This Utah millionaire couple has incredible earning power and created a plan early. They are now well on their way to financial freedom with a story that will surely inspire you.
What type of employment do you have and what does your comp plan look like? Any side income?
I was formerly an in-house legal counsel for a Fortune 100 company. My wife is a medical device sales representative. Our combined income is roughly $550k ($200k for my wife and $350k for me). I recently shifted to a part-time consulting role so our future income will likely be in the $250-300k range.
When did you cross the million dollar mark and how did that happen?
2016, right before our daughter was born. Our wealth accumulation story is pretty boring; we’ve always saved at least 50% of our salaries and invested the savings in low-cost index funds. In 2010 we had a negative net worth due to student loan debt but our net worth has grown rapidly thanks to a 10-year+ bull market and relatively high salaries. On average we’ve saved roughly $100k per year during our working careers (less in earlier years more in later years).
What was the single best thing you have done with your investments?
Nothing extraordinary. We bought a house in the SF Bay Area in 2015 and sold it in 2018. This netted us about $150k in tax-free gains (on a $175k down payment). Everything else has just been in the market so it has enjoyed positive returns pretty much every year (with the exception of 2015 and 2018).
Where do you have your money invested and what are your debts? (account balances) Whats next?
We have roughly $550k in a taxable account. We have Roth IRAs totaling about $250k. Our traditional 401(k)s comprise another $500k. We have HSA accounts of around $100k. Our house is paid off and worth around $600k (after accounting for real estate sales transaction fees). I also have a pension from my former employer with a present cash value of $100k. Cars/collectibles/bikes/etc. equal around $100k (salvage value).
All of our investments are in low-cost index funds split 70-30 between equities and bonds. Our equities are split 70-30 between US equities and int’l/emerging markets. Bonds are mostly tax-exempt and held in our taxable account. Dividends are automatically reinvested.
No debt. We had a mortgage on our prior home but we were able to buy our current home with cash. I am a strong believer in not having debt, especially debt for depreciating assets (e.g. cars).
We continue to invest our surplus cash in our accounts.
What is the biggest pitfall or mistake you have made with your money?
Luckily nothing catastrophic. Hindsight is always 20/20 and we wish we would’ve invested in rental properties earlier in the decade. I know many folks who have now retired by accumulating passive income generating properties when prices bottomed out in 2010-13.
What are the primary tax strategies you follow?
We take advantage of any and all tax deferral and minimization strategies that are available to us. We max our 401(k)s and HSA every year. Medical expenses are paid for with after-tax dollars and invoices are saved in order to let the HSA grow until it can be used as for tax-free retirement withdrawals. I use after-tax 401(k) to Roth conversions for the past few years up to the 401(k) contribution max of around $56k (also known as a “mega backdoor Roth”). A large portion of my taxable account is held in tax-exempt bonds.
Other than that we are pretty limited in our tax-planning strategies as W-2 employees. Our federal/state tax burden has always been quite high. But we don’t complain too much since our salaries have been in the top 10%-ile for most of our careers.
Do you follow a budget and how's that going?
No. I am naturally frugal so budgeting has never been necessary. Our spending has increased over time but we still like to keep spending around $60-80k/year (with a paid-off house). We feel this provides us a comfortable life and we don’t really desire anything additional.
What steps have you taken to protect your money? (estate planning, trusts etc)
We need to be better here. I own umbrella insurance to protect against some unforeseen liabilities. I need to investigate estate-planning strategies as this is one area where I have not focused my attention. Most of our focus to this point has been towards the accumulation of wealth and not preservation.
Do you use a financial planner or software to track your assets?
No financial planner. I keep track of all my assets in a spreadsheet that I update monthly. I like to keep my investing simple and low-cost. I’m quite proud that our weighted expense ratio for all investments is around 5 basis points. I can’t justify paying for active investment management unless it was shown to me that I could achieve a higher return than passive investments. My employer offered an investment advisory service to review our portfolio. I found this somewhat useful (although I’m not sure I would’ve paid the $5,000 it cost had it not been provided by my employer) and I would consider using a fee-only advisor like this at some point in the future.
What's your best money advice for someone who is just starting out?
My best money advice for someone just starting is to avoid lifestyle inflation. My wife and I started out with a household income of around $90k and we’ve been conscious not to increase our spending as our earning increased. The formula to wealth is pretty simple: (1) live below your means; (2) invest the difference; (3) save additional raises/salary increases; (4) let compound interest do its work. The real work is in executing the steps.
If you could do it all over, what would you do different?
Nothing really. As mentioned above, there are investments that I wished I would’ve pursued, but I can’t complain too much as I haven’t made many money mistakes.
What does a typical day look like for you?
My days now are much more relaxed than a few months ago now that I’ve switched to part-time work. Before taking a step back I was working regular 50-60 hour weeks with lots of travel and weekend work. Now I wake up at 6 am and get ready, read the news, get my daughter ready for pre-school. After dropping off my daughter at school I work for 2-3 hours in the morning. I then typically go on a 1-2 hour bike ride. In the afternoon I either do various house projects or work for a couple more hours before picking my daughter up from school. We typically eat at home during the week and try to focus on making healthy dinners. In the evening I usually read/watch sports/watch tv for a couple of hours before going to bed around 10.
Any advice on life you can share? (school, career, family, personal development)
I would recommend putting the time in early to maximize your earning potential when you are younger. Compound interest is magical, but it needs time to work its magic. The earlier you can begin earning/saving, the easier it will be to accumulate wealth. I focused on getting the best education I could in order to get a high-paying job out of law school when I graduated at age 24. I then maximized my earnings for the next 8 years and worked long hours, was flexible in moving to high-paying cities, etc. This allowed me to save large chunks of money early in my career and I am now in a position to take a step back now that the heavy lifting has been done. Having a spouse who is on the same page in terms of finances is important as well.
Any books you would recommend on money?
Your Money or Your Life; The Simple Path to Wealth; The Millionaire Next Door
Do you have a retirement goal? What are your plans? Concerns?
I probably won’t ever “retire” in the traditional sense of lounging around all day. That being said, we are getting close to the point where our passive investment income will more than cover our living expenses. At that time we will need to sit down and figure our next steps. I’ll probably spend more time on my hobbies (cycling, cooking, travel) and volunteer with organizations that I’m passionate about.
Favorite restaurants in Utah?
Red Iguana; Ruth’s Diner; Log Haven; Bombay House
Favorite golf courses in Utah?
Favorite ski resort?
Sundance on a Sunday
Favorite Hotel in Utah?
Where is your favorite Utah vacation destination? Outside of Utah destination?
Utah destination: Moab Non-Utah destination: Northern California in the US and Spain internationally.
Favorite things to do in Utah?
Cycling. Both mountain and road cycling is a huge hobby of mine and luckily Utah has great options for both. Spending time in the outdoors in any capacity is one of my favorite aspects of living in Utah.