This guest post is from William Cowie, who has contributed to Get Rich Slowly and other personal finance blogs. He also blogs about investing and offers a free Investing Basics course on Bite the Bullet Investing.
Like little ants, we moved and hustled all day, nine years ago, settling into our new house. We didn’t notice night falling… until we saw a light beam dance on the ceiling and loud noises from outside. From the second-floor bedroom window we saw (and heard) a group of neighbors. One had a flashlight, shining it into our undraped room. “Hey, neighbor! Stop already, and come say hi!”
In the urban America of today, that’s not your usual welcome. But then again, this isn’t your usual neighborhood, even though it’s about as middle class as it gets from the outside. We were intrigued to find the back fence has a well-used gate to the neighbors’ house, and they, in turn, have another gate in the side fence between them and the next set of neighbors.
Not surprisingly, we soon became good friends with all the neighbors, but it took a while to discover Jim’s dark secret.
With no outward sign to give that secret away, Jim is the prototypical “millionaire next door.”
In his 60s now, he had an average job his entire life, making average money, hardly what you think of when you hear “millionaire.” I asked Jim the other day about the secrets to his success.
Some of his steps may be old hat to veteran readers of Five Cent Nickel, but I was intrigued to hear a few I’ve never seen written about before:
Jim doesn’t read financial blogs. In fact, getting him to open his email more than once a week is a goal yet to be achieved. Nevertheless, his financial life’s story sounds like he’s been a saver all his life.
1. They always spent less than they made
Jim and his wife made a conscious decision to avoid the Joneses — you know, those up with which you have to keep, and they always made it a priority to save.
2. No debt
Because they had no Joneses, it was easy to avoid debt. They always drove used cars, well looked after. Even today, their Explorer and little Ranger truck are both well over 10 years old.
3. They invested
Jim said they started small, but early. Content with buying just a few shares every now and then, they went with a buy-and-hold strategy on commonsense, boring stocks. For the first 10 years nothing looked spectacular, but they just kept at it. The long bull run of the late ’90s helped them, but the crash afterward took some of that back. Still, they kept at it. Along the way, he made a few mistakes, but he says just the “keeping on keeping on” overcame those mistakes in time.
The million dollars, Jim says, came not from his salary but from the investing. The fact that they set the money aside, and never drew from it, is what allowed it to grow.
Jim, as I said, never read any how-to financial success blogs. He just made it up as he went along. And so it was interesting to me to hear two more recipes for success you don’t see mentioned in books or the blogosphere.
4. They never moved
They bought their house more than 30 years ago and never moved. There was a time when a bigger house would have been “more comfortable” and now that they’re empty nesters, they could downsize. However, they’re “people people” and their neighbors are their friends. It’s telling that almost everyone along their street has lived there more than 20 years.
It’s not just that. Moving, Jim pointed out, costs money… serious money. Not only do you have a 6 percent hit to your biggest asset in the form or real estate commissions, he says, you also have the closing fees on the new place. But that pales in comparison to the cost of making the new house a home. It’s rare that the old drapes will do, and it’s not long before carpets and furniture get added to the list. All-in, the total cost of a house change is well over $20,000, and that’s conservative. Over time, that becomes $50,000 or more in end-game money… per move! And for what? Be satisfied with what you have and look after it.
5. They’re still together
As our interview wound down, I couldn’t think of anything else to ask and a comfortable silence sat down and joined the conversation.
Then Jim continued. “And we never pissed away any of our assets in a divorce.”
You never read that, but he’s right. When he looks around at acquaintances getting divorced, he can’t help but notice the hurt that puts on their net worth.
Soon they celebrate their 49th anniversary. Their house is middle class, their cars are more than 10 years old, they rarely “go out,” and the way they dress and live would probably bore a younger generation.
But those are the things that made him our millionaire next door.