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When you consistently deliver quality work, it pays.
At least it has for Frank from 8th Great Wonder. He became a millionaire in his 30’s through providing superior work in comparison to his colleagues. When it came to raise time, Frank was considered first.
Check out my interview with Frank on how he capitalized on those pay increases and hit 7-figure status in one of the highest cost of living areas in the US.
How old are you? If you have a family, tell us about them and their ages.
I’m 39 years old and married with a 10-year-old daughter and a dog.
What part of the country do you live in? Do you own your home or rent?
I live just outside of Boston and we own our home. This is a very expensive area for real estate, especially if you want a short commute into Boston. We purchased our house five years ago for $680k. It’s now worth about $800k, but I expect the rate of appreciation will slow given the current environment of rising interest rates. We still owe about $400k on our mortgage.
When did you start tracking your net worth? What was it at that time?
The concept of net worth has been something I’ve been aware of my entire adult life after majoring in Finance in college. I’ve been tracking it since I first started out.
At that time it was -$20k. Yes, that’s a negative number. At graduation, I had $20k in student loans and no real assets. I also didn’t have a job yet. Thankfully, I’ve made a lot of progress over the last 17 years.
What is your current net worth? What are your assets and what are your liabilities?
About $1.2 million which is far better than -$20k. In this area of the country, it doesn’t feel like a lot and I have to spend carefully, but I know how fortunate I am. My net worth is broken down as follows;
- $711k in retirement accounts ($499k in 401(k)s from current and previous employers, $212k in Roth and Rollover IRAs)
- $400k in home equity ($800k house with $400k mortgage)
- $60k in a 529 plan for my daughter
- $24k high yield savings account
My wife also has retirement assets that aren’t included above.
Investing most of my assets in retirement accounts has been a key part of my wealth building strategy. First of all, I get to defer taxes on my investment returns, but more importantly, it’s harder to spend money in a retirement account. I think it’s important to protect yourself from yourself, and putting money where it’s hard to get has kept me from spending it. Instead, it stays there and compounds.
What are your current sources of income?
I work full-time for a financial firm and my wife is a teacher. We don’t own investment real estate and any interest and dividends we receive outside of retirement accounts are negligible. I also write a personal finance blog.
What has been the single best thing you’ve done to increase your income up to this point?
It’s important for people to understand the difference between income and wealth. They are less correlated than most people think – you don’t need a high income to be wealthy, and having a high income doesn’t make you wealthy. Some of the best wealth builders tend to be engineers and teachers. Notice how doctors and lawyers aren’t on that list, despite their comparatively high incomes.
That being said, the biggest things I’ve done to increase my INCOME, have been to consciously deliver a work product that was superior to what anyone else on the team was delivering. I put myself in my manager’s shoes and asked what would make me want to reward or promote someone, and I delivered that level of work. I also earned my MBA which was an investment in myself that was well worth it.
As a side note, I’m a huge fan of investing in yourself. Whether it’s a degree, training at work or just reading books, these are the best investments you’ll ever make. Never limit your skills and knowledge for the sake of frugality.
What ways do you invest your money?
Most of my money is in index funds from Fidelity and Vanguard. I do own one actively managed fund that has beaten the market for decades (it can be done). I don’t limit my holdings to just stocks and bonds because there are times they move in the same direction. For the sake of diversification, I put a sliver of my portfolio in gold and real estate (REITs) because when the next 40% market drop occurs, this may limit the damage. Here is the breakdown;
- 95% index funds
- 3% actively managed funds
- 2% Other (gold and real estate)
From an asset allocation perspective it looks like this;
- 71% Domestic Equity
- 8% International Equity
- 15% Bonds
- 4% Cash
- 2% Other (gold and real estate)
Related Articles: When An 18-Year Old Learns How to Become a Millionaire
Did you receive an inheritance or windfall of some kind during your life so far?
I haven’t received an inheritance or windfall unless you count that $90 I once won on a slot machine in Atlantic City. I have received help in other ways though. My parents paid for my very pricey college other than a small student loan I took out. A generous relative also financed our house so we can avoid the bank’s interest rate and build equity faster.
What debts do you have (if any)? If so, what are they? Which have you paid off?
We have no debt except our mortgage and don’t plan on having any. I despise car loans because borrowing for something that depreciates is a really bad idea when trying to build wealth. If you want to learn how to avoid car loans, I’ve written about how you can buy every car with cash. My student loan was paid off a long time ago.
How do you track your net worth?
Strangely, I do it in my head. If I check my investment statements and I know my mortgage balance, I can estimate my net worth pretty easily. It’s not exact, but it doesn’t need to be. I prefer to spend my time reading and learning about personal finance, not doing paperwork or analysis for a level of precision that doesn’t really matter.
Do you live on a budget?
No. I’ve always practiced Pay Yourself First.
Once I have my investments automatically moved out of my paycheck into my investments, I can spend whatever remains. Budgeting is a good approach for some people, but for me, it’s another paperwork activity that doesn’t increase my wealth. I’d say if it works for you then do it.
Related Podcast: Track Your Net Worth + Become a Young Millionaire – J. Money
What are your annual expenses?
I actually don’t track them, but I know that my housing costs are $38,000 for mortgage and taxes alone (not including maintenance). Our next biggest expense would be food.
Since the three biggest expenses for most people are housing, transportation, and food, I try to subsidize our housing and food costs with savings on transportation. We have one car that’s seven years old and another that’s three years old, with no loans, and no plans to upgrade either any time soon.
What is your favorite fintech tool that helps you grow your wealth?
I do everything through Fidelity and Merril Lynch investment platforms, and if I want to analyze anything further I geek out on Microsoft Excel. To me, Excel is more fun than any tool online.
(Andy here! Tiller is a great wealth tracking and budget tool for Excel and Google Sheets. Get a 30-day free trial with my link.)
Why is it important for you to build up your wealth?
Money gives me options. Where to work, how much to work, where to live, what to eat, all depends on how much money we have. Unfortunately, those in society with the least wealth have the fewest options and end up living in dangerous areas, eating unhealthy food and being a slave to their employer. We’re all happier when we have control over our lives and money allows that to happen.
It’s important to remember that money is a means to something. Merely building wealth to see a number on the computer screen with two commas doesn’t make you any happier. Believe me. But if that number lets you choose the job you want, retire early, move closer to your kids, or spend more time helping others, than it actually serves a purpose.
What is one financial mistake you’ve made during your young millionaire journey?
Early in my journey, I listened to bad advice. I heard an “expert” say that the goal of retirement saving was to spread your money equally across your pre and post-retirement years, therefore saving too much was just as bad as saving too little.
That advice lacks a lot of context and is really misguided. It ignores the fact that we want most of our wealth derived from compounding, not working. To do that, we need to frontload our savings as early in our career as possible. It doesn’t mean we need to be paupers, but saving early and aggressively allows compounding to work harder for us. The lesson for me was to stop and think when the experts say something, and don’t assume they’re smarter than the rest of us.
Thrilled to feature @ms_ziyou as our first global millionaire!
— Andy Hill (@AndyHillMKM) September 20, 2018
What book has been most influential to you?
The Millionaire Next Door was one of the most fascinating books I ever read. I was amazed that real millionaires became wealthy by doing things like buying used Toyotas instead of luxury cars and investing the difference. Today I’m the guy with the used Toyota and big investment portfolio, so I guess I’ve literally turned out to be the millionaire next door.
What is one financial hack that has helped you that you think most people don’t know about?
The best financial hack is to understand that there aren’t any shortcuts in wealth building. Disciplined people win this game and everyone else loses. The power of the markets and compound interest make it really easy to get rich slowly. It’s the people who try to get rich quickly that end up broke.
Where do you find the most joy in your life?
Simple things. Watching my daughter have fun, date night with my wife, family gatherings with lots of food, laughing with friends, and simply staring at the ocean and thinking.
For the 20-something with a $0 net worth, what advice would you give them to become a millionaire in their 30’s?
First, decide if you want to look rich or be rich. Choose one or the other, because unless you’re a professional athlete or rapper, you’re not going to be both.
Get a full-time job.
Focus your energy on trying to save and invest as large a portion of your income as possible. Shoot for 50% but do the best you can. Since you’re in your 20s, you probably don’t have a high standard of living yet anyway, so continue living in a cheap apartment and driving an old car.
Invest that money in an index fund that tracks the stock market
Starting in your 30s, use your wealth to start creating the life you want. Decide where you want to live, work, and for how many hours.
Take care of your life and let your investments take care of you.
Where are you in your net worth journey?
Please let me know in the comments below!