401k’s had just come into being around the time I graduated, started investing right from the get go. Always met the company match, more as time went on and I got more money.
Always lived below my means, probably to a fault.
Never got too concerned when the markets looked bleak.
Bonuses got invested instead of spent.
Company stock grants were cashed and reinvested in ETF’s. I didn’t want my paycheck AND my pension AND my savings to come from one place.
Virtually no inheritance ($7000 total).
Never had any consumer loans (car, furniture, etc.) and pay off credit cards monthly (use just for convenience and the travel rewards).
We have no debt. Bought our house in 2000, refinanced in 2004 (15 year fixed), paid it off by the end of 2012.
Pay cash for cars, furnishings, etc.
Have paid for both girls’ college (went to state schools; tuition and room / board in the $20k / year range).
Bought late model, low mileage cars for both girls (safety is the word here) and they have no car loans either.
Millionaire 139
I have met my net worth goals three different times and lost most of it two times.
To save your first million is absolutely the most challenging.
We started work in June 1987 and achieved saving our first million by June 1996 or nine years at 30 and 31 years old. I would like to say we did it through frugal living but we did not.
We bought new cars, we had a boat and we bought a pretty nice house. We traveled a lot. We consistently saved 10 to 15% of our pre tax income along with employer matches and never spent more than we made. We were a double income professional family without kids so living within our means was actually pretty simple.
The IRA savings likely got us to about 20% of the million dollar goal over the nine years. Home equity added another 5%. Saving of bonuses added another 5 to 10 percent and well over half came from stock appreciation/ownership in a start up I was CFO of.
The CEO who was my mentor was pushed out by the primary investor in the company that wanted to be CEO three months before the IPO. I stayed three months after the IPO and then left to finish my MBA full time.
From that initial million in savings:
- I paid my MBA tuition — that was a great investment.
- We bought a used ski boat (not as good of investment but really fun)
- I started and funded an IT technology company with my friend of mine from high school.
- I joined a local real estate development group and funded my share of equity as a part time partner overseeing finance and banking.
Our timing on the IT firm was the end of 1998 just as companies were spending millions on IT upgrades on ERP systems. My friend was a manager at KPMG and had many contacts for recruits and clients.
Our business model was simple — we hired as many consultants as we could from the big 5 (at that time) firms with 1 to 3 years experience. We offered our clients a better value for the dollar than the big 5.
We shared equity in the company and created a profit sharing model for every consultant based upon their individual performance. We had company trips to warm destinations with inviting spouses and significant others. We had a company boat and our office was next to Wrigley field. A couple times a week we held social/recruiting events. We had 100 percent acceptance rate on our first 40 or so job offers.
Our core strength was we were a great place to work for top performing IT consultants. We paid generous referral bonuses if both you and the people you recruited stayed with the firm.
Over about 18 months we grew to over 100 employees and a very profitable $20 million in annual sales. We decided an exit strategy made sense and considered an all cash offer for $12 million or a merger and IPO at a $52 million dollar valuation for our part of the combined company.
The IPO was the easy decision. We had our joint S1 done, one of the best California underwriting teams, and were a couple weeks away from pricing our IPO in late August 2000.
The NASDAQ started softening in March 2000 and by end of August the IPO window slammed shut. That was followed by massive pullback in corporate IT spending. The consultants were the first to be cut to save money at our clients.
It is no fun to shrink a company so I sold my ownership to my partner for $180,000 and shifted to real estate development full time. My partner still has the IT business and it’s doing well. I developed amazing friendships with some of our early employees and many of them went on to starting their own companies.
The excitement of starting a new company is unbeatable and I would do it again as an investor/advisor/board member for the right opportunity anytime.
So it’s now the end of 2000 and my net worth dropped by $10 million of equity in the consulting firm that evaporated.
Our net worth is still a solid $2 to $3 million from real estate investments and stock market investments. Over the next seven years we grow the real estate portfolio to a $130 million real estate portfolio with $100 million of debt and the three primary partners are all earning substantial income.
I see signs of a downturn but my partners want to hold the real estate forever and not sell. The housing market in Florida had collapsed and the residential housing market was getting weaker around the country.
I personally stopped investing in any new projects in 2006. We were in commercial real estate so demand was still decent in 2007 and early 2008.
Once Lehman failed in Sept of 2008, virtually all bank lending stopped and virtually all real estate values went into a free fall. My $12 million in equity in real estate evaporated in weeks and we were left owing more than the properties were worth and there were no buyers anywhere. My net worth went to negative and my wife’s was about $500,000 at that time.
Our entire net worth today was developed from that $500,000 in early 2009. I started aggressively trading stocks to generate cash flow and rebuild net worth and made a million dollars in the market in 2009 and about a half million in 2010. In 2010, I joined a brokerage firm to try become a financial advisor. It was not a good fit for me.
I started buying bank owned property in 2011 with my mentor. Our focus was bank owned commercial buildings in the $1 to $4 million price range.
It was a little too much for the local investor to buy for cash and a little too small for institutional investors. We would buy a property with some vacancy for cash, fill it up, finance it to get most of our money out and then buy the next one.
We bought industrial, office and limited retail. Our ideal purchase was 2006 to 2007 construction in a good location that had financial distress. Our typical purchase was a building that had declined in value about 65 to 75 percent from peak value and we could improve it to 50 percent of peak value through leasing vacant space.
I bought my partner out taking him off all bank guarantees through refinancing the buildings in 2017 and early 2018 for $5.5 million.
Most recessions are caused by the fed raising rates and tightening. I was close to listing everything for sale in late 2018 when the fed seemed to be on non-stop path to crashing the economy. I will likely sell once the fed raises rates one more time. I would also sell if values go up substantially or if my tenants’ businesses weaken. Right now everything is pretty healthy, interest rates are reasonable and cash flow is strong.
Millionaire 140
I started the business with a 10K loan from my mom.
Went out and bought some inventory (items to sell) in bulk.
Put them on the coffee table (literally) and repacked them into individual components.
Sold that stuff at a profit, took that money, bought a little more.
Rinse and repeat. Over and over and over again.
I literally knew next to nothing about business. I knew you had to sell something for more than you bought it for to make a profit. The rest I just picked up as I went along, I learned by doing and by making mistakes.
Millionaire 141
Honestly, just slow and steady earnings growth from jobs, steady savings, and careful investing in plain vanilla, low-cost mutual funds.
A really strong market (for now!) and the magic of time and compounding.
I wish I had some brilliant insights, but as I mentioned above – I don’t believe I’m particularly gifted with investing insights.
For the first 10 years of my career, paying down debts was a big focus (more of that below). In the last 10 years, we’ve gone from about $80k net worth to over $2 million. Which shows how fast you can grow with (1) a dedicated focus and (2) a great bull market, for which we can take no credit.
Millionaire 142
While I like to think that I’m a fairly smart person and investor, a lot of it has been just being in the right place at the right time and having the means to take advantage of it. A lot of it is luck.
I’ve always been a saver since I was a kid and always had spare money laying around in case something came up. I started buying and reselling collectibles as a teenager and then once I learned about the stock market I started dabbling in that.
A lot of it snowballed. I just happened to be looking for a home when the economy collapsed. My home didn’t require a ton of cash up front and the value increased on its own.
I worked hard and was rewarded for it at work but I also realize that a ton of people in my position are not as lucky or fortunate.
It’s been a combination of just many years of doing the same things, putting money away and investing it in things that made sense to me.
Millionaire 143
We made a decision, when we first got married, that we would live on one income.
At the time, my wife was making more than me and her income is fairly stable. We decided that we would keep our lifestyle under what she makes and invest what I make.
With some luck and hard work I have been able to grow my income. We have been able to invest more than we did the year before pretty much every year. We have still been able to keep our lifestyle mostly with in my wife’s income, with the exception of big ticket items, such as a car or a big vacation.
Every year our order is first fund both Roth IRA’s then SEP and lastly brokerage. We then use the brokerage account to buy rentals when they come up.
We don’t go look for them we are just ready to buy if we find a good deal. We will purchase them with a 25% down payment that we take out of the brokerage account and use a 15 year fixed rate mortgage for the rest.
The most recent one we purchased we did pay cash for. The purchase price for that was $60,000 and the renovation costs were $40,000. We withdrew $100,000 from our brokerage at the beginning of the year to fund that one.
Millionaire 144
Our net worth grew over time from four different sources:
- Saving/Investing – We saved diligently during the years that my wife and I both worked. We would save ~50% of our income and invested it into Roth IRAs, 401ks, savings accounts, etc.
- Real Estate Investments – I diversified our investments by learning about real estate investing. It took a while before we did our first deal, and even then I screwed up royally. However, I’ve since picked up some good deals which have done very well for the past several years.
- Entrepreneurship – Owning my own company was valuable because I was able to build up some equity over the years. When we finally exited, I was able to extract ~$400k from the deal.
- Inheritance – I did inherit ~$120k from my Mom when she passed away.
Millionaire 145
Simply through saving and investing consistently over time as well as increasing my earnings.
80% of my wealth was accumulated in the last 20% of my career (last 2-3 years) and that was due to large increases in income.
As mentioned earlier, my income grew slowly in the first 6 years and accelerated in the last 6 years when I moved from Europe to Asia. It also helped that I moved from a high tax country (UK – 40%-50% tax) to a lower tax country (Singapore = 22% tax) and that I also managed to maintain a relatively low cost of living in high cost cities (London & Singapore).
When I first started work, I’d consistently set aside 20% of my gross income for savings and tried to increase that whenever I received salary increases. I’d cook at home and invite friends over instead of going out where I could and looked for money-free entertainments (e.g. going to libraries, parks, etc.)
I managed to indulge my love of travel through my work, as I had the chance to travel to multiple countries for work and explored during the weekends instead of traveling back to UK / Singapore.
I didn’t spend much on clothes or material items as I preferred accumulating experiences and memories over material things.
When I moved to Asia, the increase in disposable income after tax increased – but I saved all of the increase rather than increase my spending. Similarly for any increases in income due to promotions or bonuses; almost 90-95% of it will be saved for investments with a small amount for spending on family & loved ones.
In recent years, we have taken to funding for some family trips and vacations because we want our families to spend time together and given that one set lives in Europe and another in Asia – flights can be pretty expensive.
We try to avoid lifestyle inflation where we can; and the next big increase we’re preparing for would be for the onset of children.
Millionaire 146
Most of our net worth is from saving and investing. I haven’t inherited much money over the years but I have used creative financing in the past.
In 2013, my mother passed away after a short illness. It was absolutely devastating to my dad and me. I am an only child. Their house was paid off at that time and he wanted to downsize to an apartment. After he sold the house, he netted $160k. Our mortgage at the time was $177k. I went and pitched him on an idea: let me take the $160k and apply it to our mortgage. I would presumably be inheriting the money at some point anyway. In return, I agreed to pay him $5,000 a year for the rest of his life.
This would effectively reduce our mortgage payment from $1,400 to $416 a month. He got a guaranteed return on that money (3% a year) without ever having to worry about it running out. Because he is a smart banker, he made me sign a contract.
I used $17k from my bonus at work and paid off our mortgage! It was a win-win for all of us.
I also used another creative strategy when it came to our vehicles. He had an old Ford Expedition that was in bad shape and my mom’s Buick, which was old but had very few miles. My wife had already been on me about buying her a new RAV4 with a better sound system. Her current RAV4 was paid off.
I pitched my dad on us giving him my wife’s RAV4, which was still pretty new. I sold the Expedition and Buick, taking in around $6,000 total. I used that $6,000 toward the purchase of my wife’s new RAV4. Everyone got what they wanted. Another win-win.
Millionaire 147
I would say that we acquired our net worth through a balance of ESI and relational opportunities.
- Earnings: Our income as a couple over the last 8 years has averaged $200-$250k per year, not bad for 2 people that did not graduate from college.
- Savings: We were always good savers and had savings on the sidelines to take advantage of opportunities. This was key to our success many times. A lack of funds or debt prevents people from investing.
- Investing: I think we did a decent job with our real estate investing; we are extremely proud of every property that we have improved and added value to.
- Relational Opportunities: We purchased houses from individuals that were in serious trouble. We are proud of the help this provided them at that time. Market timing benefited us later. Every improvement we made was noticed by someone and opened a door for another purchase. The apartment building we purchased from our neighbor may not have happened without having a great reputation for improving our properties and maintaining a solid reputation over the years.
- Inheritance: My husband received no inheritance from his family. I did receive an inheritance; however, I gave it to my brother to purchase a home as well as funds have been set aside for my sister’s support. I was already very blessed, and I ultimately wanted to say that I accomplished everything on my own.
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Lots of good stuff, huh?
Stay tuned, we’ll be adding to this series in upcoming future posts.
