I can offer many examples of working with clients that have been extremely successful at accumulating wealth and then living their “golden years” without a worry in the world. Yet, what I want to do is focus on a particular couple. I’ll just call them “D” and “H” for short and also protect their identity.
D and H, unfortunately, are no longer with us as they passed away about five years ago. D was in his 90’s and H was almost 90. They were a kind and wonderful couple that lived a life well within their means.
However, when I first met them, they brought out a shoebox of papers. They were neat and orderly, but it was the easiest way for them to keep their current paperwork readily available. Once the next month’s statements came in, they filed the previous one in their respective files.
Reading this so far most you would assume that they must have lived a life of austerity and never had fun. However, that is quite contrary to reality as they always had a nice, annual family vacation, owned a home in a middle class neighborhood and sent their children to college.
What allowed them to be exceeding exceptional was that they adopted this one principle: outside of what they called “the necessary priorities”, they didn’t splurge.
In talking to them over the years, I came to the realization that one of the great lies being perpetrated by many in this country is that the system is rigged, you can’t accumulate wealth and your retirement years are going to be bleak. The reality is that they had the blue print for success.
They saved a minimum of 10% of everything they earned. They told me if H worked extra, the additional income was invested, not seen as a windfall for spending. Bargain hunting and discount shopping was mandatory and I have to say, they always dressed well. If they went out for dinner, they found places that offered specials or a “buy-one-get-one-free” promotion.
What’s stunning is that this type of lifestyle allowed them to save and invest to such a degree that when they passed away their children inherited more than $2 million!! The income generated off of their portfolio was close to $60,000 a year which was stunning considering D never made more than $10,000 in any one year while working.
When I tell young people this story in order to encourage them to invest, I hear the usual “I want to have fun now” or “that happened then, it can’t happen now” or “I’ll start saving after I……..”. The truth is that many people will live much longer than they expect to and if they start young enough, their golden years might start earlier or be more enjoyable.
Yet what really happened was that they lived under a guiding tenant which was told to me by another very wealthy gentleman over 20 years ago. That is, “in order to be able to live a good life while working and when you are retired, you must rule the money, instead of letting the money rule you!”
The point of my story is that you can accumulate $100,000 or $100,000,000 to be used during retirement. If you don’t have a handle on your expenses and then develop and execute a plan, then the amount of capital or income generated off of that capital won’t matter. You need to adopt a mindset of valuing each and every dollar whether you are working or retired.
Tom is the Founder of TRG and has been the President and Chief Investment Officer since 2008.