The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy!
This is the saga of a Boomer couple (in their mid-sixties) who started married life with next to nothing and achieved several million in net worth. If accumulating wealth is your goal, perhaps parts of this story will inspire or instruct you on your journey to millions.
First however, lets remember that net worth is all your assets minus all your liabilities. Our Boomer couple keeps track of net worth on a monthly basis using Quicken and does so not only to know where they stand but also to anticipate the potential need for estate planning changes (might their estate grow enough to trigger those hefty taxes at the second’s death).
So, to track their net worth, the Boomers keep track not only of cash, bank account assets, stock and bond market investments, real estate and autos, but also of any death benefit amounts for life insurance they own, artwork and collections as well as an estimate of the market value of their aggregate household possessions (which at 60+ years there are many).
Lets begin at the beginning.
The couple married in 1972 and had assets of some savings bonds the wife’s parents gave her for college graduation (around $2000) and liabilities of a car loan for a car the husband bought prior to the marriage ($2000) and an obligation to pay premiums on a whole life policy purchased in college. Neither had college (thanks to parents and scholarships ) or credit card debt. Now, this isn’t as dire as it sounds because that $2000 in 1972 dollars is about $12,000 in 2015 dollars. That is a lot more than many Millennials have what with their college loans and the Great Recession.
Mr. & Mrs. Boomer entered the job market while the US economy was headed for decline. Having no trade (their college majors were Business and Liberal Arts), the couple had a hard time finding work that paid much. Both took temporary jobs in retail sales to tide them over, making minimum wage ($1.60 per hour or so at the time). Almost immediately after the marriage, the spouse joined the US Army as a private making around $2000 annually).
In the Army now.
After basic, the husband was stationed in the US Midwest in an administrative job (for which the wife was very thankful as the Vietnam War was still in progress at the time). The wife moved to join the husband and they lived in a rural area close to base, paying about $60 a month for rent for a tiny duplex.
Using the wife’s graduation bonds (most of them) as a down payment, the couple located and purchased (with a loan) 40 acres of raw land for $4000. As it turned out, this was a good move and a bad move. The good part was that it forced the couple to save to pay the loan and thus they eventually ended up with a 40 acres asset. The bad part is that raw land is a pretty risky investment, with little guarantee of any income. The couple kept this 40 acres for many years, eventually selling it for around $40,000.
Also during the Army years, the young couple (then in their early 20’s) decided to have a baby. After all, the birth would be free at the Army hospital so no problem – right? OK, all you parents, stop snickering – the Boomers obviously didn’t think about the many thousands of dollars that child would cost over the next 20 years! The Boomers later counseled their offspring to WAIT before having kids, wait until you are established in a career and have some stability.
Because they lived in a rural area, opportunities for the wife to earn a salary were scarce, so the couple was primarily living on $2000 a year (she did work at Pizza Hut as a waitress until the baby came).
Each month, the husband would use a credit card to buy gasoline to drive to his job at the fort and at the end of each month when the credit card bill came, it ate up much of that months Army salary. This was a huge lesson to the Boomers. They learned that they didn’t like paying for something long after that something was used up. Ever after, they used credit only when they already had the money to pay the bill. This kept them safely out of credit card debt for a lifetime. Lesson learned.
Feeling the pinch (rent, loan for land, gasoline, food, insurance, heat, telephone and etc) the two decided that the husband should not re-up when his initial enlistment was over, even though he was now earning about $4000 a year.
The jobless period.
In late 1973, the economy took a turn to the downside. Looking for work after the Army in 1974 was even more difficult than finding work out of college. But both studied hard to take the exam to get on with the US Government. Hubby studied more, because wife was busy taking care of new baby.
Out of the Army with no income, the couple moved back in with the wife’s parents for several months. That had to be fun for the recent empty nesters – not only did your kid come back, but she brought a man and a baby too! Family comes first, but the Boomers didn’t want to impose any longer than needed.
Thankfully, the Federal Government soon offered the husband (who scored better on the test than the wife due to all that extra study) a job. The two checked out of hotel Mom&Dad and moved across the state. The $8000 a year salary was a gold mine to them after living on the Army salary for 2+ years. They found a unit in a quadraplex for $125 a month – two bedrooms, a tiny, tiny kitchen, one bath and a living room. After a few months the landlord decided they were hard workers and diligent rent payers and offered them a chance to work off some of the rent by tending to the building and trash. The couple was grateful for the chance and very glad that they had taken great pains to be good renters and responsible adults – otherwise they might not have gotten the opportunity to reduce their rent payment.
The wife took a low paying job delivering neighborhood newspapers with a baby strapped to her back in a pack to help with expenses.
Four years passed.
The urge to procreate was strong, the couple was nearing 30. In 1977 the couple decided to go for a second kid. They felt a bit more secure financially, the wife had taken a better paying job as a supervisor at a retail store (but they still weren’t really able to save).
Now, though, that small unit in the quadraplex seemed even smaller. The new baby shared the Boomers bedroom and the 4 year old was growing like mad. Time for a house of their own.
The housing mistakes.
By this time, the couple had sort of discovered that they had different tolerances for risk. Hubby hated financial obligations (like a mortgage) but the wife saw the opportunity to build equity instead of paying rent. To keep the loan as low as possible, the couple saved for a down payment instead of using a down payment free VA loan (mistake #1), and narrowed their search to a cheaper but declining neighborhood (mistake #2).
Luckily, it was a slow decline. The couple stayed put for 10 years, during which time they were able to put aside small savings each month only to have to spend out at the end of the year.
Hubby got more and more stressed as his Federal Government job was not as lucrative as a private company job might have been and his aversion to risk kept him from looking for a better one. Instead he took advantage of many many overtime hours.
Wife stayed home raising kids and working on the run down home – stripping old paint, painting, scrubbing and maintaining, but not enhancing.
The turning point.
Eventually, the couple imploded. Tensions were high, finances were tight what with kids growing more expense and college funds and added life insurance, taxes and etc. Neither one of the couple talked about the issues. The Boomers didn’t talk money. Years later they realized what a huge mistake this was and began those discussions.
Mrs. Boomer decided it was time to go back to work to try to alleviate the situation. Besides, if a divorce was in the future, she would need a way to support the kids.
But, instead of going after a low paying easily obtained job, Mrs Boomer researched the job market at the time to see what jobs she could train for that would pay big bucks. She found that computer programmers were in high demand. She researched classes to learn programming and decided she could do this. Instead of putting further strain on the marriage to pay for the classes, she opted to open a licensed day care home and save the money earned to go back to school. She started her own at home business.
After two years she had enough money, quit the day care business and went to school full time. On graduation, she started a job paying $18,000 a year (about $42 K in 2015 dollars). In just a few years, hopping jobs for more and bigger opportunities, she was making more than hubby.
With more income, they decided to get out of the declining neighborhood. Their timing was fortuitous and they were able to sell their $25,000 home for $45,000. They had learned their real estate lesson and choose a home in a growing and desirable neighborhood this time. Unfortunately, interest rates were near all time highs when they decided to leave that first home.
The march upward in networth.
The Boomers continued to live off of Mr. Boomers salary and saved every penny Mrs. Boomer earned. They didn’t increase their lifestyle, and so they were able to greatly increase their savings. Mrs. Boomers career took off, offering opportunities for stock options, bonuses, employee stock into a retirement fund and ever increasing responsibility and income. Mr. Boomer finally advance in his long held Federal Government job, paying in each payday to an actual for-real pension fund.
Soon their college funds were full, their offspring graduated and out in the world on their own and their net worth grew. Mrs. Boomer played catch up with retirement savings in a 401K. They paid off their mortgage early,saving years of interest payments.
It seemed that the money just kept rolling in. Once they had enough saved for yearly expenses and emergency reserves, they began to invest in stocks, bonds and mutual funds. They reinvested all dividends and capital gains and put new money into the market using dollar cost averaging. All the while, they worked on getting to their target asset allocation – typically using new money instead of selling and buying.
Fast forward to now.
The Boomers are retired, living off Mr. Boomers Federal Government pension (and feeling pretty lucky to have one of the few pensions still around). Their assets continue to grow (and sometimes shrink) with the market, and their net worth has continued to grow even without salaries to pump into it.
So, what did they do right?
- They gratefully accepted help from their parents to get an education (and scholarships) so they had no college debt.
- They learned not to load up with expensive credit card debt early in life.
- They were forced to learn to save (and yes their parents did drill it in as well) just to meet expenses and it became a lifelong habit.
- They (eventually) looked for career opportunities that not only were interesting but also paid well.
- They did not raise their standard of living when new money came into the household.
- They worked hard and smart at their careers to advance and earn more.
- They (eventually) made good decisions about retirement savings.
- They bought real property to build equity.
- They didn’t continually upgrade their real property, but did maintain it.
- They saved and saved and save.
- They didn’t risk current finances to fund new schooling.
- They found a way to maximize income for the wife at home with a business.
- They learned how to invest in the markets and did so with a plan and regularity.
And what did they do wrong?
- They didn’t pick college majors (initially) that would provide good income.
- They were impulsive in life choices (such as joining the Army and having babies early), instead of laying down goals and agreeing to them together.
- They didn’t do their research when embarking on their first home buying experience.
- They waited too long to buy their first home.
- They didn’t take advantage of home buying financing on their first home.
- They stayed in a less than desirable neighborhood too long and bought in a better neighborhood when interest rates were double digit.
- They saved for college for kids before retirement for themselves.
And how did they get lucky?
Any one may be beset by unfortunate circumstances outside of their immediate control. The Boomers were lucky in that:
- Their parents provided college funding and some financial assistance.
- Their parents taught them the value of saving and hard work.
- They were both healthy.
- Their children were born healthy and had no serious health issues.
- Neither lost their jobs.
- Technological advances provided a lucrative career opportunity for the wife with minimal need for retraining.
- The stock market rallied after they started investing in it.
How about you all? What did (or would) you do differently than the Boomers?
Share your experiences by commenting below!
***Photo courtesy of https://www.google.com/search?site=imghp&tbm=isch&q=net%20worth&tbs=sur:fmc#tbs=sur:fmc&tbm=isch&q=money&imgrc=vN2V0qwbyYhNnM%3A
