Millionaire Interview 5 – Banker On FIRE

Millionaire Interview 5. 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 5, 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.

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Millionaire Interview 5 – Banker on FIRE

Millionaire interview 5 is with Damian, a blogger from London, UK who blogs as Banker on FIRE. His blog, Banker on FIRE, focuses on building wealth and achieving financial independence. He views his blog as a creative outlet and hopes to help others make better decisions, grow their net worth, and live their best life possible. He and his wife reached the $1 million mark in his mid-30’s about six years after starting their careers. They achieved this by paying off student loans having a high savings rate, rising earnings, investing in index funds, and investing in properties. He describes his current net worth as more than $1 million but quite a bit less than $10 million.

• Tell us a little bit about yourself.

I am an investment banker based in London, UK.  

My personal history is quite convoluted but can be summarized as follows: I am a first-generation immigrant, having been born in one of those emerging market countries with lots of promise but little economic stability. In my early teens, our family moved stateside, where I graduated from high school and university.  As most immigrants will tell you, those early years were anything but easy! 

Despite working through high school and college, I managed to do well at school and landed a “good” corporate job upon graduation. However, I always felt like I wanted something more dynamic – and well-paid. It just made no sense to me that after all my family (and I) have gone through, I would settle for a “normal” job with average pay. 

Sadly, I had very few career (or money) role models – which I guess applies to most immigrants. So, I stumbled around for a bit. First, I tried to accelerate my career ascent in my corporate job. I did well but was explicitly told that I would need to put in “my time” before I could get a meaningful title and pay increase.

Frustrated with the answer, I then took a sabbatical to start a business.  Within 12 months, the business failed – and I was back with my old employer.  It looked like a massive failure at the time – but turned out to be my biggest break.  I started applying for MBA programs and my entrepreneurial experience helped me get into a fantastic (think one of the top 3 in the world) MBA program.

After my MBA, I landed an investment banking job in London and have been living here for a decade now. 

I am married, with two young kids. 

• 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?

Unlike many other bloggers, I don’t disclose my net worth publicly.  Let me just say that it’s significantly into millionaire territory but still quite a bit south of $10m, which is the “stretch” target I’ve set for myself. 

At the moment, my portfolio consists of about 45% equities, 25% real estate, and 30% cash. No debt other than mortgages on our rental properties (for a variety of reasons, we rent our primary residence in central London).  Here are some more juicy details on my portfolio. 

Real estate is a big pillar of our wealth-building strategy. As such, I don’t ever foresee being completely debt-free, as that would significantly reduce the equity returns on our property investments. 

That being said, we do plan to own our dream home mortgage-free when the time comes. That, and our plans to buy more real estate, are the primary reasons for our significant cash holdings (which currently stand at seven figures). 

My journey to millionaire status also had quite a few twists and turns. In my late 20s, I maxed out my student loans to pursue an MBA.  As a result, our family basically had a negative net worth when I graduated at 31.  

That being said, I had my MBA, a great job, and our first property by then. Given that my wife is also a well-earning professional, we quickly paid off our student loans and cleared our first million just a few years later. 

Here are some of the things I learned on the journey to my first million. 

It all snowballed from there onwards as a result of rapidly rising earnings, stock market returns, and some very successful property investments. 

While I absolutely love using debt (i..e leverage) for my real estate investments, I always keep it at sensible levels. After all, the most important thing in investing is to survive long enough to let your investments compound. You don’t want excessive debt to blow your portfolio up along the way. 

As far as I can remember, we’ve never had consumer debt that we haven’t paid off the following month.

• How did you become a millionaire?

My wife and I started by securing well-paid jobs and did well enough to get promoted and negotiate strong earnings increases every year. While we are not incredibly frugal, we are smart with money and always made sure to put away 50%+ of our earnings. 

In the early days, we invested in the stock market through the UK equivalents of a 401(k) and other tax-deferred plans. All of our investments are in low-cost index funds, save for some employer shares we get as part of our compensation. 

As our cash savings grew, we expanded our real estate portfolio.  A few years later, we were able to refinance our property investments – this released more cash which we used to buy additional properties. 

Rinse, repeat – and our net worth snowballed very quickly on the back of that very simple strategy.

At the very beginning of our journey, our combined pre-tax income was probably around $200k. I don’t think we’ve ever crossed the $1m annual earnings mark, but we’ve come close a few times. 

As of today, our income consists of:

• salaries and bonuses (latter component forms the bulk of my annual compensation and varies widely)
• capital gains and dividends on our stock market investments
• rental income
• capital gains on our property investments (which we release by refinancing the mortgages)

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

In the stock market, we have a very long-term philosophy, and daily price changes don’t bother us at all. Early on, I tried my hand at day trading – and promptly lost $3k. That was enough to convince me I cannot beat the market, and I’ve been a happy passive investor ever since. 

Our stock market holdings are 100% US equities for reasons outlined here. It’s a mix of S&P 500 index funds, as well as some small-cap and value index funds (yes, I do believe in the Fama-French theory). 

When it comes to real estate, we are also very long-term and buy our properties with a view to holding them for 50+ years and ultimately passing them down to our children. As such, we are definitely not “flippers” and spend considerable time and effort evaluating investments before we pull the trigger. That means a lot of late nights at the dining room table while the kids are asleep upstairs! 

Despite what people may say, real estate is inherently an active pursuit, and we spend a lot of time managing our investments (though we do get help from professional property managers) in order to maximize our rental income and returns. 

If I could go back in time and change one thing, it would be very simple: I would have started investing WAY earlier. 

My parents, while very good at teaching me to save, didn’t do so well on the investing front. Thus, I was definitely starting on the back foot when it came to the stock market and real estate investing. 

With the benefit of experience, I can safely say that one should start investing as soon as they have money to put to work. It’s that simple. 

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

Real estate by far. 

The very first property we bought ten years ago has generated an annualized return of c.19%. We also bought another property at the height of the pandemic and it looks like we’ve doubled our money in just 8 months (though it definitely didn’t seem that straightforward last year!).

The worst investment was the money I used to day trade back in 2008.  It was only $3k but the lessons learned were far more valuable than the money lost. 

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

As an investment banker, I am constantly in the flow when it comes to financial news. When clients call you, you better know what’s going on in both the broader capital markets as well as in your sector! 

As far as our own investments, we track them every quarter or so. It’s as much financial housekeeping as tracking our net worth as the short-term fluctuations in the “number” don’t bother us that much. 

About twenty years ago, I had a financial advisor from Edward Jones.  He was a very nice guy but I quickly realized how little value he added – and how expensive the fees were!  

I ended up pulling my money out, investing them in index funds, and never looked back since. 

However, the one advisor I would never skimp on is a good tax accountant. Both my wife and I know the tax code reasonably well, but when it comes to large portfolios (and especially real estate), a good tax accountant can be worth his / her weight in gold!

• What habits helped you become a millionaire?

The biggest reason we became millionaires is our audacity. The audacity to go after – and secure – hypercompetitive, highly paid jobs. The energy, confidence, and persistence to succeed in those jobs, to get promoted and paid more every year. 

Frugality is an interesting one. On one hand, I won’t bat an eye at spending money on things I care about. Buying my wife nice presents. Flying our parents in business class when they come to visit.  Paying for private school for our kids. Helping our extended families back in the old country. 

Equally, I will die in a ditch over a tenner if I think it’s wasted.  And I always drive a hard bargain – partially because I don’t like spending more than I have to, partially because I truly enjoy cutting deals. 

We don’t budget but we do track our expenses.  All in, our monthly budget runs at about $20k.  Now I know that’s a whopper, but a big part of that is rent on our primary residence (about $7k /month) and our nanny (about $5k /month).  

Living centrally and having a nanny are the things that free up enough time to do well at work, and dedicate enough time to our real estate investments – while not neglecting our families.  I guess you could call it the cost of doing business! 

I wouldn’t say we splurge on things. We like quality things but you won’t see us at Michelin-starred restaurants, flying business (other than for work or by using miles), or wearing designer clothes. 

On weekends, we’d rather go to the playground or have a picnic with our kids than engage in some fancy, expensive activity. 

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

The Simple Path To Wealth by JL Collins

Power: Why Some People Have It And Others Don’t by Jeffrey Pfeffer 

Psychology of Money by Morgan Housel

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

I started the Banker On FIRE blog on the back of an exceptionally challenging period at work a few years ago.  I always liked writing, and so it became a great creative outlet for me, a hobby that takes me away from the stresses of my job.

I also love helping people and think it’s one of the most underrated components of happiness and satisfaction. 

Sadly, I don’t have much time or flexibility to volunteer right now – though I hope that will change in a few years.  That being said, many readers have sent me letters saying reading my blog has really helped them along in the journey – and that makes the effort of blogging worthwhile to me. 

• Besides investing what else do you like to do?

I love reading, both fiction and non-fiction. I’m currently working my way through Nassim Taleb’s “Skin in the Game” and have “Six Easy Pieces” (a physics book by Richard Feynman) on the backburner. 

I’m also a big fan of working out, which includes weight lifting, high-intensity training, and yoga. In other words, I can’t wait to get back to the gym after this latest lockdown! 

Finally, my wife and I love playing tennis. It has taken a bit of a back seat once we had our kids but now that they are a bit older, we hope to dust off those racquets again! 

• Anything else you would like to add?

Building wealth is rarely straightforward and you can expect there to be many twists and turns along the way. That being said, there’s a proven strategy for winning at life – it’s called never giving up!

Keep at it for years and decades, and amazing things will happen to you – guaranteed. 

Final Thoughts on Millionaire Interview 5

I hope you enjoyed reading about Banker on FIRE in Millionaire Interview 5. Check out his blog at the links above. His story shows that by paying down debt, a high savings rate, getting a high earnings job backed by a solid education, investing in index funds, and investing in real estate that reaching $1 million before turning 40 years old is definitely possible. Granted, not everyone will have his family’s income level but his philosophy and lessons learned along the way apply to everyone.

In an earlier article I identified the three principles of dividend millionaires: spend less than you earn, invest your savings, and reinvest the dividend. Your odds of becoming a millionaire are about 3.6% in the U.S. Achieving FIRE is a process. But I would argue that through careful planning, high saving rates, and investing you can improve your odds. Banker on FIRE has showed us it is possible at a fairly young age of before 40 in Millionaire Interview 5. Recall, in the U.S., the average net worth is about $289k 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.

You can read Millionaire Interview 4 – Gen X Investor as well.

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