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 82
100,000 dollars was inherited from my dad.
Our salaries averaged about 100k a year with both working. That is because my earning potential went down after forced retirement. We still managed to accumulate a decent net worth.
We worked hard for what we have. We took advantage of any company matching, and we saved of lot of our income and invested well. I also had a stock purchase plan at work. I always purchased the maximum at 85% of the stock’s value and immediately when I could, sold at a 15% gain plus or minus any gain or loss (usually a gain) that took place during the holding period.
Employees need to take advantage of any financial opportunities that are freebies. Stock purchase plans, stock options offered by the company, and 401K matching are all freebies.
I also took advantage of the MBA program offered by my company. If your company pays for education, take advantage of it. As the old adage goes, “never look a gift horse in the mouth.”
Always keep learning and avail yourself of any opportunities that arise from your company. And do it as soon as you can. A company can offer a freebie one day and take it away the next. I have seen that happen.
Millionaire 83
My parents created a fund to cover all my higher education costs. They didn’t let me know about it until about 8 years or so after I graduated and was really working. By then it had grown to about $300K. Not being saddled with any student loans made life a lot easier. And then being given a starter nest egg to manage was a godsend.
I had probably saved another $200K by this time and suddenly became very responsible about growing what I had and what I had been given at a steady rate. I felt like I couldn’t disappoint my parents by not carefully managing and growing my funds.
I read a lot about investing. I communicated regularly with my portfolio managers. I worked hard, earned more and saved like crazy.
Never once, to this day, have I touched the base. I’ve reinvested dividends or have used the cash plus low-interest loans against my portfolio to fund other investments like my rentals, but have paid those off as fast as possible.
I plan to do the same for my kids, just need to figure out a good plan.
Millionaire 84
My parents set up my first Merrill Lynch stock account when I was in the sixth grade, and my dad would wake me up in the morning with a question such as “Should we sell Ling-Temco-Vought (LTV)?” I would come out of a dead sleep to answer, “What profit margin do we have now?” I grew up reading all the Merrill Lynch info and The Wall Street Journal even though my family lived in the middle of a 49-acre cow pasture.
Otherwise, our net worth came from our day jobs and gifts/inheritances from family. I inherited $209K when my dad died in 1998, and my husband inherited $120K when his dad died in 2016. One of my aunts bequeathed about $50K. My husband’s grandmother also gave us a one-time gift of $40K.
Millionaire 85
All was earned from work and investments.
We have not inherited any money. My dad gave us $10K to help on the down payment of our house in 2001. At the time we only had $20K in savings.
I have a grandmother who gave us a few thousand over a several years as well, most of that went into our daughters’ investment accounts.
Millionaire 86
I think a lot of the specifics have already been covered, but earning is the biggest thing I’ve done. For the most part I haven’t done a bad job of investing but could have reduced fees earlier and definitely saved more.
Haven’t inherited anything nor do I expect to.
Millionaire 87
Our net worth was result of an above average to high salary that was consistently put to work through savings and investing.
Additionally, as we became more secure in our financial lives we have tried not to allow lifestyle creep into the household.
Millionaire 88
We accumulated our net worth with regular salaries and my yearly bonus. We also valued keeping our expenses low.
I accidentally did a geo-arbitrage by working for a company based in a large metro (high cost of living) and actually living in a low-cost part of the country. They paid me like I lived in the big city and I didn’t have to.
Millionaire 89
I have earned decent salaries and saved.
I have done quite well in my real estate purchases.
Luckily, I had parents who stressed education and paid for my college so I didn’t have debt coming out of college, which was a very nice boost for me that others increasingly don’t have.
They also tended to be more simple and raised us as such so I didn’t acquire a taste for too many expensive luxuries like fancy cars or eating out every other night at expensive restaurants.
Millionaire 90
I inherited nothing and started with nothing. I came out of fellowship with a net worth of -$120k and was very good about saving most of my income, investing it in low cost index funds, and living frugally. I avoided buying the “doctor house” and instead bought a very nice house that was less than 1/2 of my yearly income.
Gradually, the magic of compound interest started to occur and my wealth began to skyrocket. In 10 years I have gone form a negative 6 figure net worth to $6 million.
Millionaire 91
I’m a prime example of “slow and steady” winning the race. I invest on a regular basis, keep my costs low, rebalance annually and go about my day.
I have approximately $500,000 in total investable assets, between pre-tax, after-tax and tax-free. The remainder of my wealth comes from my home equity and the value of my pension account. No inheritances and, sadly, no lottery jackpots.
Now would be a good time to dive into the pension account in more detail. It’s always a little difficult to calculate the true value of a pension; for the purposes of my net worth balance sheet, I only use the literal amount in my account. The $305,000 includes the sum total of my annual contributions over the course of my public sector career (10% of my pay), any interest earned, and the amount matched by my employer (because I am vested, it is 6.67% of my pay). Should something happen to me before I retire, my beneficiaries would receive that total amount.
The value of the pension stands to be significantly more than what is just in the account, however. I have been in the system nearly 21 years; to reach “full” retirement I need 32 years. To run the model, let’s assume I just simply stay in my current job for 11 more years (I hope not), earn nothing more than a 2% cost-of-living increase annually (ditto), and retire just before my 59th birthday with my 32 years of service. Based on just those assumptions, I would earn a pension in the neighborhood of $10,000 a month, or $120,000 a year. Reversing the 4% rule, that’s the equivalent of having $3 million invested! It is a pretty damn good deal.
There are a couple of caveats, however: first, my state’s pension system does not participate in the Social Security program; I do not pay the Social Security tax, but I also do not earn credits for my years in public service. The practical impact of this is that any Social Security I receive from employment in my youth will be negligible. That’s an important consideration when doing retirement planning.
The second caveat is this: because of the value of the pension, I’m going to have some tough decisions ahead in my career when I consider my next professional step. Because the maximum value of the pension benefit is only realized if I reach the “full” retirement service of 32 years, and the payment is significantly less if I retire with fewer years than that, there is a real strong incentive to stay in the system – but, this may limit my career options. It’s something I am currently struggling with as I consider my next career move. (I would love to hear from fellow readers who have faced this choice in their career.)
Millionaire 92
The story of our net worth is an interestingly shorter one that you’d expect. We were sitting at ZERO about 10 years ago. Lots of student loan debt and a hefty mortgage and car payments.
The growth of our net worth from the doughnut hole a decade ago to now correlates to three main contributors:
- First is our businesses. The rentals plus Mrs. Cubert’s practice have grown substantially, from our first house, and few clients, to five houses and turning away new clients.
- Second is my career growth. Having made a mark at my company, the raises and bonuses these past five years have been significant.
- And third, the market has simply been stellar. I’ve watched with glee how our 401K has pretty much doubled over the last three or four years, with nothing more than $8K – $10K contributed year over year from my salary.
Millionaire 93
I didn’t pay much attention to investing and wealth building in my 20’s outside of owning my own home and upgrading a couple times to get to a better home.
Several times I saw my net worth creep past $100k just to have it slashed by a failed business, failed relationship or the housing market in 2009.
When I was 27 I saw my first equity payout around $75,000 and another $130,000 equity payout when I was 33.
My wife was the slow and steady grower maxing out her 401k every year for over a decade with nearly half of that in Costco stock that performed really well over time…way to go wifey!
Millionaire 94
All self-made. Very simple: maximize earning, minimize spending, invest the savings into the market on regular basis, avoid debt.
I have an excel file I use to track our progress and plan our finances. In this file I have also have written a few goals and strategy items down. Below is how I have summarized our strategy:
- Spend less than we make
- Spend wisely when we do spend
- Spend on what we need, avoid spending on frivolous wants
- Invest wisely
- Be patient
- Delay gratification
- No Debt – If you have to borrow for it, you can’t afford it
On maximizing earnings…
With some help from our parents, both my spouse and I worked through college and left school without any debt.
We started at the bottom of the working world, worked hard, attempted to be high performers in the work place and were rewarded as a result with promotions and raises.
It’s a pretty simple formula: Do your best, try hard and work to be the person the boss is happy to have on the job rather than the one they wish they could replace. Follow this approach and you can’t go wrong, your boss/employer/customer/client will reward you, if they don’t someone else will notice and hire you away.
As a person that now manages a pretty large group of people (and have input into their raises), I know exactly who the top performers are and always make sure they are taken care of financially in the form of bonuses and raises. I want to reward good behavior and also encourage them to stay. If I don’t pay the top people well, somebody else will and hire them away from us. Be one of these people.
On minimizing spending…
Again it is very simple if you don’t need it, don’t buy it. Avoid the temptation to try to keep up with the perceived spending of others. Delay gratification.
On investing…
As soon as you can invest in stocks do so. I started in college with some small dollars in mutual funds.
As soon as you can contribute to a 401k, do so. Max out this contribution as soon as you can, even if it means living on less money, you get used to it. Eventually you get raises and you barely notice it. If you don’t have a 401k option then do an automatic investment into a Roth or IRA.
Once you have maxed out these options, invest in a brokerage account. Go for no load, low expense ratio index funds. No matter how tempting, don’t cash those outs for any unnecessary wants (cars, clothes, trips etc). Treat the investing as an unavoidable bill you must pay before you even think of buying anything you don’t absolutely need.
Marry somebody with a similar mindset and an ability to earn or to help you earn.
Delay having kids until you can get your career established a bit if you can. Kids are the greatest thing in the world, but I am pretty sure I could not have built the career I did in my 20s I if had the kids then. 30’s was the right age to have them in my case after career and earnings were more established.
Millionaire 95
Earned it, saved what I could and invested it.
I just added up all my salary data from 1989-2018, and I estimate that my cumulative lifetime earnings have been a little over $6 million.
In addition I was awarded $1.5 million in options in the early 2000s.
So of that $7.5 million total lifetime earnings I have saved / (invested and earned) / kept $4.5 million. So my lifetime wealth ratio is 60%.
Not sure that the ratio is helpful – would appreciate any input feedback on it.
I did run a few models and saw that if I had consistently saved 15% of my income and gotten 6% consistent investment returns over my career the ratio would be 31.5%. And if I had saved 30% every year and still gotten a consistent 6% return the ratio would be 63%. Both of those models are calculated without the options grant.
Millionaire 96
It’s been a mix of all factors. My early education in the stock market via my first Apple purchase in 1989 probably served me best. From that point, I started absorbing all financial information, books and strategies to learn how to be a better investor and/or trader.
I learned how to not fear the markets but, instead, respect them and use them for my benefit. That lack of fear was so important and luckily I had solid gains before experiencing many losses.
Losses can scare individuals such that they never return which then removes a huge tool to help build wealth.
There was also a lot of luck involved but I fully believe that you can maximize your chances of being lucky with solid execution, initiative and knowledge.
When my late wife’s mother passed away, my daughter received enough money that allowed me to grow it to cover educational costs through any advanced degrees and she’s on that path. Not having to worry about educational cost allowed me to focus on our next phase knowing that her college would be taken care of. Most don’t have that luxury.
I also was fortunate enough to advance well in my career with my first executive position at 31 years old. What followed was more career advancement, a lot more money and fantastic retirement benefits.
My current employer has an unheard of retirement 401k which contributes 15% of my salary annually, not including what I’m able to contribute. For years, I’ve contributed the max allowable into the 401k. That benefit was removed years ago due to cost, obviously, but existing employees were grandfathered in. I will have put in 20 years in August, 2019.
But the most important aspect of our wealth advancement was made up of two items: 1) Financial Prudence and 2) Low Debt Servicing. Reduce impulsive purchases and ensuring that we only took on good debt and diverted cash to pay them off sooner is key to maximizing your saving/investing opportunities.
The fact is, I (and you won’t either) didn’t know where I would end up or what life would throw at me. We lost my apartment and all possessions in a fire in 1994 and insurance didn’t cover it (long story). I became a single father of a three year old after losing my wife to leukemia in 2001.
But through it all, I stayed optimistic, I/we made wise decisions and built a very wide foundation of smart personal, career and financial choices that maximized the opportunity for financial benefit. That combined with a long runway called life will pay dividends.
Additionally, I wasn’t afraid of calculated risk-reward plays. Read that as the willingness to take sound and limited personal and financial risks that don’t carry catastrophic effects should they go bad but provide major opportunity if they work out.
This included a failed business start-up following the financial meltdown in 2012, purchase of the vacation rental in 2012, starting a new business in 2006, and a multitude of investments over multiple decades that did and did not pan out. The key was to limit the impact of the ones that did not.
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Lots of good stuff, huh?
Stay tuned, we’ll be adding to this series in upcoming future posts.
