“Multi-millionaires and still have to make choices.” ~ John’s story25 min read

Introduction

I’m a 44-year-old American living in a large, but not huge city in the West.  I am married with three kids and am 19 years into my career.  I work in the field of research, design, and development making products that you probably own.  I have not yet earned a household income of $100k but have been able to save and invest my way to a net worth of more than $2 million.  I saved consistently and aggressively, but I wouldn’t say that I made crazy sacrifices.  My lifestyle looks a lot like most people’s. 

Childhood

I was born in 1975.  I am the second of seven children.  I am not going to say that I grew up poor.  I grew up in a nice suburban middle-class neighbourhood.  I will, however say that my family occupied the lower end of the socio-economic spectrum in that area.  I never went hungry, but I did have to hustle to keep up with my friends who had a lot handed to them. 

My dad’s employment and income were spotty.  He mostly ran his own companies.  Sometimes he made decent money, but finances were always tight.  When I was 11, the business he was running went under, and our house was repossessed.  All nine of us moved into a 3-bedroom duplex.  My bedroom was one end of the family room that I shared with my younger brother.  My older brother got his own room – the cellar.  We upgraded to a larger rented home a couple of years later, but my parents weren’t able to afford their own home again until right after I left for college.       

Early Employment

From my early years, I was constantly working on one side hustle or another.  That was before the term “side hustle” was coined.  My friends called my work ‘schemes’, but adults called me an entrepreneur.  I started cutting lawns commercially in third grade.  By the time I was in seventh grade (12-13 years old), I was pretty much on my own for all my expenses other than room and board. 

I did have some fantastic opportunities to experience wealth through my friends.  One friend in particular brought me along on most of his family vacations, including a trip to Maui complete with 5-star accommodations. 

By the time I was in high school I was mowing 60 lawns every week for seven months out of the year.  Even though, my personal financial responsibilities were much higher than any of my friends’, I actually had far more money at my disposal than any of them. 

When I was 17, I told my dad that I was interested in buying what I considered at the time to be a fancy car.  My dad was surprised to learn how much money I had saved and proposed a business idea instead.  He was working a sales job and thought that I could produce some of the parts of his product.  I invested $5,000 in some equipment and spent about 40 hours a week running this operation during my senior year in high school.  I had several teachers that were very supportive of my entrepreneurial ventures and looked the other way when I missed class.  I still completed my assignments, scored well on the tests, and graduated with a 3.7 GPA (92nd percentile / ‘A’ grade).

This description of my childhood may not sound all that great, but I was a very happy kid.  I certainly had my trials and hardships, but the positive outweighed the negative, and I was known to always be smiling.  I spent a lot of time outdoors and was quite comfortable living largely off the land as I often trekked with my two friends for a week at time across miles of wilderness, hardly seeing another soul.  I can’t believe our parents would consent to driving us, at age 15, out to the middle of nowhere and leave us on our own until the appointed pick-up time days later.  I may have had a lot of responsibility at a young age, but I also had a lot of freedom.  I grew up knowing that I could do anything.

Lessons From My Youth

I didn’t realise it until I was older, but my dad didn’t spend all that much time engaged in gainful employment.  This is a bit ironic, because one of the most important lessons I learned from my dad was hard work.  I don’t care if maybe his lessons were a bit hypocritical.  They were effective.  I learned to love work.  I was capable of obtaining anything I wanted through my labor.  My dad worked hard when he was with me.  He would often take my bothers and me out to work in the yard, shovel snow, paint the house, or provide those services to the old widows in the neighbourhood.  These lessons were a gift that I would not trade for all the stuff my friends received as gifts from their parents.  Although I’m sure I would have taken the trade back then.

Religion was a prominent element of my upbringing.  I was raised with the ideology that everything we have comes from God through our labours in the world he created for us, and that we should share our blessings with others.  Specifically, we should give back the first 10% of our earnings.  I am a big fan of capitalism, because it is the economic expression of freedom.  Voluntary charity is completely compatible with capitalism and is an important element of humanity and community.  Charity is good for the soul, but it is also good for our physical wealth.  I grew up taking 10% off the top of everything I earned.  I learned from experience that I can live just fine on 90%.  If that is true, then how much harder can it be to live on 80% or 70%?  This ability – the natural inclination, even – to prioritise resources and spending is probably the biggest factor in my financial success.  And I learned those habits from charity.

College and Marriage

So, I had a pretty great childhood complete with all the lessons I needed to leave home and become a real adult.  I guess I already had a distaste for debt by that time, because I chose a university based on what I thought I could afford.  In an unusual fit of financial generosity, my parents paid for my first semester.  I was on my own to pay for the rest.  I ended up spending only three semesters in traditional college.  I earned the rest of my bachelor’s degree through independent study.  This worked well for me, because it allowed me to schedule my studies around work and travel, rather than the other way around. 

My wife and I were married when I was 22 and she was 19.  Back in 1997 people were getting married a little younger than they are today, but we were still pretty young by most standards.  My wife and I often look back and marvel at our naïveté at the time.  Still, if we had it to do over again, we would not do that part of life any differently.  We spent the first three years of our married lives as poor college students.  My wife had earned a full-tuition academic scholarship.  The total tuition for my 2-year MBA was $7500.  Other than that, we were spending $500 on rent and $500 on everything else each month, and we were perfectly happy.

We spent our second married semester on a study abroad program.  It was an amazing experience and still probably the highlight of our lives together.  Looking back on that, I am amazed at the level of risk I was comfortable with at the time.  I paid my entire life savings for that trip – minus $500.  This means, that we had $500 to buy all the incidentals of a 5-month trip as well as to hold us over until we earned some more money after coming back home.  We would look at things like a $2 ice cream and have to seriously consider whether we could afford it.  It was an awesome experience and probably laid the foundation of the financial understanding and agreement that we share today.

Starting My Career and Putting Down Roots

Conveniently, my wife and I both finished school at the same time in May of 2000.  She earned a bachelor’s degree in accounting, and I got my MBA with and emphasis in finance and product development.  We both got jobs as financial analysts at Intel and started in June.  I mention the specific timing for those readers who will recognize this point in history as the very cusp of the dot com bubble.  By July, Intel’s stock had lost half its value.  By August, it was down 75%.  I still had no idea how things were building toward disaster for me.  For the time being, my wife and I were just amazed that anyone thought we were worth our combined salaries of nearly $100k. 

We had been living on $12k per year.  Suddenly, we had more cash than we knew what to do with.  Luckily, we were already set in our ways, and we didn’t really care to expand our lifestyle too much, so we saved the vast majority of our earnings.  By November, we had determined that we loved the neighbourhood where we were renting an apartment and decided to buy a home when they broke ground on a brand-new subdivision next door.  We were half way into construction when I was laid off at Intel. 

We had determined what we could spend on the house based on my salary – assuming that my wife would quit working when we decided to have kids.  My salary was about 50% higher than my wife’s, so the numbers didn’t work out on her salary alone.  But, we had all that money saved and figured we could cover the mortgage payments by dipping into savings each month until I found a new job. 

We often look back on the decision to go through with the purchase of our house as an uncharacteristically risky one for us.  It turned out to be a great decision, because just a few years later we were heading into the real estate bubble, and we would not have been able to buy our house at that time.  Still, the purchase of the house did cause a lot of stress for much longer than we anticipated.  The economy and the job market were a mess in early 2001.  I guess I should have anticipated that nine months of corporate experience and an MBA would be worthless in that economy.  Then September 11 hit, and things got even worse. 

I was unemployed for just over a year before I was finally able to find a job at only $48k, much lower than my $66k starting salary out of business school.  The job is at a very cool company that is well respected all over the world.  We make products that people stand in line to be the first acquire.  I really wanted to work for the company and figured this job would be a short-term stepping stone to a better job, one worthy of my educational credentials and with a commensurate salary.  The job turned out to be even better than I expected and easy on the life side of the work/life balance.  I quickly realised that I was making as much per hour as I was at Intel, even with the lower salary. 

Children

As I approached 30, I started feeling that if we didn’t get some kids soon, I would be too old to be a cool dad.  My wife and I had seven years to establish our life together before our first child came along.  That time together without any kids was a great start to our marriage and certainly made us more capable as parents.  Time to establish a marriage is another real advantage of marrying young.

We had always planned on raising our kids with a full-time parent, so my wife didn’t go back to work after our first was born.  This makes even more financial sense, now that we have three kids.  Having my wife at home is an arrangement that we have enjoyed very much, even though it was quite difficult for her when the kids were very young.  Now that all of the kids are in school, she has plenty of time to get out and play with other moms in the same situation.  I have to say I am pretty jealous.  She usually goes hiking, biking, paddle boarding, or on some other adventure two or three days a week.  She gets to spend long days at the gym on the others.

We have often thought about my wife going back to work, but we do like the kids to have a parent around when they get home from school, and we don’t need the money.  The amount that she could contribute to our savings is small relative to the returns we are making on our investments.  For that matter, even my salary makes very little difference anymore.  I only started tracking my net worth and its growth six or seven years ago.  Since that time, there has never been a year when I made more money at work than our investments made on their own.  On average, our investments have returned double what I earned at work during this time.

Parenting is never easy.  It certainly has been a challenge for me.  My kids are growing up in an entirely different environment than I did, so I’m not sure how relevant my experience is as a reference.  I am happy that all of my kids are doing very well in school.  However, they hate work.  I have been unsuccessful in teaching my kids the lessons my dad taught me about the importance of work.  I’m not sure why that is.  Part of it may be that my wife and I are not entirely unified in our attitudes to work.  She didn’t have a job until just before we were married.  Culture is also moving more in that direction.  There aren’t a lot of teenagers with jobs anymore.  History tells us that it is rare for wealthy parents to raise wealthy children.  That’s a difficult reality to operate in, but I haven’t given up on my kids yet.   

I have, however, been very happy with my kids’ response to lessons about money.  They get a pretty solid exposure to issues of personal finance from me and my wife.  We openly discuss financial topics in the home.  My kids know how much I earn.  They know that we are multi-millionaires.  They know how much our house is worth, how much the utilities cost, and how much college costs.  They know that they will be responsible for a large portion of their college and life expenses when they leave home.  I have been happy with the outcomes in cases where I required them to spend their own money on things they want.  It is hard for anyone to appreciate money when they haven’t earned it.  When my kids spend their own money, they suddenly become careful with their selections and then value the items they purchase more.   

I was recently caught off guard when I was asked whether my kids expect to inherit my wealth.  This is something that I have never discussed with them.  They have never asked about it.  I think they understand that they should never feel entitled to a handout.  I hope I am preparing my kids to confidently make their own way in the world.  I certainly hope they inherit my attitudes about wealth.  They have already inherited a strong preference for a life of financial independence.

By the way, I like the 4% rule as a way to teach kids about money, because it helps them understand that even though a million dollars is a lot of money, it is only enough to sustain a $40k lifestyle.  That’s not a lot if you have a family and don’t also own your home.  My kids are able to see how we can be multimillionaires and still have to make choices about how we spend our money in order to keep our life lifestyle sustainable.

Reflections On My Career

My job ended up being more enjoyable than I expected.  I did get promoted relatively quickly – after 2 years, but that was the end of my meteoric rise.  I’ve been in the job for 17 years now.  The first ten years were really great.  The next five years were really challenging.  I had a manager with whom I was simply not compatible.  I worked extra-long hours and had my requests for time off repeatedly rejected.  Because of my long tenure at the company, I earn very generous vacation time – 6 weeks per year.  However, I was losing 3 of those weeks each year, because I couldn’t ever get away.  I approached the situation with patience.  I wanted to transfer out of the group, but I had invested so much time and effort in the position.  I wanted to leverage that performance into a promotion to a different category of the business.  I could have transferred right away if I had been willing to take an equal position and start over building a performance record worthy of promotion.  This decision turned out to be the worst decision of my life.  For five years I was worn down by an oppressive boss who dangled the carrot of promotion in front of me but took every opportunity to devalue my contribution and me personally.  I persisted in my work, but allowed defeatism, victimhood, and despair to take root in my mind, then transform me into a stressed out, pessimistic, prematurely-old man.  I lost hope and forgot the place for fun in life.  The whole situation was worse than a complete waste of time.  I never got the promotion. 

Luckily, I was reorganised into a different group.  Two years later, my work environment and life in general are vastly improved, but I still struggle sometimes with the emotional scars I received during those difficult five years.  I have learned that the feelings of being treated unjustly can be very enjoyable to wallow in.  They were comforting to cling to when things didn’t go my way.  But they didn’t improve the situation.  They just made it harder to get myself in the frame of mind I needed to be in to succeed. 

If you are in a similar situation, get out of it.  Don’t let yourself be a victim, and don’t ever entertain thoughts of victimhood.  Those thought will damage you more than any unanswered injustice you are likely to experience. 

Unconventional Life Plans – FIRE

During this unhappy time, I started looking around at other possible options.  I became aware that my net worth was getting to be pretty substantial, and I started tracking its growth.  I liked the idea that maybe I had enough money to leave work permanently.  I started really tracking my net worth right in time to watch it cross over the million-dollar mark (including my house).  I earned returns on my investments of about $100k that first year I was tracking.  I wondered if 10% returns were sustainable.  Luckily, I didn’t do anything rash, and soon discovered the 4% rule and a lot of good writing about it.  The 4% rule is not nearly as attractive as the 10% rule, but it delivers much better results if you never want to go looking for a job again.  I developed a strong aversion to job searching during the year I was unemployed.

I had always been interested in investing and watched the markets and my stocks on a daily basis, but my thoughts turned from general, aimless preparations for retirement to the idea that I was way ahead in my preparations and maybe I had attractive options I could exercise sooner than age 65.  I was introduced to FIRE through an article that popped on Yahoo Finance by Tanja Hester at OurNextLife.  I was inspired as I watched her make the leap into early retirement.  Her blog also introduced me to Mr. Money Mustache, whose blog I read from beginning to end.  By this time, I had achieved multi-millionaire status, and was really starting to recognise the potential freedom that was within my reach and ready for me to actualise at any time.

I still haven’t made the leap to retirement.  I realise that I have arrived at this point in life with my physical and mental preparation for retirement out of synch with each other.  I keep thinking of my grandmother who was so proud of her excellent physical health.  She was very active and traveling the world into her late eighties.  At around ninety she quickly slipped into Alzheimer’s and dementia.  Her mind had moved on, and it took some time for her body to catch up.  To succeed at retirement, I need to get my mental and emotional preparations in synch with my financial preparations.  In the meantime, I don’t feel like retirement is something I need to rush.  I would be happy to get away from the daily grind, but I also feel a strange need to get that promotion I have worked so hard for – maybe just as a point of pride.  I also feel like my kids are holding me down right now.  The one thing I want to do most in retirement is to travel, but I also want my kids to have a stable education.  Travel and education would be difficult to mix.  My kids don’t listen to anything I say, so homeschooling is non-starter.

For now, the situation is working out pretty well.  I keep going in to work, and my savings continue to grow.  This is good for the anxiety I have about running out of money and needing to go back to work.  There are two points, beyond which it would be hard to justify my continued work.  One is when my youngest graduates from high school in nine years.  The other is when my invested assets (not including the house) reach $2.5 million, which will allow a somewhat arbitrary, but nicely round $100k safe withdrawal rate.  That may likely be just a few years away.

My Thoughts on Personal Finance

If you did some quick math while reading my introduction, you might have noticed that my net worth is higher than all of the household income I have ever received.  The power of compounding interest can be your best friend or your worst enemy.  I highly recommend using it to your advantage.  This is the simple secret to my financial success. 

My investments have been almost exclusively in stocks (and stock funds).  I was lucky to learn about stock investing when I was fairly young.  Lucky, because I learned the hard lessons of losing money when my investments were relatively small.  The first stock I ever bought went to zero.  The cost of that lesson was huge at the time, essentially my entire net worth – $800.  A lesson of similar impact that would cost hundreds of thousands today. 

The stock market is an amazing wealth-building machine.  Average people like me can expect to make millions with it, but that isn’t going to happen quickly.  The stock market rewards two things – time and diversity.  Anyone who consistently buys and holds a broad-market index fund over decades will not be affected by the storms in the market or the failure of some companies and can expect to earn an average 8-10% annul return.  This is all it took for me to make my millions.

As I mentioned earlier, I was “lucky” to get married young and to find happiness in a simple lifestyle with a partner who was similarly happy with the situation.  When we started making real money, saving was easy.  We weren’t burdened by debt, and we didn’t enjoy spending for the sake of spending.  We had three years of double incomes, which also boosted our savings.  On average, we saved around 40% of our salaries, except when we were paying a mortgage.  After my wife quit working, we were cash-flow-negative each month after moderate savings and mortgage payments.  We decided to use our savings and investments to pay off the mortgage about five years in.  Then, we diverted most of what we had been paying for mortgage back to retirement savings.  The timing of this strategy turned out to be very fortuitous, because we sold investments at a relatively high point and then pumped the 401K hard though the great recession and the epic bull market that followed.  Fourteen years later, I’m not sure this was the best financial strategy, but it was the right decision for me and my family.  Living completely debt free has been a big source of needed peace and satisfaction and has freed up the mental and emotional bandwidth to deal with other life concerns.

Paying FI Forward

I have talked with very few people about my financial situation.  I find it awkward to tell people with whom I associate personally that I’m rich without first developing a mutual financial understanding.  I wish I could share what I have learned with people.  This is the reason I started my blog.  I want people to experience and achieve the freedom, peace, and satisfaction that I enjoy as a result of being finically independent.  I may not be quite ready to approach my friends, siblings, and neighbours, but maybe I can help or inspire some random, anonymous person on the web.

I do have a reputation at work as a resource for financial advice.  I have been able to get a lot of people set up making 401k contributions (SIPP / tax advantage pension contributions) or participating in the employee stock purchase program.  Others have been in a position to get more serious about financial planning.  Any financial plan needs some consideration of personal goals, but if I had just a minute in the elevator to give someone financial advice, this is what I would want people to know:

You don’t have to spend your life toiling just to keep up with expenses.  You can make your money work for you – build a Perpetual Money Machine – so you can spend more of your life doing what you are on Earth to do.  It will take some sacrifice, but not nearly as much as a life chained to a job.  Start today to save 10% of everything you earn.  Even better, determine to increase that percentage each year.  Take advantage of employer matching and tax advantaged accounts.  Invest in a broad-market index fund like VTI (Vanguard Total Stock Market Index).  That is the simple path to freedom.  I sincerely believe that anyone capable of providing oneself can follow this path to financial independence, peace, and satisfaction.

Remember to enjoy the ride…