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Guest Post: Five Frugal Multi Millionaires

November 18, 2009 · Filed Under Random · 2 Comments 
This guest post was written by Kris who writes about managing personal finances for a credit card comparison website which compares a range of balance transfer cards and cash back credit cards. When not writing, Kris enjoys spending quality time with his young family.

Not every millionaire was born with a silver spoon in his mouth, nor does every millionaire live the lavish lifestyle often associated with the title. In fact, many millionaires live very reasonable, unassuming lifestyles, often combining frugal spending habits with wise investment choices to build immense wealth. It’s important to remember that being frugal doesn’t necessarily mean you are cheap, it just means you make well-informed and smart choices regarding your money. For many millionaires, it isn’t necessarily their lofty incomes that create their fortunes so much as their frugality and ability to save and invest the money they do earn. Here are a just a few examples of prodigious savers who turned their frugal savings into fortunes.

1. Warren Buffett

It’s hard to find someone who hasn’t heard of Warren Buffett, either because of his extreme wealth or the amazing way he achieved that wealth. This Nebraska native turned successful investor and business owner, came from a working-class family in Omaha, and even joined a fraternity (Alpha Sigma Phi) during his college days at The Wharton School, University of Pennsylvania. Along his path to millionaire and then billionaire status, he never lost sight of living frugally and making level headed business decisions. According to Forbes Magazine, after losing $25 billion (USD) in 2008-09 Buffett is still the second wealthiest man in the world at a net worth of $38 billion. On his Wikipedia.com profile his annual salary — $100,000 (USD). Talk about living frugally in the overall scheme of things — wow!

2. Marjorie Kennedy & Jack Lynch

You might not remember their names, but you might remember hearing their stories or ones similar to them. Both were unassuming librarians, (Marjorie in Scotland and Jack in North Carolina). Both of them lived unassuming lives, saving and investing well, and living within their means. At the end of their lives, both were able to leave vast fortunes (well over a million dollars), far larger than their librarian salaries would belie. These are the typical ‘millionaire next door’ type stories you never expect due to the relatively normal and unassuming lifestyles these people live. See, it doesn’t take a huge salary and fancy job title to becomes rich!

3. Ingvar Kamprad

What, this name doesn’t ring a bell? How about IKEA? Ah yes, now you’re making the connection. He is the Swedish billionaire, one of the richest men on the planet, who not only grew IKEA into a name recognizable worldwide, but also maintained the characteristics of a frugal millionaire in the process. In his Testament of a Furniture Dealer Ingvar states, ‘Expensive solutions to any kind of problem are usually the work of mediocrity. We have no respect for a solution until we know what it costs.

4. Jen Smith: ‘Millionaire Mommy Next Door’

On her website, Millionairemommynextdoor.com, Jan chronicles her path from minimum wage earner to self-made millionaire. It is a remarkable, yet for most of us, very attainable path that made her a success. Unlike Warren Buffet who, while starting small has built a nearly unimaginable fortune compared to the everyday investor, Jen Smith’s story gives us all hope that hard work, common sense, and learning to do things yourself rather than paying others to do them for you, can lead to financial independence and success. Here are two quotes from Jen’s website that I think sum up the lifestyles of many frugal millionaires:

“We tend to be do-ers, not have-ers. For instance, we don’t care much for ‘stuff’ (a McMansion home, fancy cars, clothes or jewelry), but we spend generously on recreational pursuits, organic foods and long trips to faraway places.”

“The morning I calculated our net worth to be over one million dollars, we were living in a rented apartment, driving a six-year-old car, and wearing used consignment store clothes. At age 40, we were ‘closet millionaires’.”

5. Dave Ramsey

Ramsey is the host of a nationally syndicated radio program and podcaster giving live, one-to-one personal finance advice to callers. Dave made a fortune from real estate in his 20’s but he went broke. With lessons learned and a resolve to do it the right way he started again and made his second million from real estate. Now, Dave is renowned for his Christian background and no nonsense approach to personal finance, especially when it comes to getting out of debt, staying out of debt, and living financially free. So, if you listen to Dave’s advice, you’ll be taking personal finance advice from a wealthy man, not your broke friends or family.

Monthly Net Worth Checkpoint: December (yep – lower still)

December 17, 2008 · Filed Under My Finances · 2 Comments 
Cash + Money by Terence Chang
photo credit: Terence Chang

We recently (at least it seems like it was recent) celebrated Thanksgiving and now we’re into the hustle and bustle of the Christmas season.  Christmas shopping, Christmas cards, Christmas programs for the kids (my daughter had one Sunday, another tonight, a play next Friday, and my son has a play next Thursday) and so on and so forth.  It is also time to check all our account balances and update our net worth for the month. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it .   This post mentions some online tools for tracking your net worth .

Our assets dropped 1.6%

Just like last month, I expected our assets to drop more than they did.  At least for that month, the rate of descent of our assets has slowed.  The biggest mover was my stock options which have dropped another 14.5%.  Since August, they have dropped a total of 85%!  (wow, that’s a lot).  The other accounts, even those with stock market exposure, did not drop a tremendous amount.   Our retirement accounts only dropped 2.3% and our taxable investments dropped less than one half of a percent (How crazy is that losing 2.3% of your retirement account value in one month is not that bad anymore!?!).  In fact, my daughter’s 529b plan actually increased almost 4%!  It was a tepid month for all accounts, I think, as even our liquid accounts, which were increasing over the past few month, only grew by a little over 1%.

Our liabilities decreased by 0.5%

Our liabilities dropped the typical monthly rate of about 0.5%.  I’d love to get rid of that mortgage payment…but the principal balance is so high that I can’t foresee doing anything about it in the near future.  I’m still thinking about it though.  Usually I would say every little bit helps, but when throwing a little extra cash at it each month wouldn’t reduce the length of the loan significantly, is it really worth it?

Our net worth decreased approximately 3.6%.

Well, we’ve experienced another drop in net worth this month (that’s starting to become a habit).  At least the downward rate has decreased again this month (last month it was a 4.5% drop)  Most of this is out of my control still (stock market losses and house valuation declines), so I try to focus on what I can control, which is mainly the liquid savings and liabilities.  So, since our liquid savings were up slightly and our liabilities were down slightly, that’s good news from my perspective.  Of course, Christmas brings with it a lot of extra expenses (gifts, travel, food, etc) so it will be interesting to see how we end up 2008 (of course, if you use a credit card for some expenses, then you don’t really get hit until January)

Merry Christmas!!

Monthly Net Worth Check Point: September (down 6.1%)

September 8, 2008 · Filed Under My Finances, Net Worth · 2 Comments 
Cash + Money by SmileMyDay.com
photo credit: SmileMyDay.com

To track how we are doing financially, I monitor our net worth and update it on a monthly basis. I think it is a great way to keep track of how all your planning and hard work is paying off. Check out this page if you want to see the spreadsheet I use to track it and a video tutorial on how to create and update it . If you prefer, I also have a post on some online tools for tracking your net worth .

Yikes! A 13.4% drop in our assets!

The hard work does not seem to be paying off (at least not this month!) It was actually a crazy month for us finance-wise. For example, our total assets dropped 13.4% driven by a whopping 65.6% drop in our liquid assets. Of course, since you are all faithful readers, I’m sure you remember that we paid off our final student loan this month and that accounts for the vast majority of the drop.

On top of that, however, it seems to have been a poor month for my mutual funds and company stock. Actually, the value of my company stock holdings dropped more than 7% and the value of my stock options fell off a cliff, dropping almost 50%! My other stock market exposure (in 401ks and mutual funds) also accounted for some of the asset drop, but they were down less than 2% each.

Woohoo! Our liabilities decreased by 17.5%.

Again, the weirdness of the month created quite a large drop in total liabilities. Ahhh, it is so nice to not have to obsess about paying off the student loan anymore. I haven’t really started obsessing about anything in its place yet (like paying off the mortgage, for instance). I’m still waiting for our liquid assets to recover a bit over the next months due to not putting so much cash towards that loan each month. After a trip to IKEA , however, I’m not sure how fast those numbers will rebound.

Our net worth decreased approximately 6.1% in August.

Putting those two large numbers together yields a slightly smaller, but still pretty large, drop in our net worth. Obviously the stock market wasn’t too kind to us this month. Taking into account the fact that a large amount of our cash buffer was used to pay off the student loan, you can see that the stock market exposure will continue to have a large impact on our net worth in the months to come.

This month, however, was much more about getting rid of our last student loan that anything else. I am very happy with our decision to use some of our cash to eliminate it. We are now down to only having the mortgage (and the other contractual obligation to pay back if my wife stops working in the next 15 months). From a net worth point of view, it will probably be bumpy for the foreseeable future as it will depend in large part on stock market performance.

As we go forward, we won’t be looking to replenish our cash reserves to where they were previously. We will keep our emergency fund at its current level of 3 or so months of expenses. We have started some short term savings for vacation, gifts, large home purchases, and yearly expenses. Also, I finally decided on an asset allocation for my rollover IRA and our taxable mutual funds. We will start putting more money into those mutual funds soon and probably increase our kids’ college savings accounts as well.

So, I sum up the month thusly: 6.1% drop: bad . No more student loans: great!

Monthly Net Worth Check Point: August (up 3.7%)

August 8, 2008 · Filed Under My Finances, Net Worth · 5 Comments 
Cash + Money by SmileMyDay.com
photo credit: SmileMyDay.com

To track how we are doing financially, I monitor our net worth and update it on a monthly basis. I think it is a great way to keep track of how all your planning and hard work is paying off.

I usually calculate our net worth around the 5th of each month, after our mortgage payment is deducted from our checking account. I feel that doing it the same time each month gives me an accurate picture of what happened the previous month. So, after I see that the mortgage payment is debited, I sit down in front of the computer and go through all of our accounts and update my little spreadsheet.

The overall number is important but I also like to create a number of groupings of various accounts and liabilities to provide a finer-grained view of exactly what is happening with all the components of our net worth. If anyone is interested, I can create a post detailing exactly how I set up the spreadsheet to collect this useful information and how I update it each month. You can even have it create a simple little graph for all you visual people out there. Click here to continue reading…

Earning Money is Good but Keeping Some of it is Even Better

July 28, 2008 · Filed Under Net Worth · 2 Comments 

expensive car We all know people around us who are really rich. You know, the guy driving his expensive car from his gated neighborhood to the country club on Saturday morning or the family down the street with the big SUV to pull the boat and the camper (hopefully not at the same time) when they’re not at home watching their 60” Plasma HDTV. Without really knowing their finances though, are we sure that they really are wealthy?

How do you define wealth?

Click here to continue reading…

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