When Steve and Annette Economides got married in 1982, they made a conscious decision to always live below their means. The couple from Scottsdale, Arizona, even made the pact a part of their wedding vows.
Then the car broke down.
This is usually the part in the story where taking on a little bit of debt seems perfectly OK to do. After all, Americans collectively owe nearly $12 trillion in outstanding household debt. Sometimes other alternatives are simply out of reach.
In this case, though, Steve was able to ride a bike to work, so he did — for a solid month. And they saved even harder.
“Friends lent us an occasional vehicle over weekends,” Annette Economides said. “They're still good friends of ours.”
Their resolve would be tested many times over the years, given that they've raised five children on an income that rarely exceeded $40,000 a year, not far above the federal poverty line for a family of their size.
But by staying the course, the couple has amassed almost a million dollars in assets.
Here's how they did it
First, they defined “living below their means” as paying for all their expenses, including adding a defined amount to savings each month and regular charitable giving, with 90 percent of their take-home pay.
At the time, that was about $800 a month, or about $2,000 in 2015 dollars. Every month, three accounts were prioritized: rent (later a mortgage that they would paid off in less than a decade), charitable giving, and their emergency fund.
Tools: A single savings account and a simple spreadsheet to keep track of all the items for which they were saving each month:
- Car repair
- Car replacement (in lieu of car payment)
- Home repair
- Medical emergencies
- Emergency travel
When one of their parents in Chicago became seriously ill, there was enough money in the emergency travel category so that everyone could visit.
“It's amazing how emergencies become smaller, or even stop being emergencies at all, if you have your emergency fund properly funded,” Annette said.
Then they tracked their spending and cultivated a serious lifestyle of frugality. A dining room set was found for $50 at a garage sale. They still have it 30 years later.
Steve worked as an advertising account executive and graphic designer and Annette worked as a stay-at-home mom. After three years, they had saved $7,500, which they used for a down payment on a bank-owned house. Mortgage interest rates at the time were about 13 percent — a huge difference from today, where they average about 4 percent — but they still managed to pay off the house in nine years.
Cars were bought used, for cash. Regular payments were made into savings so they would have enough money to purchase a another car outright by replacement time.
This is the first in a series of articles looking at American families who are saving major dollars on real-world incomes. Next week: the Argues of Orlando.
So savvy did the Economides family get about saving money, they eventually had more than enough tips and hacks for both a website, Money Smart Family, and several books. They recently shared some of their best advice with Get Rich Slowly:
Beware of coupons. Annette is not a huge fan of coupons. Most of the food they buy is fresh and coupons tend to be for higher-priced, branded items and processed foods. What they do use quite aggressively is Walmart's Ad Match system, which allows them to purchase anything Walmart sells for the same lowest advertised prices of any other stores in their local area. They have never spent more than $100 per month per person in their household, including paper goods and toiletries.
Never buy a work lunch. Steve tells how he used to feel like the church mouse at work when everyone would invite each other out for lunch and he just sat there with his packed lunch, which saved them $1,500 per year and ended up in their savings account. When the company moved into a place with a lunch room, that's where he sat and ate his lunch. Others began to figure out they can sit and talk to each other for less in the company lunch room. Soon enough, the company's culture changed from, “Where will we go for lunch today?” to packing salads and other healthy food, and visiting around the company lunch room table.
Patience is a must. In their view, there is a direct correlation between being impatient and wasting money. If you need or want anything, chances are you can get it cheaper if you wait. Or, at the very least, you won't have to compromise your savings account or emergency fund because you'll give yourself time to save for it.
Knowledge is power. The best deals are rarely obvious at first glance. And the purchase price is rarely the total cost. When they buy a car, for instance, Steve researches the insurance and running costs using comparison resources.
Persistence pays off. When they know something is available at a certain price, they keep looking until they find it. Then, when the sales associate says that a good deal is not available, they (politely) keep going up the chain of command until they reach someone with the authority to strike a better deal.
Live within your means. No matter how much (or how little) you make, decide ahead of time never to spend more than, say, 90 percent of your take-home pay. Once you have set a limit for your spending, have the discipline to stick with it.
Keep your idealism. The idealism they had in their early years became a core value. There is always a way to save, always a way to build up that savings account, always a way to defuse emergencies with savings … and never an excuse to fall into debt.
Never buy anything new. One of their daughters tracked down a Toyota Tacoma pickup for just over $11,000. She bought it for cash from her own savings account and, three years later, sold it for $12,000.
Channel your creativity. It often takes creativity to find ways to live within the budget you set for yourself. Rather than view it as a drag or a shackle, view it as an opportunity to let your creativity flourish. See what unique solutions other people came up with, and see if you can improve on that.
Work to become part of a community. When you are part of a community — whether it's the neighborhood, your apartment complex, social clubs, church or other — you become involved in other people's lives and you help each other. Steve and Annette view this as building up an emergency fund of goodwill: When you need help, those you've helped in the past will think nothing of pitching in.
Tell us: What's your savings strategy?
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William Cowie spent 30 years in senior management (CFO/CEO) before retiring. He has a bachelor's, a master's, and a partial doctorate in management and strategy. Author of the book “The Four Seasons of the Economy,” William also assists medium-sized businesses in the use of the Four Season Strategy to help them capitalize on economic cycles. He runs two blogs: Bite the Bullet Investing (investing) and Drop Dead Money (the economy) and writes for several other blogs in addition.