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 October.
My questions are in bold italics and their responses follow in black.
Let’s get started…
OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 61 and my husband is 66 years old.
We have been happily married for 38 years.
Do you have kids/family (if so, how old are they)?
We have three grown children, ages 29 through 34. Our two daughters are married, and we have one grandchild and another on the way.
Our oldest daughter lives in California. Unfortunately, we don’t get to see her as often as we would like.
What area of the country do you live in (and urban or rural)?
We live in a suburb of upstate New York.
While New York is a beautiful state, it is not very tax-friendly. We may relocate out of state in a few years, depending on where our adult children and grandchildren reside.
What is your current net worth?
Our current net worth is 8.9 million dollars.
This includes our home and vacation home.
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
Our main assets are equities, mostly ETFs and Mutual funds. We have approximately three million dollars in our pre-tax accounts.
We include our home and vacation property in our overall net worth. The vacation property doesn’t bring any significant income, but the rental income offsets our annual expenses. We have no debt.
Current allocation:
- 60% Equities
- 38% Bonds (including 25% muni-bonds)
- 2% Cash
EARN
What is your job?
We are currently retired. I retired three years ago, right before my 59th birthday.
I was a Clinical Psychologist with most of my career spent in private practice. In my late 20s, I obtained my Ph.D. and have worked full-time thereafter.
While completing my doctorate, I worked full-time as a child and family therapist. I completed my pre-doctoral internship at a local VA hospital. I completed my postdoctoral training as a Pain Psychologist in 1993.
From there, I have worked in and consulted for numerous pain clinics. However, the majority of my career was spent in private practice.
Unfortunately, my husband’s academic career had forced us to relocate several times throughout the country. By the time we finally settled down in upstate New York in 2002, I started my third private practice. Luckily, pain psychology is a rare specialty so my practice was quickly established.
My husband was a Professor and retired at age 60 in May of 2020, in the midst of the pandemic. This was planned and announced 3 years in advance.
Luckily, the university continues to subsidize our health insurance until the age of 65.
What is your annual income?
Our current annual income from interest and dividends is approximately $140,000/year.
Fortunately, this covers our annual spending.
Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?
My initial salary as a Ph.D. Psychologist was $35,000 in 1993. My income had gradually increased to approximately $190,000 per year in private practice.
For most of my career, I worked approximately 60 hours a week. I reduced my work schedule to 80% for the two years prior to retirement. This provided much-needed work-life balance.
What’s your work-life balance look like?
As the higher earner, I have always worked long hours. The work and the long hours were very stressful, but I enjoyed my career.
The balance was skewed. As I transitioned toward retirement, I reduced my work week to four days (approximately 35 hours per week).
This resulted in a significant improvement in my stress level and the quality of my life. The balance of structure and enjoyment is perfect now in retirement!
SAVE
What is your annual spending?
- $67,200 Necessary expenses
- $28,900 Discretionary expenses
- $96,100 Total expenses
- $37200 Income taxes
- $133,300 Total expenses after taxes
What are the main categories (expenses) this spending breaks into?
- $6,350 Insurance (not including health insurance)
- $22,500 Health (insurance, medications, co-pays)
- $42,500 Taxes (income, property, home)
- $12,000 Food/dining out
- $18,000 Travel
- $6,400 Transportation (auto, repairs, gas)
- $7,800 Utilities
- $4,900 Home upkeep/repairs
- $1,800 Donations/gifts
- $1,450 Services (CPA, attorney)
- $9,600 Miscellaneous (hobbies, shopping)
This does not include $108,000 gifts to adult children, which began last year.
Do you have a budget? If so, how do you implement it?
While we never followed a budget, I do track our annual spending. I tracked the four years prior to retirement to get an estimate of our retirement spending.
I knew that once the kids graduated college and launched, we would spend less in that area. We added to our estimates for discretionary travel and increased health insurance.
I monitor our annual expenditures on the first of the year. It is more out of curiosity than necessity.
What percentage of your gross income do you save and how has that changed over time?
Early on, we saved as much as we could and contributed the maximum amount to our retirement plans. It was probably around 10% saving in addition to the pre-tax contributions.
We also made maximum Roth IRA contributions while we qualified.
We made sure that we were debt-free as soon as we were able. We paid off our house and our retirement property so we had no debt. Thereafter, we saved a minimum of 45% of our annual income.
Now that we are retired, our plan is to have enough cash available to provide 3 to 5 years of living expenses in the event of a market downturn. We plan to continue to do Roth conversions.
Currently, our passive income through dividends and capital gains have exceeded our annual spending. We have not needed to take any money out of our taxable account with the exception of annual gifting to our children.
What’s your best tip for spending less money?
I believe the best way to spend less money is to consciously choose to live below your means. Be appreciative of what you have and try not to keep up with the Jonses.
Learn to delay gratification. Cooking and eating at home is an easy way to save a lot of money.
Keep your vehicles for at least 8-10 years. It is important to find a balance between saving and spending enough to have a comfortable lifestyle.
What is your favorite thing to spend money on/your secret splurge?
Our favorite things to splurge on are travel and experiences. We are trying not to accumulate more possessions at this point in our lives.
With a new grandchild, I believe that he will be one of my favorite reasons to splurge.
INVEST
What is your investment philosophy/plan?
Our investment philosophy is to buy and hold long-term. Our financial plan was mostly self-directed with minor input and validation from our financial advisors through Fidelity and TIAA.
We review our plans annually and make any necessary adjustments. Ten years ago, we enlisted the one-time assistance of a fee-only planner for additional confirmation and tax-advantaged planning.
If I were to start over, I would follow the Bogleheads three-fund portfolio.
What has been your best investment?
Our best investment was buying and holding ETF index funds.
While they are not sexy, nor has the highest return, it has been stable and consistent.
What has been your worst investment?
We have taken some hits from real estate. My husband’s academic career has forced us to move several times.
Each house that was sold was a break-even or a loss, after considering closing costs, etc.
I would say that our worst market investments were buying C-share mutual funds through a financial advisor. I wish I would have selected a different investment model in our earlier years and had purchased low-cost ETFs.
We didn’t know any better at the time and are still working on shedding the remaining funds. They have created massive capital gains, so we need to plan accordingly.
What’s been your overall return?
Our overall rate of return for the past 20 years has been roughly 7-8%.
This is consistent with most 60/40 portfolios.
How often do you monitor/review your portfolio?
I quickly look at some of my major fund holdings through my tracking list on the Yahoo Finance site daily. I check our portfolio about three times a week.
I know this is excessive, but I enjoy it since personal finance is one of my preferred hobbies.
I complete our asset spreadsheet twice a year: on October 1 (my retirement anniversary) and again on December 31. This allows me to track year-over-year changes.
NET WORTH
How did you accumulate your net worth?
We accumulated our wealth through our income and investing. Fortunately, I had a good-paying career, making $190,000 at its peak…
I did have a small inheritance in the early 2000s, which was invested for our children’s education and weddings. We saved a healthy percentage of our income.
We invested early and regularly. We never made significant money through real estate, despite purchasing and renovating several houses throughout our marriage.
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?
My greatest strength is the ability to save. I’ve saved since I was a child.
Up until recently, we have always looked for sales and used coupons. We continue to shop for sales and look for discounts, but not to the extreme we did when we were first married and had young children.
While I believe that all three (ESI) are important, I know a lot of people who earn a significant amount of money but spend too much. They complain about having little savings despite being in their sixties.
What are you currently doing to maintain/grow your net worth?
Currently, our income is derived from passive income such as capital gains and dividends. This income has exceeded our annual spending.
To date, we have not needed to take any money out of our taxable account except for annual gifting to our children, which began last year.
We are currently making Roth conversions. We will continue to do so until required minimum distributions begin. This may end sooner depending on Social Security income, tax considerations, and IRMMA.
For 2024, our total annual spending was $133,000, including income tax and discretionary spending. We spent $67,000 on necessary living expenses, $37,200 on income taxes, and $28,900 on travel and other discretionary spending.
This does not include our annual gifting to our adult children.
My husband reaches full Social Security retirement age next summer, and I plan to take mine at the full retirement age of 67. Since our projected Social Security benefits are nearly identical, it doesn’t make sense to delay my husband‘s filing in order to increase the spousal benefit.
Once we are both receiving SS benefits, 90% of our annual non-discretionary spending will be covered by SS.
Do you have a target net worth you are trying to attain?
Our initial target was 5 million dollars.
As the balance continues to grow, even with retirement spending, I’m looking forward to crossing the 10 million dollar mark.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I was 37 when we achieved our first million dollars. We had 3 young children at the time, so there were no significant shifts in our financial behaviors.
Once we hit seven million dollars, we began to consciously spend more freely. This has not been as easy as I would have thought.
What personal habits and/or traits have you developed that have made you successful at growing your net worth?
I have always been a good saver, which has helped us to achieve an early retirement. My husband and I were both in graduate school and working on our doctorates when we got married.
We lived like poor college students until we began our career jobs and paid off student loans. We are good at delaying gratification.
We are handy and self-sufficient. We don’t hire out for cleaning, lawn care, or home repairs.
My husband is extremely handy and can fix anything. This has saved us an incredible amount of money.
We have taught our children to be handy as well. It’s rewarding to hear about my daughter’s success in fixing her plumbing or installing faucets.
What money mistakes have you made along the way that others can learn from?
I wish I hadn’t worked as many hours as I had, especially when our children were younger. I was working to achieve financial security for our family.
I never expected our wealth to grow so significantly. Now that we are retired, we have more money than we will likely spend.
Our net worth has grown substantially since we retired, despite annual drawdown and gifting.
Throughout our careers, we have always maxed out our retirement plans. In retrospect, I wish we had invested less in pre-tax accounts since this may likely result in higher taxes and IRMAA penalties with future Required Minimum Distributions.
What advice do you have for ESI Money readers on how to become wealthy?
My advice is to live below your means. Don’t keep up with the Joneses, unless you want to work into your mid-70s like the Joneses likely will.
If it is discretionary and you can’t pay cash, then wait until you are able. Credit card debt is a killer.
Pay yourself first and be sure to contribute to your retirement savings, at least up to any employer match that is available.
Eliminate all debt, including mortgages, if possible. Track your expenditures for a few years prior to retirement.
If you can, reduce to part-time for the final year of employment, as it makes the transition to retirement easier.
ENJOY THE JOURNEY! Don’t focus only on the end goal. Find balance, take vacations, and make memories along the way.
FUTURE
What are your plans for the future regarding lifestyle?
We are currently retired. I continue to do online coaching a few hours per week.
This is mostly for fulfillment and the reward of helping others. We snowbird in Costa Rica and travel a few times per year.
We rent out our vacation property while we are not there. Since we are there for two and a half months, it doesn’t turn a profit; it has been financially self-sustaining.
What are your retirement plans?
Although we both enjoyed our careers immensely, we looked forward to traveling and experiencing new destinations. About 10 years prior to our retirement, I began reading a number of financial and retirement blogs and forums, which I found to be extremely helpful and validating.
Approximately 12 years ago, we purchased a condominium in Costa Rica, with the intent to use it as our retirement escape from the cold New York winters. By the time our children graduated from college and we were empty-nesters, we knew that we were financially ready to retire.
We both retired voluntarily, mostly due to the desire to travel. One of the biggest factors for retiring early was the lack of longevity in my family.
My mother passed at age 53, and her mother died at age 34 (with 4 kids under the age of 8). My father passed suddenly, three weeks after his 65th birthday.
I believe he did receive his one and only Social Security check. I wanted to enjoy post-work life to the fullest for as long as possible.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Our biggest concern in retirement is health and early disability or death. My parents both died relatively young, so I am acutely aware that longevity and good health are not guaranteed.
We have completed our estate planning and recently updated our trust. We paid into Long Term Care Insurance for the past 15 years, but decided to take a buyout, with LTC payments up to 150% of paid premiums.
Since the cost of LTC continues to rise substantially and payouts are not guaranteed, we decided to take the buyout and self-insure for any remainder.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
I learned to save as a young child. I babysat and had a paper route at age 12.
I saved most of my earnings and took them to the bank to have my “bank book” updated. I remember getting 5.5% interest and free silverware servings, which I kept until we got married.
My father taught me about compounding interest and the importance of saving for a car and college. I worked three jobs to pay for college and graduate school.
Fortunately, I was able to continue living with my parents through college. This helped me get a jumpstart on saving.
Who inspired you to excel in life? Who are your heroes?
My parents inspired me and shaped me into who I am. I grew up in a blue-collar family.
My father worked several jobs while we had the benefit of a stay-at-home mother. We had a lower-middle-class upbringing, but my family was frugal, mostly out of necessity.
My parents were very responsible and hardworking. They taught us good values and fiscal responsibility. Although they never went to college, they insisted that we all attend.
My parents eventually owned and renovated several rental properties. When I was 19, a junior in college, I bought my first duplex for $41,000.
It was in a very nice suburb. I rented out both apartments for the first year and a half.
My husband and I then moved into one of the units when we got married. It was a bonus to have our tenant cover our home expenses and mortgage.
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 Millionaire Next Door by Thomas J. Stanley and William D. Danko
- Die with Zero by Bill Perkins
- Money Psychology by Morgan Housel
I read The Millionaire Next Door in high school, and it resonated with me because it was consistent with my upbringing and financial habits. About 7 years ago, I read Die with Zero, which opened my eyes to the importance of giving “with a warm hand” and sharing experiences with our children.
I recently read Money Psychology, two interests dear to my heart (money and psychology). I love his philosophy and outlook on the future.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
We give to both local and international charities.
We allocate approximately 15% to charities and gifts.
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?
We plan to leave the majority of our inheritance to our children, as well as some money to some worthy charities. We have a trust that outlines how the estate will be distributed.
We believe in giving with a warm hand when possible. Since we have more money than we need, it makes sense for us to help our adult children now when they need it, rather than waiting until they are in their 60s to inherit it all.
We began helping our children at the age of 16 when they began their first job by matching their Roth IRA contributions. We gifted them money toward their first home purchase.
Last year, we each gave the maximum per child up to the reporting exclusion, which we hope to continue. We will also contribute to our grandchildren’s 529 plans.
Remember that life is a journey, not a destination. Be sure to be grateful and enjoy the journey along the way!
