Frugal couple accumulate large nest egg by choosing not to live beyond means

Seattle Times ^ | 01/04/04 | Kathleen Lynn

[Ciexyz]

Cable TV is a good investment as long as you use it. Forego renting a large number of current videos and wait for several years, they'll all be out on cable. We all complain about cable TV prices, but I consider it a good investment because I actually watch it about eight hours a day. I consider it part of making my household a home and a welcoming place to relax.

I personally wouldn't want to wear a coat from K-Mart, but if it works for that woman, fine. But if you shop smart and use store coupons, you can get decent deals at the mall department stores. Or look into catalogue shopping.

[B4Ranch]

Invest cautiously with 90% of what you have available. Take 10% and go for the higher risks. When you make profit on that, use the profit to stay in high risks. Put the intial funds back into medium risk. Use their money to play the higher risk areas.

[Zevonismymuse]

I was thinking the same thing--especially the "no kids" part.

My first thought reading this was how different life without children would be. Those poor people.

We have three wonderful children, the youngest now almost an adult. Braces, camps, tuition, not to mention the clothes and the long showers have cost us a pretty penny. Kids aren't cheap, but they are worth every cent.

[Ciexyz]

I'm grateful to my parents, who were savers. They left me some savings bonds that helped me over the years esp. in a down payment for my house. God bless them for saving a little bit and passing it on.

[Polybius]

A life spent in perpetual fear of lawyers is a life not worth living.

It doesn't hurt to practice a bit of proactive self defense, though.

That is why I have insurance.

That is also why I have a very aggressive law firm protecting my interests........As my former corporate partners found out when they thought they could blackmail me with the threat of their lawyers but, instead, ended up losing everything that I had once been willing to buy from them when I started my own corporation.

[luckystarmom]

Some (I'm guessing most) women (like myself) don't have a mother's wedding dress or can't wear their mother's wedding dress.

[luckystarmom]

We'd be very wealthy if we didn't have kids. Also, it means that someone has time to cut coupons, bargain shop, cook cheap meals, etc.

Kids changes the whole formula. Then if one (or all) have any kind of medical or learning problem, it really screws you financially.

[Polybius]

Agreed. I would also add that I'd rather raise a family and enjoy the grandkids than to be a couple of frugal fogies. Heck, I'm 43 with three kids. One is married and has a 2 year old. One is living on her own. The last in the nest is 16, plays high school baseball, basketball and bowls. I smoke, drink, own a 21 foot Palm beach center console (paid for) slipped in a NJ marina, drive a 97 Suburban (paid for), will have the mortgage on the house paid off in a year and have no other debt than the mortgage. I don't quite live up to the formula (Salary $110,000 and non-equity savings/investments of approximately $300,000), but I'd much rather live my life than Mr. Frugal and Mrs. Barrenhouse. Besides, since you never know when your ticket will be puncged, you better reach for the brass ring every day you are fortunate enough to wake up.

Forget about the formula.

It's not realistic, especially if you are doing so well in your business that you are constantly bumping your income up. I've been falling short of that formula for 12 years and all it means is that my income has tripled during that time.

What is important is the concept of not being mired in debt and you fit the frugal profile recommended by the book.

You have almost paid off a house that you can obviously afford instead of crushing yourself with a mortgage that you have no hope of repaying. You drive a 6 year old car that is almost paid for instead of buying a new car every 2 years. You have no other debt as opposed to the guy that is scrapping by to pay the minimun payment on a huge credit card debt that he is carrying at 18% per year.

If an accident crippled you physically tomorrow, you would probably do O.K. The guy working as hard as he can just to pay of the interest on his debt every month, however, would be in financial dire straights.

I hate to burst your self-image as a care-free, "reach for the brass ring" kinda guy but you are just a boring, responsible frugal fogy like I am. ;-)

[Trajan88]

Here you go (you'll need a user id & password to get onto www.dallasnews.com):

http://www.dallasnews.com/latestnews/stories/011703dnbusnuforeclosure.9eedb.html

Trajan88

[Conservative til I die]

I think a decent used car would be a good idea. I put $5500 down on my new car. Consider if I did that with say, a 1998 or 1999 model, I'd probably only have to pay off maybe $3000 on the balance instead of $13000.

[RightOnline]

"Not to mention that he's an academic and probably has posh benefits."

No he isn't. Go back and re-read.

[Floratina]

So this couple was making $100,000 since birth? Or they made a slowly increasing income and yet the formula is based on their most recent income? If one worked full time from after college at 22yo to 40 they would have to save $22,000 per year. To bank $22,000 at 80's and 90's tax rates they would have had to gross $35,000 per year and bank every penny with zero expenses.

Thanks for this analysis, Eaker. Took some of the shock out of it for me!

[Choose Ye This Day]

We're trying to do the same thing--live fairly modestly--except on only one modest income. I can't say it's always fun; there are plenty of things we do without (cable, fancy clothes, expensive vacations, electronic gadgets, etc.). But I feel sure in the long run we'll be much happier without a huge weight of debt dangling overhead, ready to crush us.

I also heartily recommend the Dave Ramsey show. You can listen to his get-out-of-debt, live-frugally advice online, at www.daveramsey.com

[Choose Ye This Day]

I'd forego putting anything into savings until all my credit card debt was paid off. Then I'd max out my 401K contribution and adjust my lifestyle to living with those means, plus save what I could. With the interest you are paying on your credit cards, you're throwing money away. Get own to zero owed. Then start saving and begin paying cash for everything except home mortgages. Let your money work for you, not the credit card company.

Excellent post.

[technochick99]

May I add, pay cash for it. I had just bought a very nice used car two weeks before my job went bye bye. If I had known I never would have bought it but at least I didn't have car payments to worry about because I had paid cash.

I had a car paid off, but got married to someone who had no car. Marriage over, he took my car, and I have another 18 months of car payments. Sigh...

[Richard Kimball]

I agree. Kids also mean you need a bigger house. My middle daughter and I teach at the same college and go into work together every morning. I got completely out of debt, except for $28,000 on the mortgage once, and my wife said, "Honey, guess what?" She left her job and we had the baby. Because of some health issues with our youngest, my wife never went back to working outside the home. 14 years later, I've never been close to being out of debt. But we're happy, the oldest is on her own, the youngest is home-schooled, and we make it okay.

We could be in better financial shape than we are, but if I can get the youngest through college, I'm not worrying about a darned thing after that.

[btcusn]

By your logic, why even bother dying with $100K in the bank? Why not spend it all?

Heck die in debt up to your ears!!
Jack

[Mamzelle]

I appreciate your story--it's not that frugality won't pay off, it's that the formula in this article does not include most couples.

First of all, an essential way to be in a fine financial position in your fifties (when the tire starts to hit the pavement and retirement may be hitting the horizon!) is to marry well and avoid divorce. This was not mentioned, and IMO is very important. The people I know in bad shape managed their lives pretty well except for losing big in divorces.

I'm glad your kids are out of college--have you seen how tuition has gone up recently? When I was in college, many people worked their way through and emerged debt-free. That's not within reach these days. The hikes in tuition, are, IMO also, a huge fraud.

And the academics I know have good insurance and other nice bennies--one reason why everyone wants to be a professor.

[Mamzelle]

re: I understand this, and I know I'll be flamed..but what good is money if you don't enjoy it once in a while? I don't know....I live my life a little differently.)))

Knowing a few cheapskates myself, they get a kick out of boasting of their cheapness. I call it "poor mouthing"--

Now, watch who gets flamed...

[Taffini]

I didn't think anyone got alimony anymore