Baby Steps Millionaires (2)

In my article yesterday, I discussed the book Baby Steps Millionaires by Dave Ramsey. This book presents many real-world examples of ordinary people achieving financial independence (“millionaire” status) through hard work, discipline, and consistent investing. These stories are all inspiring.

Yes, I am also a baby steps millionaire. My story may not be as inspiring, but let me add to the sample.

I grew up in an upper-middle-class family in Japan. My dad was an engineer-turned-consultant and was making good money, perhaps around 150k per year. My mom was a French teacher and was making perhaps 50k. However, none of them were very responsible with money, and although we had a comfortable lifestyle, like traveling to Canada every summer and often going on vacation in Southeast Asia or skiing in winter, we lived almost paycheck to paycheck. My dad was essentially a gambler and tried all sorts of “get-rich-quick” tricks and failed. I heard that before I was born, he inherited a house from his grandmother, sold it, used the proceeds to invest in oil futures contracts, and lost everything. He also bought three real estate properties in 1990 at the height of the Japanese real estate bubble, and all three declined in value by 80% over the next decade. I recall answering phone calls (there were landlines in those days) from debt collectors. My dad was also cheap but not frugal, often buying unnecessary stuff at a discount. My mom’s siblings often told me, Hey Akira, if you do everything opposite to your father, you will be a millionaire.

I grew up in the post-1990 “lost decades” in Japan, so for me, financial security was extremely important. One of my goals was to be financially independent as soon as possible. So, although my true interest was mathematics, I worked hard and attended medical school at the University of Tokyo. In Japan, medical schools are 6-year undergraduate programs, comprising 2 years of liberal arts education and 4 years of medical training. In the first two years, I just studied math. The remaining four years at the medical school were painful. During this period, I became interested in economics and was determined to switch fields after obtaining all the certifications in medicine.

I finished college in 2004 with essentially no assets. My first job was as a resident at a hospital in rural Hokkaido, Japan’s northernmost island. Most of my classmates remained in Tokyo in prestigious residency programs, but I had no intention of staying in medicine or climbing the ladder, so I chose my program purely for short-term benefits. My hospital offered me a 60k salary, about twice as much as in Tokyo (because there was a shortage of doctors in Hokkaido), and the cost of living was less than half of Tokyo. Besides, Hokkaido is similar to Canada, with beautiful forests and lakes, mild summers, and harsh winters. All my colleagues at the hospital bought cars with their salary, but I did some math and decided it is more efficient to just rent a car when necessary. By the time I finished my residency in 2006, I had about 70k of savings, mostly in cash.

I did a master’s in economics at the University of Tokyo from 2006 to 2008. During this time, I attended school three days a week for coursework and worked four days a week as a part-time doctor, earning about 180k a year. During my studies, somehow I read A Random Walk Down Wall Street by Burton Malkiel, which was a life-changing revelation. Until then, my asset allocation was about half cash, the rest in individual stocks and mutual funds, but I was investing without a plan. Random Walk taught me how to get rich slowly but surely by just investing in index funds. Because brokerage firms and mutual funds in Japan charged high expenses, I decided to open a brokerage account in the U.S. When I obtained my master’s in 2008, my net worth was about 200k, half of it in cash and the rest in index ETFs like VTI and VXUS.

Then I moved to the U.S. for my Ph.D. at Yale, and the financial crisis hit. I recall, perhaps on September 30, 2008, the stock market plunged 10% overnight. I lost about 10k in one day and couldn’t sleep. Having heard about the rise and fall of the Roman Empire, I was very worried about the long-term prospects of the U.S. and the global economy. However, over the past 200 years, the stock market has always recovered from crashes and continued to grow. So, I decided to set my fear aside and invest all my cash position of 100k into stocks, splitting it into 10k per month for 10 months. By March 2009, my net worth had declined to about 150k, but that was the bottom. Since then, I have just bought-and-hold index fund ETFs. By the time I obtained my Ph.D. in 2013, my net worth was 780k. I have to admit this is not all from investment. Yale gave me a generous stipend of 37k per year, and each year my wife and I spent two months in the summer in Japan to work as part-time doctors, so our household income was close to 100k during all my Ph.D. (And we hardly paid any taxes, because our incomes in the U.S. and Japan were modest and we were non-residents.)

The rest of the story is boring. Just by working, budgeting, saving, and investing in index funds through 403(b), 457(b), and Roth IRA, I became a millionaire in February 2015. I have to admit that getting a head start with a medical degree helped. I was also lucky to have 50% in cash when the financial crisis hit, and I went all-in on stocks at the right time. But it is really hard work, discipline, and consistency that get you to be a millionaire, and I am convinced that pretty much anybody (born in a developed country) who desires can achieve it.