Millionaire Interview 11 – Financial Freedom Countdown

Millionaire Interview 11. I have started a series called Millionaire Interviews. There is no better way to learn how to build wealth than from those who have already done so. Along those lines, I ask millionaire bloggers or even millionaires who are not bloggers a series of 11 questions that they answer. The questions are highlighted in bold and the answers are below each question. Hopefully, the answers are enlightening and will help you on your journey to build wealth and attain the $1,000,000 mark and beyond. 

The millionaires in the Millionaire Interview series became millionaires at a younger age than the Secret Dividend Millionaires. This comes down to mostly having higher incomes. Second, they are not very frugal to the point of austerity as some of the Secret Dividend Millionaires but certainly save more than they earn and save more than the average person. Lastly, most have multiple sources of income.

Before we start with Millionaire Interview 11, if you are a millionaire blogger or even a millionaire who doesn’t blog and want to be a part of this series, just send me an e-mail or message me on Twitter.

Millionaire Interview 11 – Financial Freedom Countdown

Millionaire interview 11 is with the anonymous author of the Financial Freedom Countdown blog. He is a first generation immigrant from India, and single with no kids. He has Bachelor of Engineering in computer science and works in the technology industry. He blogs about building wealth and reaching financial independence in a high cost living location. He reached the $1 million mark at the age of 33 through saving and investing in index funds and being real estate. His current net worth is approximately $3.1 million. Now let’s take a look at Millionaire Interview 11.

• Tell us a little bit about yourself.

I am a first-generation immigrant from India. I came to the US all by myself 14 years ago with only $1000 and a dream. I was the first one in my family to actually travel out of our home country. My only exposure to the US was watching a few episodes of FRIENDS. To be honest, it was scary and exciting at the same time. Looking back, there were a million ways it could have gone wrong. When I landed here, I did not know anyone or anything about the system. Growing up in a cash-based society, I had no idea of credit history or how important it was.

The hardest part was the first month where I was trying to get set up with a bank account, cell phone and an apartment (after my 10-day initial hotel stay) in a foreign land with zero credit history and not knowing how to drive. It did not help that I had to also be productive daily at my job to make sure I was at my best.

The scary part was that I knew that my $1,000 cash would last me a month at the most. Just enough for a flight back home. The positive aspect of my journey is that once you are in such a precarious position, you push yourself mentally, physically, and emotionally because failure is not an option.

I am now 40 years old. No kids. Living a single life in the San Francisco Bay area.

I have a Bachelor of Engineering degree in Computer Science and worked in the technology field all my life.

• What is your net worth? At what age did you become a millionaire? How many years did it take to become a millionaire? Do you have any debt?

Current net worth is approximately $3.1M.

Growing up poor I always have a fear of losing all my money. Hence I have diversified my net worth as much as possible into various income-producing assets.

Since I live in one of the most expensive parts of the country; my primary home is a major component of my net worth at $1.2 M.

Stocks including taxable, Roth, IRA are valued at $1.1M

I have a number of other investments which are less mainstream such as cryptocurrency, real estate syndication, lawsuit financing, mining stocks on Australian and Canadian exchanges valued at $1M.

I have over $500K in Roth contributions. I have been fortunate to work for large corporations in the last few jobs, a 401k with an after-tax contribution component is awesome. As a result, I contributed to the max 401k limit every year. In 2020 that was $57,000. Given that I already have a large Roth bucket, I might not need to go for an IRA to Roth conversion in early retirement.

The only debt is my primary mortgage of $200K. Given that it is a fixed rate mortgage I do not intend to pay it off anytime soon.

Contrary to popular wisdom I am a huge fan of debt as long as it is for a business or investment reason. In fact, in March of last year I added to my debt by doing a cash-out refinance. Market timing was deemed an unpopular decision based on the comments in that post, but it increased my net worth as a result of leverage. I am against consumption debt such as credit cards or any high interest debt.

I became a millionaire at age 33.

• How did you become a millionaire?

I accumulated most of my net worth by working and trying to keep increasing my salary. In the early days of starting our careers, we have no assets. The only way to earn more money is to improve our human capital.

Once we accumulate income-producing assets, we realize the dream of passive income. We have more free time to spend on activities we enjoy. Buying my primary residence in the San Francisco Bay area was a great move.

I am very bullish on real estate as an asset class, although I have switched from direct ownership to other forms of holding. Of course, most investments are restricted, so I figured out how to become an accredited investor and wrote a post about it.

My next secular bet was on individual technology stocks. Of course, my risk appetite is higher than most. I was investing in the aftermath of the Great Financial Crisis. It was scary doubling down in Citigroup (C) as it kept falling; but I persevered and got lucky. Of course, I lost my money in Bear Stearns, but you win some and lose some.

I am not a huge fan of dividend stocks outside of my index funds because of their tax treatment and the industries they operate. Most dividend paying stocks are in legacy industries, and I lean towards growth stocks. Also, capital gains are taxed at a lower rate compared to dividends. Living in California and being taxed at the highest rate makes it hard to be overweight dividend stocks. I know some states and countries have more favorable tax treatment of dividends which makes it an excellent choice. Also, the steady cash flow is great if you can’t stomach the volatility of growth stocks. At the end of the day, personal finance depends a lot on your personal circumstances and risk tolerance.  

When I reached the $1M mark I was earning $170K W2 income. I also had additional rental property income and passive dividend income from my index funds.

• What is your investing philosophy, and do you use a particular strategy?

My initial investment strategy was geared towards paper assets like stocks and bonds, and it has definitely changed over time to include more real assets.

If I could go back in time, I would focus more on real estate. I did not know much about real estate when I was younger and now write extensively about it. It does take effort for wholesaling real estate or fix and flip houses, but it is totally worth it.

I even did a 401k vs real estate comparison article with live numbers and certain assumptions. Besides leverage which works in favor of real estate, it also involves sweat equity which is easier done at an early age. The tax advantages of real estate also are much higher especially if you plan to build generational wealth for your family.

• What was your best investment? What was your worst investment?

On a risk adjusted basis, I would say my primary house. Bought it for $500k and in 5 years it reached $1M. And if you consider the fact, I bought my house with a conventional mortgage; the cash-on-cash return is much higher.

A primary home purchased with a fixed rate mortgage is leveraged trade where you never get any margin calls.

I wrote about my 4 worst investments and the lessons I learnt. If I had to pick one it would be ICOs

Once I went down the rabbit hole of Bitcoin, it was only a matter of time I decided to delve deeper into other Cryptocurrencies. A lot of tokens came into existence and were offered as ICOs. These were known as “altcoins” and once they failed the moniker changed to “shXXcoins”.

The premise of these tokens was that it could be used for a variety of use cases. Some for accessing a decentralized internet, others for accessing file stores and few were blockchains themselves used for interoperability.

Needless to say, during the Crypto winter from 2018 onwards a lot of these firms ran into funding issues. Most of them are worthless now and unable to deliver their roadmap. Some founders genuinely tried and failed. Quite a few founders did an exit scam. The ICO scams became so blatant that the SEC has a spotlight ICO section on their website highlighting the cases.

The other problem could be that these are too early in the game, and we need failures in order for the next wave to succeed. Just like with the dot com burst.

I would estimate losing roughly $200K of capital invested in ICOs.

• How much time per day or week do you spend reading financial news and going over your investments?

I spend around 20 hours a week reading about investments and finances. For the average early retiree, it is excessive. However, I love investing and learning. My portfolio’s bulk is in traditional investments like index funds, but I do have several exotic investments which require some research. 

I also spend time researching new investments to add to my portfolio. For example, I wrote about my Bitcoin investment thesis, which was less about price appreciation and more related to the censor-less transactions and ability to cross borders when fleeing persecution. I was so happy when two of my readers wrote back to me that they bought BTC at $8K when I had published my post.

Similarly, I was investing in SPACs, and while it has now become frothy, I still believe they offer an asymmetric risk compared to IPOs. After some trial and error, I developed a framework and now feel comfortable investing more considerable sums. 

While index investing works well for everyone, I do invest in moonshot companies. Although the data for active fund managers is not favorable, I do like to invest in companies I believe will do well in the future.

I also change my investments based on when facts change. For example, I own a rental property along with my primary. However last year I realized that residential rental property is no longer a good investment and wrote about what caused me to change my mind.

But of course, I have made plenty of investment mistakes as well. Even in real estate crowdfunding, I did lose a lot of money before I developed a checklist on how to evaluate real estate deals. I started farmland investing with the hopes that I get some produce annually. Yes, grape harvesting is very lucrative for farms, and I live an hour away from Napa.

TLDR: If you have only index funds, then you need only one hour a year to rebalance. I don’t consider the time I spend learning as work. All my posts will articulate my investment thesis with pros and cons before I take the plunge. So after retirement you do not need to spend time reviewing your investments unless you like it as I do.

I use a CPA to prepare my taxes because I believe they have more experience across several clients which can be applied to my situation. I do not use any financial advisor for investments. 

• What habits helped you become a millionaire?

I wouldn’t consider myself frugal and hardly followed a budget. Only in the last 5 years when I became serious about early retirement did I actually look at all my expenses and what my lifestyle would cost. My current estimate is $40k annually which is not too low given that my rental pays for my mortgage, so I don’t have expensive housing costs.

My most expensive splurge would be travel since I have become addicted to business and first-class travel. Most of it is funded through credit points and partly by purchasing tickets in off season. Early retirement means I do not need to plan for vacation or travel during the busy season. So, I can take advantage of last-minute fares as well.

• What are your three favorite books related to investing, personal finance, retirement, and financial freedom?

The book which had the greatest impact on me was Your Money or Your Life by Vicki Robin and Joe Dominguez. You can consider them to be one of the earliest proponents of Financial Freedom before it was in vogue. The book’s basic concept emphasizes that when we work, we exchange our life energy (usually in the form of time) for money.

Chad Carson is a real estate investor and also blogs about his journey. Retire Early with Real Estate book focuses on using real estate for early retirement. Using cash flowing real estate has always worked for individuals not comfortable with stock markets’ volatility. While the down payment requirements can be daunting to get started, I have written an article about ways to invest in real estate with little or no money down.

If you are more stock focused and prefer a simple allocation, I would recommend The Simple path To Wealth. At a high level, the book’s concepts are to buy the Total Stock Market Index and rebalance periodically. It is an early retirement book favorite due to the simplicity of the message.  

I created a list of my top early retirement books which has 7 more recommendations. I highly recommend buying books to learn because the amount of knowledge you can gain from other’s experience is much more valuable than the cost of most books.

• Why do you blog about your investing and journey to millionaire status and financial freedom?

Even with high incomes, I noticed many of my coworkers and friends stressed out about work, finances, and emergencies. Earning money is one aspect, but effectively deploying capital, so it works for you, is the tricky part.

Starting this blog was inspired by a distinct memory in my working career. My VP, who is in her 70s, mentioned that her sister was not keeping well. I naturally assumed she would visit and asked about her travel plans. However, she did not want to take time off, given that we had a massive product launch coming up.

Two weeks later, when we were in a meeting, she received a phone call. Her sister had passed away:(

Although she was a VP, earning at least 3X more than me, and yet was a “wage slave,” hit me like a tidal wave. I decided to pursue Financial Freedom.

As I share my own experiences, I hope we can learn from each of our failures and successes. I firmly believe while each of our paths would be unique based on our financial situation, we all share the same goal of living our best lives along this journey.

• Besides investing what else do you like to do?

My favorite hobbies are travel and weightlifting. Lifting weights helps me focus my attention in a Zen like meditation phase. Besides, I am hoping that staying fit improves the quality of my life as I grow older.

I typically spend 6-8 weeks/year on international travel. Besides the usual tourist attractions, I do enjoy meeting folks in different parts of the world, and it helps ground me with respect to realizing how lucky we all are.

I was in Cambodia before all travel was shut down. A lot of locals were selling trinkets at Angkor Wat. The person who had the most business was a young teenager who actually spoke 4 different languages – Mandarin, Spanish, French and English. I spoke to him, and he mentioned using YouTube to learn simple phrases which helps him connect with the foreigners in their local language.

Talk about hustle and developing an advantage over your competition!

• Anything else you would like to add?

Thank you so much for allowing me to share my journey.

If you found any of my articles interesting, follow me at Financial Freedom Countdown where you can also sign up for my newsletter.

Final Thoughts on Millionaire Interview 11

I hope you enjoyed reading about the anonymous author who blogs at Financial Freedom Countdown in Millionaire Interview 11.

Check out his blog when you get a chance. His blog has an interesting look at building wealth in one of the highest cost of living areas in the US and world. He also talks about alternative investments like cryptocurrencies and SPACs. His story shows that even coming to America as a first generation immigrant with very little it is possible to become financial independent. His focus has been leveraging his education, working hard, saving, and investing to become financially independent.

The author of Financial Freedom Countdown has shown that it is possible to reach $1 million by age 33 and go further from there.

In an earlier article I identified the three principles of dividend millionaires: spend less than you earn, invest your savings, and reinvest the dividends. Your odds of becoming a millionaire are about 3.6% in the US. Achieving FIRE is a process. But I would argue that through careful planning, high saving rates, and investing you can improve your odds. The author of Financial Freedom Countdown has showed us it is possible at a fairly young age of 33 in Millionaire Interview 11. Recall, in the US, the average net worth is about $728k in 2016 dollars for those between 35 and 44 years old. I have written previously on net worth targets by age.

As a final note, I have another series called Secret Dividend Millionaires. This one is about ordinary people who became millionaires by investing in dividend paying stocks for the most part. Most of these people were only discovered after they died and left their money to charities and other non-profit organizations. Often, they became millionaires through very frugal if not austere living, investing their savings in stocks that paid dividends, and reinvesting the dividends.

Thanks for reading Millionaire Interview 11 – Financial Freedom Countdown!

You can read Millionaire Interview 10 – Accidentally Retired as well.