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« The Seven Pillars of Financial Success, Pillar 2: Grow Your Career | Main | Foreclosure Hitting Well-Off Families Too »

May 24, 2010


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Thanks for the story! We all get discouraged and want to give up sometimes, but reading stories about millionaires that just played good defense provides hope for us middle class folk and bloggers!

Good to see stories like this, as they provide examples of regular folks that achieved solid levels of success (stricly in financial terms, anyway) by applying the simple concept of maximizing the income minus expense gap, and doing for the long-term to allow for compounding to take effect.

Its the discipline part that trips up a lot of people, I think. Its good to be reminded that the little things, on a daily basis, can make a large impact.

It also helps to keep your earning power strong, which I definitely believe and I know is also suggested on this blog frequently. Your career is the engine that drives your finances. If you manage it well, and combine with a solid money management foundation, it can go a long way.

stiries this this is very encouraging and motivates me to be frugal now and reap the benefits later. however, it's also good to reap the benefits now and save a little less later. it's hard to enjoy some of the things when you're older, and more fun when you enjoy somethings when younger.

Absolutely true! If I may summarize in four words: "live within your means." Maybe an even better summary would be: "live below your means." If you do that, you'll be on your way to millions. Invest a little bit too.

Great story. I love reading these. I am currently reading "Rich Like Them". It is about a guy who just walks up to mansions and asks them what they did to become rich. A lot of perseverance and self discipline - exactly what your story embodied.

The story is great, the fact the commenter's parents passed on all these financial details (401k size, savings rate, house payment) to their children is even better...

Great article. It is very true that living below your means is the best way to accumulate wealth! Plus it is also very rewarding and satisfying (IMHO).

Money is meaningless if you don't even spend a little.

Living within our means seems to be a lost art.

Great article.

bb --

Who said anything about not spending some of what you earn?

When I see a post like this, it seems to be saying that if we do the same things that our parents did (mine were similar to yours), we'll end up in the same place. I don't think that's a fair comparison--the younger generation faces more challenges. For example, take the cost of education (put aside for a moment the debate of the value of a degree and whether it's worth taking on the debt). My husband recently graduated with the same professional degree from the same institution as his father did about 30 years earlier. When his father was in school, between his mother's teacher salary and his part time job, they were able to support themselves and pay the tuition out of pocket. Tuition has risen so much since then that had we not taken loans we would have had $800/yr to live on (despite my professional job and his part time job). So, to put himself at the same starting place as his father, with similar earning potential, my husband had to take on debt and put us financially a step behind where his parents were at our age.

"doing software work at a telecom"

I'm not trying to minimize the value of the post, but his father worked in one of the fastest growing industries where he was likely paid in options. How much of his net worth/401k is from company stock options and how much is from saving? I think it's relevant to break this out because 100% of his net worth could be the result of stock granted to him and have nothing to do with saving/frugality.

I Think Ann has some very valid points.


I think he is referring to:

"rarely ate at restaurants, never went out for coffee..."
"Buy clothes at thrift stores. Buy furniture at thrift stores..."
"never buy new cars, only old beaters..."

I kinda of agree w/bb on this one. What I see here is someone sacrificing A LOT today for a million tomorrow? There needs to be a balance in life and it can't all be about saving, saving, and saving. What good is a million dollars if you die the next day. I know that is an extreme example but the fact is we don't know what tomorrow holds and need to "stop and smell the roses" every now and then.

There's a difference between a used car and a beater, rarely/never going out and doing so within your means, shopping at Target/Wal-mart versus Rodeo Drive. I'm all for living within your means and saving for the future but there's more to life than money in the bank.

As an example a couple years back my wife and I spent 2.5 weeks in Turkey...that trip was amazing and the experience was a once in lifetime thing. Sure it cost ~3.5K+ to do so but we didn't go into debt, stayed with friends in Turkey, and tried to do it as cost effectively a possible but the fact is we spent the money.

If we invested that money @ 8% and figure 3% inflation then in 35 years we end up w/~$18K (~$52K w/o inflation). Now which is better to save or spend? While I read this blog, and several others, I find all too often the focus is on cutting expenses, increasing income and someday you'll have 1/2/3 million in retirement...but rarely do any focus on what you actually give up in doing so. Perhaps a future post/series of posts...

I agree with some of what Travis says... I've argued there can be an opportunity cost of saving. One cant spend at the cost of saving, and one cant save at the cost of living- balance is vital.

Travis --

What's interesting to me is that in every post like this someone always comments about how the person probably had a bad life, that the wasted their life simply to save, that they didn't enjoy life as much as they could have, etc. And on top of that this time we have Tyler making up possible scenarios as to how the guy became wealthy on stock options (BTW, Tyler, why would the commenter focus on the above if stock options were the source of his family's wealth?).

The saving issue is a valid point -- you certainly don't want to hoard your money, doing nothing enjoyable you'd like to do, simply to save a bundle that someone else will get when you die. That said, simply because a person doesn't buy new cars, clothes at a high-end shop, or eat out very often doesn't mean he's not enjoying life. I don't do two of those three (I do buy new cars) and I'm enjoying life quite nicely.

You can enjoy life without spending a bundle. I like to grow roses, watch/referee soccer, read, write, and coach basketball. Not much expense with these. This family seemed to like spending time together on trips ("They did buy a used RV, which allowed the family to travel much more cheaply than it would have cost to stay in hotels.") I can imagine some great family times in that RV that you really can't put a price tag on -- similar to your trip (and I'm guessing the RV was much more expensive.)

Maybe this family was over-the-top with their saving and maybe they weren't -- we'll never know. But I really don't read that into the post. I see a family that's careful with their money, spending it where they want to and not spending it according to others' expectations or notions. This is perhaps the key to why they did so well financially.

Because details in blogs posts are often negligible visitors have to "read" something into it to understand the whole picture. I'm not saying they, or anyone else, had a bad life but majority of the post is what they didn't do...didn't buy new cars, didn't buy new clothes, never went out for coffee, didn't buy new furniture, etc.

When most of what we know about someone is what they didn't do we have to make assumptions and extrapolate that into other areas of their life. I agree life's pleasures are different to everyone...but I heard a good saying once. The problem with being a miser to become rich is that once you're rich you're still a miser. The psychological changes that have been made years after year make it difficult to spend what you so diligently saved to have. My point being we all need a balance that works for us and I do wish more financial articles would point that out.

I didnt make anything up, I merely raised the possibility and said it would be worth breaking it out. I analysis stories and data with a critical eye. This ability to analysis and think critically has served me well professionally and personally. Maybe you should re read my post- yet again.

Most of your readers, who are so inspired by these stories, dont have access to options in an amazing growth sector. Thus, I would find it relevant if 100% of his 401k and net worth came from said options. A programmer/software work over that era also made far above average income, on average.

"why would the commenter focus on the above if stock options were the source of his family's wealth?"

I dont know that he did. I also dont know that he didnt. How about this- he wanted to please you. He wanted to provide support to your arguments. He wanted you and fellow readers to tell him it was good and right. I'm not saying he provided the story for any of these reasons. Shaping a story is very easy and it can be done for any number of reasons.

These stories are great. They are of value. Will it work in the future? Is it the best way? What's the cost? And most importantly, what's the whole story?

The guy started working for a telecom company in 1980- How do you not have a net worth in excess of $1mm?

Original commenter here.

Tyler, if there were any stock options at all, they made up only a small amount of the final portfolio. The vast majority was due to savings and creating a balanced retirement account.

Travis, the original thread was about things done or not done by millionaires. My post talked about a lot of things we didn't do, not because we had a "bad life", but because that's what the original thread was about. Click through to the original thread and you'll see everything I said is a direct response to the original article.

So, how about some stuff we did?

- competitive swimming
- private music lessons (with a nationally-renowned teacher)
- regular vacations to the family cabin (built by my grandparents)
- regular RV trips, ranging from a few days to a month long
- trips to the zoo, amusement parks, etc. (often free or discounted through the library's summer reading programs)
- weekly visits with grandparents, aunts, uncles, and cousins
- activities with church groups, kids from the neighborhood, etc.

Some of that stuff cost money, though my parents often got group discounts. And shopping at thrift stores and driving old beaters meant we had the money left over to do all that good stuff while still saving and investing.


Thank you for the additional information. I think this info is incredibly valuable in the context of the post.

One thing I really like- Swimming costs so much less than Football, Lacrosse, skiing etc. That choice alone saves a ton of money that people forget.

Tyler --

Darn. I was sure that he made a bazillion in stock options...or renting out his RV...or renting out one of his five bedrooms...or some tax scheme.

Hmmm. Sounds like he simply spent less than he earned. Wisely, I might add. Because we know that no matter what someone's income is, they can certainly spend it all and then some. Even someone working for a telecom company in 1980.


Thanks for the extra info.

I am sure of very few things in absolute terms. Maybe that is why I am good at managing money. I asked a question I felt was relevant given the context. Maybe these questions should have been asked before making the post?

With the additional information, it sounds like the poster saved on physical goods and spent on experiences- living a worthwhile life. It also doesnt appear the wealth was generated in a fashion unlikely to be repeated.

So now we have everything cleared up. They saved and lived frugally for decades and now have a nice nest egg. And as you say in the post this is all very simple.

It's quite simple. 3 easy steps. Anyone can do it.

I do enjoy this blog. It is one of the finer PF blogs that exist. But the themes seem to bleed. The standard advice is from above. I like to ask why alot so I ask.

And the answer I come up with is the advice applies to the widest population. Most people can't control their income much. Sure they can do side jobs, or overtime, but in reality most people are employees with fairly fixed incomes.

So the focus becomes on controlling spending. Because that is what most people have control over. The frugality seeps in. Frugality is today what highly leveraged was 5 years ago, and .com was 10 years ago. Chic and Trendy.

I completey agree with Travis and Tyler.

The assumption of frugality means an opportunity cost of some type. Most PF blogs focus on the opportunity cost of not saving, of not being frugal or spendthrift or wise. The opportunity cost of not contributing to your trusty 401(k) ot your TSP/457 or your 529 or 403(b) or IRA.

Yet rarely do I see the opportunity cost of the present compared.

In fact hardly ever. Every action has a cost. Putting off to the future has an opportunity cost on the present.

It is not that I care about how his parents got rich, or if they even are rich, or what they did to get there. What I find interesting is why many are so absolutely positive that being in a better position in the future overides a better position in the present.

And most all PF blogs, this one included take that position.

FMF. I would thoroughly enjoy a discussiion on this topic as a future post. The opportunity cost of tommorow.


What is it about these discussions that you find so personally threatening? Your sarcasm clearly indicates we are able to hit a nerve, with minimal effort I might add, whenever you are crossed about the "Save + Invest in Indexes + Time = wealth" equation.

Dont you ever wonder if the sacrifice you make today will yield the dividends you expect tomorrow? The sacrifice today is very real and the dividend is very abstract. I find it completely natural to question this abstraction. To wonder if a life of regimented savings is the proper choice for one's expected future.

Are you so absolute in your thesis that any challenge is immediately found invalid?

Dont you ever hear a story and wonder what isnt being told? What's the hidden context? If any.

I save. I believe in the general thesis; not because I am certain the thesis is absolute in it's supports, but because I have no better solution to the inevitable problem. My search continues; as should every one of your readers.

I am not the enemy of our mutual faith in the thesis. I am only the enemy if looking at data critically is met with disdain and the regurgitation of the mighty equation is valued.

The equation is becoming the survivalist's doctrine in today's financial climate. To save now is to have a promising future. I don't know what the 'non-savers' or extreme 'under-savers' expect to do when the rug gets pulled out from under them, but I am not willing to take that risk!

to both Tyler and FMF,

there is a lot of truth to what both of you are saying, and i am largely in agreement with both. the real issue here is striking the appropriate balance between saving at the expense of "living you life" as i think Tyler you are suggesting and saving/living a prudent life while enjoying things/activities you enjoy.

a bigger issue however is that some folks are truly happy/content in "rarely eating out" or "taking a bus to work" whereas others convince themselves that they are happy when they are really not. they do this as a consolation and self justification because they realize they should really be saving their money (for whatever reason - maybe they realize they have no choice).

so....what is the writer's situation here? are they truly happy? are they self justifying? only he who does truly knows . . .

What makes this PF blog so interesting is that we all can take away life experiences from others and decide what we find to be most important for our happiness and/or particular situations (i.e., family, housing, income, spending, retirement/savings, etc.). Personally, I tend to enjoy reading how others are diligent about their savings to the point they will sacrifice things in their lives that I would never do so in my life (and I'm sure that 80% of the readers do not care to spend on some of the things we enjoy as a family). At the end of the day, we all make personal choices and/or sacrifices today for tomorrow, spend our time and money on things we so choose that others may find useless, save our money for goals that others would not, and yet I believe (IMHO) that it is okay to strike the balance that works for your particular situation despite what may work for others...

I spend money (sometimes overspend) on cars, real estate, dining out, vacations (including quick Vegas trips) and a multitude of other life experiences while we're young enough to enjoy our money. I've spent well beyond my means, well within our means and everywhere in between. I've saved/invested plenty (not to the extent many of you have) and continue to do so, I do have my financial plans for retirement, security for the family should I die tomorrow, and have always provided (even when I made under $40K per year) for my parents (and mother-in-law:(. I've also done the forbidden loans/gifts to relatives in need and interest free loans to friends under tough circumstances. Of course, I've invested heavily in myself and my career to provide me the wherewithall to achieve our financial goals, sustain our lifestyle, and prepare for an uncertain future.

Tyler --

A few things:

1. I'm part serious and part messing with you. I don't know what it is about you, but it's so fun (and easy) to get you worked up that I just can't help myself sometimes. ;-)

2. On the serious side, my only real issue with your thoughts on this topic is that every time I bring it up you make up some sort of scenario where it's not true. You take one portion of the text, add a wild imagination, and then postulate on why the post is not true -- simply to prove a point. How about simply sticking with the facts and expressing your points of view in light of them? I'm fine with dissent in that manner, but this making up "what if this" and "what if that" out of the blue is ridiculous.

3. If you want additional context on any comment I republish, it's best to click through to the link I provided that goes to the original post. Read that post and the comments there and you'll get more insight.

4. I believe I've offered you the chance to guest post on this subject before, and if I haven't, please allow me to do so now. If you'd like to write out your specific point-of-view, I'd be glad to run it. I run guest posts all the time that I don't agree with/use -- in the interste of offering an alternative point of view. You're welcome to add to these. My guidelines are here:

Troy --

I find that the best posts are ones written by people who are passionate about the topic. If you'd like to submit a guest post on the opportunity cost of tommorow, feel free to do so (guidelines above.)

sunil --

Very well said -- you summarized many of my thoughts better than I could/did. Thanks.

You make many good points, but. Your message, to me at least, is always clouded by your need to get so personal. I hope you take
fmf up on his offer to do a guest post. I really would enjoy reading it.

BTW, with no inheritance, options, or anything hidden: My wife and I have accumulated a tidy some and have retired with no financial worries. We did it by spending less than we earned, managing our careers, and investing in index funds. We did (and don't even now) not live frugally, miserly, nor thriftly. Just not extravagantly and below our income. We vacationed well, golfed and enjoyed life. And we didn't work in high paying industries.

Looking forward to your post

A guest post doesnt do anything for me, and opens the door to risk. It is unlikely that I will ever provide a guest post. Besides, my guest posts are in the comments.

"Need to get so personal"... I would be interested to hear how my arguments are personal. I am truly interested to hear more on this subject because I tend to be anything but personal in the eyes of most.

I dont get worked up. I write between spells of boredom to help keep myself engaged in other tasks. It's nothing but a debate to me- where the act might yield a stronger thought process. Its an intellectual game to me.

The story was missing facts. Based on the facts provided I asked questions. "How much of his net worth/401k is from company stock options and how much is from saving?" I didnt jump to any conclusions. I inquired.

> "The story was missing facts. Based on the facts provided I asked questions. ... I didnt jump to any conclusions."

But you prefaced your questions with the statement that my father

> "was likely paid in options"

Not "could have been", but "was likely". Since you're curious why people think you're getting "personal": that line came across to me as an attempt to undermine what I'd said, an attempt to wedge in a "likely" conclusion into the minds of readers before I had a chance to respond, not an honest attempt to inquire. Maybe that wasn't your intent, but that's the way it came across to me.


You and Troy both raise good points, though.

Most PF blogs hammer on saving because the issue most people have is neglecting the future in favor of the present -- problems like inadequate savings, too much debt, or too little insurance. But it's certainly worth pointing out that neglecting the present in favor of the future may be a mistake, especially if when the future becomes the present, you continue to neglect it for some even farther off future. Consider Ebenezer Scrooge: even as an old man, he sat next to a low fire in a dark, cold room eating gruel. He wasn't saving for retirement, he was just a miser.

There's a balance to be struck between future lifestyle and present lifestyle. The key is to figure out what's worth spending on and what's worth saving for, and then cutting out whatever is least important to make room for what's more important -- in both the present and the future.

My family decided that brand-new clothes and eating out provided us with low "lifestyle return on investment", while music lessons and taking a month-long RV trip provided a high LROI. So we focused on the stuff we thought was more worthwhile.

...there are ramifications for almost any decision we make--

Should I drive the busy main route, or take the scenic route? the gps or ask my friend for directions? the oatmeal or the doughnut?

...force myself to get to bed at a reasonable time or stay up to finish the last 5 chapters?

What difference does it make as long as we continue to be conscious about the possible good/bad outcomes of that decision? Ask if you are happy/content/fulfilled, if not, find out why. Money is a no-brainer...hold onto it rather tightly (within reason/balance!) or risk wishing you had.

Someone working at a steel company "might have been", but someone in the tech sector and telecom from 1980-2010 was "likely" compensated in part via stock/options. Even if one worked for old blue (IBM), options became a major form of compensation during that era. Had I jumped to a conclusion, I would have likely said,"His father WAS compensated".

Likely- Having a high probability of occurring or being true: Very probable.

Any attempt to undermine you or what you said does not make my argument personal. You provided a personal story, and I am glad you did, but my analysis or criticism does not make my response personal. The only time I was "personal" was a direct address to FMF- notice the use of the word "you" vs my original post's use of the 3rd person singular possessive with "his". I didn't address you in any way.

I can make any number of assumptions based of the profession, age, region, general syntax,etc. As more information is provided, I can shift those assumptions.(example: You mention snow mobiles so I can assume you live in the north, and if I had to guess the mid west.If your father is 50 you are likely under 30. etc.)

I appreciate your post and your story. Reading the story and being critical of it, has nothing to do with you from my perspective.


I dont think we know the good/bad outcomes. How could we? We are discussing the possible outcomes. I can tell you this, its not always good to save. Being a saver in a high inflation environment is not good- had you lived in Germany between WWI and WWII being a saver is not good. There are ways to "hold on to it" and still lose it.

Tyler, had you said "I'd like to know if his father was paid in stock options, as many telecom employees were during that era. If so, that may have contributed a lot to the size of his 401k" it would have been seen as a simple request for information. But "he was likely paid in stock options" is a statement of expectation. Probabilistic conclusions are still conclusions.

You stated before that "shaping a story is very easy". In light of this, I hope you can see why attempting to shape my story might be considered a personal attack. I have no problem with analysis or criticism, but I do have a problem with criticism based on assuming before you ask.

It takes only a very subtle change in your approach to avoid creating such confusion in the future.

In the future, Ill do what I can to handle posts with more sensitivity. I apologize for thinking that your father might have been compensated in stock from his company. (You should know however that when I provide this exact scenario to people, they find it likely that company stock/options were a major part of his portfolio.) I wont "make anything up" as FMF says. (Honestly, not being sarcastic here. I will try to do these things in the future- if for no other reason than to avoid these off topic posts.)

I firmly believe there is something fishy in this story because the math is so extreme. Sorry. High/above average costs, average income, average market returns, 30 years of work. My excel sheet (yes I made one before my first post) doesnt work out.

Income had to be higher (over 100k in today's dollars) or something I am missing. (100k -10k in 401k- 25k tax = 65k to live on with 8 kids. No roth because of income. So any other savings is from the 60k post tax and taxable income going forward.) What does an RV to fit 10 people cost these days?

Please tell me what I am missing. Or don't because I'm tired of this thread.

What you're missing:

1) costs weren't "high/above average". The main point of my post was that we kept costs low. Housing costs, counting utilities, were less than a tenth of take-home pay. Clothes came from thrift stores or as hand-me-downs from cousins; last time I saw my baby brother he was wearing a shirt I left behind a decade ago (a trade-show freebie, too!) We shopped online deals, coupons, and clearance sales. There are a lot of economies of scale that crop up in a large family as well.

2) income was pretty good; doing software work for a telecom pays well. Dad made the most of his career (FMF would be proud); his company invented new titles for him so they could keep promoting him but keep him on software. He didn't start anywhere near $100k in today's dollars, but he was there by the end. (Tangent: Roth phaseouts start WAY over $100k for married filing jointly.)

3) taxes weren't anywhere near your assumed value. The $3650 per person exemption turns into $36,500. Max 401k contribution is $16,500. Add in some charitable giving and other deductions, and $100k turns into $40k taxable income -- low enough to qualify us for reduced-cost school lunches. A 15% marginal rate means we're looking at under $6k in taxes.

4) The RV was at least 15 years old, class C, designed to sleep 7. An airbed across the front seats and a baby who could fit next to one of the smaller kids let us get it to 9. The oldest left for college the week the youngest was born, so we didn't ever need to fit 10. A new RV like this might run $65k, but I'm sure we paid under $10k. And we used it for errands instead of buying a second van, thus mitigating some of the cost.

It's not my story that's fishy; it's your assumptions.

I completely forgot about that tax exemption- thank you. That makes a lot of sense now. Funny you should mention the school lunch program because I was trying to figure out how that was even paid for since I thought income would have been too high to qualify. Thanks for the info.

It seems that as a younger person reading this I am some what confused on the savings part... You go to work every day for 30 years and put money in your 401k pay off your house and then when retirement comes you find out that your 401k lost 45% of its value and your beloved home is worth two thirds the value that you were hoping it would sell for. To top it off you are having a hard time selling your home because there are so many foreclosures that are selling for pennies on the dollar that you would lose more than you already have. ( example I purchased a foreclosure for what the neighbor purchased his house for 26 years ago and my home was nicer. That is scary. This happened too so many in Oct 2008 when the market tanked. You may say to wait out the loss but that could be years so when you are 85 and can't walk up a mountain or jump out of a plane or scuba dive. Was it worth it too save and and not enjoy life while reckless 20 year olds were fliping homes and making $300k plus a year until the market dumped and everyone walked away from there home hurting everyone by there reckless acts. It seems the way to make money is to build something ( business, rental income, side work) plus a steady check to get ahead in this world. If you have not noticed but the work ethic is gone from the younger generation.

Stan --

1. You're assuming that saving = not enjoying living. That is not the case. If you create enough of a gap between what you make and what you spend, you will be able to save AND have plenty left over to enjoy.

2. Building a business/side job is a great way to increase your income, but it also requires a lot of sacrifice, time, effort, and risk (not all businesses are successful, of course.) Not that these are bad, but they have their trade-offs.

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