Frugality Archives - Page 5 of 5

Retiring Wealthy On An Average Salary: The Story Of The Altruistic Educator

Last week I published the first post in a series I'm calling “Retiring Wealthy On An Average Salary”. The series is intended to give us a brief glimpse into the lives of some average people who made average salaries, but still managed to retire with a net worth that we would say makes them wealthy. My intention in writing the series is to help people realize, you don't have to be a celebrity or a doctor in order to retire comfortably. Instead, you just have to work hard, have a plan, and save and invest diligently.

Last in this series, we told the “Story Of The Thrifty Engineer“. This week I want to talk about the story of a thrifty teacher who was able to save a fortune on a teacher's salary, and later give it all away to help others.

The Story Of The Altruistic Educator

Edna Diehl, was a Davison, Michigan woman who spent almost 3 decades as a teacher and counselor at the city's high school. She was known to be a serious educator that didn't take any nonsense from her students. She pressed them to succeed and do well in whatever careers they pursued. Former students have also stated that she had a soft side, and showed how she cared deeply for them and wanted them all to do well in their lives.

Edna and her husband (who had no children) were also careful with their income, and made sure to save and invest their money regularly over the years. The result was that they had amassed a fortune of well over a million dollars by retirement.

Instead of spending all of that money as some might have done, Edna decided that once she passed her fortune would be used to fund college scholarships for the district she had taught in.

DAVISON, Mich. — A woman who spent 29 years as a teacher and counselor at the city high school has left $1.3 million to the school district.

Edna Diehl died in July at 88. The Davison Educational Foundation will hold the money in trust, with the interest to be used to fund scholarships.

The district expects the interest will generate about $60,000 a year, paying for two years' worth of college for five students every year, said Kevin Leffler, a school board member and foundation president.

Diehl and her husband, Ben, who died in 1997, had no children.

She was known as a serious, sometimes even strict, teacher at Davison High School. Former students said she cared deeply and wanted them to succeed in life.

“She was pretty serious most of the time. But she could also be fun outside of school,” Connie Olejniczak, a student during the mid-1960s, told the Flint Journal.

Diehl was known for her ability to raise money for student trips, colleagues said.

“I remember her having to count money all the time,” said Dick DeLoge, a retired teacher who worked with her for about five years.

Davison is 50 miles north of Detroit.

I'm sure it must have been a wonderful feeling for Edna to be able to give such a wonderful gift to the students of her district as she did. Being able to give $60,000 a year in scholarships is no small feat, and her hard work and forethought will mean a college education for many hard working students in her district.

How Can Even A Teacher Become Wealthy?

So how does someone become wealthy on a teacher's salary? Education experts Mark C. Schug and William C. Wood offer their advice to teachers in an article on beyond-the-book.com. Their 3 rules for teachers:

Start Early: When you start saving early you have the benefit of having more time to enjoy the wonders of compound interest.
Buy And Hold: Spend less than you earn, and don't go into debt. Save your money, and purchase investments, and then don't touch them. If you withdraw your money you short circuit the gains you might have made due starting early and the wonders of compound interest.
Diversify: Don't put all your eggs in one basket, in other words, don't have all your money invested in one – or only a few stocks. Instead diversify your holdings via low cost mutual funds.

They say that since teacher salaries start lower than some other professions, it is doubly important that they start earlier than others. I think their advice would be applicable to most of us, however, not just teachers. Start early, invest regularly and make sure you are diversified.

What do you think? Does the example of the altruistic teacher give you hope that you could do the same? Do you think it's possible to become wealthy on an average salary? Tell us your thoughts in the comments.

Retiring Wealthy On An Average Salary: The Story Of The Thrifty Engineer

By Mr. Money 4 Comments

A couple of times on this site I have profiled millionaires who became rich through hard work and determination, and I talked about how and why they were able to rise to such success.

While those stories can be inspiring, sometimes they can leave us average folk thinking that dreams of becoming balance sheet affluent are beyond our reach because we aren't able to create a six figure income or become wealthy within a few years.

This week I decided to start a series of posts looking at the stories of more average folks who, despite making an average salary during their working years, retired wealthy and were able to help out a lot of people when they died. I'll call this series “Retiring Wealthy On An Average Salary”.

Today I want to look at the story of Jimmie Dean, the thrifty engineer. (not Jimmy Dean the sausage magnate, who also has a great story and who we profile here.)

The Thrifty Engineer

Jimmie Dean was an engineer, who was raised in a family of modest means – in Washington County Oklahoma. He believed in hard work, individual responsibility and education, and that through those things a person could achieve their goals and dreams. After serving honorably in the Navy, he worked as an engineer at Phillips Petroleum for 33 years. While he worked hard and with distinction, he never made a six figure salary. The most he ever made was around $50,000 a year. Even with such modest means, Jimmie was able to leave a substantial amount of land and money to his family, and still have enough to create a 2 million dollar scholarship fund for Oklahoma college students. How did he do it? Through being “frugal with his money” and investing in mutual funds.

A thrifty engineer from Oklahoma who died with $2 million and has set up a scholarship foundation.

Jimmie Dean (not to be confused with the sausage magnate) worked for 33 years as a technician at Phillips Petroleum. The most he ever earned was around $50,000 a year.

But he scrimped and saved and invested in mutual funds. When he died in 2008, he had more than $2 million in the bank. His bequest was to set up a scholarship fund.

“He did it through being frugal with his money,” said Mr. Dean’s nephew, Bob Boyd, who now runs the Jimmie Dean Foundation.

The foundation is handing out scholarships of as much as $10,000 to students who show hard work and a commitment to remain in Oklahoma.

Granted, $50,000 a year in Oklahoma is decent pay. Mr. Dean was married only briefly and had one son. Still, getting to $2 million on a $50,000 a year salary is worth noting.

And at a time when giant philanthropists like Bill Gates and Warren Buffett get so much attention for their largesse, it also is worth celebrating the little-knowns who saved all their pennies over a lifetime only to give it all away when it was over.

It just goes to show that even if you aren't making a six figure income, you can still retire with a nice nest egg if you're willing to do the hard work, be frugal, save and invest.

Does this story of living on an average salary and retiring wealthy help you realize that you could retire comfortably as well? Tell us your thoughts in the comments!

What Separates Millionaires From The Average Joe? Discipline, Frugality and Moderation.

By Mr. Money 4 Comments

When looking at what makes people successful, people often attribute wealth and success to things that really aren't the cause. For example, people often assume that the wealthy only got to where they are because they inherited their wealth, and because they did unethical things to cheat people out of their money. The reality is that most millionaires are first generation wealthy, and that they got to where they are because they place a premium on ethics and are extremely fair in how they treat other people.

So today, I want to do a quickie post talking about another misconception, and talk about a few attributes that set the wealthy apart from those who aren't.

Discipline, Frugality And Moderation Lead To Success

We're often told that the wealthy are prone to great excesses, and that they love to spend lavishly on things they don't necessarily need. In some respects people believe that the wealthy lack a sense of moderation, and that they love to spend. Quite the opposite is true.

One thing that often leads to success for the wealthy is the fact that they are disciplined in the things that they do, whether it be in researching and planning their financial lives, or if it comes to being disciplined in their eating and exercise habits. They learn their outlook on life via their parents who taught them the value of discipline, frugality and moderation from an early age.

Author Thomas J. Stanley discusses this point in a recent post where he talks about calls for government restrictions to fast food consumption.

Just like hypereating is a danger to one's physical well being, hyperconsuming is a danger to one's financial well being. So what does this all have to do with millionaires? Most millionaires eat and spend in moderation. They are well disciplined. In fact, it is rare to find any of the millionaires whom I have interviewed one on one or in focus groups to be overweight. I have found that the typical millionaire, a male, is 5'10” tall and weighs 184 pounds. Decamillionaires are about an inch taller and 3 pounds heavier. After reviewing this data, I was prompted by the numbers to review my latest copy of the Forbes 400 issue. Looking at the pictures of the wealthiest 400 people is telling. Bill Gates is hardly overweight nor is Steven Jobs or Larry Ellison. One must be well disciplined to achieve the status of a Forbes 400 designation. This discipline extends to the consumption of food.

The problem often isn't necessarily that someone doesn't have the opportunity to succeed due to their situation, it's the fact that they haven't been given the tools to succeed by their parents. They haven't been taught the value of hard work, discipline, frugality and moderation. They see the excesses that society says is ok and laudable, and they shoot for those goals, when in fact discipline, moderation and frugality are the actual keys to success.

The habit of eating in moderation among the wealthy in America was not developed via government mandates and laws. Most economically successful people tell me that their disciplined lifestyle including consumption habits originated from their upbringing. In other words, the parents mold the child. They are the ones who dictate how much the child eats and where he eats.

Today a good number of millionaires patronize fast food restaurants. In fact 47% of those in the $1M-$5M net worth category reported eating at least one meal inside a McDonald's within the last 30 days before being interviewed. Forty percent of those with a net worth of over $5M did the same. If anything these numbers understate their patronage since my question did not ask about drive-in or take-out orders.

What can I say about children who are taught the benefits of discipline, frugality and moderation? They are much more likely to become economically successful and satisfied adults than those who were raised in an atmosphere void of these characteristics.

So having discipline, frugality and moderation are key ingredients to becoming successful in life, no matter what your starting point. If you have those things, you'll be much more likely to be economically successful – and satisfied adults.

What are your thoughts on this. Do we understate the importance of these things – discipline, frugality and moderation? Tell me your thoughts in the comments.

Three Steps You Can Take To Turn Your Financial Life Around

By Mr. Money 3 Comments

After we got married just over 8 years ago, my wife and I entered the marriage with more debt than we would have liked. My wife had zero debt, and I came in with student loans, credit card debt (for our honeymoon) and a loan for my car. We weren't happy with having so much debt, and after a couple of years of slowly paying off the obligations, we decided to take things a bit more seriously. We wanted to get out of debt and get on track for an increased net worth as fast as possible.

Here we are several years later and we're now back on track. We have no debt (except a mortgage) and we're slowly building up a nice nest egg that includes savings, retirement accounts and insurance.

Here's are three things that we did that had the greatest impact in helping us to turn things around.

Start Tracking What You Spend And Set Up A Budget

The biggest change that we made was to actually start tracking what we were spending. When we got to the end of the month normally we would be at the end of our bank account – with not much left over to save or pay extra on debts. The money was just gone and we didn't really know where it had gone.

After reading Dave Ramsey's Total Money Makeover we started actually tracking where our money was going for a couple of months. What we found was that we were overspending by huge amounts of money in our eating out category and in our entertainment spending. There was a lot of room for making cuts.

Once we had tracked our spending for 2-3 months we actually set up a budget and cash flow plan at our house. We started working on a zero based budget suggested by Ramsey where you allocate every dollar to either a spending, saving, investing or giving category before the money even hits the account. You allocate every dollar, and if you have money left over at the end of the month – it needs to be re-allocated to a category. If the money isn't given a name and given a job – that money has a way of disappearing.

We quickly found that once we started using our budget, and not spending more than had been allocated in different categories (using a cash envelope system), we ended up having several hundred dollars a month left over that we hadn't had before. And it wasn't like we ended up making any painful cuts or hard decisions. That's quite a turn around!

Set Up An Emergency Fund

Another thing that made a huge difference for us, while we were paying off debt – and once we had it all paid off – was having an emergency fund. According to a Gallup poll a few years back, Only 10% say they have $1,000 in cash available in case of an emergency. That's not good!

In the past I had always thought that having a credit card was just as good as having a cash emergency fund. But what I realized later on was that using a credit card to pay for life's little “emergencies” just helps to continue a cycle of debt by creating new debt – when you could have instead planned ahead and had the cash to pay for it up front.

So how much should you save in an emergency fund? It depends on what you want your level of security to be, and the amount of risk you want to take on by not having an emergency fund. At our house, and in this economy, we currently have about a 10-11 month emergency fund (we can pay for 10-11 months of our expenses if we were to lose all income tomorrow). We just aren't optimistic about where our economy is heading, and we want to make sure we're prepared for the worst. While we were paying off debt we saved up $2000 in our emergency account because we figured that would cover most problems that could happen.

Try Living A Cash Only Lifestyle

The third thing that we did that had a huge impact was switching from a lifestyle financed by credit and loans, to one financed strictly by cash. If we want to buy something now, we pay for it with cash. Now that doesn't necessarily mean we pay for everything with crisp new $20 bills, but it does mean that we don't buy anything unless we have the cash on hand in our bank account to pay for it.

A couple of examples of how things changed in our life.

We needed some new furniture for our new house when we moved 4 years ago. In the past we probably would have financed the furniture at the store or put it on a credit card. Instead, this time we had planned ahead and saved the cash to pay for it up front.
Two years ago my car started having problems, and we knew we'd have to buy a new car to replace it. Instead of buying an expensive model financed at the dealership as we had in the past – this time we had saved up enough money every month in a “car fund” to buy a nice used car – that was new to us. A paid off car just drives so much nicer than one with a huge loan on it!

Paying cash and not having new debt is so much more freeing!

Planning Ahead, Saving Up And Living Within A Framework

When you look at the three points above, they all have something in common. They involve taking a look at your life, and making a decision to live with a plan, to thinking things through and making rational decisions that will pay off down the road. They involve living with delayed gratification, and deciding that you want to make sacrifices today so that tomorrow will be a brighter day. Making those types of decisions isn't always fun, but in the end it will pay off.

What other things would you suggest people do – or what are some things that you have done that have made you more successful? Tell us your thoughts -and your tips and tricks – in the comments!

Personal Finance Basics: Live Below Your Means

By Mr. Money 6 Comments

Last week I started a series called “Personal Finance Basics“. In the series I plan on talking about basic concepts of personal finance, going back to the simple concepts that we sometimes forget or ignore. Last time I talked about the idea of paying yourself first in order to ensure that your savings grow – instead of having your money mysteriously disappear.

This time I want to talk about another important concept – living below your means.

The Lure Of Easy Credit

One thing that this generation has done is to forget the basic concept of how you create and grow wealth. The ideas of easy credit and buying things before you have the cash have taken hold. Whereas our parents would save up and pay cash for the things they bought, when we have a whim and desire something – we just buy it.

The average age at which a U.S. consumer under the age of 35 first adopted a credit card is 20.8 years. The average age of credit card adoption for a consumer over the age of 65 is 40.6 years. (Source: “The 2008 Survey of Consumer Payment Choice,” Federal Reserve Bank of Boston)

The average age that we started using credit has dropped as time has gone on. Using credit and going in debt has become more acceptable. Millions of people have acquired debt and gone thousands of dollars in debt.

Total U.S. revolving debt (98 percent of which is made up of credit card debt): $852.6 billion, as of March 2010 (Source: Federal Reserve's G.19 report on consumer credit, March 2010)

So revolving debt in the U.S. has grown to near 1 trillion dollars. That can't be a good thing!

So what can you do about it?

Spend Less Than You Earn And Live Below Your Means

Thomas J. Stanley in his book “The Millionaire Next Door” talked about millionaires and what the greatest factors were that lead to their creation of wealth. Contrary to the picture that many people hold of the wealthy, the picture of the lavish spending, expensive cars and expensive homes, most millionaires that he interviewed were rather frugal. They lived well within their means – and most lived below their means.

He said that the average millionaire doesn't have material things just to have them:

We wear inexpensive suits and drive American-made cars. Only a minority of us drive the current-model-year automobile. Only a minority ever lease our motor vehicles. Most of us (97 percent) are homeowners. We live in homes currently valued at an average of $320,000. About half of us have occupied the same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes.

Millionaires don't feel the need to display their wealth, or show off by living in fancy neighborhoods and drive a fancy car. They live below their means, make thoughtful homemade gifts, buy quality things, and don't focus on brand names or status symbols. They enjoy the good things in life, but also know good value. They know how to live on less than they make. In fact, for many of them, their frugality and living below their means is one of the primary reasons why they have created their wealth.

So what do you think – is living below your means an important piece of creating and growing wealth? Tell us your thoughts in the comments!

Rags To Riches Millionaire Success Story: Jimmy Dean

By Mr. Money 1 Comment

From time to time I think it's an interesting exercise to look at the stories of people who have risen to fame and fortune, and figure out how they did it. Was it luck? Hard work? A burning desire to succeed? Today i wanted to look at one such story of rags to riches.

This past weekend we saw the passing of a entertainment and business icon, musician, actor and sausage magnate Jimmy Dean. While most of us are probably familiar with Jimmy Dean's sausage because of the prolific TV commercials, what a lot of people don't know is that Jimmy Dean lived a true to life rags to riches story. He was a musician and singer, actor, businessman and more.

Early Life And Musical Beginnings

Jimmy Dean was born in 1928, in Plainview, Texas. He was raised in poverty and dropped out of high school after the ninth grade. Despite his humble beginnings, he rose above his situation, worked hard and made himself into a huge success.

Dean grew up in a musical household where his mother taught him to play the piano. His father, who left the family, was a songwriter and singer. Dean taught himself to play the accordion and the harmonica.

Dean began a band “The Texas Wildcats” in 1948 that by the early 1950's had it's first national hit. In 1961 he won the Grammy for his big hit “Big Bad John,” which is about a coal miner who saves fellow workers when a mine roof collapses. It's one of his more famous songs, that you can still hear today. Here's a video of the song:

Fame, Fortune And Business

His fame in the music business ended up leading to a career in TV and movies. He had a couple of iterations of “The Jimmy Dean Show” on CBS and ABC, played an ally of James Bond in the film “Diamonds Are Forever.” He was also the first guest host on “The Tonight Show”.

In the late 1960's Jimmy Dean returned to something that he knew well – the meat business. His family had raised hogs when he was little. Jimmy and his brother slaughtered the hogs and ground the meat – and his mother seasoned and prepared it.

Jimmy Dean opened the The Jimmy Dean Meat Co. in his home town of Plainview, Texas – and after six months, the company was profitable. Jimmy was a good businessman. He sold the company to Sara Lee Corp. in 1984, although he stayed on spokesman until 2003. Who hasn't seen one of the commercials for Jimmy Dean Sausage?

By the early 1990's Jimmy's personal fortune had grown by leaps and bounds and was estimated at near 75 million dollars. Not bad for a poor kid from Plainview!

Jimmy Dean – Careful Money Manager

Having watched other stars fritter away their fortunes, Dean was always a careful money manager – which helped him to amass such a fortune.

“I've seen so many people in this business that made a fortune,” he told the AP. “They get old and broke and can't make any money. … I tell you something, … no one's going to play a benefit for Jimmy Dean.”

Jimmy Dean rose from a life of poverty with a single mother to attain every dream he had ever had. He did it through hard work, persistence and through common sense business practices and integrity. If we can learn anything from his life it is the power that can be found in those things.

Main Menu