Do you ever wonder how you can become a millionaire in your 30's?
Well, I sure do!
In my quest to solve this mystery, I'm completing one interview a week with a young millionaire and asking them how they reached 7-figure status before their 40th birthday.
Here's this week's interview with Mr. Shirts!
How old are you? If you have a family, tell us about them and their ages.
My wife and I are both 36 years old. We don’t have any children (at least not yet).
What part of the country do you live in? Do you own your home or rent?
We live in a big city in Texas and currently own our home.
What is your current net worth? What is it composed of?
I stopped publicly disclosing our net worth number after we passed $1.6 million.
Our net worth is almost entirely invested in equities and we’ve been able to defer a tremendous amount into retirement with the help of company matching and the availability of a deferred compensation plan over the last couple of years.
What are your current sources of income? Does your spouse have other income sources?
Almost all of our income is derived from my job in commercial banking. The income consists of salary, bonuses, and restricted stock grants. We also are seeing $10,000 – $15,000/year in dividends/capital gains from our taxable investment portfolio.
My spouse worked as a veterinarian for seven years but took some time off from practicing when we moved for my job and she hasn’t looked back.
What has been the single best thing you’ve done to increase your income up until this point?
It's not necessarily a “single” thing, but its been focusing on my career and skill set. I’m in commercial banking, but it's really technical sales. We issue loans to privately/entrepreneur-owned companies and it's a business that’s learned through experience. You have to find potential customers, but then you have to negotiate an acceptable deal between the employer and the customer.
There’s a lot of competition for people and the loans can get large in size (think $5,000,000), so the people who can go out and produce good loans for their institution are rewarded well.
This job took a good five years before I was pretty good at it. Then ten years in I was given an opportunity to lead a team. This ended up giving us the lesson of how to save a lot of money when our salaries are low because ten years ago new producers in this line of business didn’t make a lot of money.
What ways do you invest your money?
I graduated college with a finance degree and pretty quickly started studying for the Chartered Financial Analyst designation. I think that jaded me early on to believe the right way to invest was to pick individual companies and find the best fund managers out there. This belief slowly changed and I’m more in the camp of buying index funds and driving the expense ratio as low as possible.
The current allocation sits around:
- 16% Individual Stocks
- 10% REITs
- 64% Passive Index Funds
- 10% Active Mutual Funds
I do believe that over a long period of time, mid-cap and small-cap indexes will outperform the S&P 500, so I supplement the Total Stock Market Index Fund with Small and Mid Cap Index Funds. Over time this should provide a slightly higher return than just owning a Total Stock Market Fund alone. Ishares and Vanguard both offer low-cost ETFs.
I provide some detailed asset allocation information and account breakdowns here.
Related Post: 3 Smart Reasons for New Investors to Choose Index Funds
Did you receive an inheritance or windfall of some kind during your life so far?
We’ve never received an inheritance. The closest we came to an inheritance was receiving a 1989 outboard motor (new in the box) that was exchanged to us for two days of work cleaning out an old family member's home. We sold that for $850! We have no expectation of any inheritance in the future.
What debts do you have (if any)? If so, what are they? Which have you paid off?
Today, we only have a fairly substantial mortgage. I work in the 4th largest city in the country and don’t enjoy commuting, so we bought close to my office and took out a $500,000+ mortgage.
We paid off $100,000 in student loans between my undergraduate loans and my wife’s veterinary school loans. Looking back, we managed our student loan debt pretty well by maxing out all our retirement accounts first, getting a nice base of savings/investments under us, then when our net worth was up to $700,000, we attacked the loans aggressively. In hindsight, we could have waited another four years and let that money stay invested, but it's nice to have the debt gone.
How do you track your net worth?
I had completed one or two personal financial statements for loans/mortgages and had a general idea on how much money we had, but I completed my current spreadsheet first in December of 2011 and update it consistently once per month. I also started logging our net worth each month. I’ve found keeping that log of where we were and where we are now helps us stomach the two 10%+ market drops we’ve felt.
It was nice having that monthly benchmark this past February when the market was down 10%, we could look back to the late 2015 correction and say “okay, that was rocky for five months but worked out okay.”
Do you budget your money monthly?
Yes! I’ve kept a budget since college, I grew up watching money struggles in my family and was getting by in college on a complete shoestring budget. I had no backup if I ran out of money, so budgeting was a forced habit. That continued when I got married and my wife was in veterinary school, we were still near broke with my entry-level job and we were going into more debt each semester.
We’ve maintained that and log every expense. We care less about “going over” in a month now because it's just a transfer from our investments, but seeing when we “go over” still instills discipline.
What is your favorite fintech tool that helps you grow your wealth?
I started using Fidelity in 2008 and they were ahead of their time with the best overall online banking / online investing. Most of the other companies at that time were geared towards “traders” and I’ve never found Vanguard to be as user-friendly. Their donor-advised fund availability seems to be the best based on low minimum / low grant sizes, and now they’ve whacked their existing expense ratios. Schwab, Fidelity, and Vanguard have all done amazing things for the DIY investor.
These online calculators can run simulation after simulation of how much money you need to retire, chances of success, chances of failure. It's tough to sometimes imagine not working and how long your money would last. I think both of these crowdsourced calculators win.
I’ve been a fan of travel rewards, but we haven’t been incredibly efficient in managing our sign up bonuses until we found these aggregated sources of information to know what the highest bonuses are and who the issuer is. The Facebook community that Travel Miles 101 has is especially nice, any question you have has already been answered there if you do a search.
Why is it important for you to build up your wealth?
The biggest thing that drove me and my wife is we had no real backstop.
The best way to describe both my parent's background and my wife’s parents' background is they were the rebellious kids. Our grandparents were either WWII veterans or children during the war and they came home then spent their lives from the 50's to the 90's working. That’s what that generation did and was darn happy to do it. They worked hard and provided for their family.
Their children were the rebels. My parents both quit college, ran off, and were knuckleheads with money for a good chunk of their adult life. My wife’s parents also quit college but matured quickly with solid non-degree type jobs. There was never a ton of money, but we also saw the work ethic of our grandparents and that was instilled in both of us.
Later on, the importance of building our wealth changed/evolved, neither of us enjoy our life/time/schedule being dictated by someone else for money. I specifically remember one moment in my working career where I said to myself “never again will I HAVE to have this job” when a complete jerk of a boss threatened my job and I didn’t have savings or options.
We also recognize that we have the financial ability to help our family if needed and will probably have some type of hobby/lifestyle entrepreneurship after I stop working full-time.
This podcast is dedicated to helping you strengthen your family tree and live financially free.
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— Andy Hill (@AndyHillMKM) August 23, 2018
Check out my podcast dedicated to growing your young family's wealth!
What is one financial mistake you’ve made along your young millionaire journey?
There is a lot written about the big three expenses: Transportation, Housing, and Food. People write about these because they are huge portions of your budget and thinking differently about them is how to impact change. We’ve made good decisions and mistakes in all three of those, but none of them were crushing mistakes.
I’ll actually say the biggest “mistake” I’ve had is not being willing to take certain risks when I knew in my gut they were the right choice. I took the safe route growing my career with a pretty defined path to increase earnings instead of taking different risks.
The two that stand out to me are:
1. I was sitting in the center of the residential real estate collapse and didn’t buy any rental properties. I had money, a job, and knew how to run the numbers and finance them, but never had the courage to pull the trigger. Career skills are great, but it still involves me selling my time for money. That real estate investment and sweat equity we’d put in would have been an annuity.
2. I had the opportunity to go work for a client who was cornering the local market for a profitable financial product and he would hire me directly into his management ranks. I should have told myself the worst thing that can happen is I’ll be back doing the same thing I’m doing if this doesn’t work out.
What book has been most influential to you?
The Millionaire Next Door, without question. I was lucky to get hold of that book in 2003 after a few months into my professional job. Learning the difference between income affluent and wealthy at a young age stuck with me.
Related Post: These 5 Books Will Skyrocket Your Net Worth
What is one financial hack that has helped you that you think most people don’t know about?
Living close to your work.
People have been giving financial advice for a hundred years, but Mr. Money Mustache (MMM) was the first person I ever saw writing about the slow leak of money caused by a commute. Gas, wear and tear on the car, the emotional stress of dealing with drivers, and the time it steals from you is unbelievable. It's not just the financial aspect of it. The wear and tear that you put on your body is cumulative over a lifetime and sitting in a car is outright bad for your long-term health. I moved closer to my office after finding MMM in 2013 and have never looked back.
Where do you find the most joy in your life?
I could give the easy answer of traveling or spending time with family. However, I think those answers are given and the deeper meaning of joy is a tougher question to answer right now. I credit Doug Nordman with his Fog of Work post as to why this is a tough question, especially for someone that’s been so career focused.
At the top of my list are spending time with my spouse (who’s also my best friend!), having a consistent routine, and long trail runs. Professionally, I enjoy helping others grow and develop their skill set. I hope to take a lot of what I’ve learned in business and apply it in some way after leaving full-time work next year.
For the 20-something with a $0 net worth, what advice would you give them to become a millionaire in their 30's?
This falls under one of my favorite sayings: It's difficult, but it's not complicated.
Create a budget, then put your budget on a diet reducing the monthly inflows that make it to your budget. You starve your budget by increasing your automatic contributions to retirement accounts or automating your investment accounts. We have almost half of our monthly income automatically invested, then we use that net number as the starting point of our monthly budget.
Personally, I found it easier to spend the money if it was in the budget and at times our total budget had a higher started point. We’ve been better when that starting number is just lower. It avoids the temptation of justifying an expense.
Where are you in your net worth journey?
Please let me know in the comments below!
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