Why do some people end up financially secure and even well off, when others, starting with similar situations never quite make it?
Let’s look at two real couples, with fictional names to protect the innocent, to see what we can discover.
John and Sue.
John’s dad was a big city bookkeeper – with 17 children.
Sue’s Dad invested in the stock market but lost it all and died young.
John and Sue were educated in private catholic schools, lived in the big city, never served in the armed forces and had high school diplomas.
They married in the 1940’s and moved to a new ranch 3 bed home the suburbs. They had 4 kids.
John went to night school for 10 years to become an architect. He worked for multiple firms over the course of his career and tried to start his own firm twice without success. He retired at 65 with a small pension.
Sue stayed home with the kids, but worked part time as a secretary when needed (to help support the family when John was trying to start his own firm).
Sue and John ended up with about $60K total in net worth at retirement.
Harry and Marjorie.
Harry’s dad was a farmer with 2 children. Both parents only went through the 6th grade.
Marjorie’s dad was an immigrant – a chef who worked up to one of the city’s premier hotel chefs. He owned a farm, but lived in the city.
Harry and Marjorie both went to public schools and graduated high school. Harry went to trade school and Marjorie went on to college.
They married in the 1940s and moved to the outlying suburbs to a new 4 room frame house. They had 2 kids.
Harry worked for the same company until death at 65 and spent evenings and weekends dabbling in other interests – inventions, real estate and the stock market.
Marjorie stayed home with the kids but taught school as a substitute teacher and led the school PTA.
In the 1960’s she went back to college and earned a Masters degree. She went back to work full time when the kids were in high school.
They traveled extensively, sent both kids through college and helped them out financially to get started in married life.
Harry and Marjorie ended up with a net worth of over $750K at retirement.
Why the difference? What did Harry and Marjorie do right that Sue and John neglected?
Harry and Marjorie controlled expenses.
They only had two kids, Sue and John had double the number. Kids are expensive.
They sent their kids to public school, avoiding the private school tuition Sue and John paid for many years on their 4 children.
They were do it yourself people, fixing things themselves if they needed fixing. Sue and John hired most repairs done.
They shopped for bargains and didn’t insist on name new name brand items. Sue and John wanted to appear successful and felt they needed to impress others by wearing and using brand name articles.
Harry and Marjorie maximized income.
They started with a small home, bought a larger one at rock bottom prices and rented out the smaller one, creating an additional income stream. Sue and John started with a larger home in a more expensive area and did not acquire rental real estate.
They utilized the job talents of both partners and maximized Marjorie’s through added education. Sue and John did not fully utilize Sue’s talents, nor provide added education for her. John chose a profession requiring college, but not providing college level compensation.
Harry and Marjorie kept income producing day jobs that provided benefits and pensions. John switched jobs often and used up resources with unsuccessful business starts.
Harry and Marjorie saved and invested to grow their money.
After meeting basic emergency needs, they put their money to work for them – in real estate and in the stock market. Sue and John kept what little savings they amassed in low interest bearing ‘safe’ bank accounts.
Harry and Marjorie lived off current income.
They did not touch invested principal because their lifestyle and current income matched. They did not try to keep up with the Jone’s. Sue and John borrowed money to buy their home and each of their cars.
Harry and Marjorie did not buy a new car every two years. Sue and John felt that they needed an up to date car due to Joe’s profession so they bought cars more frequently, using loans.
Small decisions on how money was spent and how it was earned made a large difference over time in the financial outcomes of these two couples.
What small decisions are you making to end up with a great financial outcome down the line?