You Can Build Wealth Even if You Don’t Make A Lot of Money

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You Can Build Wealth Even if You Don’t Make A Lot of Money

By JLP | June 4, 2008

I have the May issue of Money Magazine to thank for all the kind emails I have received recently. One of those emails came to me last week from a guy who has built a nice-sized nest egg even though he has never earned a big income. Here’s his email altered slightly for blog posting:

I just read about you in Money Magazine and then a little about yourself that you wrote in your blog so I decided to say hi and introduce myself. Why? Because I think you have your feet on the ground. No quick get rich nonsense.

It does take time and sacrifice to get anywhere, as you say and trust me, I know. I don’t or never have mad a lot of money. Probably averaged around $45,000 per year over my lifetime, if that much and I turn 60 in August so not much. Although the last 3 years I have made over 60,000 per year, but have saved since I started working with my current company at age 38 and my 401k is around $325,000 and my IRA and mutual funds are around $250,000 (and I am sure it’s not even close to being enough but it’s a start). All by just saving a little each month and being lucky enough to have gone through the 90’s being in the market although I did stop after Bush was elected and am seeing the fallacy in doing that.

I save in a lot of ways. Even being single I shop at Costco. I can buy a dozen premade burgers for say $14.00, and if I eat 2 a night, that’s 6 meals, plus the buns (24 for $3.00). I wrap the burgers in foil and when I thaw them out, I wash the foil and reuse it. I only go to the movies, if at all, at the matinee prices and I ride my bicycle to work.

I don’t believe in debt at all and owe nothing on my credit card. One card, that’s it and I pay it in full every month. If I can’t do that, I can’t buy whatever I want. I paid off my house, a 30 yr. mortgage, in 15 yrs and although I am not sure that was a good financial decision, it does feel good.

Anyway, I just wanted to say hi and tell you a little about me and that I hope to hear from you and will try and read your blog as much as possible. Money Magazine says you are sensible and they appear to be right. I also like your idea of earning extra money, esp. by starting a blog. So maybe I will try that myself once I figure out how to do that and have more time. Since you are in Texas and I am in California, just to let you know, if you are a football and Dallas Cowboy fan, I hope we kick your butts this year…

Best Wishes,

Dave

Let’s get one thing straight: I AIN’T NO COWBOYS FAN! LOL! Unfortunately, I’m a Raiders fan (it’s a long story).

Back to the point of the email…

I think it is awesome what Dave has been able to accomplish over his lifetime. It’s proof that you don’t have to make lots of money each year in order to build wealth as long as you live within your means. His story should be an inspiration for all of us.

My only advice for Dave would be to substitute all those burgers for salad!

Topics: Miscellaneous |

Comments to “You Can Build Wealth Even if You Don’t Make A Lot of Money”

Bozo Says:
June 5th, 2008 at 4:41 am

Might I add my congratulations to Dave. After all, it just goes to prove “it’s not what you make, it’s what you spend” that counts.

By the way, I buy frozen burger patties at Lunardi’s in Pleasant Hill (CA); they’re something like $6 for 20 patties. Keeps me in cholesterol for a month or so. Throw in the onion rolls, mustard, mayo, lettuce, and onion, it’s still a bargain.

We folks gotta have our burgers.

Yours,

Bozo

PS: The burgers aren’t half bad, might I add. Better than McDonald’s or Jack-in-the-Box.

Glenn Says:
June 5th, 2008 at 7:58 am

As of paying any payments on a 30 year or whatever length and paying it off in half the time is a good. (I might be wrong but as of what I researched, u actually cut half of your interest rate if you pay down every month.) So w/ a 30 year loan at 6% you pay 600 a month but pay down about 900 or 1200 you actually pay about 3%.

KC Says:
June 5th, 2008 at 10:42 am

Congrats to Dave and all others who’ve built wealth over their lifetime w/o earning a lot. I always look to my parents for support on how to be wealthy while never making a lot of money. My dad was a state employee and my mother did a variety of things. But combined I doubt they ever made more than $50k (in today’s dollars).

I always wondered growing up why we never had new cars, new appliances, or anything new for that matter. My parents had the same jobs as my friends’ parents and they had lots of stuff, why not us? But now my parents are retired early, have a great looking house with new stuff every so often. They have nice cars (they even bought an Avalon brand new last year). They paid for undergrad and grad school for me about 15 years ago.

How did they do it? They didn’t spend money when they were young. They always drove beat up, old cars, and really never put much into their house until the kids were grown. They’ve never financially supported their adult kids (but do loan us small amounts of money if we do need it - its always paid back). They also worked at their jobs long enough to receive some benefits - like health insurance from age 60 on. I’d say these are the 3 biggest factors in building their wealth. #1 being the most important - living well beneath your means with minimal debt.

I try to live by these examples my parents have put forth. I’m very fortunate to have them as guides.

muddlehead Says:
June 5th, 2008 at 11:06 am

not what you make. what you save.

Meg Says:
June 5th, 2008 at 11:19 am

BOOOOOOO Raiders. YAAAAAAAYY Cowboys!

dodo Says:
June 5th, 2008 at 12:31 pm

replace burgers for salad. LOL!

Frugalicious Says:
June 5th, 2008 at 5:17 pm

I would NEVER be a Cowboys fan. I am from Buffalo, so it is in my blood. It is also in my blood to despise the Dallas Stars who do not know how to play hockey. No Goal!

"Mo" Money Says:
June 5th, 2008 at 7:20 pm

Good post. Just shows what one needs to do to prepare for their future.

Bozo Says:
June 5th, 2008 at 9:58 pm

To: CA Dreaming

I think somebody ought to make a movie about your (financial) life.

Good job!

Miguel Says:
June 6th, 2008 at 11:12 am

I’m impressed by the stories on this thread. It certainly speaks to the power of living below your means. Wish I’d had role models like these examples when I was growing up. I’m not sure I would have chosen a different path, but at least I would have known there could be a different path.

Growing up poor, with a burning desire to escape, the only way out that I was taught was through the aggressive pursuit of wealth and status - basically by getting as much education as I could, from the best schools I could, and going for high-income professions (i.e. the traditional become a doctor, lawyer, banker, or business owner if you want to succeed financially). In order to do that, I rationalized working extraordinarily long hours in super-competitive environments, spending years in school, borrowing huge sums for education, moving to a high cost city, and taking some significant business and career gambles to attain bigger and better financial rewards.

Today, I have pretty much achieved most of the financial goals I set for myself, and while still in my 40’s. But, the fact is that to continue living the high-octane, big-city life-style we enjoy, I still need to work, and not just work, but work pretty hard. In part, it is a choice - I truly do love the excitement and challenge of my life. I could easily retire today to the simple life, not that I could even begin to understand how to live on $25K/year like CA Dreaming. But, I feel that I’m only now beginning to tap my own professional and business potential.

And that is the trap inherent in doing it my way, and the reason I’m so interested in hearing about people who’ve chosen a far simpler path to financial independence.

Someday, I may just join you when I’ve had enough of the rat race.

JLP Says:
June 6th, 2008 at 12:15 pm

There were lots of good comments on this post. I like stories about people who have built wealth over the years by making good choices. This is the reality for most people.

Christina Says:
June 6th, 2008 at 12:46 pm

Very inspirational! As a person with a great interest in food, health and economics (studying ag econ in grad school) I have to say that yes salads are healthier, but it is very hard to have have fresh produce every night (for the salad) on the same budget as the burgers! Thanks for making saving seem more possible!

DJ Says:
June 6th, 2008 at 10:17 pm

Not to take away from his accomplishments. But, I would not call an average over those years of $45k a low income. Anyone that can save 26k per year and pay their home off in half the time is making pretty good money. Show me someone that has done well averaging 25k or less, and then I’ll be impressed.

Assetologist Says:
June 7th, 2008 at 8:21 pm

Dave has nailed the core of financial freedom - save more than you spend. It is very commendable that he has succeeded in this regard. Far too many people in North America choose to live on credit rather than face the relative hardship of saving and investing.

My personal philosophy tends to expand upon this as I think life is far too short not to have more pleasures. Although not all of them take money - most do. I believe in Abundance NOT Scarcity and will cover this in my ‘Philosophy and Science of Wealth’ blog in the next few weeks.

ech87 Says:
June 7th, 2008 at 10:10 pm

People don’t realize how easy it is to accumulate if you just sacrifice a little money every day/week.

If you start working at 25 and retire at 65 and save 125 bucks a month and get 6% interest then you could have almost a quarter of a million bucks in the bank just by saving a little more than 4 dollars a day.

-ech87

levity Says:
June 9th, 2008 at 11:04 am

My parents have the same attitude as KC (#3). We never had new things in our house, and our beat-up vehicle is one that you’d be probably ashamed to bring to school… but they got me and my 2 siblings through college.

Sorilea Says:
July 8th, 2008 at 9:39 am

I live in the midwest, in a small town with a lower-than-national-average unemployment rate and a lower-than-national-average education rate (not many degree holders here). Our town has a population of just over 4,000 mostly consisting of farmers and cattlemen. So, the job market is somewhat difficult.

I have been a stay-at-home mom for the past year, a decision made with rising gas prices in mind since my job was a commute of almost 40 miles a day each direction and the cost of daycare also being high. I have three children: 15, 13 and 4.

I worked as a graphic artist for a local newspaper for several years, and also still currently teach classes as an adjunct instructor for our local community college outreach. (I usually teach 2 classes per year at $400 per credit hour which works out to $1200 gross per semester if we get enough students to have the class.)

I am currently enrolled in college to obtain my bachelor’s and then master’s degree in an education leadership program online.

My husband has worked in construction, making enough money for us to pay our living expenses and allowing me to stay home. Currently, however, he is working at a salary of $35k yearly at a local mill (processing organic flour and other organic grains). He has no college degree, but would love to return to school to obtain a teaching degree (as an art teacher).

We are currently living in a small (1200 sq. ft.) home that we are trying to purchase at $35k. We have a 2001 F150 we are still paying for at $380 per month. Our utilities run $130 for gas, $195 for electricity, $35 water, $40 trash (quarterly).

Our phone bill is about $180 per month, give or take a few dollars. Our rent is $400 monthly.

We have some medical bills that we pay about $100 monthly on, two credit cards that we use and try to pay off each month (one with a limit of $300, the other $750 - we are using these to raise our credit score and buy things we would normally buy with cash or debit cards for ordinary expenses) and our auto and renter’s insurance costs are $87 monthly.

We try to keep our grocery bill as low as we can around $300-$400 monthly.

My husband’s take-home pay is $1150 bi-weekly.

I am not a financial aficionado, but even I can see that saving money is not an option for us right now. We try to reduce our expenses as much as possible. We rarely buy extras. We don’t eat out or go to the movies.

We will be having some big expenses coming up soon… school clothes, supplies and tuition for three kids. I don’t know how we’re going to buy them clothes for school without using credit cards, and taking several months to pay that debt.

Supposedly everyone can save money…

So, any advice or solutions? I doubt any of you money savvy people will be able to find any extra money in our budget, but I didn’t think it would hurt to ask.

heather Says:
July 12th, 2008 at 3:57 pm

i wholeheartedly agree with saving money and not splurging on stupid stuff that only clutters your life. but i have to wonder about people who live as misers, when they can enjoy the many small luxuries of this world for not a lot of money. it is fantastic to have that much money saved up and to know that you never need to borrow from anyone ever again. but doesn’t some kind of mental complex emerge when all you do all day is figure out how to squeeze that extra penny out of your budget? i work at a bank in a wealthy area of southern california, and let me tell you, people with money are WEIRD. it’s like the money means more than life, which is absolutely the wrong idea to portray. i’d rather be happy, living comfortably (and for me that means having food, a decent place to live and being stress-free) with some amount of savings, but not stockpiling money like the world is about to end tomorrow. my opinion, of course, only applies to those who have the option to save this vast quantities of money, not those who HAVE to scrape and save to afford whatever it is that they need. we pity/complain about people with OCD who can’t stop hoarding items or who can’t step on the cracks in the sidewalk…why are these people any different from those who hoard money to the extreme?

Mel Says:
July 15th, 2008 at 8:32 am

Sorilea -

I don’t know if this is the place to do it. But looking @ peoples budget is something I love to help people with, so here’s what I’m seeing in yours ..

Your husband brings home $2300 a month - $1897 in bills = $480 left.

Here are a few thoughts - the $180 phone bill? I’m not up-to-date on where you live, but we live in a med/small town and pay $50 a month for nationawide long distance any-time service - I’d check around on that bill — you would cut that down over $100!!

Also, your electric & gas total $325 a month? We have a 1500sqft home and we spend about $200 a month on our utilities. We keep our Ac at 80 in the summer and heat at 70 in the winter. I hang clothes in the summer when I can, we also use fans to circulate the air, we use energy-save bulbs & cut the AC/Heat down/up further when we’re out of the house. I would say you could maybe cut those bills down.

Even without cutting those things out, you still have $480 a month left. Even if you keep out $35 a week for “spending fun money” (that’s what we use) you have $340 to spend a month.

You could take $200 and put back in some type of savings - an IRA/401k, or a money market or something if you do already have those.

This doesn’t even include your pay. You could take 1/2 your pay and put it back for “emergenies” and part for b-day/Christmas and if you have any left add to the savings.

And just to make you feel better, I am a SAHM that makes a little extra money a month babysitting (about $300 mth) and my husband makes about $50k yr (that is BEFORE taxes) and after taxes, medical/dental/life insurance and 401k he doesn’t bring home much different than your husband. We do not have a car payment, but we have a higher mortgage payment and we have put back 6 months income in a savings for emergencies, and have an education account for our daughter, a Christmas club, and an IRA for me, plus we will pay our mortage off in 9 years (a total of 15 since we bought it)

We are very frugal and watch what we spend, and we still have fun, we’ve just found ways to do it on a budget - It’s worth it to say at home for me!

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You Can Build Wealth Even if You Don’t Make A Lot of Money