Greetings from the future. This is a message to you from you at age 72. I just wanted to thank you for the little things you did while you were young (or actually, what you are going to do over the next several years) because we’re in great shape now.
I’m living at a great little condo down on the beach in the Carolinas. We sold our big house and moved here several years ago after leaving work at 67. Note that I could have retired at about age 50, but instead I decided to change jobs. I also started a small business, doing consulting. It was nice to get paid a lot of money per hour because people don’t ask you to do anything but really important things when they need to pay you a lot. They found someone else to fill out the forms and get the formatting on the reports just right. I just got to do work on the challenging problems that I love. Finally at age 67, Nancy told me it was time to hang it up and we moved down here.
And yes, Nancy and I are still together. Fifty years of marriage last fall. We found that being on good financial footing – thanks to you good work – really reduced the stress we felt early in our marriage when we were still struggling with bills. Of course we’d have a minor argument every so often, but we didn’t get into the big money fights that some of our friends had because they had gotten deep in debt. We also found that the monthly budget talks, where we’d put down on paper how we wanted to spend our income, really gave us a chance to talk about our wants and dreams. That made us grow closer over the years. I found out that things were important to Nancy that I didn’t realize. It’s funny how when you’re talking about how you want to spend your money you’re really talking about what’s important to you.
Probably the most important thing you did was getting into the 401K right when you started work and putting 10% away each paycheck. I really didn’t miss the money since it was taken out from the very first paycheck. By the time I was forty, I had almost a quarter million dollars in there, thanks to those regular deposits with each paycheck. Sure, that big bull market helped, but I would have missed the boat if you hadn’t decided early on to put money away with every paycheck and leave it alone. By the time I reached 70, I had more than 10M! Incredible how it grew those last few years. Some years I was making almost $2M just in capital gains on stocks. While my friends were worrying about making their money last, I was just thinking about trips I wanted to take and things I wanted to see. We’re also set for home care when we need it, instead of the government nursing homes our friends are facing.
Another great move you made was getting that 15-year mortgage and putting 20% down when that mortgage broker was suggesting putting just 5% down on a 30-year mortgage. You actually got more aggressive at reducing that debt after about ten years and we paid it off in twelve. My friends at work who were paying down their home equity loans and still have 25 years left on their mortgages couldn’t understand how I was able to take those nice vacations every few years. Having an extra $15,000 in my pocket by not needing to pay a mortgage payment each year really helped with that. And you should have seen the envy on their faces when Nancy and I upgraded to our dream home, paying cash all the way!
Now on cars, let me say I wasn’t sure at first when you started buying those used cars. I mean, that $2,500 hatchback didn’t stack up against the shiny new hybrids and Mustangs in the lot other people were buying. But then that left an extra five hundred dollars per month to put into stocks on the side. By the time five years had passed and it was time to trade in the hatchback, I was able to pay cash for a nice four year-old car with about 50,000 miles on it. That car could have gone ten years, but I was able to trade in and pay cash for another one about ever four years and still build up a portfolio of individual stocks. By the time I was in the third car, I had something like $50,000 in stocks. I had over a hundred thousand by the time I got the fourth one. It sure felt good to know I had enough money to last for a few years in that account, even if my job went away the next year.
As time went on, I was able to add some luxuries to the standard monthly budget, like the cruises and a little vacation home on the lake, but I was still able to squirrel away about $800 per month since I didn’t have a car payment or a house payment. Pretty soon, I was making almost as much in capital gains in my portfolio as I was getting in salary. That was what allowed me to leave my job in my fifties and start the consulting firm. I passed a million dollar net worth by the time I was about 42, and then a second million by the time I was 46.
Scott — your oldest son — was ready to go to college when I was 48. I couldn’t believe how much college costs were. We were looking at about $100,000 for just an education at the state school. But Scott didn’t go to a state school – he went to Dartmouth. And because we had more than a million dollars in the portfolio, we just paid cash. All of our friends’ children were getting student loans and coming out owing a house. We just sent a check to the college and he came out debt-free.
Actually he was better than debt-free. We started gifting stocks to him when he was about 16, teaching him how to manage the money while he was still at home. We then paid for his tuition while he took care of his living costs in college using income from the portfolio. He made a couple of mistakes, but in general he managed the money well. We therefore kept gifting money to him throughout his college years and for a couple of years afterwards, so he had the security of a starter portfolio to start his adult life. We did the same thing with our daughter, Kelly, who went to UC Santa Barbara.
So once again, thanks. I know usually people have advise to give their younger selves, but you actually did a pretty good job of things. Maybe the only advice I can give is make sure you take a little time to hold onto the moments while the kids are young – when you have the kids, that is. Time passes really quickly, and you only get one shot at it. Oh, and don’t get so mad at Scott when he wrecks the car. It’s really not his fault.
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