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 115
At a minimum, the following seven points work together to increase our net worth:
- Our salaries are high, and we have managed debt decently.
- We live in a lower cost area that has great public schools and reasonably priced homes.
- We invest in low cost index funds.
- We save / invest any bonuses (company stock sales, year-end bonus, profit sharing). We never spent our year end pay-outs.
- We do not hold any stock in the companies where we work(ed). We sell options and RSUs as soon vested, no matter where the stock price might be. We do not buy company stock via a stock purchase plan. We understand missing out on the tax advantage of holding the stock for greater than one year; we understand the financial benefit of the employee stock purchase plans. However, I’ll remind everyone about the Enron’s, WorldCom’s, and many other companies’ stories throughout history.
- We get full use of items. We keep cars for a minimum of 10-15 years, until they have no value. I repair many things, can learn how to repair many other things, and above all, understand what is dangerous to repair. (I have clothing that almost has more repairs than original material. I do not wear clothing quite this bad to work, but close. Not absolutely requiring new clothes every season is one advantage to working in a technical field.)
- We are lucky. (This luck is multi-faceted. We started investing at time with incredible market returns; we have similar investing philosophies (slow and consistent); we have complementary and similar-enough beliefs about living life; we have each other.)
Millionaire 116
We accumulated our net worth mainly through earnings, keeping our debt to absolute minimum, savings and investing. We both came from low income families and have no inheritance. Our parents taught us to spend wisely, save a lot and get great education.
When we took debt – such as car loans or HELOC, the only reason to take loans is not because we did not have cash but because we could borrow money at less than 2%. We could invest and make more money in the market.
If we had debt that were higher than 5%, we did everything possible to pay that off early.
We never paid interest on any credit card since we got married. My wife taught me well on this.
If we financed anything (such as furniture), it was because it was 0% interest for 12 months, etc. Never pay interest. Pay cash.
For the most part, it’s pure hard work to earn money and live within our means.
Millionaire 117
Primarily saving — both through retirement plans (IRA, 401K) and taxable accounts.
Home equity has been growing via appreciation and I’ve been paying off debt.
No significant inheritances (maybe $20K from wife’s family).
We never refinanced to take out any cash (we refinanced several times for lower rates). We did this to reduce the loan duration or to reduce the mortgage payments but we kept paying the same monthly payment or more to bring down the principal quicker.
Honestly we were better spenders than savers most of our lives but we never touched anything we put into the 401Ks.
Recently, after many years, my company was purchased and I made some good money from that transaction. That really added to my long-term financial outlook thankfully.
That’s also why I have too much money in cash accounts currently.
Millionaire 118
It was a combination of making a lot of money and investing it.
My wife was making $150,000 a year plus generous bonuses as a salesperson for the first 5 years we were together.
But just because we were making good money, doesn’t mean we automatically were becoming millionaires. We lived modestly and saved 50-60% of our income every single year.
She drove a 2005 Toyota Camry that had close to 300,000 miles on it. I drove a 2001 Volkswagen Golf that had close to 200,000 miles on it. We shopped sales and made dinner at the house most nights.
Our biggest splurge was travel.
Living modestly was a decision we chose because we want to retire early.
And the reason we focus on saving as much as possible is simple. The more money we save, the more compound interest works in our favor. We could earn a lower return every year and still significantly grow our wealth simply by saving as much as possible.
Millionaire 119
ESI of course!
I believe our income puts in the top 0.1% of Americans. We continue growing our income through innovation. We do a lot of saving but I wouldn’t say we deprive ourselves (Ferrari, BMW’s, big home, private school, travels).
About 50% of pretax income (70% after tax) is saved in savings/CD accounts, contributed to retirement/taxable accounts, and goes into real asset equity.
Most of our NW is invested in something and growing, mostly in the 8-15%/year range.
Both sets of parents still living, but we anticipate inheritance from each side.
Millionaire 120
I max out yearly my 401K and IRAs. I contribute to my IRAs even when I cannot take a tax deduction.
My liquid assets are growing by chasing the CDs and Savings interest rates.
In 2009 I bought annuities. Some are fixed term between 2-4%. I have a phantom 6% guarantee on one that I pay for riders. Up to now this type of investment is very confusing to me.
My current investments are with low cost index funds and robo advisors and less than $350K. My biggest aggressive exposure is with my 401K plan of about $400K.
I wish that I could tell you that I made great financial decisions early on and made good investment choices along the way. I think I may have even made mistakes that costs me opportunities lost by being ultra conservative both in business and in my personal finances.
What helped me accumulate is earning and saving really well these past 10 years.
Millionaire 121
100% earned.
My wife and I were married in 1998 while I was in grad school and she had just finished high school, getting ready to start college. She earned 5.15/hour and I worked weekends cleaning carpet and sold plasma biweekly to keep the lights on.
When I got out of grad school and got my first real job at $30,735/year gross ($1801/month after taxes) we felt rich. We didn’t know what we would do with all that money!
First thing we did was have me stop selling plasma, which was a welcome treat.
Next thing we did was move the grocery budget up from $150/month to $300/month, which allowed us to shop at Publix instead of Wal-Mart, also a welcome treat.
I’d say we invested well in that we invested every single paycheck, always, without fail, and always into the same vanguard index funds (small-cap, mid cap, total stock, total bond) and just kept doing it.
There’s a lot of noise out there, a lot of folks eager to and good at separating folks from their money, and we have been able to avoid all of that by sticking to our plan.
We have also always been good at living below our means, staying on a budget, and being easily (and cheaply) entertained.
In the end, just being together and having time is the important thing. It’s why we married one another—to be together—and it’s still our thrust.
That sounds corny, I know, but it goes back to the marrying well bit I mentioned above. Do that, and so much of this other stuff just seems to fall into place.
Millionaire 122
I’ve taken the slow and steady approach. No windfalls, no inheritance, just sound, principled investing.
I’m by no means FI or ready to RE. I’ve always figured I need $2.5M for that. Having topped $1M, I know I’m on my way, now it’s just a matter of time.
Millionaire 123
Our net worth was accumulated by dollar cost averaging about 50% of our income since we were married.
Neither of us has inherited money.
We both started working with minimum wage jobs progressing to highly compensated physicians.
We always maximally contributed to our employer retirement accounts and dollar cost averaged weekly into our own account.
I always paid extra to our mortgage when we had a mortgage. We were completely debt free in 2013.
Millionaire 124
No inheritances for me. My partner inherited $300k last year from her mother’s estate.
We happily live below our means. We’ve always lived on a budget. Neither of us spend money on things we cannot afford.
As a young man I read The Millionaire Next Door and adopted those frugal principles.
I drove older vehicles but took care of them. Until 6 years ago I drove a 1997 Toyota Landcruiser that I bought for $17k.
She has always had a company car. We saved the money we would have spent on expensive cars.
Since I was in my late 20s I’ve kept at least 6-12 months of expenses in a cash account.
Having money in the bank and low expenditures has given me the ability act when lucrative opportunities present themselves. That has been key in some of the real estate that I’ve accumulated and the consistent market investments we’ve made.
I’ve been lucky to surround myself with good accountants, attorneys etc. Being able to take advantage of tax laws is a HUGE part of growing wealth.
Even the little bits add up – SEP contributions – HSA contributions – strategic spending on equipment etc.
Having a “team” to help is vital no matter how much money you have.
Philosophically I have always enjoyed growing my net worth more than spending my earnings. Also I have a healthy fear of being broke.
I’ve been fortunate to keep the company of like-minded people and I met a like-minded girl a few years back. She’s great.
I have nice things – a nice guitar, a nice truck, a great bicycle. I pay for my son’s state school education. I give to charity.
We both get a bigger kick out of being active and on our bikes than buying the latest greatest new object.
One more thing. We have many friends and many don’t have the same financial means as us. It’s nice to live in a way that nobody really knows about our finances. It’s entertaining to watch others do that though.
Millionaire 125
All the money I have made has been through earning and investing.
As I’ve grown my income I’ve tried to keep expenses under control, but spend easily on things that matter to me.
The property investments tenants have paid down my loans and I’ve been able to build my net worth.
I currently save about 50% of my gross income and have been a high saver all my life.
I came from a middle class background and my parents worked in the steel industry so we didn’t have much growing up.
So I’ve always valued money and tried to save it as a form of security.
Millionaire 126
- We’ve always lived below our means.
- For the first seven years we were married and both working we banked my wife’s salary. We didn’t make very much but we always saved.
- Once the emergency fund was in place, I invested in the company savings plan and received matching funds. This was before there were 401Ks
- Over time as my income started to rise and my learning kicked in I began investing in a wide variety of vehicles always trying to find the fastest path through the forest.
- Over time I refined my approach. Really took the time to research and understand the S&P 500 market performance year in and year out since 1929. There’s a lot to learn from 89 years of historical performance.
- When you begin to understand the incredible performance of the market and then further refine your search to identify the truly amazing individual contributors to that long-term success the light goes on.
- We inherited nothing monetarily, but I benefitted from my father’s incredible work ethic. He was tough on me but in retrospect I have benefited from his intentions.
- We have earned, saved, and invested our way to financial independence.
- Anyone can.
- My earnings were modest early on. I earned a few promotions along the way, but I never made more than a good living. I’m not Bill Gates but one doesn’t have to be to achieve success and independence.
- The entire picture that you need 10 cars and 5 mansions and $50M is ridiculous.
- Balance in life is key.
Millionaire 127
Earn, Save, Invest. No rocket science here.
We live a similar lifestyle as we did 20 years ago…well beneath our means.
We’ve been following the rules from before we knew what the rules were.
Both of our parents gave us nothing. We have had no inheritance. What we did both receive is a college education free from debt.
Millionaire 128
I add value to commercial properties. For me making the move from residential to commercial was really a game changer.
You see in the residential world things are more speculative. Your value is based on comparable sales. With commercial your value is very dependent on the net income the property produces. Sure cap rates are based on comparables, but with commercial more than with residential you are in the driver’s seat to what your property is worth. You simply manage it better (higher income – lower expenses) to increase the value.
Because I like to add value I typically will not buy something that is stable and well ran. I look for the properties that need work that I can purchase at a discount to what they will be worth once properly ran.
Keep in mind this is much riskier than purchasing something that runs well and has a good history. I take calculated risks that through my hard work and attention I can have a positive impact on the performance of the property.
Millionaire 129
Over 90% of our net worth came from the income we generated.
My wife did get a nice stock gift from her grandfather before we were married. That small gift of around $15,000 has now grown to over $380,000 just by letting the stock accumulate, and reinvesting the dividends.
I’ve been fortunate to get decent incentive pay that has brought in annual windfalls (that we normally invest the majority).
When my grandparents died, I’ve also received around $15,000 of cash over the last few years. Relatively small amounts that we just put into savings and invested.
Millionaire 130
Our net worth has accumulated from earnings with a nice tailwind from returns.
I always focused on where I saw opportunity and my wife has consistently but slowly increased her earnings as her experience/seniority grows.
I expect the majority of our growth from here on out will come from compounding and not additional investments.
Millionaire 131
Most importantly I always lived below my means.
I did not use credit cards to fund my lifestyle. If I don’t have the money in my account to buy something, I don’t buy it.
I learned early the importance of “paying myself first.”
I made it a priority to save some money out of each paycheck before I started to spend.
I am a natural saver, so this wasn’t all that difficult for me.
I took full advantage of all employer savings plans. The 401k is my largest asset.
I work with people who say they can’t afford to save money in their 401k. I say you can’t afford not to save! Compound earnings over time are so powerful and are how I’ve accumulated what I have so far.
Millionaire 132
Around 80% of our net worth has come from saving money we earned from our jobs.
We’ve consistently purchased $150-$200k of stock index funds each of the past few years.
Our investment returns are not consistent year to year. In 2017 we saw over 200k in returns and in 2018 we saw negative 75k in returns.
What is consistent is our earning, saving, and investing. That’s how it took us 6 years to accumulate $1M.
Millionaire 133
A combination of saving a big portion of our income from the beginning of our career and investing in the stock market. Having a growing income without a lot of lifestyle creep helped. Living within our means and not acquiring expensive tastes also helped.
I recall one point in my career when my salary went up by 25% through a negotiation with my boss that went far better than I had anticipated. I set up a new account and invested the after-tax portion of that 25%. I never missed the 25% as I never saw it.
We never deliberately sacrificed lifestyle today to save for tomorrow. We saved and invested excess income and developed a habit of saving.
Millionaire 134
Every dollar in capital that I have, I have earned from a salary.
I was never given, nor inherited any money.
The CAGR of 25%, representing long term all-in performance (including my own sweat equity / income), has been the powerful factor that has grown my net worth.
Millionaire 135
Increasing our earned income, saving the raises, and investing our money in the market and real estate.
Neither of us have inherited anything.
Her parents paid $1,500 per semester for undergrad tuition and the rest of her college expenses were covered through scholarships and her own pocket.
He paid cash for college while working.
Millionaire 136
We received no inheritances. We accumulated our net worth through aggressive savings, and with help from the power of compound interest.
We paid ourselves first by maximizing our contribution to 401K, Traditional/Roth IRA. We also lived well below our means.
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Lots of good stuff, huh?
Stay tuned, we’ll be adding to this series in upcoming future posts.
