I came across this story today, promoted on twitter by a Financial Planner, using it as an example of what appears to be a great strategy to follow…. Janitor dies at 92 with $8M saved. You can read it here. My synopsis: someone worked all their life, drove a crappy car, dressed in clothes held together by paperclips. They died. They gave away a ton of money to a hospital and a library.
Why on earth is this supposed to inspire anyone?
I can certainly appreciate leaving a legacy, and I’m ok with the concept of being savvy with your money. But I just can’t seem to understand the attraction of being a millionaire if it means living like this. It reminds me of stories from The Millionaire Next Door that talks about how many millionaires drive second hand cars and live in modest houses. Why would that be be desirable?
The glaring reason of course is that a million is now chump change. If you are a head of household and have accumulated $1M by full retirement age its likely you will have to make some frugal decisions to ‘stretch that dollar’. However, when most people dream of being a millionaire I don’t think that this is what they envisage.
If we go back to our janitor with his $8M that’s probably how he felt. He’d saved up ‘some money’ but with a modest mind it may have appeared quite small. If he focused on living frugally and spending money from social security, then he could leave his nest egg untouched. If he retired in 1988 that would give him 27 years growth, and the markets have averaged about 12% in that time. That means he’d only actually need $375K invested back at age 65 in order to have it be worth $8M today. Incidentally, these numbers really highlight the problem with ‘averaged returns’ since the stock market is cyclical, he would have actually needed to initially invest $600K to get to $8M.
Assuming an indexed approach to investing, the biggest gain for this portfolio occurred in 2013, it gained about $2M. Last year a paltry $1M on top of that. Here’s the biggest challenge. Do you really want to earn $2M in gains when you are 90 years old and walking around with clothes that are stapled together? Life needs to be about balance.
Where’s the plan here? Where’s the goal? To live poor and die rich? Mission Accomplished.
Regarding “average returns”, here is a chart I’ve always loved…
http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html
A bit out of date but the point can be made that the term “average returns” depends on how you define it.
Excellent chart.
As for this 90 year old dying rich, he should be applauded. Sacrificing (or probably in his view, living “a normal life”), his money actually will do some good – feed/educate/give health care to hundreds and thousands.
Most millionaires I know could give a crap about the rest of the world. They invest in “legacy homes” and leave it to their spoiled brats and support scumbag politicians who think that allowing the rich to pay a 15% tax is perfectly reasonable.
I live in an enclave of 1%ers and it’s revolting to see. 10,000 sf homes cleaned by tinted skin immigrants. Manicured gardens tended by tinted skin immigrants. Ferraris, Lambos, Bentleys, Beemers, Mercedes, Land Rovers, Maseratis etc etc by the thousand. All nicely polished by tinted skin immigrants. Vast majority are leased and tax dodges for their businesses. Often driven by teenagers who’ve never done a honest day’s work in their lives, and if their helicopter parents have their way, never will do any meaningful work (other than the barest minimum to pad their resumes to get into the appropriate private schools or colleges).
From my perspective, it’s easy to see why there’s a gargantuan gap btw the haves and the have nots – the haves have rigged the game so bridging the gap is all but impossible (especially if you have deeply tinted skin and an accent).
So while this guy may have lived more frugally than I would like, he’s certainly worthy of respect rather than the disdain you have.
The sad thing is the 99% think it’s impossible to be a “millionaire”. May as well be water from the moon to them – unobtainable. Yet they think nothing of blowing their cash on cigarettes, the lotto, new cars, boats, motorcycles, expensive vacations, flash clothes and yet have nothing in the bank. Pathetic when a bit of discipline and attention to detail could easily get them that million they think is so hard to obtain…
Maybe his money won’t “feed/educate/give health care to hundreds and thousands.” maybe it will just employ “tinted skinned immigrants” ?
There’s nothing wrong with helping the ‘world’ and I mentioned that in my post. However, I think that it is Pavlovian to give away everything at your expense vs finding a balance.
Wildly biased comment Paul. Though I agree that it was a nice chart.
Going to go work on my tan so I fit your demographic there 🙂
You’ve got a lot of nerve lecturing a stranger, who didn’t harm anyone, on how he should live his life. He lived in a way that was comfortable for him and that’s none of your business.
Why would it be acceptable to highlight financial decisions using someone who was spendy with their money, but not someone who is thrifty?
If what Matt did was to “lecture” the janitor, then he’s way more talented than I thought.
The man’s dead. Which means that he’s impervious to anyone’s lectures. Jim Rohn used to say that he wished that failures would write books, so we’d know exactly what not to do.
Living in poverty, if that’s what you truly want to do, is fine. But doing so because you feel that it’s wrong to do things that are enjoyable–that’s sad.
Your point about a million dollars not being much money anymore reminds me of an entertainment piece I saw on TV around 10 years ago. They were talking about celebrities’ expensive homes and they mentioned “Pamela Anderson’s 2 million dollar beach house in malibu”. I was sitting in silicon valley, where $400K would get you a shack thinking 2 million sounded like it would get you a pretty modest house on the beach in malibu. ???
I also don’t see the point in being “rich”, but living like you’re poor. Yes, it is worthwhile and desirable to allocate some of your estate to go to a cause or causes that you believe in. That way, great, if my investments do well, I can make a positive difference with the money, but it’s also sort of there as a cushion so that I don’t end up out on the streets when I’m 90. But I’m not going to be driving an old junker if I’ve got a bunch of money in the bank. One of the great things about having more money than you need to meet your basic needs is that you can then spend it on comfort and enjoyment. Balance, that’s what it’s all about.
I think the biggest thing for me is that there wasn’t any balance here. Maybe that’s the catch to being fiscally responsible. The habits and and lifestyle that allows people to successfully accumulate wealth sometimes render then unable to enjoy it, either through fear or force of habit.
I have an aunt and uncle that had high income jobs and lived below there means (admittedly that wasn’t much of a sacrifice at their incomes). They retired early and have a lovely home in a golf community in Florida (a very nice one). However, they are always concerned about money to the point where a simple domestic flight is something they don’t want to spend on to attend a wedding, etc.
In the meantime while living off their portfolio its over doubled since they retired. To me that shows they are missing that balance in their life.
Similarly I feel that the man in this story has failed to enjoy his hard work. Charity is excellent but having seen what these type of gifts end up buying I wonder if he would feel its all worthwhile. A small brass name tag on a plaque in the entrance and a new piece of equipment in radiology…
Somewhere between being in debt to your eyeballs and stealing ketchup packets at fast food places to squeeze back into your bottle at home there has to be a happy medium.
Exactly. In the case of this gent a CRAT or CRUT would achieve a better balance.
I hadn’t heard of those, or at least I think heard about the concept before but didn’t know the terms. That definitely seems like a good way to go about it and it would have forced a certain amount of usage of the funds.
I think a better read might be Die Broke by Stephen Pollan (1998). I’m not sure if it is completely relevant today but I remember valuing the advice at the time.
Wow … I don’t think anyone is recommending that people of means live an impoverished lifestyle.
Yet, this does illustrate that people with more modest incomes have the ability to live within their means and save significantly for the future should they choose to do so.
We live in a society that often seems to be run by marketers, pushing us to consume more and more without regard to what we really need. Hell, even the Federal government pushes consumer consumption at the expense of thrift.
Yet, the endless buying of things, for many, does not buy happiness. Certainly not for me,. Admittedly, I learned that most material possessions hold no special value at an age beyond yours, Matt. I choose to buy what I want, regardless of others’ expectations of what I “should” possess based upon my income.
As far as a legacy is concerned, some value leaving gifts for family or charitable institutions. Others want to spend it all and die with little assets. I guess it depends upon your value system and I’m not sure that there is a “right” answer for everyone.
I think that there can be great lessons from this example, but at the same time I think it serves also to highlight drifting too far from the balance point. I really think it has a lot to do with societal conditioning. People love these stories, but I think that they show where things can go too far.