Millionaire Dreamer

A lot of people assume that if you are a millionaire, you don't have to work any more and retire right away to live happily thereafter.  Yes, we are all confused about who millionaires are and what does it mean to be wealthy like that.  That is what I used to wonder myself when I was just a regular guy with just a few thousand dollars of savings in my bank account as a man in my late 20s. Here is the reality, though.  I am sure that many people who have no retirement savings or only a modest amount of tens of thousands of dollars or even low hundreds of thousands of dollars will say that I am one of those spoiled, rich people who should be happy to have so much money.  To me that is beside the point.  My reality is that my wife and I have a certain lifestyle, as modest as it is.  We have just one car , 6 year old cell phones , we cook nearly all our meals at home , hardly any subscriptions , etc.  We still end up spending close to a hundred thousand dollars each year living a midd

The year 2022 has not been kind to investors.  After the boom during the Covid-19 pandemic when he had massive drops and then a boom like no one had imagined, many tech or growth stocks have lost massive value.  Even otherwise solid companies like Amazon, Tesla, Apple, Facebook/Meta, etc. have lost a lot of value.  In times like these, particularly if you entered the market during the pandemic (meaning at or close to the peak), it is tempting to think that the market is rigged/broken and "not for me."  This is the biggest mistake you could make. Let share this chart with you then.  This shows the market's performance between 1982 and 2022.  Indeed, there have been drops, but what do you see over the long term.  Nothing but growth.  In fact, when you look at real estate, gold, etc., they don't appreciate like the market does. So what is the secret to investing? For me, it is all about keep investing no matter where the market is going .  I entered the stock market clos

Previously, I have discussed the importance of patience in becoming a millionaire .  As a self-made millionaire couple (granted our student debt was small because of scholarships and cost of college being a lot low in prior to 2000s), our wealth has been a result of simply investing each year the money that we had left over after saving, for example, by cooking nearly all our meals at home . So, what does discipline have to do with it? If you are wondering that, the answer is that based on my conversations with friends and family members who are not millionaires and some of them have actually had higher total incomes during the two decades that it has taken us to become millionaires, my understanding is that they always have an excuse for spending.  The car is too small for their family, they need a bigger house because of having another kid , they need a new grill/TV/ phone /handbag, etc.  Saving is the last item on their list, taking care of their needs and wishes is a higher prior

Let me share my philosophy on debt.  Many experts often recommend paying for everything in cash, never to use credit cards, and tell you not to buy anything unless you have the money to pay for it in cash.   A smarter way to benefit from debt So for my wife and I, the only debt we currently have is a mortgage.  You might wonder that if we are millionaires, why don't we just pay off our mortgage, as many advisers suggest?  Well, this is the reason: our mortgage interest rate is just 3.5% for another 21 years, while the average return in the stock market is about 8%.  In other words, a bank is giving us liquidity so that we can make an extra 5.5% interest by simply being responsible. You can apply the same logic for any debt that has a relatively low rate of interest.  So, if a car comes with 0% financing, unless you can negotiate a much lower price (rather hard to do with those car dealers), it is much better to take that free money, rather than pay it all in cash. A similar smart s

One of the main reasons married couples have higher net worth than cohabiting couples is because they are more likely to have common goals for saving and retirement . To get started with combining your finances and financial goals , start with a joint checking account.  Whether only one or both of you work, until you pool all your financial resources, you are really not really in this together.  Having separate accounts and sharing expenses as if you are merely conducting transactions with others, means that your marriage will also be transactional and that will impact how you feel about wealth creation. My wife and I have always had a joint account and we simply pool all the money that we make.  Then we spend it as needed.  If there is something that she needs only for herself (we count items like clothing, makeup, etc. for her and gym fees for me as essential family expenses rather than discretionary expenses), for example, she wants to gift something big to her friends or family m

I have discussed why having a simple wedding is key to becoming a millionaire , a study by the Federal Reserve caught my attention.  As of 2019, the median net worth for cohabiting couples age 25 to 34 was $17,372, a quarter that of the $68,210 for married couples of that same age range, according to data from the Federal Reserve Bank of St. Louis. Fewer couples are getting married but they are living together and even raising families That is why it is troubling that their net worth is a quarter of what it could be if they were married.  So what could be the reasons.  Having been married for 20+ years, this is what I can hypothesize: When couples simply cohabit, if they feel like it, they can simply pack up and leave.  A married couple has to actually divorce, meaning interactions with lawyers, accountants, and maybe someone from their church (if they belong to one).  This forces them to work through their problems rather than end their relationship, which also means that they end up

As I discussed in my post on imagining yourself to be a millionaire , the reason it was so hard to do was that you have to imagine that small amounts of money that you are investing each year will eventually add up to a million bucks .  So way back in 1998 when I first signed up for my employer's 401(K) plan and contributed my first $12,000, with the ups and downs of the stock market, in the first few years it did not seem like much.  However, because of the tax breaks available, the desire to save for retirement, and a passion for economic security, we just kept saving whatever we could and invested it in our retirement plans and some years we had money left over since we maxed our contributions, so we invested it in a brokerage account, mostly in ETFs . How long did it take us to become millionaires? Well, it is hard to really come up with a precise time, but in 1998 we opened our first brokerage account and also signed up for my employer's 401(K) plan.  Prior to that, though

I'll be honest.  In 1994, when I got my first corporate job after graduation, all I could think of was building a cushion of savings so that I would not feel stressed if I got laid off or needed to pay for an emergency for me or my loved ones.  In a few years, my girlfriend and I were living together and while we together brought in about $100K a year, between apartment rent and paying for two cars, we were left with little.   How smart of me to make the maximum 401(K) contribution! That said, the only thing I was definitely doing was making the maximum contribution of $12,000 to my 401(K) because I did not want miss out on the match from my employer.  At that time, I did not think it was a big deal, but in retrospect, it was the wisest decision of my life.  While I have strong roots in Math and understand the concept of compounding, trust me, it was difficult to visualize that it will eventually work and one day at some point of time in the distant future I will be a millionaire.

If you are an aspiring millionaire , you obviously want to know what will really make you join this very exclusive club of millionaires .  So here are many ways to look at it. Net worth millionaires This is the most accurate way of looking at who is really a millionaire and this is how financial planners and advisors look at it.  Naturally, the banks, other financial institutions, and the government will also use this definition. Net worth = Assets - Liabilities Assets are things that you own.  For example, cash, stocks, valuables, gold, home/real estate, jewelry, etc. Liabilities are items like debt and other commitments like child support, alimony, etc. If you live in a home worth $100,000 (that is assets) and your remaining mortgage is $75,000 (this is your liability), the home will contribute $25,000 to your net worth. Now, this is a technical definition, but the one definition that I like is often used when you want to become a professional investor (e.g. you want to invest in sta

When I was not a millionaire, I used to think that the rich simply spent their money on finest things.  After all, we always had to compromise by opting to buy lower priced products.  And in the media, we always saw the celebrities, in particular, with the most expensive cars, clothes, homes, etc. Of course, then you read a book like The Millionaire Next Door (a book that came out in the late 1990s, and while a lot of information is outdated since the dollar amounts are less relevant today and lot has changed, it is still a great book to learn some of the principles of creating wealth), and you realize that the super-rich millionaires did not drive fancy sports cars or waste their money on handbags with logos or show off their money by having the most expensive smart phones.  Instead, they lived below their means and never wasted their money to impress other people with the stuff they could buy. That is why a story that former CEO of GE, Jack Welch, told resonated with me.  He once sai