The Simple Secrets of Modest Millionaires

Thanks to Ben Carlson for linking to this post. If you’re here from Ben’s blog, A Wealth of Common Sense, welcome!

I started a great dialogue with “Carl” in August and immediately felt a kindred lifestyle connection. Carl and his wife, “Colleen,” are about my age, with young children, and they earn a healthy-but-not-astronomical income ($160,000 pre-tax, which puts their family in the ~75th percentile). Carl reached out to share some exciting news: 

Their family surpassed $1M in net worth at age 35. They are millionaires. 

I prodded Carl and Colleen for the tips, tricks, hacks, and pitfalls on his path to millionaire status. Yes, he’s been reading and listening to our podcast, Personal Finance for Long-Term Investors for a few years – but there’s got more to the story! 🙂 

I think you’ll be surprised after reading this. 

Inheritance and Gifts

Carl and Colleen haven’t inherited a dime. They didn’t win the lottery.

They both received some gifts for college but graduated with $30K and $50K in college debt, respectively. They paid off those debts by age 27.

There’s not much “outrageous fortune” involved here. They’re vastly self-made.

Budgeting, But Not Religiously

Carl and Colleen practice “loose budgeting.” What does that entail?

They prioritize “paying themselves first” every month, by making deposits into their 401ks and Health Savings Account directly from their paychecks, and auto-depositing money to their IRAs and taxable brokerage accounts. Saving money for investments is the first thing they do!

Carl uses budgeting software to review the household spending at the end of each month. Some months are higher than others, and they’re okay with that. They don’t fret about short-term fluctuations. But they do have a goal of never spending more than their net take-home pay in consecutive months. They also aim to be net positive over each quarter. 

In other words – even after “paying themselves first” through investment account deposits, they still aim to be cashflow positive with their remaining income.

Safety Nets

They keep a 6-month emergency fund in a high-yield savings account. When they save beyond that amount, they skim off the difference and move it to their taxable brokerage account. 

They each have term life insurance policies, just in case.

They have a “bronze” level health insurance plan, and they understand that could lead to large out-of-pocket expenses during specific years.

Spending

Carl and Colleen do spend money, but they do so intentionally. One quick example: they took a $10,000 family trip in July 2024. They love the outdoors, and went to various national parks in the Western USA. But they also choose to drive 10+ year-old cars – if it runs and it’s safe, they’re comfortable with it. 

To dive further, Carl and Colleen don’t live a stereotypical “millionaire lifestyle.” They live a frugal life. Some people might say they’re “cheap,” but that’s in the eye of the beholder. To each their own. Carl and Colleen have old cars, basic clothes, and cheap fun. They could join an expensive gym but they’re at a cheap one. They could dine out more, but they stock up on Aldi groceries.

I loved this line from Colleen:  “You never know exactly what someone is spending, but based on the obvious external images (cars, trips, clothes, dining out, all the stuff that people post on Instagram)…it feels like we spend less than any of my close friends. I can’t be sure, but I think there’s some truth there, and it’s correlated with where we find ourselves.”

Wealth is less about what you earn. It’s more about what you keep. 

Perspective

Carl and Colleen care about time. There are many different “lenses” through which we can observe the world. Carl and Colleen are acutely aware of the connection between money and time.

They count their blessings. Carl and Colleen know they would not be millionaires today without the tailwinds from the past ~15 years of stock market returns. In other words, luck was involved. That’s ok! That’s the nature of life. But I agree with them; it’s not that they’re geniuses. Instead, they made intelligent long-term decisions that worked out better than expected.

And, funnily enough, they’re aware that millionaire status might be fleeting for them. If the stock market dropped ~10% before the end of the year, they would no longer be millionaires (for the time being). The stock market giveth, the market taketh away. That’s not a bad thing. It’s all part of the long-term investing process.

On the topic of “perspective,” I like these two quotes from them:

• “It’s just a number. It doesn’t make us good or bad. It’s a nice milestone, but that’s about it.” 
• “I looked the other day…inflation has halved the value of a dollar between 1997 and today. In other words, reaching $1M in 2024 is the equivalent of reaching $500K in 1997. We aren’t pretending like we’ve conquered the world here.”

I think they should be happy. But also, life goes on.

Investment Choices

Colleen and Carl are primarily invested in the stock market.

More than half of their net worth is from their retirement accounts (401k and IRAs), which are 90%+ invested in low-cost, diversified stock funds.

Some of their net worth is from their house (which is mortgaged) and has appreciated beneath them (another stroke of luck).

I think it’s worth noting that their taxable brokerage account is 50% stocks, 50% bonds because “technically speaking, we might tap into that money well before traditional retirement age, so that account isn’t as long-term as the retirement accounts.” Personally, I agree with this approach – it’s goals-based investing.

Career

Both have made small professional advancements over their ~13 years since graduating college and entering the workforce. They’ve taken on more responsibility and their earnings have grown accordingly (beyond the pace of inflation).

Earnings, after all, are the origin of future net worth. Cashflow is the foundation of all financial planning.

The 30,000 Foot View

When I zoom out and summarize Carl and Colleen’s situation, I see: 

• Smart, long-term decisions.
• Ignoring short-term impulses. 
• Repeating that process for many years
• Hard work – but not ridiculously so. 
• Good fortune – but not “stupid luck.” In fact, I’d call it “smart luck.” 
• Wise perspective. They realize what they can and can’t control, and how certain “rolls of the dice” have affected them over time. 

Carl and Colleen are a The Best Interest couple, through and through. Their storylines up with many of the maxims that I believe in, write about, and speak about. 

It’s not rocket science. It’s not forbidden knowledge. Instead, the “secrets” of becoming a millionaire are quite simple. It’s just a matter of recognizing that truth, applying it in your own life, and continuing to do so for many, many years. Not always easy. But certainly simple.

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