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Millionaire Interview Update 5 - ESI Money 2Today I have an update for you from two previous millionaire interviews.

I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. 😉

We begin with Millionaire 16 who took the feature photo for this post (used with his permission). Man, that was one big tree!

You can/should read his initial post for specifics before you read this one, but here’s a basic overview:

  • His original interview was posted on August 21, 2017
  • At that point, he was 53 years old (this was republished from my previous site and he was 53 when the post originally went live in 2013.)
  • His net worth was $2.5 million.

This update was submitted in August 2020.

As usual, my questions are in bold italics and his responses follow…

OVERVIEW

How old are you? (and spouse if married, plus how long you’ve been married)

I’m 60, wonderful wife is 61. She’s awesome.

28 years married, plus another three on the front end under a lease-to-own.

Do you have kids?

No kids, but if we did they would be indolent, entitled ingrates. So, we dodged a bullet!

What area of the country do you live in (and urban or rural)?

We live in California’s Gold Country, about an hour from Lake Tahoe. Rural, quiet, low population density, no light or noise pollution, or graffiti.

We are quiet people who make an effort to maintain our privacy. People are respectful, mostly good drivers, and mind their own business.

If one is thinking about leaving a big metro area, one could do worse than Gold Country.

NET WORTH

What is your current net worth and how is that different than your original interview?

  • 2013 – $2.5mm
  • 2020 – $3.2mm

Our investments are passive, requiring less than one hour per month. The passage of time is working for us.

What happened along the way to make these changes?

No changes, we have been doing the same things for three decades.

Most important to us was the ‘S’avings, driven by our joint ‘E’arnings, and eventually ‘I’nvesting.

We learned some hard lessons on our path, took some risks that backfired, and now find ourselves in a low/no-interest rate environment.

In 1980 when CDs paid 13%, I never would have guessed that forty years later a 10-year CD paying 0.75% would be considered good.

Two quotes that I wish I had taken to heart, as they would have saved us years of tedious work.

“Seek wealth, not status. Get to the point where you make money while you sleep.” – Naval Ravikant

Money is a measure of freedom, not a measure of a person. We have always found the types who are trying to ‘one-up’ or show off to be tedious. Not real friends, just people we used to share a neighborhood, classroom or workplace with. Job titles, trophy spouses, vacations, etc. Status can change quickly. Will leave it at that.

“If you go to zero, it’s game over.” – N.N. Taleb

Applying some basic economics concepts, like the ‘sunk cost fallacy’ and ‘game theory’ can be really useful to your life.

Nobody likes to cut a loss, because it means…you lost! The Einstein-brain takes, i.e. “you don’t lose, until you sell’ or “I broke even in Vegas” or ‘I doubled my money’ (neglecting to mention the 25 years it took) are stunning to see. Listening to people claim expertise, in the face of contrary evidence, can be an interesting peek into the human psyche. Anyone who has gone to a County Fair in the summer, and observed the “halter-top/belly-ring/daisy-dukes” ratio can attest that there is a big difference between confidence and delusion. Again, will leave it at that.

What are you currently doing to maintain/grow your net worth?

We are attempting to maintain our net worth, with a conservative outlook.

We do not see a bright economic future for the U.S., or any sector with growth potential. We do see a disconnect between 1) the real economy; 2) the reported economy (i.e. unemployment, GDP, and inflation rates), and 3) the market economy (i.e. stock and real estate markets) which in times past has been used as a predictor for the 4) future economy.

This disconnect, and the unpredictable environment created by Federal Reserve actions, lack of correlated government revenue and expenditures, and unfunded entitlement promises ignored by both citizens and politicians, has stopped us from any pursuit of growth through risk. This has been true for us for the past 10 years.

EARN

What is your job?

Both happily retired.

My wife was a Director of Contracts in a university research environment, and I was a consultant in project management in many industries.

Neither of us liked our jobs or truly committed to a ‘career’ as we found the business-decisions of extra hours/effort/striving not worth the uncertain reward. Not all stories end so successfully like that of our host, ESI Money. We are quite content with our choices and results.

What is your annual income?

Our best working year was 2011 at $280,000, mostly W-2 with some dividend and interest income.

A good figure for us to use now, going forward, is $167,000.

This includes dividend and interest, a small pension, my wife’s small artisan business (6 hours/week), IRA drawdown, Social Security, and additional streams.

How has this changed since your last interview?

Not much change in the static income streams, our approaching 62nd birthdays are an opportunity to realize IRA and S.S. funds over a longer duration while enjoying a lower tax rate.

SAVE

What is your annual spending and how has it changed since your interview?

$60,000, up from $50,000 in 2013.

Our home and vehicles are paid off, and we have no debt. The quarantine has had no impact on our day-to-day, and it was always an effort to go out to restaurants. It is more trouble than it is worth to go out to restaurants. Once every few years we’ll have a larger expense for remodeling or a vehicle.

We no longer wish to travel. We’ve been to more than 30 countries, and the experience of new places-and-people-and-cultures has really degraded. The behavior of travelers has become atrocious, and is the most memorable part of our last trips. Fold in the COVID drama, and travel holds no appeal. The only thing that might change my mind would be instituting the Con Air prisoner cages that Adam Carolla has advocated for.

We’ve been shedding possessions for 20 years, and the acquisition phase is over. We really don’t want or need anything, and are quite content to continue living as we do now.

Concern-trolls might worry that we are ‘saving too much!’ and ‘will die with millions!’ Oh, noes! We are watching and helping with situations very close to us, where Home Health Nursing and caregiver expenses are $10-12,000/month. We aren’t saving for that, particularly, but will be ready if it comes our way. In the meantime, simmer down concern-trolls!

ESI has noted that the best part of the ESI Money blog is the commenters, and I agree. There are a number of exceptional commenters on the ESI site, including Razorback 14, Apex (I remember him from one of ESI’s previous sites), and others. Paper Tiger noted that he was moving on to a different phase in life, where he tuned out the worthless news (intended only to agitate to keep ears and eyeballs for the ads) and where he focused on the people/places/things that brought joy and value to his life. I took that years-ago comment to heart, and thank him for putting into words what I want for myself.

INVEST

What are your current investments and how have they changed over the years?

Our core net worth is held in 51 FDIC-insured Certificates of Deposit laddered over 10 years. As of this writing, our blended rate is 2.84%. The trend is down, and we don’t see risk-appropriate alternatives.

This is different from our 100% equities portfolio in the 2000s that performed great, until it didn’t. Losing 50% is quite different at 60 than at 40. The risk/reward ratio made sense then when we had jobs and could rebuild savings through work. Today, no.

MISCELLANEOUS

What other challenges or opportunities have you faced since your last interview?

Actions of corporate boards and the Federal Reserve have been unpredictable for years, and there no longer seems to be a correlation between actions and consequences. We are watching a continued financial engineering of assets. Crypto. Green energy. Corporate values.

20 years ago, an invention was introduced that promised to change the world: the Segway. My point is there is really nowhere to go for markets, as products aren’t being created. Just new ways to package them. So far, we have resisted the siren-song.

Overall, what’s better and what’s worse since your last interview?

“Expectation is the parent of anger.” – Kevin Kelly

What is better, is my managing of expectations. I have reduced my exposure to outside variables of all kinds. We consider ourselves ‘in, but not of, the world.’ I’m more content, and more importantly, so is my wife. Nothing is worse since the last interview.

I’ve made a few unexpected friends, which is always a great thing. One is a rabbi. Another is a retired hedge fund manager specializing in Emerging Markets. And I’m happy to enjoy their friendship for as long as it lasts, at whatever level is comfortable for us both.

I’m still working on improving our property, 250+ trees removed as fire hazard, with my chainsaws and stump grinder. It is a meditative experience, helps me to sleep well, and I like the visible results.

What are your plans for the future?

We are doing what we want, right now. Our future is now.

It is a nice feeling to think that tomorrow won’t be much different than today, because today is a great day.

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

“Control your narrative!” – The Essential Character, EC3

Yes, take charge of the story of your life. Pay attention. If there is a disconnect between words and deeds, don’t ignore it.

I wasted a lot of time complaining and hoping for fairness, when I should have been figuring out what to do in order to change my circumstance. Nonsense and gossip are a zero-value proposition.

One quality that wealthy people share, is that they are readers. Will leave it at that.

Avoid flaky people, and anyone who cannot be on time, who says “I’m not a detail person”, “I’m bad with names”, “that’s just the way I am”, “I forgot”, etc. without irony. These people are forewarning you that they are deficient by choice, and won’t change.

Nobody is a “detail person”, “good with names” or “punctual” naturally; it takes effort and practice and (most of all) respect for others. Sooner or later, you will have to pick up the flake’s slack, and they will let you down. Don’t be that flake.

Lastly, be aware of the difference between ‘tolerance’ and ‘acceptance’. If you are being ‘tolerated’, try to move towards ‘acceptance’. Same with your own exposure. It is okay to make some changes, as needed. Wishing all ESI readers success and acceptance!

—————————————–

Lots of wisdom there! And more to come!

Our next update is from Millionaire 20.

Here’s a quick overview of his initial interview:

  • His original interview was posted on September 18, 2017
  • At that point, he was 51 years old.
  • His net worth was $4.6 million.

This update was submitted in August 2020.

As usual, my questions are in bold italics and his responses follow…

OVERVIEW

How old are you? (and spouse if married, plus how long you’ve been married)

I am 54, about to turn 55 in December and wife is 52.

We have been married 21 years now.

Do you have kids?

No kids. One older cat we have been fostering for a few years.

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What area of the country do you live in (and urban or rural)?

Houston, Texas, but not way out in the suburbs.

Is there anything else we should know about you?

I was working for the 3rd largest county in the country and was laid off in April 2019, 450 days before vesting in my County Pension (not that I was counting). Oh well.

Life has been much better in retirement. My blood pressure is down and I have learned a few things and finished a few projects around the house.

Since we love to travel, I started a travel agency. It was going well last year and I had about $50K in bookings in 2020 until COVID hit. Almost all my clients have pushed their vacations into 2021.

I went on a ‘work’ trip to Spain in early March 2020. I got back on March 10th and Spain was shut down two days later. We were in the Southern part of Spain, so there weren’t as many people like in Madrid. We had a Panama Canal Cruise cancelled in late April and our African Safari was cancelled. Various other trips have been cancelled as well.

Our next hope is a cruise from Spain to Portugal in late November. Less than 300 on the ship, so I am hoping it doesn’t get cancelled. I got a great deal on it.

Our parents are all still alive, but mine and the wife’s are all single and starting their 80’s. 3 out of 4 have long term health insurance. Wife’s mom is in memory care. More on that further down.

NET WORTH

What is your current net worth and how is that different than your original interview?

Current NW is $8M, it was $4.6M at the time of the interview. 2017 ended with our NW being $5.1M.

House is worth around $550K and has been paid off since around 2008. We paid $225K in 2001 and have put in over $200K between kitchen and bathrooms.

I ran around with the wife on some of her work trips to New York and Chicago and Los Angeles since I wasn’t working anymore and we had the Companion Pass on Southwest Airlines. We did a Caribbean Cruise and a River Cruise on the Rhine, went to Puerto Vallarta with friends over Xmas in 2019. Wine Country in May, Ireland in July. It was a great travel year. Travel spending 3 years ago was around $20K.

Cost of commuting has gone way down. Gas usage down, no dry cleaning, I used to eat out every day, wife cancelled her parking contract in May at $165 a month — she isn’t scheduled to return to the office until January. If she goes in 3x a week, I will probably drive her to work and go to the gym. If she Ubers home 3x a week, it’s probably the same as her parking contract.

What happened along the way to make these changes?

Wife is still working and I was laid off in April 2019.

We renovated both bathrooms last year and had to have the house repiped, so that was a $75K hit to the NW. 2017 and 2019 were great stock market years. That didn’t hurt.

We have been fortunate and haven’t really had any bad experiences except investing in a friend’s restaurant and lost around $30K on that venture.

What are you currently doing to maintain/grow your net worth?

Staying the course on investing.

Bought stocks in March 2020 once the market was down 25%. At this point, we don’t need to grow the NW much more, but I am still 80% stocks, 10% bonds for a bit of stability and 10% cash for the years between wife retiring in 2022 and me turning 59.5. 10 year average is about 9.5%, so not shabby. It was over 10% before March 2020.

I am going to sell one of our rent houses in Texarkana and buy a townhouse for my Dad, who got divorced at age 78. He turns 80 in August and is concerned about his rent going up each year, even though he is in a stable area. We are going to do a 1031 exchange. The rental house was getting to be a pain. Spent $7K on it last year. We had good tenants this last year, but had six months of vacancy leading up so it’s time to ditch a house. Hopefully it sells for around $210K. We paid $95K as it was a foreclosure about 10 years ago.

EARN

What is your job?

I am now retired 15 months, but I started a Travel Agency since we love to travel. Costs are low and benefits of travel are pretty good. I was at home and just learning the travel business and going to the gym so COVID didn’t change much for me except zero income right now.

I now do volunteer work 2x a week doing Meals on Wheels.

The Wife is a Tax Director at a Big Four Accounting firm. This has been her only job since college. She is ex Arthur Andersen. Would have made Partner if it wasn’t for Enron. She is happier as a Director now.

What is your annual income?

Wife has a base of $513K and for the first time, she won’t get even a COLA raise due to COVID. They laid off a bunch of staff, gave Partners early retirement etc.

One of the Partners in the DC office took the package and he was a bit higher up than my wife. I think she is now #1 in knowledge of her specialty, which is taxes on Securities like Collateralized Debt Obligations, Mortgage Back Securities and stuff like that.

2019 we made $613K total. Rental Income was $24K of the total.

How has this changed since your last interview?

My income was right around $90K, so not a huge loss. I was already scheduled to retire on July 2nd, 2020, so being let go before I vested in my pension might cost me $20K a year. I get the money that was taken out at a 7% rate, but the County would have put in 225% of my balance once I hit 70. So if my part had grown to $100K, the County would have added $225K.

People that have been with the County a long time have a great pension. Many retired once the pension was more than their salary. I was only there 6.5 years, so mine wasn’t going to be huge, but hey, free money is free money. We will be just fine.

Have you added, grown, or lost any additional sources of income besides your career?

Wife’s salary went up a few times since 2017. She got a large bonus in 2018 and an OK one last year.

Rental income has been steady.

Dividends are going up a few thousand each year.

SAVE

What is your annual spending and how has it changed since your interview?

We spend between $80K and $100K a year.

2019 spending breaks down into:

  • $8K in utilities
  • Charity was around $30K
  • Entertainment was about $12K
  • $4K in groceries
  • $3K in restaurants/bars
  • Home/Car Insurance $5K
  • Travel was an all time high at $50K

There have been renovation and maintenance projects every couple of years. This fall we are going to replace the air conditioning ducts and that will run about $7K.

Travel was on the uptick, but everything has grinded to a halt. We have received refunds for our Panama Canal cruise, her trip to Switzerland/France with a friend and our airfare to Africa. So that saved us $10K right there.

We have upped our charity giving each year. We are up to around $50K a year now and support several organizations. We hit $100K in giving with an organization we are heavily involved with one last June.

What happened along the way to make these changes?

As I said before, my wife is not a shopper and now she needs even less for work clothes.

We spend more on food at Farmer’s Markets than at the grocery store, we don’t have a 2nd house or a boat or a Country Club membership.

I have lightened up the purse strings on travel. We were going to be business class going to Africa and in 2018, we had a suite on a River Cruise in Portugal. That was our most expensive vacation at around $15K all in. We have a suite booked on a cruise for a 14 day trip to Japan in April of 2022. It’s going to be about $20K and airfare will be another $6K. A friend is turning 50 and that is her dream trip, so I am booking it for her and a few others.

We are still saving about $10K a month outside of retirement in our brokerage account.

INVEST

What are your current investments and how have they changed over the years?

I have almost all ETFs in various funds. VTI, VB, VUG, VXUS and a few others. I recently decided to dump my REITs on the thought that most office buildings are going to suffer in the coming years if many people work from home.

I still buy on dips in the market and buy here or there.

I am still building up the cash and will probably stop at $500K and start to invest a bit more.

Wife’s 401K is in a dividend mutual fund and a growth fund. All the 401K money currently goes into the Dividend Fund.

With her profit sharing of $32K a year and her annual $5K bonus, she puts away $67K a year. I was maxing out for the last 10 years.

What happened along the way to make these changes?

I listen to the Ric Edelman show weekly and I was convinced about 12 years ago to move into ETFs instead of mutual funds. I like the tax efficiency aspect and low costs.

I have kept my asset allocation pretty consistent over the years. I have re-balanced a few times, but not every year. I am fine with an 85%-90% allocation in stocks. There was one year I re-balanced in my brokerage account and caused about $16K worth of taxes.

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

So my wife’s mother moved down to Houston from Texarkana in August of 2018 and we put her into an independent living facility near us. She had mild dementia at the time, but last year she sort of wandered out of her apartment building and ended up 2 miles away on a very busy road and really had no idea where she was.

So at that point, we started to scramble for a memory care facility and she has been there for a year now. Thank god we were paying for her Long Term Health Insurance for 20 years. It paid back in about 8 months.

I had been managing her money in a conservative manner, but now that she has everything paid for by insurance, I have put her portfolio into a bit more stocks to grow it, since it will become the wife’s money at some point.

As I said before, my Dad got divorced at age 78 (she wanted out after 26 years) so it hasn’t really created a burden on us, but we are going to make his life lower stress by finding a townhouse for him so we can control his rent payments. If we break even in the future, that is fine. Not trying to make money on this deal.

Overall, what’s better and what’s worse since your last interview?

Things aren’t worse. Wife has been working from home and she loves it. Coffee on the patio during the spring and does yoga twice a week during lunch and has lost 15 pounds.

We have been to Spain, Portugal, London, Ireland, N Ireland, did a Rhine River cruise last November and South America for the first time a few years ago, went to Mt Rushmore and the Badlands in July.

Hoping to get out of the heat and go to Lake Tahoe for a week in September.

What are your plans for the future?

Travel Travel Travel.

Once we can do some last minute traveling or being gone for more than a month, we are going to be all over the place. We might spend summers in Colorado. We have friends in Denver and love hiking and the mountains. Spend a month or more in Europe bouncing around the area.

The wife is going to have about a $75K a year pension, so that is nice.

Honestly, we are going to have trouble spending what we could at 4%. With a $10M portfolio, that is $400K a year that we could potentially spend. Most will go to charities since we have a goal of spending X and if we don’t, the balance goes to charity, but our travel budget will just increase. Nicer cabins on cruises, or business class flights or smaller customized tours that might cost more due to size of group.

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

Start to find out what you like to do now before you retire. I love doing the travel agent thing at my own pace. I have organized several group trips over the years, so to me it was a no brainer. I don’t have to make money at it, but I am just doing it for friends and family. I ‘lost’ money last year and was on pace to make around $5k this year, so much of that is pushed into 2021, but I don’t spend much on the business either.

A few trips are tax deductible, but with the wife being a CPA, she cracks down on some of my travel expenses.

I am hoping to lead a tour of 14 friends around Kentucky doing the Bourbon Trail in September if things calm down.

Go find some volunteer work. There are hundreds of opportunities out there to help out. You are retired, you have plenty of time.

For the savings, save early and as much as you can.

Stay the course. We were down $2M in May with the COVID dip. Pretty much back to early February 2020 levels now.

Give up the new car every 5 or 6 years. Go for a new ‘used’ car every 12-14 years and you save a ton. We are fortunate to make a good chunk of money, but we haven’t wasted it by buying everything in sight.

Try not to buy a large house. Our property taxes are around $8K a year right now, but taxes are going to go up to make up for the loss in revenue caused by COVID.

Write down the goals in a spreadsheet and keep track each year or use Quicken to help keep track of your money. Have fun with your money.

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