Saving Your Way to Becoming the “Millionaire Next Door”
November 30, 2016
On a flight back to California after visiting my parents in Michigan, I found myself in awe of them. They are both in their late 70's and they are millionaires. They aren't Mark Cuban rich, or even multi-million-dollar millionaires. My dad never made over $100,000 a year at work, and they raised a couple of kids and put me through college. And yet, by spending smartly and by making smart investment decisions, they have accumulated enough wealth to have a comfortable retirement.
How to save like a millionaire
A couple of years ago, when I discovered that my parents were one of those "millionaires next door," I asked my dad how he had done it. In my dad's usual way, he asked me to think about how we grew up, think about how he and my mom lives now, and to tell him how he had done it. My dad has never been one for letting me get away with not answering my own questions.
Here's what I came up with:
- Use rather than consume. My parents’ home is a testament to finding out how long things can last. The 25-year-old towels, dishes, and silverware. Cars with 90,000+ miles on them. Worn, but perfectly good furniture. They take care of their things so they last.
- Spend time with friends, not services. On this recent visit, I finally joined them in their evening tradition of sitting in the driveway. After dinner, we went outside and pulled some plastic chairs into the shade in our driveway. Over the next two hours, about a dozen neighbors stopped by to chat. People walking their dogs wandered up the driveway to talk. The next-door neighbors (on both sides) came over to hang out with their kids. Out came a magic box of toys that the kids dove into. I've got to tell you, there was more drama in those two hours than any episode of Real Housewives of New Jersey. Many people travel the world to experience how other people live their lives. My mom does it from a plastic chair in her driveway.
- Make big purchases slowly. My dad has a hatchback with 93,000 miles on it. He is just now starting to research his next car. The plan is to replace it in February of 2018! Between now and then, he will research, go to all the car dealerships, and start to bargain with them. By the time he actually buys, he will have gotten the best possible deal. He is never in a hurry, and never pays more than he believes is the best price.
- Don't be afraid to spend money, but be conscious of what you get. I don't want to give the impression that my parents live the overly frugal life of shut-ins. They have traveled to South Africa, England, Asia, and all over the US. My dad has owned motorcycles and jet skis. My mom has amazing collections of antiques. They do the things they want, and have a full and rich life. But they pace things out and have never over-accumulated. They get maximum enjoyment from the purchases they make and the experiences they have.
- Save always. I guess, in the end, this is the important one. My parents aren't sophisticated investors. They don't buy and sell stocks. What they have always done is put away as much as they could, whenever they could. They always had a good handle on their money and made it a priority to save first. My dad tells me that most of their big savings happened after my sister and I moved out and their expenses dropped, but it was the money they saved before that time that grew the most. My dad describes compounding interest as money magic!
What I find so amazing is that looking back at my parents’ life, they seemed to have anticipated so many of the actions that are consistent with good money habits. Now, I don't know if I can live the life my parents did. The world is a different place for me and the next generation. But it doesn't mean that I can’t take cues from what my parents did to become millionaires and make sure my life reflects their wisdom.
That’s what I find so fascinating about my work at Varo. What my parents seemed to just do, so many of us struggle to repeat, including me. My life is busier than my parents’ with less time to shop for the best price, less time to sit in the driveway, and far more distractions. I need better tools, better technology, and a better way to make sure I’m on track if I’m going to be able to accomplish what my parents did. My work at Varo gives me an amazing platform to combine the wisdom of my parents with new technology like AI, Bots, and data science, to make the goal of becoming a millionaire more achievable for the rest of us.