The Secrets of Financial Freedom: An Interview with the Millionaire Next Door
Published on - April 30th, 2009 (by J.D. Roth) Today is the last day of Financial Literacy Month. To tie everything together, I thought it would be fun to share an interview my real millionaire next door, a man we’ll call John. He used the basic tenets of money management to build wealth and to retire early. Here’s how I described John when I first wrote about him last year:
John is a 71-year-old retired shop teacher who lives in a modest ranch house on half an acre, the same house he’s had for over forty years. He has an old barn filled with salvaged lumber, outdated appliances, and who knows what else. When he’s around, he drives a junkie 25-year-old station wagon. But most of the time, he’s not around.
He spends his winters in New Zealand helping friends on a dairy farm. His summers are spent fishing in Alaska. For a couple of months each year, he’s home, puttering in the yard. Year-round, he rents his house to boarders. He leads a very active retirement.
John’s story was popular with Get Rich Slowly readers, and many of you asked me to interview him. I had to wait for him to return from New Zealand, but earlier this month, the opportunity finally presented itself. John agreed to sit down for a chat.
“I want to take you to lunch at the Chinese place up the street,” I told him.
“What the hell for?” he asked.
“Just to be nice,” I said. “To thank you for taking the time to speak with me.”
“I don’t need that,” he said. “Save your money. Let’s just sit at your dinner table.” And so we did.
In the beginning
Before John left for New Zealand just after Christmas, I mentioned the idea of an interview. He liked the notion, so on his flight home at the end of March, he made some notes about his financial philosophy. “These are my secrets to financial freedom,” he told me, showing me what he had jotted on the back of an envelope. “This is what I did to get where I am today.”
“I’m ready,” I said. I had a yellow legal pad and a Bic pen. I motioned for him to continue.
“It was interesting to do this,” John said. “It’s really the story of your web site. The real secret is to spend less than you earn. I don’t care how much you earn, you spend less than you earn.”
I laughed. “My readers aren’t going to like that,” I said. “There’s a vocal group that complains that personal finance writers are always preaching ‘spend less than you earn’.”
“It’s not funny,” John said. “Because that’s the secret. They don’t have to like it, they just have to do it.”
“Right,” I said. “There are no magic bullets. There are no special shortcuts. Now, before we get started, can you tell us a little bit about your background?”
“Well, I’m retired,” John said. “I’m 72 years old. I spent twenty years as a shop teacher at a junior high school. I retired at 58. Before that, I did other things. I worked as a carpenter for eight years, and I spent six or seven years working in the juvenile court system.”
“Did you have good financial habits growing up?” I asked.
“Yeah, I really did. My family had a lot of money. We owned a big hardware store. But I saw money wasn’t the key to happiness. There were other families that were happier that had far less. But I’m grateful for having grown up with a solid financial background.”
On frugality
“What advice do you have for people who want to spend less?” I asked.
“Well, I made this list,” John said, pointing to his old envelope. “I listed all of the things I do. First of all, people should learn what a kilowatt hour is. A kilowatt hour is a thousand watts burned for an hour. All of these appliances left on standby draw power. And don’t leave your lights on.” John gave me a look.
I was sheepish. The lights were on in the bathroom and the kitchen, but we were sitting in the dining room. I got up to turn them off while he continued speaking.
“Learn to figure your own power bill and know why it is what it is. People should learn about electrical use. That’s a drain on your monthly budget. Every penny saved on electricity is a penny you can use for something else.”
“No smoking or alcohol consumption,” he continued. “This has nothing to do with morals and health — okay, maybe health — it’s all about the money. I see people with a cigarette in their mouth, and I think, ‘That’s 25 cents!’” I laughed.
“Don’t have a credit card without autopay. And if you have a credit card, you should benefit from it. I use a credit card for everything I can, but I get things back from that.”
“Like air miles?” I asked.
“Exactly,” John said. “Air miles or a cash rebate. And I have my bank automatically pay the bill every month.”
“Next is food,” he said. “I think people’s eating habits are hell-bent on spending money.”
“Yeah,” I said. “I offered to take you to lunch while we talked.”
“I know, but I don’t need that gesture. I appreciate it, but that’s money that could be spent on other things. Like your new car!”
“You don’t have to spend a lot on food,” John continued. “When I go to the grocery store — which is rarely — I don’t know how anyone could afford to feed a family on that stuff. It seems outrageously expensive. People need to learn to cook from raw ingredients.”
“But where do you get the raw ingredients?” I asked.
“From the farmers market! Or Costco! You don’t need the little individual servings. That’s crazy. You have to be creative. Part of the problem is that you need to buy a freezer. Or look,” he said, waving his hand at Kris’ seedlings. “Over there are your tomato starts. Those cost you what? 50 cents? You’ll get 50 dollars of fruit from those! Plus I buy what I can in bulk.”
“Eating in-season food is important. It’s less expensive and it’s better quality. I also like this eating close to home thing. That’s neat.”
“Kris makes her own granola,” I offered.
“Yeah,” he said. “Exactly. But nobody advertises that. Nobody advertises ‘make your own granola’. Again, it makes sense to own a freezer. The electrical use of a freezer is pretty tiny. That’d be an interesting article for you, J.D. How much electricity does a freezer use versus how much you save by buying in bulk? People don’t understand about electrical use. They have a foggy notion about it.”
“Yeah, I have this device called a Kill-a-Watt,” I said. “It measures electricity use. But I’ve never checked our freezer.”
“Here’s another thing,” John said. “It’s okay to buy used. There’s nobody advertising to be thrifty. There’s nobody advertising to go to Goodwill. That’s not where the profit is. People have to get permission to buy used from somewhere else, because they’re not going to get it from advertising. I buy all sorts of stuff used, but especially cars. I bought my minivan off Craigslist.”
“How did that work?” I asked.
“It worked great,” John said.
“I bought my Mini Cooper used,” I said, “but I didn’t do it as well as I could have. I didn’t take it to a mechanic, for example.”
“I took my car to two mechanics. I wanted to be sure.”
He rattled off a few more tips. “Do your own home repairs. Use the library more — movies and books, and it’s totally free. I think that’s great. Remember: A dollar spent will never produce dividends. Money spent is gone and will never earn you anything.”
On investing
“That’s a good transition,” I said. “Let’s talk about your approach to investing.”
“I advise people to look for good investments. Take some time to do research. And think outside the box. I just re-opened my account with Reliable Credit. They offer 4%, which keeps up with inflation.” Reliable Credit is a nearby consumer finance company. But it’s not a bank. They take deposits from people like John and they loan them to high-risk clients. They do a lot of used car loans.
“The thing that worries me about Reliable Credit is that they’re not insured. There’s no FDIC insurance,” I said.
“Doesn’t bother me,” John said. “I’m not putting a whole lot in there. It’s just part of my money.”
“What would happen if you lost it all?”
“Not a big deal. I own my home. I have a guaranteed pension. I have no debt. That’s the key. Because I’ve done these other things, I can afford to take some risk. A lot of people can’t.”
“What about your other investments?” I asked.
“If you’re going to do stocks, diversify your stock holdings,” John said. “But for me, no-load mutual funds are the only way to go. To give anybody 3-4% of your money off the top is insane. It used to be I wasn’t aware how much I was paying. Once I figured it out, I thought, ‘Shit, I can make these mistakes myself. Why should I pay anybody to do it for me?’”
“I invested in small-cap funds at Columbia here in Portland. What a great move that was. Those did very well. I tracked their growth in the newspaper. Every week I drew a graph. I plotted the weekly high and the low and where it closed. I had to keep making new pages for my records because it was growing so much. I didn’t mind,” he said, laughing. “Back in the olden days, if I wasn’t getting 20% a year, I looked someplace else. But I can’t hold that up as an example — although it may happen again if things get turned around, once this economy corrects itself.”
“Does this economy worry you?” I asked.
“No. I don’t have to worry about it. I don’t need the income. I’m debt-free. If I was retired and had a mortgage or other debt, or if I had health problems, it would worry me. To my mind, even if you invest and it goes to hell, it’s still better than nothing. The odds of that are pretty slim, though, especially if you diversify.”
“What are your financial goals?” I asked.
“I used to say that when I reached $100,000 I would have arrived. But I got there so fast, I just kept going. Some people plan for retirement, but I didn’t plan. I did go to investment workshops — free workshops — that were put on for the teachers, and I learned from them. You’d be surprised at how few people showed up to them. Nobody cared.”
“When did you start to save?” I asked.
“It must have been 30 or 35 years ago,” John said. “And I’m glad I did. I think there are people who still don’t take advantage of tax-advantaged savings and investments accounts. I did this as soon as I could. I was amazed at how many teachers didn’t take advantage of this. That’s crazy.”
On choosing a lifestyle
John looked back down at his list. “Here’s another thing,” he said. “Volunteer to help others. I really think that’s an important personal lifestyle choice. It feels good to me. I used to do scouting. I had a Boy Scout troop for fifteen years.”
“You know, scouting was important for me when I was a boy,” I said. “I think it can be a great experience.”
“Sure it can,” John said. “When I was growing up, a lot of people shared things with me. It feels good to be in a place to be able to share myself now.”
“What kind of things do you share?”
“Well you know I rent the house, but it’s basically at cost. I don’t charge much at all. I host guests on my boat [in Alaska] at no charge. I do my work in New Zealand. Earlier today I picked up some sheet metal. I went and bought some scrap sheet metal and I took it in to Franklin High School. I took it to their metal shop. They can really make use of that.”
“What do you splurge on?” I asked. I’ve seen the things John owns. They’re very functional. He doesn’t have a lot that I would consider “fun”.
“Some people would say that buying a boat is a splurge,” he said. “But I bought that boat right. I bought it for less than market value. I’ve taken care of it. I’ll get a lot more use out of it.”
“I guess I could eliminate a couple thousand dollars airfare getting to New Zealand and back, but I spend very little money when I get there. If I spend a couple hundred dollars in New Zealand, I’d be surprised.”
“How do you keep your costs so low there?”
“I work on farms. I’m part of Willing Workers on Organic Farms. You travel to someplace and do work on their farms for them. They provide room and board. Sometimes they take you to do local stuff. This year I got to see sheepdog trials. That was fun. Anyhow, I do carpentry work. I build stuff and fix things. There are four farms I go to, about three weeks at a time, and I do what needs done.”
He paused for a moment and smiled. “But Alaska is just for fun.”
“How long have you been doing this now?”
“I’ve been doing this for about fifteen years, ever since I was retired. Back when I was 58.”
Reader questions
We’d come to the end of John’s list, but we weren’t finished yet. “I told some of my readers that I was going to interview you,” I said. “They sent in some questions. Would you be willing to answer them?”
“Sure. Of course.”
“Annie Blue wants to know how money affects your daily happiness.”
“Well,” he said. “I can buy whatever I want. Not need, but want. I just don’t want very much. I always have $100 in my pocket, but I don’t piss it away. I don’t stop for coffee. I seldom eat out.”
“I understand why people buy things,” he said, “I like to buy things, too. There’s a certain satisfaction in looking at the things you’ve accumulated. It’s like an affirmation that you’re doing things right. So you surround yourself with things that make you think you’re doing well — but they’re not necessary. That’s one of the advantages of being older. People just leave you alone to do what you want.”
“Next,” I said, “Suburban Dollar wants to know what advice you’d give to a 30-year-old.”
“Spend less than you earn. This is true whether you’re on welfare or a millionaire. And remember: wealth is created by investing money, not by working longer and harder.”
“Here’s another thing,” he said. “Remember that when you’re raising kids and stuff, that’s really hard. The demands on your money are so great. But you’ve got to be willing to say no. So much money is pissed away to keep kids happy.” (John has grown children. He’s speaking from experience.)
“Here’s a final question from Bill in Detroit,” I said. “He wants to know if outer wealth causes inner wealth. Or is it the other way around? Or are they completely disconnected?”
“There’s a lot of personal power from personal spending,” John said. “If I’m feeling down in the dumps, going out and buying something gives me a lift. But I’m aware of that. I’m aware of how it makes me feel and it helps me to not do it.”
“I think it all has to do with how you feel about yourself,” John said. “I learned long ago that it was okay to spend less than I earned. It wasn’t going to kill me. And I learned that by doing so, I felt really good about myself. I still do. I’m happy. I feel really comfortable.”
I thanked John for answering my questions, and we walked out to look at the vegetable garden. He admired our onions and peas and asparagus. We discussed whether it was time to rototill. At last, we shook hands and said our farewells. I was headed to California in the morning, and he was off to Alaska. He’ll be there until about the time his grapes are ready to harvest in September. I’ll miss him while he’s gone. But if I’m lucky, I just might get to spend a week with him on his boat this summer, catching a glimpse of what early retirement is like.
This article is about Frugality, Interviews, Real-Life
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@Troy: Echoing Kris here. My educator friends would beg to differ with the old summers/holidays off argument. Their jobs don’t stop during the hours when the kids aren’t in school — they have to do professional development courses and continuing education classes, come in during the summer and holidays for planning meetings and sessions, and go to conferences. Before and after the school day they sit through (often boring) faculty meetings, and take work home to grade on nights and weekends…they don’t just get to clock off and leave work behind them when the bell rings, like many a cube farm worker.
As for comparatively good pay rates, how many teachers pay for classroom supplies out of their own pockets in these penny-pinching days? Almost no reimbursement there, unless the district or school is swimming in cash.
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I’d like to meet a teacher that only works “7 hours per day 36 weeks per year.”
Are you kidding?
This kind of attitude boils my pot!
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What a great article! But there is one thing I would like to know. Does he pay for health insurance? I know that can go from $500 to $1000 a month for people that age. Is he able to afford health insurance or does he goes without it?
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Hey JD,
I was wondering if you had any more insight on the kind of meal planning or grocery shopping that Jon and his family did. I live in VT, and while we have plenty of farmstands and farmers markets, and their quality is superb, I can’t say that the price is any lower than the grocery store. If you don’t have room for a garden, what are some of John’s tips for saving?
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Oh, and Troy – I’m looking forward to a summer of waiting tables, since I teach. With a masters degree. And yes, I spend less than I make.
36 hours… I’m still laughing over that one!
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I’m sorry, but I’m not impressed with this guy’s life philosophy at all. What a grim life, what a grumpy guy…ugh!
It’s quite clear that anyone can be financially responsible and retire comfortably. No, it doesn’t help much to be be a life-long self-righteous grumpus who rejects all small treats like a social lunch or a cup of coffee, and who feels free to scold strangers about tiny things like leaving their lights on!
To achieve financial freedom, the number one rule is figure out what you need to do to be employed at a steady job with good salary and benefits, and then do it. Number two: spend less than you earn.
Saving trivial amounts of money by going to ridiculous extremes and by denying yourself *your entire life* the pleasure of even one lunch with friends or a cup of coffee and a donut? You’ll only gain self-righteousness but not much cash.
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As a teacher in a large urban school district on the East coast, I find it ludicrous that anyone would assume that this man became rich because of his “cushy” job as a public school teacher. I’ve never heard of any teacher retiring rich based solely on their pension. My salary is less than half that of all of my friends who chose to work in the private sector, I pay into my health care and social security, and my mandatory pension contribution is automatically removed from my check each week. I enjoy children and I enjoy teaching, but between the below-average salary and dealing with the needs of 90+ teenagers every day, there is nothing about the job that feels “cushy” to anyone I know.
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I’m reading the comment posted by people, and at this point I’m actually amused by all the teacher/pension/who has what advantage back and forth chatter. Life isnt’ fair. It’s a fact – everyone does not have the same chance at wealth in life. Those people who want to use the excuse – oh but he has a pension, or inheritence, or whatever, and therefore will do better than me are MISSING the BIG PICTURE.
It doesn’t matter how much you have (whether it’s money, brains, talent, charisma, health) it’s making the most of what you have – and being happy with what that amount is. JD, this was an excellent article, and John is an excellent example of that philosophy.
It is challanging to people to seperate wants and needs, and to be willing to recognize WHY you want something. We would much rather sit back and make excuses for why our lives aren’t as good as someone else’s and that it’s completely out of our control. The challange is to take control – to own your decisions.
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I don’t know why so many readers are getting hung up on his “guaranteed” pension. I think we can all agree that the auto industry workers thought they had a guaranteed pension, as well…is anything ever really “guartanteed”? This pension is surely only one part of his investment portfolio. The most important issue here is to make permanent habits toward living frugally, and making long term diversified investments… which this man has obviously done!
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Just a point about folks talking about pensions and how that’s guaranteed income that you won’t have. When this guy started working there were no IRAs, Roth IRAs, 401Ks, or 529s or tuition plans for college.
There were pensions and savings/investments.
In essense, he thought about, learned about, and then used what was reasonably available to him.
You can bitch about not having a pension, or think about and reasonably use what’s available to you.
What I find funny is that when I started working out of college federal and state pensions were mocked in private industry as being pitiful, and often used as the “poor” comparison to the private company’s offering. Yet now people think they’re some kind of holy grail for retirement and whine about how unfair they are.
Given that you get about 50-70% of your salary for dedicating yourself for 30-40 years respectively to a career, that you can’t collect social security with most of these pensions (which can replace 15-20% of salary when retiring), that you did pay some percentage of money out of your salary into most of these, that you’re chums in private industry were and are typically making 10-30% more than you, that once you retire they typically index the cost of living increases so they lose against annual inflation and slowly draw down your real buying power, I don’t think it’s as “great” a deal as people think it is.
Its always easy to point to the “advantages” those who have succeeded have as why they seem to have succeeded. But as others have said, in the end the same basic lessons keep coming through, and there are those that succeed in every generation using those lessons.
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@96 Troy
You’re partially right and those are important “perks” to being a teacher. But it seems you’re underestimating the grading and planning that teachers do “off the school day clock”, the mandatory professional development hours during time off, the parents’ nights and other frequent school events, assorted meetings, emailing and phone conversations with parents after the school day etc.
I know very few teachers who really get anywhere near the vacation time you are talking about. I would estimate it to be more like 75%-80% of the hours of other jobs. Plus, if you took out the non-productive down time I see in most other professions of web-surfing, coffee breaks, etc. that just aren’t available to teachers, you’d have a worse “time quotient.”
But, that said, I accept your basic position that the idea of teaching being a low-paid profession isn’t a foregone conclusion.
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Hi JD,
I have been reading your blog a while and this story reminds me of my grade school shop teacher at George School in St. Johns.
If this person is that person. I would love to tell him that I still have the bookcase I made in that class (hard maple) and I still use the skills of innovation and making do I learned with him. I live in Alaska now, I would love it if you would pass my email on to him. BTW I remember learning to code basic on cassette drives from this man too. Thank you.
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From MO DESE (Dept of Secondary Education)
“Local boards must adopt school calendars which provide at least 174 days and 1,044 hours of instruction for all pupils in grades 1-12; and, at least 174 days and 522 hours for all pupils in kindergarten”
I understand most teachers put in extra time for career development, continuing education, preparation, etc. But so do most other degreed professions, including both mine and my wifes. Lots of professions bring work home with them and have meetings. It’s part of most professioinal jobs.
And my point was solely about the compensation, not the work or effort or commitment.
Teachers enjoy one of the best pensions in the world. Teachers in Missouri can retire as early as 25 years in, while most retire with 30 years (avg age 52-55) with 80-100% pre-retirement salary. Guaranteed for life. There is simply nothing that comes close.
They have their own separate retirement system outside of social security, and it is unbeliveable. And Teachers enjoy a fantastic schedule, typically with breaks for summer, holidays, and spring. This may not be your schedule, but it is common here.
Just so I am using facts and not opinions or emotions, I checked the upcoming 08-09 calandar for our childrens school district. 179 teacher working days, which includes 2 full day workshops and 3 half day parent teacher conference days.
There are 11 weeks off between the end of school in Mid-May 09, and the beginning of School in Late August 09. There are also 19 days off (xmas, new years, thanksgiving, labor day, etc) throughout the school year, which equates to 3.8 weeks. So approximately 15 weeks off. I was close in my prevoius post. 52 weeks minus 15 = 37 working weeks per year. Close again.
The current average MO teacher salary is $38,971, ranking us 43rd out of 50 states. The US average is 46,597. All accourding to BLS (Bureau of Labor Statistics)
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I have to back Troy up here, career development is part of any professional’s schedule. It is not unique to teachers.
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Thank you, John and JD, for this awesome post. So much good advice, wisdom, and experience to learn from.
Having a sweet guaranteed pension certainly doesn’t hurt John’s situation. However, it would be easy for John, or anyone, to piss that away keeping up with the Jones’ if he wasn’t responsible with his money.
Kudos to you John, and enjoy the fruits of your efforts!
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Here is another example.
After retirement, most teachers get health benefits along with their pension and at working rates.
My relatives retired as lifetime teachers from a neighboring state with full pensions after 30 years of service last year. They recieve over 90% of their previous best three years salary. They are 53 yrs old. They each get over 50K from their pensions annually. Six figure guaranteed for life retirment income with full health insurance.
Upon moving to our State, they resumed teaching under our states Teacher retirement plan, which is completely separate and does not affect their current pension. It wasn’t difficult for them to find a job, with their experience and since education is usually one of the largest employers of virtually every town large or small in the US. It is the one consistent employer everywhere.
So, they both work together in the same school district and with their experience each earn 50K+ with their new contract. New pension system, no social security.
$200K+ household income. 2 pensions. 53 years old. 15-16 weeks off per year, most of it in the summer where they can enjoy their lakehome. Doing what they love. Both K-12 Art Teachers.
Underpaid? Not necessarily.
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Taking three years away from the classroom to sell books, my learning curve was steep. I made almost triple my classroom salary; PLUS several great bonuses, PLUS being sent to every type of extended learning that I requested (with my lunch/dinner and hotel room paid for), PLUS a computer , auto and a gas card, PLUS my 401 was well contributed to. I could have easily retired in half the time on what I was making. How did I miss this opportunity before? And the RESPECT! Wow! No one throws a pencil across the room,missing the mean kid, and hits me? No parent cusses me out for their child not earning a good grade? Amazing!
No matter what the money was, I missed the students (but not the parents). I returned to a classroom, untenured.
Sure, I may make $40,000 a year- in my 24th year of teaching- when I “only” teach 182 days. Sure, this summer I get to pay for my own training in DC to history come alive so only the best will be repeated. After all, it is my “time off”. Sure, my son makes more than I do, one year out of college. Sure, I could retire at 30 years, IF I had stayed in the same town and never left the district. Sure, I am privileged to sit and listen to an overpaid trainer tell me how to make sure “your child” is not bullied when “you” are at work and they are home alone on Monday.Sure, my old postition calls and offers me $300. a day to simply BE that over paid trainer.
The forty year dream of shaping the future keeps me going back to the classroom.
Ah, Troy, there are some things in life you should not step in. Here is hoping you never have this debate with your children’s teacher, especially when you child has been exceptionally obnoxious.
Look around, dear Troy, the reason your relatives have a job is because the 28-45 year olds have abandoned the “boon dongle” of the “great paying” classroom. The 46-60 year olds are staying because they are finally making enough to live off of.
You think you could cut it? Come on out! Try subbing for a day! Make sure you have a strong bladder. No leaving the room once the students arrive!
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BTW- enjoyed the article. Here is hoping John takes pleasure in his frugal lifestyle for many years to come.
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For monitoring your electricity there is a device called a clipsal cent-a-meter, it is installed on your electricity meter and sends a wireless signal to a LCD monitor and shows you in real time how much electricity you are using per dollar or per kilowatt for your entire house. It was invented in Australia so I’m unsure whether it is compatible with North American electricity systems, maybe something to look into?
But you can do things like set up an alarm to go off if your electricity goes over a certain amount. It pretty much saves you 20% on your bills straight away.
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I’m glad John mentioned better use of electricity as a money-saving tip. I work for an electric utility and I’m astounded at how few people we serve actually consider their daily power use. Those who don’t can’t understand why their monthly bill is so high.
Electricity in most parts of country is truly inexpensive and a great bargain–but not if we waste it. And the cost of a kilowatt-hour could soar in the future, depending on what Congress does to address climate change.
Check out http://www.energy.gov and your local electricity provider’s Web site for energy-saving advice. In my opinion, exploring ways to reduce utility costs is as important as any other financial advice you might seek.
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Hmmm…. “Spend less than you earn,” eh? It’s no wonder the government and industry don’t want us to know about this. If everyone pulled that stunt, we’d all retire by our early 50s and commerce would grind to a standstill.
Best interview-type post I’ve read on the net, anywhere. Thanks, J.D.!
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Great interview!! You mentioned he has grown children. It would be interesting to sit down and talk to one of them and hear their story as well. Just out of curiosity to see if it runs in the family or not. Just my personal observation, but it seems that people who are smart with money from an early age tend to come from parents who taught them how to manage money. I know mine sure didn’t, and I made tons of mistakes in my 20s and early 30s that I’m struggling to make up for now.
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This is now my new favorite article at GRS, Trent. Thank you so much for sharing, and thank John for us too!
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Doh! I meant JD. I realized my mistake the second I hit the Submit button and tried to hit stop, but it was too late. And there’s no edit button! Sorry! *blush*
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Sounds to me like his big advice should be “make 20% interest on your investments every year” instead of “spend less than you earn.” He was really lucky. Of course you should invest, but no one should expect 20% returns consistently.
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I’ve been waiting for this interview and enjoyed it, J.D. Thanks. It really doesn’t have to be rocket science.
Regarding the debate on the cushiness of a teaching job, as a former teacher, I have to say that the “walk a mile in my shoes” expression definitely applies. Although I’ve worked long hours in jobs since, nothing has ever been as demanding as teaching. As other teachers have shared those summers off are largely a myth. Yes, you are not at school, but there’s training/recertification, prep for next year, and just a general need for decompression when you can get it, due to the exhausting school year. The teachers who can make it to the retirement stage are fewer and fewer. And, while salaries can be compared to other positions, there are other factors than the hourly wage reality check that others mentioned. When I taught school, the insurance premiums I paid for our family were higher than any other job I’ve had. So, there’s much more than meets the eye. But, as the teacher who went back said, I still miss the kids to this day and feel a bit guilty about leaving. I’ve considered going back several times, but all my friends who remain as teachers say, NO, don’t do it! The demands have increased dramatically over the years. Most wonder if they’ll be able to make it through each year.
Last, as I saw a friend retire from a govt job this past week after 31 years, I thought to myself, “See if you had stayed with teaching or the same job all these years, you could be doing the same.” BUT, I was not willing to make the concessions needed to do that. And, I don’t regret my decisions. My years have been better spent and more enjoyable than if I’d stayed in one position that whole time. I daresay I’d be a worn out person if I had with no energy to enjoy my retirement much.
Shirley
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Nice post, but i have to disagree on a few items.
Most importantly, I would never advocate putting your money in a non-FDIC-insured account, even by way of illustration.
Two, i also make my own granola, but to keep it from tasting like sawdust, you need to add something sweet. I like dried fruit, like dried apricots and dried apples, but dried fruits are very expensive and i’ve often wondered if i’m really saving much. Although i do it as much becus mine tastes better than store-bought.
Finally, just an observation: a lot of people around your friend’s age benefitted greatly from the 14-year-long bull market of 1983 to 1997. They just had good timing and didn’t have to work as hard to save their money as Generation Y people will in this economy.
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“Steady plodding brings prosperity; hasty speculation brings poverty.”
Proverbs 21:5/The Living Bible
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BB @ 108 – I just wanted to second your comments. This discussion reminds me of a line I remember from Richard Bach’s Illusions, “argue for your limitations and sure enough they’re yours.” (Quote may not be quite right; I havent read it for 25 years or so.)
John’s philosophy is great and while my life will never be identical to his, I can apply his theories to the extent appropriate to my circumstances. Again, JD, thanks to you and John for a terrific post.
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Great post. Timeless advice, I’d LOVE to see a good look at the cost savings of modern appliances, for instance if I knew that buying or *cough*financing*cough* a new fridge (vs my 80′s clunker) would be reasonably offset by the powerbill savings I would feel a lot less miserable about the up front cost or financing fees. As a 25 year old homeowner I can honestly say that it’s a lot easier to save for a vacation than it is to save for a fridge
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Hi JD – I really enjoyed this post. It’s a great reminder of what I can be doing better financially. I’m a new reader, and I’ll definitely be back. Looking forward to checking out your archives! Thanks!
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To everyone talking about a pension – you too can have a low paying job with a nice government pension. That’s always been available. (Check out usajobs website.) If you don’t have one, that’s your own fault. You should have thought ahead and positioned yourself for a job like that. Too bad, so sad now.
I have to say, John’s advice is right on. I’m always amazed when people start talking about not wanting to live the way John lives just to save money. Or they want to talk about “balance”. Everyone has their own balance when it comes to money. The point is, the more you spend, the less you have to invest and to take care of future expenses. Period. If you don’t want to make the sacrifices necessary to become financially independent in your 50′s (or earlier) then ok. Maybe you can become the next $500ker next door. But posting something about “balance” on a post like this when talking about smart $$$ moves (as opposed to smart moves concerning other things in life) is moronic.
Furthermore, I appreciate it when people are frank with their friends (as John was) about needing to save money. This is not called being a jerk. This is called being a good influence on your friends. Keeping up with the Jones’ was, is and always will be one of the main drivers behind irresponsible spending. If you think you are immune to what the Jones’ have, you are kidding yourself. Don’t even post that. To some degree or another we all struggle with it, some more successfully than others.
Actually, I wish that everyone would actively encourage their friends to cut spending, avoid flashy or expensive gifts – especially “just because” gifts, and exert peer pressure focused on helping the person do the right thing financially. I respect people like that and so does anyone with common sense.
This was a great post – very enjoyable and encouraging. Thank you JD for posting this.
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What a fantastic story. This would be a great submission for Dr. Thomas J Stanley’s “Millionaire Next Door” stories he publishes in his blog!
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I am thankful to you JD for sharing your interview with john . I enjoyed this line
“Wealth is created by investing money, not by working longer and harder”
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Dear JD,
I have been reading your blog for the last six months. I am amazed at how people manage to steer them selves to finacial freedom. I am residing in Uganda one of the African countries and this article has been of greet use to me at the beginning of 2010. I am sure if I stick to this philosophy of John I will be a victor.
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WOW! Thank you, thank you, thank you, for publishing such a fantastic interview. My husband and I are digging our way to financial freedom and our main principle: Spend less than you make.
Thank you again for such a terrific, heart felt interview. And please, thank John for his time and sharing.
For those stuck on what a teacher makes or doesnt make, you’ve totally lost the sentiment of this interview. We all have choices in life. If you dont like the one you made to become a teacher, make a different choice.
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Excellent story. The importance of saving during flush years is critical.
Here’s the other side of that coin–
“I went from making $180,000 to relying on food stamps,” she said. “Without that government program, I wouldn’t be able to feed my children.”
http://www.nytimes.com/2010/01/03/us/03foodstamps.html
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I am going to be a Wall Street banker and rob people like John here, good luck with your investments… I know I am going to enjoy them
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For the most part I enjoyed reading this article, he sounds like a smart guy, however I don’t think its wrong to go out and splurge once awhile especially if you have savings and no debt.
It seems that his splurges are different from most people. He bought a sailboat, he likes to go to Alaska and NZ, etc. That’s what is fun to him. I respect that about him. I like his advice, a lot of people seem to criticize him because he came from a wealthy family, he has a pension, his house is paid off.
Even if you didn’t have all that then its possible to get ahead, I really believe that. The thing is that most people choose to live in very expensive places where housing, transportation, food, daily living is expensive.
People don’t have to live in expensive cities like NYC or San Francisco, I live in Omaha, and you can find an affordable house here for like 90k-150k.
If you choose to live in a more affordable area then you can save more, salaries in Omaha for professionals are the same as the rest of the country, but since life here is more affordable people can have more freedom to save, invest, and have more comforts.
Omaha isn’t very exciting but that’s why people stay here because its affordable. When it comes to vacations, people do go elsewhere most definitely but then they come back from their vacations and are able to save and lead comfortable lives.
Life is all about choices, your neighbor made his choices, life doesn’t have to be some never ending rat race, it sounds to me like your neighbor is more free than anyone else. Good for him. =)
p.s. warren buffet lives in Omaha, lol, I find that hilarious he can live anywhere he wants but he lives in omaha, i don’t agree with all of WB’s decisions, but its clear that just because one is wealthy they don’t have to throw away their money and I like that.
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Nice article. I thought at first maybe you were interviewing my dad who is the exact same age and also a retired shop teacher.
However, my dad did not have parents that ran a hardwear store nor does he have a boat. He does volunteer (a whole bunch) and travel (on a smaller scale mostly to see some of his grandkids aka my kids).
Troy a few people got some sweetheart deals, but the bulk of retiring teacher just get whatever the formula for their state dictates and maybe a year of salary and/or year of health care. In the district I work in retires just get the privilege to pay COBRA (which if crazy expensive IMO). Nearly everyone that retires from my employeer takes a year off and then gets another job until they are old enough to get Medicare and Social Security. A few with spouses that still work full time do truly retire from paid work completely, but they are the minority.
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It’s been interesting reading the impassioned comments ranging from “great, simple advice” to assuming he has not led a “fun” life because he doesn’t go out for coffee.
The responses give a clue on the perception people have about spending money and also a little peak into their own view of money.
Certainly, money is there to be enjoyed…we work hard for it and we get to choose how to spend it. Some choose to enjoy it later by saving it. Some choose to enjoy it now by spending it now. Ultimately, it’s a choice.
So, LATER, when you are complaining that you don’t have enough money…remember that you enjoyed it a while back.
And for those that chose to save it for later, enjoy the freedom that it has allowed you to have.
Everything is a choice. There are pros and cons to everything, so you make the choice.
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