Low Income, High Net Worth - Stories Of

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
angelescrest
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Low Income, High Net Worth - Stories Of

Post by angelescrest » Sat Jan 18, 2014 2:14 am

There have been a couple posts asking how some folks make as much income as they do.

I'm not and don't necessarily plan on being in that boat as I love my job. Thinking of some "lower" income folks who may not feel as comfortable on this forum, I'd love to hear stories of those who have had a modest income, but have still achieved or are well on their way to achieving high net worth.

(Edited to include actual median household income)
I'm open to ideas on how to define those terms, but I'm thinking primarily a modest income as being at or below the median income in your region, or specifically, national median household income at $52,100 (http://www.nytimes.com/2013/08/22/us/po ... .html?_r=0). High net worth might be described as an amount (self-described) enough to allow an adequate retirement or financial independence.

What's your situation, and how'd you beat the odds to make it happen? What did you sacrifice in order to save so much?
Last edited by angelescrest on Sat Jan 18, 2014 3:13 pm, edited 1 time in total.

goaties
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Re: Low Income, High Net Worth - Stories Of

Post by goaties » Sat Jan 18, 2014 5:45 am

What a wonderful question! Although I wouldn't consider myself high net worth (and after looking at the recent posting where Bogleheads post their net-worth, I'm *definitely* not, by Boglehead standards), I have absolute financial freedom. I work when I want. I travel when I want. I sleep when I want. :)

My only answer to your question has to be: I live like a grad student. Always have, always will. In fact, I seem to take a perverse pleasure in it. It's my way of beating The Man.

Yeah, I read the posts here where people casually mention their half-million-dollar homes and their six-figure salaries. Never had any of that. Didn't need it. Some people do. I don't get on their case as long as they don't get on mine! You shouldn't feel inferior. There are many paths to wealth. Heck, there are many *kinds* of wealth.

brajalle
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Re: Low Income, High Net Worth - Stories Of

Post by brajalle » Sat Jan 18, 2014 7:24 am

I was married 3 months ago, so my household income has doubled and we are now significantly higher than the median household income. That being said, I'm thinking back to before that.

I'm not sure I would call it "high net worth" (at least not until I'm 60+), but on $12-14/hr, you can save for retirement, have financial security, and still enjoy life.

1. Spend less than you make...by alot. I would recommend to have 50% of your take-home pay be saved. It seemed impossible for a few years, but I eventually got there. I actually use a variation on the 60% budget with a bit more saving for retirement. If you are married, always, always, try to budget so you can live off the lower-earning spouse's income. If you do this, you will never feel stressed about money! It's the best feeling.

2. In order to achieve the above you must be smart. Become aware of every single tax credit and all programs available at all levels of government. There are often some great values in housing assistance for people in this income bracket. Maximize all tax credits & plan ahead for years. Shop smartly - don't just shop because of sales or coupons at a place, look at everywhere - ie Goodwill/Plato's Closet for example. A specific, clothing example, is I realized that Wal-Mart is the baseline in terms of price and quality. Consider the marginal value of more expensive clothing stores (ie Kohls for example) even if they have great sales/discounts. I buy at Sears/K-Mart because their quality/prices are largely similar to Wal-Marts and they have the best loyalty program in the business, which nets me anywhere from 20-50% discounts. Nicer clothes are bought for durability/quality as long-term investments (see the Brooks Brothers threads around here for example). Along the same lines, invest in your future needs not just your present ones. Sears ran a killer Goodyear tire sale on Thanksgiving/Black Friday - I got 4x 80k mile tires for my wive's car for a net cost of about $130 - original price over $800 by combining a ton of stuff. I also purchased a set of tires for my car (which likely won't need them for 18 months) for a similar savings. Be smarter than the average bear in everything, and you will find your expenses dropping by 10-15% (food for example) to 50-60% or more.

3. The best tactic for spending less on non-essential stuff is to ask yourself - do I really need this? I made it a habit to put things in my Amazon cart for 3 months before even considering buying them. 90% of the time, 3 months later, I wondered why in the world I had wanted those items. I would recommend working around your own bad habits by limiting access to money and I would recommend a good budgeting program like YNAB (wait for a steam sale where it's $15! (see principle #2 above!)). Experiment with what you think are must-haves. I once turned my hot water heater off for 2 weeks - yes, I really do need hot water, but I did find out that I could easily do navy showers. Did I need high-speed internet/netflix? No, but I found it to be a smart investment because it was cheaper than the alternatives for entertainment that I would default to.

4. I'm going to go back to housing - it's a huge cost for most people. I've been most comfortable when my housing costs are under 25% of my pay, and the lower the better! This is only possible in my town by owning a modest home or in a specific co-op apartment complex. Since we are married, housing costs are now 11% of our budget. Something people may not consider housing costs - but I do, is that the house's location may increase gas & maintenance costs. A really cheap house in a nearby town would have saved me $120/mo in housing costs, but increased my transportation costs by 3x the savings. It made more sense to buy in town.

5. Start saving as early as possible for retirement and get really smart about job choices. Why do I combine the two? Because many people make bad job choices - and my experience is that the area this most often impacts is retirement savings. Some examples - a co-worker left a position making $14/hr to take a position making $15/hr. The $15/hr position actually ended up paying less - extra driving for an extra shift a week (8hr shifts vs. 12 shifts), and they had built-in overtime in the old position. A friend left a government job for a higher-paying private sector job. They will end up losing money - they were close to being vested for the government pension plan, and this would have been worth about $4-5/hr (retroactively even) worth of retirement savings. If you have high student loan amounts - a non-profit/government employer and an IBR plan+ PSLF goal may be very much worth it - I advised a friend on this and the expected net benefit was about $100k on $50k of loan debt...and $50k more of retirement account investing over 10 years. I could go on using examples of job-related transportation costs, meal/clothing costs, and health care expenses. Sometimes lower-paying positions are actually higher-paying positions when considering all aspects. This can directly translate into retirement savings & general financial security in ways people may not normally think of.

6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.

Bmac
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Re: Low Income, High Net Worth - Stories Of

Post by Bmac » Sat Jan 18, 2014 8:24 am

Brajalle said:
"I got 4x 80k mile tires for my wive's car for a net cost of . . . "

Great post, but I would think having more than one wife could be even more expensive than having kids! (Although having them share a car must help) :wink:

Moneybags1
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Re: Low Income, High Net Worth - Stories Of

Post by Moneybags1 » Sat Jan 18, 2014 8:41 am

Brajalle, Great post and oh so true...

Mike

Johm221122
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Re: Low Income, High Net Worth - Stories Of

Post by Johm221122 » Sat Jan 18, 2014 9:00 am

Make 40k, one full time job and do a little side work.Save 25/30% plus company matches 4%.Key points to saving are pay my self first, tax deferral, savers credit, use public transportation and shop smart(by only things I need or enjoy).Good points by Brajalle(almost same points)
John

red5
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Re: Low Income, High Net Worth - Stories Of

Post by red5 » Sat Jan 18, 2014 10:11 am

I'm not so sure that many will like my story but it is what it is. I'm not so sure my net worth is high either, especially in this forum, but perhaps it is compared to an average American family?

Our income has been low since 2008 when I got out of the service. It has ranged from 20k to 32k. This has been supporting a family of 4. We live frugally. Very frugally. I embrace it well, the wife not as much. We are very careful where and how we spend our money. We've been fortunate enough to have stayed away from high dollar expenses and/or purchases. Our 2003 two-door car is still running along. We've had no major health expenses, no major home repairs, etc. All in all we've been able to save probably 5% to 10% of our income each year. This is not really much but we do have a 5 to 7 month e-fund because of it.

Additionally, we take every penny of the, how shall we call it, "generous" refundable tax credits and put them into roth IRAs every year. We haven't been maximizing both of our IRA space but we've been able to max at least one of them every year. I suppose the refunds got quite high when the kids entered the picture (prior to me leaving the service). It has made quite a difference. So a lump sum into the market every year since 2008 has been pretty good for our net worth.

fwiw, our net worth is above 100k and below 125k and our average age is 29. Much of it is tied to equities.

btenny
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Re: Low Income, High Net Worth - Stories Of

Post by btenny » Sat Jan 18, 2014 10:28 am

One of the most contented and happy people I know is 92. He is an immigrant from Europe after WWII and the closing of the Iron curtain and Russian occupation. He now lives in California and skis almost every winter day. He hikes around the forest and lakes during summer days and goes camping some. He has a girlfriend who is 85ish since his wife passed away a few years ago. He is more active and robust and happy than many 50 year olds. He never made more than $15 per hour his whole life but had a wonderful career as a glove maker and medic and ski area worker. He saved and lived below his means for years while he worked to pay off his home and car and raise two kids. Now he draws a small SS check and small pension that covers his expenses.

So it is possible to live very well and be happy and never make a lot of money. Enjoy.......

sambb
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Re: Low Income, High Net Worth - Stories Of

Post by sambb » Sat Jan 18, 2014 10:30 am

my wife grew up in extreme poverty in the third world. She liked to read. Emigrated to the US. Graduated top in her high school and attended Duke, and studied hard. She made it in the world. She thinks that US kids are spoiled, as they don't study 4-6 hours every night after school, but instead watch TV and play video games. I informed her that I was one of those kids playing video games...

ResearchMed
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Re: Low Income, High Net Worth - Stories Of

Post by ResearchMed » Sat Jan 18, 2014 10:49 am

During the years that DH was living like a grad student, even as his job title increased dramatically, his income did NOT increase in a commensurate fashion, although it was soon very comfortable.
(When we met, I earned much, much more. That changed sometime later.)
Only relatively recently, his income level became considerably higher, due to consulting.

The BIG difference in "savings"?

CHILDREN.

I had 'em. He didn't.
[Yes, he was a "surrogate father figure" for many, many years, but he never contributed directly to any child-rearing costs, and for much of that time, I earned more, anyway. We didn't marry until much later, so "pooled marital income" - now one big pot - wasn't an issue before the children were fledged.]

We've long joked that the "savings differential" shows quite well "what children cost".
It's really quite true.

He didn't have to pay to replace clothing constantly outgrown. Summer camps. Gymnastics lessons. The dreadful cacophony of 4th grade trumpet and clarinet lessons, or the cost of the earlier "mandatory until you learn to read music and understand and then you can stop if you wish" piano and piano lessons. Baby sitters making EVERY little outing much more expensive. Double or tripling (or more) most travel expenses.
And a home with more bedrooms in a good school district. And FOOD for growing bodies.

We know just about what that difference was :shock: :shock:
He was squirreling away similar money.

It was an interesting if unplanned "experiment".

RM

fisher_man89
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Re: Low Income, High Net Worth - Stories Of

Post by fisher_man89 » Sat Jan 18, 2014 10:57 am

brajalle wrote: 6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.
I disagree and speak from experience.
Kids are people and need very little, yet want much.
The great thing about children is that parents decided what they get and how much of a "financial drain" they are.
What kids need most is free: love, encouragement, protection, boundaries, and instruction.

If a parent buys their children everything they want or what their friends have, then financially they are costly.
But is an adult does the same, the story is also the same.
Why can't children do with less than other children, yet have their needs met?

Saving is a simple formula, that does not involve the number of children, just what one spends.
Sacrifices can be make with children and they can be potentially better off for it.

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Re: Low Income, High Net Worth - Stories Of

Post by tacster » Sat Jan 18, 2014 11:28 am

fisher_man89 wrote:
brajalle wrote: 6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.
I disagree and speak from experience.
Kids are people and need very little, yet want much.
The great thing about children is that parents decided what they get and how much of a "financial drain" they are.
What kids need most is free: love, encouragement, protection, boundaries, and instruction.

If a parent buys their children everything they want or what their friends have, then financially they are costly.
But is an adult does the same, the story is also the same.
Why can't children do with less than other children, yet have their needs met?

Saving is a simple formula, that does not involve the number of children, just what one spends.
Sacrifices can be make with children and they can be potentially better off for it.
I just had to say, that's a great post right there. :thumbsup
INSERT PITHY QUOTE HERE

Mike Scott
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Re: Low Income, High Net Worth - Stories Of

Post by Mike Scott » Sat Jan 18, 2014 11:30 am

We have invested deeply into quality of life choices (things that are important to us) of which one result is that we have modest income and net worth. The other end is balanced by some level of job security and expected pension.

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retire@45
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Re: Low Income, High Net Worth - Stories Of

Post by retire@45 » Sat Jan 18, 2014 11:48 am

fisher_man89 wrote:
brajalle wrote: 6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.
I disagree and speak from experience.
Kids are people and need very little, yet want much.
The great thing about children is that parents decided what they get and how much of a "financial drain" they are.
What kids need most is free: love, encouragement, protection, boundaries, and instruction.

If a parent buys their children everything they want or what their friends have, then financially they are costly.
But is an adult does the same, the story is also the same.
Why can't children do with less than other children, yet have their needs met?

Saving is a simple formula, that does not involve the number of children, just what one spends.
Sacrifices can be make with children and they can be potentially better off for it.
Great post. I agree 100 %.

dekecarver
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Re: Low Income, High Net Worth - Stories Of

Post by dekecarver » Sat Jan 18, 2014 1:08 pm

Good stuff in the preceding posts. When I'm asked I tell folks about 1-4:

1. Get expenses under control and savings will follow.
2. With savings begins wealth accumulation.
3. Invest smart and start early.
4. With time and discipline you can end up with a high net worth relative to your situation.

As far as housing goes I'm a firm believer in good neighborhood, clean house and it doesn't need to bigger than the neighbors. In another sense I believe in having your house in order before taking major leaps such as getting married, having kids etc..that's just me. Yeah some things are spontaneous :D

As a parent my child is a child under my roof. I don't give a gnats arse about what the friends have because I don't have to. I'm more concerned with my child's table manners, being respectful and being able to think for himself and appropriately express: disappointment, success and so on. That cost me nothing but time, honesty and a chit load of love and it is something that my child cannot buy nor needs money for. Point is kids don't have to be a drain on wealth accumulation unless you want them to be barring significant medical/special needs. I never considered the latest DSS/IPOD or what ever the flavor of the day to be a necessity even though easily affordable.

The bottom line is you don't have to start out a millionaire/high net worth to get there, you just gotta get your ducks in a row and set your priorities. And a little lucks helps out every now and then.

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Bulldawg
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Re: Low Income, High Net Worth - Stories Of

Post by Bulldawg » Sat Jan 18, 2014 1:16 pm

Tom Stanley ( Millionaire Next Door fame ) has a section on millionaires who don't make huge incomes, but play great defense when it comes to spending. I've heard the same message from Dave Ramsey and Clark Howard : live below your means , save regularly, and watch the compounding work its magic.
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Jane
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Re: Low Income, High Net Worth - Stories Of

Post by Jane » Sat Jan 18, 2014 2:18 pm

I know a couple that are children of The Great Depression. They knew want, need and hunger. They had a lifetime of low income work, but they always worked, lived below their means, and they saved. Every single purchase is/was given long hard consideration. They put their money in the best CDs they could find in their local area only. They bought new modest cars when they needed them. If they didn't have cash, they felt they couldn't afford it and didn't buy it. They bought their houses with cash. They had to borrow money against cash in the bank to build a credit history to get a credit card that they hardly ever use. They now have 2 million dollars net worth. They don't feel they sacrificed anything.

scrabbler1
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Re: Low Income, High Net Worth - Stories Of

Post by scrabbler1 » Sat Jan 18, 2014 2:34 pm

brajalle wrote: 6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.
I agree totally with this, the best part of your post. Being childfree enabled me to keep all of my expenses low, year after year after year, from housing (I live in a studio apartment in a co-op, something impossible had I not been childfree) to medical to clothing to food to (small) cars to just plain "stuff" for one person instead of for more than one person. Unless the kids are generating income, they will always be a drain on one's finances.

My wage income never exceeded $80k and it maxed out at just below that in 2001 in my 16th and final year of full-time work. I then worked part-time for 7 more years (wage income never exceeding $50k) before retiring 5 years ago at age 45. My NW of investments is around $1.25M.

angelescrest
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Re: Low Income, High Net Worth - Stories Of

Post by angelescrest » Sat Jan 18, 2014 3:29 pm

goaties wrote:What a wonderful question! Although I wouldn't consider myself high net worth (and after looking at the recent posting where Bogleheads post their net-worth, I'm *definitely* not, by Boglehead standards), I have absolute financial freedom. I work when I want. I travel when I want. I sleep when I want. :)

Yeah, I read the posts here where people casually mention their half-million-dollar homes and their six-figure salaries. Never had any of that. Didn't need it. Some people do. I don't get on their case as long as they don't get on mine! You shouldn't feel inferior. There are many paths to wealth. Heck, there are many *kinds* of wealth.
Thanks--viewing that net worth post inspired this question. The average income on the forum is very high compared to national figures, but I saw there were a handful of lower income, high net worth individuals who haven't retired yet.

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vitaflo
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Re: Low Income, High Net Worth - Stories Of

Post by vitaflo » Sat Jan 18, 2014 5:11 pm

One of the people I really look up to is my mother-in-law (how many people can say that?). She got divorced when her girls were 4 and 8, and had a dead end job. She got custody and decided to go back to school to become a nurse. They were dirt poor, they used to go to the buffet and she would line her purse with a plastic bag and stuff it full of extra chicken to take home for meals for the rest of the week.

When she finally got out of school and became a nurse in her 40's she didn't change much about her living, except buying a more reliable car. All the rest of it went into savings/retirement. She even got part time nursing gigs to help (she likes to work and hates being bored). She loved her job, and never really changed her lifestyle.

She's now retired and has more in retirement than she'll ever spend and a really nice pension to match. The one thing I really learned is that you do not have to have anything fancy in order to be happy, especially if your job is something you really enjoy. I also learned a lot of frugal tips to really cut down on costs of just about everything (which she learned when they were very poor). It's really helped our own finances and well being.

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Re: Low Income, High Net Worth - Stories Of

Post by Fallible » Sat Jan 18, 2014 5:28 pm

vitaflo wrote:One of the people I really look up to is my mother-in-law (how many people can say that?). She got divorced when her girls were 4 and 8, and had a dead end job. She got custody and decided to go back to school to become a nurse. They were dirt poor, they used to go to the buffet and she would line her purse with a plastic bag and stuff it full of extra chicken to take home for meals for the rest of the week.

When she finally got out of school and became a nurse in her 40's she didn't change much about her living, except buying a more reliable car. All the rest of it went into savings/retirement. She even got part time nursing gigs to help (she likes to work and hates being bored). She loved her job, and never really changed her lifestyle.

She's now retired and has more in retirement than she'll ever spend and a really nice pension to match. The one thing I really learned is that you do not have to have anything fancy in order to be happy, especially if your job is something you really enjoy. I also learned a lot of frugal tips to really cut down on costs of just about everything (which she learned when they were very poor). It's really helped our own finances and well being.
I can easily see why you look up to your MIL. Without even knowing her, I also look up to her after reading this. Thanks for sharing her experience.
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StaTiK
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Re: Low Income, High Net Worth - Stories Of

Post by StaTiK » Sun Jan 19, 2014 5:43 am

brajalle wrote:6. Having kids is a huge financial drain.
goaties wrote: There are many paths to wealth. Heck, there are many *kinds* of wealth.
Both right. My children are young still and I left a lucrative, high-travel profession to be a stay-at-home parent for a few years. I'm back to work now but in a different field and making significantly less. I know for a fact I've lost a few hundred thousand dollars in income because of the job change, but I'm "wealthier" now than I ever have been. Money is tighter than I'd like but we're doing fine and I wouldn't trade my children back for all the money that could have been...

Now, if I could go back in time and travel more pre-children that I would do! :oops:
"M is the amount of money you need to retire, Y is how many years you'll live, R is your future rate of return, and I is the future rate of inflation. Y, R, and I are unknown. Solve for M."

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Re: Low Income, High Net Worth - Stories Of

Post by The Wizard » Sun Jan 19, 2014 6:28 am

Jane wrote:I know a couple that are children of The Great Depression. They knew want, need and hunger. They had a lifetime of low income work, but they always worked, lived below their means, and they saved. Every single purchase is/was given long hard consideration. They put their money in the best CDs they could find in their local area only. They bought new modest cars when they needed them. If they didn't have cash, they felt they couldn't afford it and didn't buy it. They bought their houses with cash. They had to borrow money against cash in the bank to build a credit history to get a credit card that they hardly ever use. They now have 2 million dollars net worth. They don't feel they sacrificed anything.
My parents survived The Great Depression as well, but never accumulated the $2M net worth. Some of the scars of surviving that era didn't lead to healthy rational financial behavior in later decades, IMO.

While I am NOT a believer in spending all your money in retirement, the point is: excessive frugalness isn't going to win any awards. Balance in one's finances and personal life is a good idea...
Attempted new signature...

ResearchMed
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Re: Low Income, High Net Worth - Stories Of

Post by ResearchMed » Sun Jan 19, 2014 7:37 am

The Wizard wrote:
Jane wrote:I know a couple that are children of The Great Depression. They knew want, need and hunger. They had a lifetime of low income work, but they always worked, lived below their means, and they saved. Every single purchase is/was given long hard consideration. They put their money in the best CDs they could find in their local area only. They bought new modest cars when they needed them. If they didn't have cash, they felt they couldn't afford it and didn't buy it. They bought their houses with cash. They had to borrow money against cash in the bank to build a credit history to get a credit card that they hardly ever use. They now have 2 million dollars net worth. They don't feel they sacrificed anything.
My parents survived The Great Depression as well, but never accumulated the $2M net worth. Some of the scars of surviving that era didn't lead to healthy rational financial behavior in later decades, IMO.

While I am NOT a believer in spending all your money in retirement, the point is: excessive frugalness isn't going to win any awards. Balance in one's finances and personal life is a good idea...
This sure rings a bell - Depression-era parents who also didn't make sensible financial decisions.

It was more than just excessive frugalness, although it was definitely that, too.

As best I can figure out, they felt that investments and even savings could be wiped out, so... why do that?
Instead?? Gambling or any other way to "hit it big". (I never really before thought about, well, IF they had actually "hit it big", where would they have kept it all?)

Everything was so cheap as to be less economical, although I didn't realize that when I was young.

Watching them make dreadful decisions pre-retirement was difficult, although in the final 10 years, they piled money into the TIAA-CREF trad annuity, and that, with SS, allowed them to be reasonably comfortable.

But the gambling was REALLY difficult to watch, and I hate to think how much went down that drain.
Probably most of what could have been used to help with college, but that didn't really matter, actually. "Girls" didn't need a good education, since I'd "only need to get married, and never would need to support a family". (My brother was encouraged to apply to elite schools.)

Unfortunately, I *did* end up needing to support a family (the children and me).

Thank goodness I fought my own way into good scholarships, fellowships, and student loans, etc. - but mostly by getting myself declared "independent" for school financing purposes.

It wasn't a pleasant way to grow up, although at the time, I didn't realize how "abnormal" it really was.

RM

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NAVigator
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Re: Low Income, High Net Worth - Stories Of

Post by NAVigator » Sun Jan 19, 2014 10:05 am

goaties wrote:There are many paths to wealth. Heck, there are many *kinds* of wealth.
Yes, indeed!

I came across the following several years ago. I read it to establish my perspective.
Money
It can buy a house, but not a home.
It can buy a clock, but not time.
It can buy you a position, but not respect.
It can buy you a bed, but not sleep.
It can buy you a book, but not knowledge.
It can buy you medicine, but not health.
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Re: Low Income, High Net Worth - Stories Of

Post by amitb00 » Sun Jan 19, 2014 10:14 am

Nice post

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Re: Low Income, High Net Worth - Stories Of

Post by 6miths » Sun Jan 19, 2014 10:33 am

retire@45 wrote:
fisher_man89 wrote:
brajalle wrote: 6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.
I disagree and speak from experience.
Kids are people and need very little, yet want much.
The great thing about children is that parents decided what they get and how much of a "financial drain" they are.
What kids need most is free: love, encouragement, protection, boundaries, and instruction.

If a parent buys their children everything they want or what their friends have, then financially they are costly.
But is an adult does the same, the story is also the same.
Why can't children do with less than other children, yet have their needs met?

Saving is a simple formula, that does not involve the number of children, just what one spends.
Sacrifices can be make with children and they can be potentially better off for it.
Great post. I agree 100 %.

+3 I agree completely and with the statement above that wealth comes in many forms.

Both my parents and my wife's parents held middle income jobs and raised families and they both managed to become millionaires by saving and living frugally but well. They were all born just before or into the Great Depression. I am amazed when I look back at their tax returns from the 60s and 70s. Reinforces my respect for what they accomplished and for the effects of inflation.
'It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so!' Mark Twain

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Re: Low Income, High Net Worth - Stories Of

Post by mikeast » Sun Jan 19, 2014 11:23 am

Long story short--wife and I earned two average paychecks but lived on one for twenty years. Our net worth would probably be considered respectable by most on this forum but would likely
blow the minds of our family and friends if they know what we were worth. We are financially independent now in our 50s although I work for a modest hourly wage at big box retailer because what I do
there is fun and I just like going to work.

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Re: Low Income, High Net Worth - Stories Of

Post by 555 » Sun Jan 19, 2014 1:10 pm

3 kids
5 figure income
7 figure portfolio

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Re: Low Income, High Net Worth - Stories Of

Post by angelescrest » Sun Jan 19, 2014 3:21 pm

555 wrote:3 kids
5 figure income
7 figure portfolio
Succinct, and admirable. How did your portfolio grow over the years?

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Re: Low Income, High Net Worth - Stories Of

Post by heyyou » Sun Jan 19, 2014 4:55 pm

DW and I think that we are rich.

We didn't ever reach a combined $70K of annual income from our blue collar jobs. We retired when I was 55, with retiree healthcare, a barely double comma portfolio, $40K of no-COLA pension, about $40K of annual expenses, and a paid off mortgage on a retirement sized home.

Sometimes good luck happens to those who live below their means for 30 years. You probably didn't overspend on housing, so you weren't overexposed when housing crashed. Being accustomed to living on less allowed you to need a smaller nest egg, or to retire early. You may have had significant savings in the stock market before it started a boom period. You may have not changed jobs because you didn't need more income, then much later, the small pension looks like a gold mine during a period of limited market returns. Seems to me that LBYM brings luck that compounds over decades of time.

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Re: Low Income, High Net Worth - Stories Of

Post by boglebill » Sun Jan 19, 2014 5:13 pm

fisher_man89 wrote: Kids are people and need very little, yet want much.
What kids need most is free: love, encouragement, protection, boundaries, and instruction.
Beautiful!

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Re: Low Income, High Net Worth - Stories Of

Post by abuss368 » Mon Jan 20, 2014 1:42 pm

I read the book "Millionaire Next Door" a while back and it really opened my eyes. That was definitely a life changing event for me.
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Re: Low Income, High Net Worth - Stories Of

Post by Noonha » Mon Jan 20, 2014 1:48 pm

As for studying abroad and traveling extensively I can completely see why this is the case. However, when abroad in South America and heard from others experiences the workload in school is much less compared to the US. I don't feel like this can be generalized, yes maybe so in some countries, but certainly not all.

sambb wrote:my wife grew up in extreme poverty in the third world. She liked to read. Emigrated to the US. Graduated top in her high school and attended Duke, and studied hard. She made it in the world. She thinks that US kids are spoiled, as they don't study 4-6 hours every night after school, but instead watch TV and play video games. I informed her that I was one of those kids playing video games...

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Re: Low Income, High Net Worth - Stories Of

Post by nirvines88 » Mon Jan 20, 2014 1:55 pm

I make 38k/year as a public school teacher. I spend approximately 1/3 of that per year and save the rest. I still travel a few times per year, go out whenever I want, buy what I need, etc. If I ever felt like I was restricting myself by saving too much, I would cut back on the saving and ramp up the spending. I guess I just don't have many superfluous wants and I was lucky to avoid student loan debt.

In my opinion, it's not hard to live off my modest salary as a single dude in a modest C.O.L. area, although I don't know if having a family or living on this salary in a high C.O.L. area would be feasible.
"Beware of little expenses, a small leak will sink a great ship" - Poor Richard

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Re: Low Income, High Net Worth - Stories Of

Post by 555 » Mon Jan 20, 2014 1:56 pm

boroc7 wrote:
555 wrote:3 kids
5 figure income
7 figure portfolio
Succinct, and admirable. How did your portfolio grow over the years?
Mainly saving a lot. The market's been up a down a lot in the last 10-15 years, as you know, so although the recent runup has pushed us just into 7 figures (and a correction coould easily take us back down to 6), my view is that it's all about saving the money in the first place, and if the market helps you that's icing on the cake.

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Re: Low Income, High Net Worth - Stories Of

Post by angelescrest » Mon Jan 20, 2014 2:01 pm

nirvines88 wrote:I make 38k/year as a public school teacher. I spend approximately 1/3 of that per year and save the rest. I still travel a few times per year, go out whenever I want, buy what I need, etc. If I ever felt like I was restricting myself by saving too much, I would cut back on the saving and ramp up the spending. I guess I just don't have many superfluous wants and I was lucky to avoid student loan debt.

In my opinion, it's not hard to live off my modest salary as a single dude in a modest C.O.L. area, although I don't know if having a family or living on this salary in a high C.O.L. area would be feasible.
That's essentially a $1,000 a month budget on all expenses. I'd love to see how you break that down.

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Re: Low Income, High Net Worth - Stories Of

Post by rbrown599 » Mon Jan 20, 2014 2:04 pm

abuss368 wrote:I read the book "Millionaire Next Door" a while back and it really opened my eyes. That was definitely a life changing event for me.
I'll second the 'Millionaire' books. I was fortunate enough to have a mentor recommend them to me in college, and then I was sensible enough to actually read them in college. Blew my mind when I read the words "Deca-millionaire" and "Uneducated" in the same sentence.

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Re: Low Income, High Net Worth - Stories Of

Post by technovelist » Mon Jan 20, 2014 2:31 pm

boroc7 wrote:There have been a couple posts asking how some folks make as much income as they do.
Are there folks who don't make as much income as they do? :confused
In theory, theory and practice are identical. In practice, they often differ.

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Re: Low Income, High Net Worth - Stories Of

Post by steve88 » Mon Jan 20, 2014 2:33 pm

brajalle wrote:I was married 3 months ago, so my household income has doubled and we are now significantly higher than the median household income. That being said, I'm thinking back to before that.

I'm not sure I would call it "high net worth" (at least not until I'm 60+), but on $12-14/hr, you can save for retirement, have financial security, and still enjoy life.

1. Spend less than you make...by alot. I would recommend to have 50% of your take-home pay be saved. It seemed impossible for a few years, but I eventually got there. I actually use a variation on the 60% budget with a bit more saving for retirement. If you are married, always, always, try to budget so you can live off the lower-earning spouse's income. If you do this, you will never feel stressed about money! It's the best feeling.

2. In order to achieve the above you must be smart. Become aware of every single tax credit and all programs available at all levels of government. There are often some great values in housing assistance for people in this income bracket. Maximize all tax credits & plan ahead for years. Shop smartly - don't just shop because of sales or coupons at a place, look at everywhere - ie Goodwill/Plato's Closet for example. A specific, clothing example, is I realized that Wal-Mart is the baseline in terms of price and quality. Consider the marginal value of more expensive clothing stores (ie Kohls for example) even if they have great sales/discounts. I buy at Sears/K-Mart because their quality/prices are largely similar to Wal-Marts and they have the best loyalty program in the business, which nets me anywhere from 20-50% discounts. Nicer clothes are bought for durability/quality as long-term investments (see the Brooks Brothers threads around here for example). Along the same lines, invest in your future needs not just your present ones. Sears ran a killer Goodyear tire sale on Thanksgiving/Black Friday - I got 4x 80k mile tires for my wive's car for a net cost of about $130 - original price over $800 by combining a ton of stuff. I also purchased a set of tires for my car (which likely won't need them for 18 months) for a similar savings. Be smarter than the average bear in everything, and you will find your expenses dropping by 10-15% (food for example) to 50-60% or more.

3. The best tactic for spending less on non-essential stuff is to ask yourself - do I really need this? I made it a habit to put things in my Amazon cart for 3 months before even considering buying them. 90% of the time, 3 months later, I wondered why in the world I had wanted those items. I would recommend working around your own bad habits by limiting access to money and I would recommend a good budgeting program like YNAB (wait for a steam sale where it's $15! (see principle #2 above!)). Experiment with what you think are must-haves. I once turned my hot water heater off for 2 weeks - yes, I really do need hot water, but I did find out that I could easily do navy showers. Did I need high-speed internet/netflix? No, but I found it to be a smart investment because it was cheaper than the alternatives for entertainment that I would default to.

4. I'm going to go back to housing - it's a huge cost for most people. I've been most comfortable when my housing costs are under 25% of my pay, and the lower the better! This is only possible in my town by owning a modest home or in a specific co-op apartment complex. Since we are married, housing costs are now 11% of our budget. Something people may not consider housing costs - but I do, is that the house's location may increase gas & maintenance costs. A really cheap house in a nearby town would have saved me $120/mo in housing costs, but increased my transportation costs by 3x the savings. It made more sense to buy in town.

5. Start saving as early as possible for retirement and get really smart about job choices. Why do I combine the two? Because many people make bad job choices - and my experience is that the area this most often impacts is retirement savings. Some examples - a co-worker left a position making $14/hr to take a position making $15/hr. The $15/hr position actually ended up paying less - extra driving for an extra shift a week (8hr shifts vs. 12 shifts), and they had built-in overtime in the old position. A friend left a government job for a higher-paying private sector job. They will end up losing money - they were close to being vested for the government pension plan, and this would have been worth about $4-5/hr (retroactively even) worth of retirement savings. If you have high student loan amounts - a non-profit/government employer and an IBR plan+ PSLF goal may be very much worth it - I advised a friend on this and the expected net benefit was about $100k on $50k of loan debt...and $50k more of retirement account investing over 10 years. I could go on using examples of job-related transportation costs, meal/clothing costs, and health care expenses. Sometimes lower-paying positions are actually higher-paying positions when considering all aspects. This can directly translate into retirement savings & general financial security in ways people may not normally think of.

6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.
Great deal on the goodyear tire. The goodyear tire always claims 80k but usually last 40K hope this is not the case with yours.

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Re: Low Income, High Net Worth - Stories Of

Post by die-tryin » Mon Jan 20, 2014 3:16 pm

Low Income , High worth can be achieved.

Save and live below your means, smart investing will help and putting money away early (401k, savings, etc). Starting early is the main key, I saved early but didnt get into 401k til later (which obviously i regret).

A good/decent job with benefits will help, from health insurance, company match 401k, perks such as take home vehicle w/company gas card, free cable/internet, if your job has uniforms, work cell phone. I have all these things and they easily could cost me 300-400bux a month, I can save what most would be spending. While the pay is so-so, the benefits help.

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Re: Low Income, High Net Worth - Stories Of

Post by abuss368 » Mon Jan 20, 2014 4:23 pm

rbrown599 wrote:
abuss368 wrote:I read the book "Millionaire Next Door" a while back and it really opened my eyes. That was definitely a life changing event for me.
I'll second the 'Millionaire' books. I was fortunate enough to have a mentor recommend them to me in college, and then I was sensible enough to actually read them in college. Blew my mind when I read the words "Deca-millionaire" and "Uneducated" in the same sentence.
Same here. An investment mentor at the time recommended the books to me.

Fantastic book.
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Re: Low Income, High Net Worth - Stories Of

Post by angelescrest » Mon Jan 20, 2014 5:42 pm

technovelist wrote:
boroc7 wrote:There have been a couple posts asking how some folks make as much income as they do.
Are there folks who don't make as much income as they do? :confused
Apparently not.

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Re: Low Income, High Net Worth - Stories Of

Post by horste » Mon Jan 20, 2014 9:42 pm

rbrown599 wrote:
abuss368 wrote:I read the book "Millionaire Next Door" a while back and it really opened my eyes. That was definitely a life changing event for me.
I'll second the 'Millionaire' books. I was fortunate enough to have a mentor recommend them to me in college, and then I was sensible enough to actually read them in college. Blew my mind when I read the words "Deca-millionaire" and "Uneducated" in the same sentence.
This was my first foray into financial freedom too. Helped put so many things into perspective.

I have the median average salary, and my spouse pushes that up to near 140% of the median household income. We save 30-35% of our post-tax income and 10% of our pretax income. I am looking forward to the next 30 years of compounding.

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Re: Low Income, High Net Worth - Stories Of

Post by rob » Mon Jan 20, 2014 10:14 pm

fisher_man89 wrote:
brajalle wrote: 6. Having kids is a huge financial drain. Even with all of the above, on a modest income, my view is, with kids, you have a choice - you won't be able to travel, save for retirement, buy a house, and have financial security (not including home & retirement). At best, you may have two of those (with 1 kid) or one of those (2+). Just be aware of the potential trade-offs.
I disagree and speak from experience.
Kids are people and need very little, yet want much.
The great thing about children is that parents decided what they get and how much of a "financial drain" they are.
What kids need most is free: love, encouragement, protection, boundaries, and instruction.

If a parent buys their children everything they want or what their friends have, then financially they are costly.
But is an adult does the same, the story is also the same.
Why can't children do with less than other children, yet have their needs met?

Saving is a simple formula, that does not involve the number of children, just what one spends.
Sacrifices can be make with children and they can be potentially better off for it.
This is an emotional topic but I see this as an emotional response.... kids are very expensive regardless of how much people might want to downplay that cost - and I have 3 kids so I'm not speaking about the other side of the fence. We pay for larger houses, have FAR higher running costs for almost everything (medical, travel, food, education, cloths e.t.c.) and a some of us get by with one salary instead of two e.t.c. It's a vast cost....... I'm not saying it comes with no benefits but can we at least be honest about the real financial cost. I admit that I will work for years and years longer and have far less money for other purposes than I could otherwise because of having kids.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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Re: Low Income, High Net Worth - Stories Of

Post by nirvines88 » Tue Jan 21, 2014 12:36 am

boroc7 wrote:
nirvines88 wrote:I make 38k/year as a public school teacher. I spend approximately 1/3 of that per year and save the rest. I still travel a few times per year, go out whenever I want, buy what I need, etc. If I ever felt like I was restricting myself by saving too much, I would cut back on the saving and ramp up the spending. I guess I just don't have many superfluous wants and I was lucky to avoid student loan debt.

In my opinion, it's not hard to live off my modest salary as a single dude in a modest C.O.L. area, although I don't know if having a family or living on this salary in a high C.O.L. area would be feasible.
That's essentially a $1,000 a month budget on all expenses. I'd love to see how you break that down.
I'm lucky to have health insurance covered by employer. An approximate breakdown below:

450 rent (town home with one roommate)
~80-100 utilities (my share of internet = 18, power usually 50-60, gas another 10 or so)
~200-500 CC bill (groceries, gas, going out, etc. - hit 500 due to Christmas)
50 car insurance

~1400 to 401k
~450 to Roth IRA (although I max this out at beginning of year)

Could be forgetting something, but yeah, it's about $1,000/mo. Sometimes a couple hundred less, sometimes a few hundred more. Running shoes, beer, and pizza are probably the biggest discretionary expenses, and I'm not sure in which order. :beer
"Beware of little expenses, a small leak will sink a great ship" - Poor Richard

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Re: Low Income, High Net Worth - Stories Of

Post by angelescrest » Tue Jan 21, 2014 12:47 am

nirvines88 wrote: I'm lucky to have health insurance covered by employer. An approximate breakdown below:

450 rent (town home with one roommate)
~80-100 utilities (my share of internet = 18, power usually 50-60, gas another 10 or so)
~200-500 CC bill (groceries, gas, going out, etc. - hit 500 due to Christmas)
50 car insurance

~1400 to 401k
~450 to Roth IRA (although I max this out at beginning of year)

Could be forgetting something, but yeah, it's about $1,000/mo. Sometimes a couple hundred less, sometimes a few hundred more. Running shoes, beer, and pizza are probably the biggest discretionary expenses, and I'm not sure in which order. :beer
Bravo! That totally reminds me of my first year of real employment, particularly with the townhouse and roommate(s). But I wasn't putting aside $2000 a month. I think not having any student debt or debt of any kind, much less a car payment, would be one different others might have to deal with first. Well played.

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Re: Low Income, High Net Worth - Stories Of

Post by khale7 » Tue Jan 21, 2014 4:38 am

For me having kids was one of the best things that ever happened to me financially and It helped that my wife and I are on the same wave length about saving & spending. We were both low income earners when starting out and after having kids it really gave me the drive (or kick in the behind!) to look for ways to improve our financial picture. I switched to better paying jobs, changed states and learned all I could about investing & saving. The drive to improve my income was so great that we took a job overseas (not for everyone though).

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Re: Low Income, High Net Worth - Stories Of

Post by investingdad » Tue Jan 21, 2014 8:01 am

ResearchMed wrote:
The Wizard wrote:
Jane wrote:I know a couple that are children of The Great Depression. They knew want, need and hunger. They had a lifetime of low income work, but they always worked, lived below their means, and they saved. Every single purchase is/was given long hard consideration. They put their money in the best CDs they could find in their local area only. They bought new modest cars when they needed them. If they didn't have cash, they felt they couldn't afford it and didn't buy it. They bought their houses with cash. They had to borrow money against cash in the bank to build a credit history to get a credit card that they hardly ever use. They now have 2 million dollars net worth. They don't feel they sacrificed anything.
My parents survived The Great Depression as well, but never accumulated the $2M net worth. Some of the scars of surviving that era didn't lead to healthy rational financial behavior in later decades, IMO.

While I am NOT a believer in spending all your money in retirement, the point is: excessive frugalness isn't going to win any awards. Balance in one's finances and personal life is a good idea...
This sure rings a bell - Depression-era parents who also didn't make sensible financial decisions.

It was more than just excessive frugalness, although it was definitely that, too.

As best I can figure out, they felt that investments and even savings could be wiped out, so... why do that?
Instead?? Gambling or any other way to "hit it big". (I never really before thought about, well, IF they had actually "hit it big", where would they have kept it all?)

Everything was so cheap as to be less economical, although I didn't realize that when I was young.

Watching them make dreadful decisions pre-retirement was difficult, although in the final 10 years, they piled money into the TIAA-CREF trad annuity, and that, with SS, allowed them to be reasonably comfortable.

But the gambling was REALLY difficult to watch, and I hate to think how much went down that drain.
Probably most of what could have been used to help with college, but that didn't really matter, actually. "Girls" didn't need a good education, since I'd "only need to get married, and never would need to support a family". (My brother was encouraged to apply to elite schools.)

Unfortunately, I *did* end up needing to support a family (the children and me).

Thank goodness I fought my own way into good scholarships, fellowships, and student loans, etc. - but mostly by getting myself declared "independent" for school financing purposes.

It wasn't a pleasant way to grow up, although at the time, I didn't realize how "abnormal" it really was.

RM
It's like you're talking about my maternal grandparents. Same story with them. Tough go in the Depression and bad financial decisions the rest of their lives. They got by on my grandfather's pension and SS in their final years. My mom is a baby boomer that grew up with an outhouse...that's how tight money was for them. What killed me is that my grandparents would play the Daily Number...every...single...day. By the law of averages, they'd win on occassion. But over the long haul it's the same old story...math wins and the players lose.

They didn't trust banks and certainly didn't invest what little money they did have. They managed to squirrel away money over time after decades of skrimping.

What's remarkable to me is that my paternal grandparents were just the opposite. They also went throught the Depression but my grandfather was a smart, small town business man at heart. He capitalized on the meltdown by investing his money when it was REALLY hard to do so. By the time he passed away, he had a significant portfolio. Made a lot of money running a print shop from his house and opening a small biz in town with his brother.

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Re: Low Income, High Net Worth - Stories Of

Post by stoptothink » Tue Jan 21, 2014 10:18 am

mikeast wrote:Long story short--wife and I earned two average paychecks but lived on one for twenty years. Our net worth would probably be considered respectable by most on this forum but would likely
blow the minds of our family and friends if they know what we were worth. We are financially independent now in our 50s although I work for a modest hourly wage at big box retailer because what I do
there is fun and I just like going to work.
Same here, by Boglehead standards my net worth is nothing, but it would blow the minds of my family and friends. I was recently married and my wife had no clue about my financial status until a few days after our wedding when I went over my portfolio with her; she thought the numbers were a joke at first. It has motivated her to save though, her retirement fund has more than tripled in the past 4 months. Her parents visited this weekend and my wife had mentioned that we were beginning to save for a home downpayment. Her father asked me what the goal was. He said $10k, when I said $50k his jaw dropped; he has owned five homes and never had the means to put more than 5% down and he has had a 6-figure income for two decades. We always joke with my parents about being poor (we live in a small basement apartment, drive old paid off cars, spend next to nothing on entertainment, etc.) and several times my stepfather has commented to my wife that I have to have $30k or so stashed away in retirement...little does he know it is nearly 10x that. Of my 6 siblings, two of them make more than me (one, nearly 3x more than I do), but I am pretty sure my net worth is more than all of them and my parents combined.

Together my wife and I bring home ~2.5x the median household income, but neither one of us has a six-figure salary yet we are well above the 90th percentile for net worth for our age (and my wife's net worth was essentially $0 a year ago). I expect that we should be financially ready to retire before my wife hits 50. I started young, completed 10yrs of college without taking out a single loan, have continued living like a broke college student, and encouraged my wife to get in financial house in order. We're certainly not wealthy, but I doubt many people I know can even contemplate financial independence by 50.

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