This post initially ran on Wealth Lion. I have added the comments from the interviewee on that post to this one to provide more clarity.
Here's the latest in my series of millionaire interviews, discussions with everyday people who have practical tips and insights into growing and managing wealth.
My questions are in bold italics and their responses follow in black.
Let's get started...
How old are you (and spouse if applicable, plus how long you've been married)?
My wife and I are both 49 and have been married for 28 years.
Do you have kids/family (if so, how old are they)?
We have 4 children (20, 18, 10 & 7). We are often asked about the age gap. The two youngest are adopted.
What area of the country do you live in (and urban or rural)?
We live in a suburban area.
What is your current net worth?
$2.4 million (broken out in next question). I have not included the value of our cars, home furnishings, jewelry, etc. I have also not included value of my Long Term Incentive (LTI) program or pension program.
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?
- Retirement accounts - $850,000
- After tax investment accounts - $800,000
- Home - $750,000 (paid off)
- We have no debt.
- I have not included the college accounts as those are being spent out.
What is your annual income?
$300,0000. I also have an LTI account that will start paying out this next year. Current value is around $1 million and annual payments will now run about $200,000 a year as I will hit my first vesting period this year.
The LTI is substantial. Can you give us some additional insights about it?
It comes in the form of restricted stock grants. It vests over time. If I leave before retirement, it would go away. You can take retirement as early as 55 and then you would get pro-rated amounts of the LTI (in addition to retirement healthcare benefits). Between the LTI, pension, retirement healthcare benefits and deferred compensation program, it is hard to leave the job (golden handcuffs).
What is your job (type of work and level)?
I am an executive (VP level) in a business function.
What is your main source of income (be as specific as possible -- job, investments, inheritance, etc.)?
My job is the main source. I do not take income from my investments (reinvest interest and dividends).
What is your annual spending?
Spending this year is $113,965. I run our budget off a spreadsheet.
How did you accumulate your net worth (what did you do, what happened, etc. -- this is where you can tell your story and give readers insight into how you became wealthy)?
My income from my job has driven my net worth. I have focused on growing my career. The income has jumped in the last few years after our company was bought out and I joined a much larger company.
What have you learned in the process of becoming wealthy that others can learn from (what can others apply to become wealthy themselves)?
Personal and business advice - Understand risk and be prepared to mitigate if and when it arises. Businesses value someone that can address problems immediately. Personal hardships are much easier to deal with when you have a plan prepared (job loss, extended illness, etc.)
Investing advice - It is hard to beat the market and you can lose a significant amount of money trying to do that. Further, you need to be mindful of expenses associated with investing. Low cost index funds are hard to beat.
What are you currently doing to maintain/grow your net worth?
With the impact of my LTI vesting, I will be able to save even greater amounts of money. We have a great deferred income program at work that I will now take advantage of as well.
Do you have a target net worth you are trying to attain?
My target number is $6 million. My pension plan will cover almost all of my expenses. The reason for my somewhat high number (when taking everything into consideration) is that we may need to address certain needs for one of our children.
What are your plans for the future regarding lifestyle (for instance, will your net worth allow you to retire early, downsize jobs, etc.)?
I enjoy working and will continue to do so for as long as I am able. After hitting my target number, I want to expand my support of a local Christian school and to help build out several of their programs, including special education services for those with learning disabilities.
I was recently approached by an investment group to buy out a company. I would be one of four that make up the key management team in building the company. I will only consider this move if the equity portion exceeds $2 million (because I would be giving up my LTI program) and that the project value of equity is expected to hit $10 million by year 7.
Is there any advice you have for FMF readers regarding wealth accumulation?
I like Dave Ramsey' advice about having a plan for each dollar. It is easy to spend money when you have a windfall.
There were several questions asked after the interview above, and here's what he added:
I hit VP level in a small company after 13 years. It would have taken longer in a larger company. As I have grown my career I have moved up in size of company.
Company acquisition-this did not really help in the financial picture from the transaction alone as it was a private company and I had minimal equity. I also lost about $150k on our home. However, I benefited from this company by getting a nice pension program and could benefit very well from the LTI program and retirement healthcare benefits. Also, the transaction gave me greater visibility within my industry and I have had several offers by other companies as well as current options to buy out companies to run.
I have a B.S. I wanted to get an MBA, but I was working too many hours for the first 10 years and then with children entering the scene as well as progression in my career, it never became practical. In my area of expertise, it is experience that is valued most.
Career path - I started in sales. The big change was taking a home office position with a small company that required wearing many hats. That open up many possible pathways of career development. What I do now is somewhat specialized and I have not given much detail for privacy concerns.
Compensation/LTI choices -- my restricted stock grants are based on my band. We have a deferred compensation program that allows us to defer a large percentage of our bonus and up to half of our base. The investment options are attractive and also include a very generous interest bearing option.
At my current company, we have tight bands with little negotiating room as I work for. Large company. With previous companies, I had to negotiate with each position, with the exception of one. My first job out of college in 1986 paid $19,000 a year. The largest jump came when I hit VP level after 13 years. My base was temporarily reduced when my last company was bought out, but total comp was higher when factoring in the pension and LTI. Since then, my base has risen above the level of the last company.
I usually travel every other week.
Mortgage -- I paid it off because I hate debt. I could have paid it off earlier, but left the cash up due to adoptions and a cancer diagnosis along the way.
College saving -- we save about 25% through 529′s and the rest has been in laddered CD’s. We knew the college so, we just targeted the 4 year tuition/fees and adjusted for inflation.
My wife stays home with the two youngest as one has some neurological issues.
To some degree, I have put all my eggs in one basket and that is my career. On the plus side, I am somewhat specialized and am good at what I do. I have built up a great reputation and have a team of people around me in a similar situation. On the negative side, I have no other sources of income (other than taking cash flow from investments) should I lose my job. That lack of diversity doesn’t bother me at this point because I have options should something impact me at my current company.
My current financial focus is to maximize the deferred compensation program to finish out the remaining gap on my target number.