Hello dear reader and welcome to the third blog post of the Millionaire Interview Series. In today’s interview, we have Perpetual Money Machine.

As this blog’s domain name suggests, my personal long term financial goal is to reach a net worth of one million euros, or in other words, become a millionaire.

In addition to self-educating in topics as finance, and summarizing my learnings on my millionaire mind series, I am keen on acquiring knowledge from other people experiences, especially from those who are self-made millionaires.

So, what is this Millionaire Interview Series about?

Every interviewee will answer a set of questions, which aim to collect information from several millionaires around the world. These questions will be all be pretty much the same for everyone.

My goal is to analyse and find common patterns, behaviour, careers, lifestyles, mindset, hobbies, or any other aspect that may come across.

If you’d be interested in being interviewed please get in touch with me by email tony (at) onemillionjourney (dot) com or a message me on Twitter.

Previously interviewed:

  1. Millionaire Interview #1 – Finimus (The UK)
  2. Millionaire Interview #2 – FI Heroes (USA)

Meet Perpetual Money Machine

For this interview, I reached out to a peculiar machinist, a trade person who doesn’t precisely machine metal o wood but money. As I could learn, he’s not only outstanding at making money but also at writing about the topics of financial independence, living below your means and retirement planning at his personal finance blog Perpetual Money Machine.

My first thought after I had met him on Twitter was: A Perpetual Money Machine? WTF? It must be someone printing notes for the FED??!! Hah…

via GIPHY

But, I can tell you in advance, he is not! 🙂

He has machined most of his wealth by consistently saving and investing over a period of two decades. Building perpetual money machines that will generate money to sustain his family lifestyle is his approach to becoming financially independent.

As you’ll see, he and his family are millionaires thanks to living below their means, hard-working and automating investments in broad index funds.

Becoming a millionaire isn’t rocket science.

Something that raised my attention is that they purchased a house valued 6 times pre-tax household income in 2001. You would not say that this is living below your means, but what came next was, as they manage to pay off the mortgage in only 7 years, while others lost their house during the 2008 housing bubble.

I like all the advice he mentions during the interview, but I want to especially highlight one that I believe can be overlooked easily:

 “Maybe make the most of the COVID-19 crisis to reassess what’s really important to you.“

Without further ado, it’s learning time with The Machinist.

Introduction About Yourself

How old are you?

45

What’s your nationality?

USA

Where do you live?

I live on the left side of the USA in the suburbs of a major city with a higher than the average cost of living.  Google says the average salary is nearly $70k and the average house cost is nearly $400k

Are you married? (If so, how old is your spouse and when you married?)

I have been married for 22 years.  My wife is 42.  We married in 1997 at age 22 and 19.

Do you have any children? (If so, how many and how old are they?)

We have 3 kids – 15, 13, 10

What do you do for a living?

I work in research and development.  I am responsible for bringing new products to market at a big international corporation.  It is an independent contributor job.  I started at $48k and recently passed $100k after 18 years.

Determining how wealthy you are

In this section, I would like to find out where you stand along the wealth continuum, or in other words, if you are a prodigious accumulator (PAW), an under accumulator of wealth (UAW) or just an average accumulator (AAW). More about this on wikipedia.

What’s your net worth? Please include debt details if applicable.

My net worth has fluctuated between $2.4 million and 1.9 million in the past few weeks.  My debt is a few thousand dollars – whatever I have spent on my credit card since I paid it off last month.

After a few weeks into the Corona Collapse, I am back to multi-millionaire status and about halfway back to my all-time high from recent lows.

How much of your net worth is inherited?

Zero

Could you please tell us what’s your pre-tax household income from all sources, except inheritances and how it has evolved from your first earnings until now?

My first job after graduating in 2000 paid $66k.  I was laid off after nine months and spent a year out of work.  My current job (since 2002) started at $48k and now pays $101k.  My wife worked for 4 years after graduating in 2000 starting at $44k and ending around $50k.  She has not been employed since our first child was born in 2004.

I have engaged from time to time in a side hustle or two, earning about $100k since 2000. 

I did have a pretty strong earning history as a kid.  I ran a lawn-mowing business starting in 3rd grade and through most of the college.  I was responsible for most of my own expenses other than room and board since middle school.  My parents did pay for my first semester of college.  I didn’t keep good records, but I was probably making around $20k per year through high school and college.

Sources of income

Please, would you mind telling us what are your main sources of income and how much they contribute to your pre-tax income household? (Day job, side hustles, businesses, dividends, interests… ).

Current income just over $100k.  I don’t include any dividends, because I keep my investment accounts completely separate from daily expenses.  I have a one-way relationship with my investment accounts.  I put money in and never take it out – until retirement.  I don’t really have any side hustle of any value right now.

I first hit $1 million in net worth in 2013.  I save about $40k per year, so I have had investment “income” (growth) averaging about $100k per year since then – even after my Covid losses.

Approximately, how many hours per week of your time is required to maintain this income level?

That’s a great question that I am glad you are considering.  40 hours.

Have you had any period with a significant lower stream of income due to a career or occupation change, incapacity, illness or any other bumps on the road you encountered? (If so, what did you do to overcome the situation?)

I spent 2001 out of work.  My wife was still working, so that made things easier.  When I finally found a new job, I took about a 30% pay cut.  This was not a big problem, because my wife and I had resisted lifestyle inflation after finishing college.  This was only 2 years later.  We also took a hit when my wife stopped working in 2004.  We had planned for her to stay at home, so we had been building a lifestyle that we could support with my salary alone. 

Do you spend time or money looking for new opportunities to boost your income?

I have been working really hard for many years to earn a promotion at work.  So far, that has been a complete flop.  I still keep trying.  Fortunately, I make far more “money” investing than I do by working.  This is not really “income,” but rather the growth of net worth.  I spend significant time on this, but I can’t say how much of that is productive and how much could be more accurately categorized as entertainment.

Savings, expenses and purchasing behaviour

How much of your pre-tax household income do you save and how it has changed over time?

My historical records are vague, but I have been saving around 20% in 401k, and 10% in an employee stock purchase program.  I get a 5% 401k match and typically get a 4% profit sharing that goes to my 401k.  By that calculation, I save about 39%.  I also save another 10%+ in a Roth IRA in most years recently, but less often further in the past.  I’d say that 40% is a pretty fair estimate of my savings rate since we paid off the house 13 years ago.  Before that, we were putting a lot of our money toward paying down the mortgage.  Is that savings?

Do you have a budget, pay yourself first or track your expenses? (If so, how much time do you spend on it on a monthly basis?)

We have never kept a budget, but we do track our expenses.  We also pay ourselves first with automatic withdrawals for 401k, etc. as noted above.  My after-tax-and-deductions take-home pay is very close to $50k per year, and we are spending most of that.

We use Personal Capital for tracking, and I spend a few minutes every day plus about an hour each month to discuss with my wife.

Do you remember how much you paid for your first home and what was your household’s total annual realized income at that time?

I paid $295k for my first home in 2001.  At the time, our pre-tax household income was about $50k.  I remember that the mortgage, tax, insurance payment was right about $1700 per month.  Yes, we were beneficiaries of the easy money that led to the 2007 housing crisis.  We probably should not have been approved for that loan, but we were never late, paid it off in 7 years and still live in the house after 19 years.

Is there any category where you don’t mind spending more money into? (travelling, education for yourself or your kids…)

My hassle-free budget categories are groceries and gasoline.  Of course, we still try to be wise consumers, even in those categories, but the way I figure it, any money spent on groceries will return several times the value in money saved by not eating out.  I also think that gasoline is a dirt-cheap way to have great experiences.  We chose to live close to work, school, and everything in our daily lives, so we don’t use a lot of gas.  In fact, I bike to work and have not driven into the office in many years.  But if we want to go on an adventure to the beach or the mountains or go see friends and relatives, then the cost of gas is well worth the experience.

What’s the most expensive piece of clothing and the motor vehicle you’ve ever bought?

I splurged to buy $120 hiking boots when I was in high school.  I spent around $250 on a ski parka in college (the one I am still using).  I do own a $300 suit, but it was a Christmas gift from my in-laws before I graduated from business school.  I am a big fan of Costco jeans – $14.

Cars are a little different.  We paid $28k for a new VW after graduating.  We decided that we would never buy new again and have had used cars since then.  The most expensive of those was a $22k Sienna that we are still driving after 10 years.  In January, my wife did something very uncharacteristic and spent $54k on a very slightly used luxury automobile.  I sure wish I had that money to buy stocks at recent prices, but that’s kind of the way partnership works.

What’s the current value of all your motor vehicles?

The 2 cars that we have been driving for the last 10 years are each worth about $5k.  The most recent purchase is probably only worth $40k, the ways cars depreciate.  I’m kidding, but I don’t even want to know how much it is actually worth.

Investing strategy and behaviour

What’s your net worth asset allocation?

Stocks and stock funds – $1.45 M

Home – $570K

Cash – $50k

What’s your investing philosophy? Do you stick into any strategy? (If so, do you change it often?)

I believe in investing consistently over decades and holding for even longer.  I had graduate-level training in stock analysis and used to believe that it was possible to pick quality stocks and perform better than the indexes.  After 20 years of trying to do so, I hit some epic home runs like NFLX for 100X+ gains.  I also picked some total losers like Kodak and Worldcom.  All in all, I consider myself lucky to have performed right in line with the market.  Now I put all my new money into VTI, and I tell anyone that asks to do the same.  It’s the perfect investment for almost everyone.

I also think it’s pretty fantastic to be a little aggressive about saving.  The power of compounding returns more than makes up for the nominal discomfort caused by making reasonable sacrifices.  I call it deliberate consumption.  Buy the things you really value and skip the things that don’t really mean that much to you.

How much time do you spend planning and tracking your investments on a monthly basis?

I spend very little time planning investment.  I enjoy tracking my investments and watching them grow, but most of my new investment is automated.  My biggest investment strategy decisions are things like whether or not I can afford to fund my Roth IRA this year and at what price should I donate appreciated stock to charity.

Do you follow the markets and media closely and trade accordingly? Are you an active or inactive trader?

I track my investments daily and read financial news to see what is driving the market.  As I said, the vast majority of my investments are automated.  I have probably averaged less than one sale of stock per year over the last several years. 

I am trying to figure out how to divest of some of the individual stocks I bought years ago and move that money into VTI.

Do you hire any professional financial and tax advisors, lawyers or accountants? (If so, what’s the annual cost of it?)

I have never paid anyone for this kind of service.  I believe that even if you consistently invested only in VTI you would beat the performance of an advisor over decades – even before subtracting the advisor’s fee.  I think advisors may be helpful for those that really don’t want to learn even basic personal finance or who are incapable of self-motivation and just need a coach.

I do my own taxes with TurboTax.  My mother-in-law is a CPA, so I do have a resource for complicated tax questions.  However, I think that most people can do their own taxes with software like TurboTax and can even find resources around them if they do have a tough question.

I don’t have a will, but I know I should.  I plan to use an on-line provider like Legal Zoom to get that done.

Tell us about your best investment.

I bought 50 shares of NFLX for $959 in July of 2006.  Adjusting for splits, that’s 350 shares at $2.74 each.  A year later I doubled up at $2.49 per share.  I held onto that $2k worth of stock through wild ups and downs.  Today it is worth $250k. 

And the worst one?

I have had several stocks that went to zero including WAVX, Worldcom, and WIRX.  I guess I have blocked the others from my memory, but there were many.

What would be your investment advice to anyone who wants to build wealth today?

Start saving at least 10% of your income today.  You can do that.  Keep doing that and increase your saving rate periodically.  Invest consistently in broad-market index funds and hold forever.  

Of course, it is so much easier if you start out (as in fresh out of college) this way, rather than trying to deflate your current lifestyle.  However, lifestyle deflation is possible and isn’t as painful as it sounds. Maybe make the most of the COVID crisis to reassess what’s really important to you.

Your Habits

Are you a goal-oriented person? Do you have a net worth target number?

No, I have always been bad with goals.  I would say that I am ambitious.  I want to succeed, but I probably spend more time trying to make the most of the situation at hand than I do planning my future actions.  I have succeeded financially by automating my savings and forgetting about it.  A couple of decades went by, and boom, I‘m rich.

I don’t really have a net worth target, although I have said that $2.5 million in addition to my house would be a number high enough that I would struggle to justify continued employment.  That is based on the calculation that with this invested capital, I could safely withdraw $100k forever using the 4% rule.  $100k is about twice what I spend now, so it seems like enough.  Adding 2 – 3 years of expenses in cash would be even better.

Do you follow any specific morning routine? How do you spend the first hour of the day?

Here again, I am a poor example.  I usually spend the first hour of my workday distracted by financial and political news.  I struggle to engage and get my momentum going on my real work.  I do my best work in the afternoon and evening.

Is there any specific goal or habit you would like to mention?

Automated, somewhat-aggressive savings worked for me.  You do have to decide to save.  It will never be convenient to save.

Miscellaneous

How do you view money? What does it represent to you?

I guess I think of money as productivity.  I earn it with my own productivity and trade it for the produce of others.  I can also invest it to increase the productivity of others.  In that case, I am entitled to a portion of that produce.  Ultimately, money can be the means to provide the necessities of life, so it can be used to purchase freedom from the need for work.

Did your parents provide you with economic outpatient care? (If so, how much was gifted to you?)

I was responsible for most of my own expenses other than room and board by the time I was in middle school.  I have been completely on my own financially since my second semester in college.

Do you consider yourself financially literate? (If so, please could you tell us how you got the knowledge?)

I was responsible for most of my own expenses other than room and board by the time I was in middle school.  I have been completely on my own financially since my second semester in college.

Tell us about your hobbies and how you like to spend (free) time and energy.

Work and family take a lot of my time.  I don’t find much time any more for skiing, fishing, camping, or world travel.  I hope to do more of those things when I retire in the not-too-distant future.

For now, I spend a fair amount of time keeping honeybees and doing the woodwork that often goes along with that hobby.  I enjoy building and fixing things as well as gardening.  I also spend more time than I should reading and listening to financial and political news.

I am blessed with fantastic genes.  At 5’ 11” I have weighed the same 160 pounds since I graduated high school 27 years ago.  I do get out for walks and hikes, and I ride my electric bike an entire mile to work every day, but I have to admit that my lifestyle consists of way too much sitting at a desk and no defined fitness regimen of any sort.

I think my diet is pretty healthy, although many would disagree.  I mostly try to eat real, home-made food, but I have no problem topping a meal off with sugary or fatty desserts.  I do most of the cooking while my wife directs and helps.  I have never counted calories.  I don’t even know what number would be considered high-calorie.  I listen to my body and eat the things that seem good, then stop when I am full.

Your concerns, fears and worries. Can you tell us a bit about them? Is there anything you are especially afraid of?

I suppose that my biggest fears are related to dropping the ball on my responsibilities, especially work.  That might be more of constant, low-level stress than fear, but it occupies most of the fear space in my mind.  Maybe that’s why the idea of retiring is so appealing. 

I am also afraid of running out of money, being forced back to work after retiring, or otherwise finding that I have more needs than I have the funds to provide for.

Who do you hang out with? Where do you hang out? What’s your environment like?

I mostly hang out with my family.  I have a few friends from church, some beekeeping buddies, and some people at work that I enjoy. 

My family takes most of my time outside of work, so I don’t do a whole lot of hanging out.  I guess if I’m not at work or doing family life, then you’d be most likely to find me working on something in my garage.

What is your mindset like? What do you think about on a daily basis?

I think a lot about my projects at work, but I like to distract myself from those thoughts with a number of other topics like what I will do when I no longer have to work, building projects, perusing my net worth and the day’s changes, politics, and bees.  I also try to understand my kids and why they don’t want to listen to me, but that’s hard, so I often get distracted from that too.

Tell us three books you think any wealth accumulator must-read.

The Richest Man In Babylon is the easiest finance book to read and understand, and it covers all the basic principles of responsible personal finance.  I recommend it to anyone.

Becoming a millionaire is a common people’s dream. Can you see any pattern that some millionaire dreamers follow, and you think it isn’t the most appropriate? What would you advise them?

I believe that the best way to become a millionaire is by consistently saving and investing in broad-market index funds over a couple of decades.  Its all about time and money.  The more you have of one, the less you need of the other, but you have to find balance that works for you.  It won’t last if you are too aggressive with the saving, and it’ll never happen if you are too casual about the amount of time you are willing to wait.

I recommend not trying to speed things up by gambling in the stock market, either by trying to time the market or by picking individual stocks.  There is a slim chance that gambling could work out, but more likely you will take longer to reach your goal.  You’ll also spend a lot more effort and emotional capital on the journey.

Of course, it’s nice if you also do the right thing and try not to be a jerk.  In fact, I believe that charity is an important part of responsible personal finance.  As a child, I was taught to prioritize charity above all other “expenses,” giving the first 10% of my earnings to charity.  I learned from an early age to live on 90% of my earnings.  And If I could live on 90%, then why not 80% – sending the second 10% to savings?  This is how I learned to arrange my lifestyle and expenses to always work in my favour.

Is there anything else you would like to add?

You probably can’t work hard enough to get rich, but you can save some money, and that money can do the work for you.  It worked for me.  I’m 45. I have a wife and three kids, and just earned $100k for the first time after 20 years in my career.  But in those twenty years, I saved and invested my way to millions – more than all the salaries I have ever earned.