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)?
I am 40, my spouse is 33 and we have been married 6 years.
Do you have kids/family (if so, how old are they)?
We just had our first child -- a lovely baby daughter. Being a first time parent is very challenging experience, but one that will build some strong lasting memories. My hat goes off to all parents who have raised children!
What area of the country do you live in (and urban or rural)?
We live in an urban area outside the USA -- in SE Asia. I have now been living outside the USA for the past 7 years, and prior to that was born and spent my entire life in the USA (mostly on the East Coast with some time spent on the West Coast and in the Midwest).
What is your current net worth?
Approximately $3.2M USD
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?
We own our own place (a condo) that is currently worth about $250K USD in the market, that was bought 7 years ago for $175K -- it has no debt or mortgage. We just purchased a 2nd larger penthouse 2-level condo for $600K USD, and will be moving there when the baby has settled down and my wife recovers from her C-Section. The second property was also purchased outright so neither has any debt. Out here there is no mortgage deduction benefit, and home interest rates are very high (6%+) so buying outright seemed to be a good use of capital. Also, I am a big believer that homes should be 20%-25% of net worth, if this can be managed.
We will keep our $250K condo and rent this out after we have moved and clean up the property. I expect that rent would bring in $1300 per month gross and $1150 per month net. I have not yet rented out property so may work with a management company, who would take 10% of this. The advantage is the two properties are quite close to each other so it will be pretty easy to keep an eye on it.
The $600K place came fully furnished and decorated, but did need some minor home improvements to be made (under $10K). I believe it is undervalued but the real estate market here is quite illiquid so you need to be very patient. I am not concerned as it is used as a place of residence vs a short term investment.
Other assets are different stocks and bonds that I am invested in, that make up over $1M of my portfolio. I am still maintaining $1+M in cash accounts, that are split up below FDIC levels. This cash will be deployed when good investment opportunities come up.
What is your job (type of work and level)?
I am the Senior Director of Sales, responsible for approximately $170M / year of business. I used to be the head of a smaller business unit which merged into another unit, and am heading up the Sales function for both units now.
What is your annual income?
Approximately $330K per year for gross income, and this can vary slightly with the amount of annual bonus paid from my job.
What is your main source of income (be as specific as possible -- job, investments, inheritance, etc.)?
My job is still, by far, my main source of income that brings in 90% of the total income.
What is your annual spending?
Approximately $50K per year, but this year will come in significantly higher- perhaps 30%-40% above this number. This is because of the one-time charges of having a new baby plus buying a new place.
How did you accumulate your net worth?
I accumulated my net worth by growing my career income, saving substantially, and making prudent conservative investments. But by far the biggest benefit came from earning much more while spending very little and doing this for several years. I got my big break at age 33, when I moved overseas into a much bigger role that paid double what I was earning before -- so I jumped on it. That was a 2-year assignment. Following the end of that, I really looked hard for another job, both in the USA and locally and was able to find a similar paying position here, but with greater responsibility. I have been able to continue working at that company for the past 5 years.
Big mistakes I made in my life were related to blowing investment opportunities by getting the timing wrong. For example, I have bought shares in a company that have done very well but sold too soon (making a 50% profit vs a potential 400% profit). Also when I was in my late 20’s I worked for a fast growing telecommunications equipment maker that had a rapidly rising share price. At one point I was worth $900K on paper (only $200K was vested at the time so a good portion was unavailable to access) but kept waiting for it to go higher. As a result, I never exercised any vested shares and ended up riding back down to nearly the basis price. That was a painful lesson. Always take something off the table in a windfall.
What have you learned in the process of becoming wealthy that others can learn from (what can others apply to become wealthy themselves)?
Maintain a very high savings rate by trying to secure a high income while keeping expenses very low. Try to get to a saving more than 50% of your gross income which is hard, but if you make the habits and merely stick with them, you will grow wealthy automatically. Try doing this for 1-3 years first, then stretch it to 5-7 years and you will have a very comfortable cushion. You can live very well without paying a lot, as many things in life are free.
What are you currently doing to maintain/grow your net worth?
I am continuing to work, plus have been building up a dividend investment portfolio in addition to looking at generating rental income as mentioned above.
Do you have a target net worth you are trying to attain?
No, not at this time. I have found that I can plan and re-plan this number, it is a moving target. For example, us having a child now re-sets the target somewhat. A few years ago we didn’t know if we would have children so the target was much lower then. We may consider having a 2nd child which would cause us to re-examine our plan.
What are your plans for the future regarding lifestyle (for instance, will your net worth allow you to retire early, downsize jobs, etc.)?
My net worth buys some flexibility, but we all still have to live our life every day. Retiring early is a possibility but I do like the balance of working and having a family right now. We certainly can weather some rough patches though.
Is there any advice you have for FMF readers regarding wealth accumulation?
The main engine of wealth creation is savings from your career. The booster engine is investing that surplus and letting it compound as well. Combining the two will really push your net worth up every year.