Meet Jim, my millionaire next door

The unemployment diet

This guest post is from William Cowie, who has contributed to Get Rich Slowly and other personal finance blogs. He also blogs about investing and offers a free Investing Basics course on Bite the Bullet Investing.

Like little ants, we moved and hustled all day, nine years ago, settling into our new house. We didn’t notice night falling… until we saw a light beam dance on the ceiling and loud noises from outside. From the second-floor bedroom window we saw (and heard) a group of neighbors. One had a flashlight, shining it into our undraped room. “Hey, neighbor! Stop already, and come say hi!”

In the urban America of today, that’s not your usual welcome. But then again, this isn’t your usual neighborhood, even though it’s about as middle class as it gets from the outside. We were intrigued to find the back fence has a well-used gate to the neighbors’ house, and they, in turn, have another gate in the side fence between them and the next set of neighbors.

Not surprisingly, we soon became good friends with all the neighbors, but it took a while to discover Jim’s dark secret.

With no outward sign to give that secret away, Jim is the prototypical “millionaire next door.”

In his 60s now, he had an average job his entire life, making average money, hardly what you think of when you hear “millionaire.” I asked Jim the other day about the secrets to his success.

Some of his steps may be old hat to veteran readers of Five Cent Nickel, but I was intrigued to hear a few I’ve never seen written about before:

The classics

Jim doesn’t read financial blogs. In fact, getting him to open his email more than once a week is a goal yet to be achieved. Nevertheless, his financial life’s story sounds like he’s been a saver all his life.

1. They always spent less than they made

Jim and his wife made a conscious decision to avoid the Joneses — you know, those up with which you have to keep, and they always made it a priority to save.

2. No debt

Because they had no Joneses, it was easy to avoid debt. They always drove used cars, well looked after. Even today, their Explorer and little Ranger truck are both well over 10 years old.

3. They invested

Jim said they started small, but early. Content with buying just a few shares every now and then, they went with a buy-and-hold strategy on commonsense, boring stocks. For the first 10 years nothing looked spectacular, but they just kept at it. The long bull run of the late ’90s helped them, but the crash afterward took some of that back. Still, they kept at it. Along the way, he made a few mistakes, but he says just the “keeping on keeping on” overcame those mistakes in time.

The million dollars, Jim says, came not from his salary but from the investing. The fact that they set the money aside, and never drew from it, is what allowed it to grow.

The un-classics

Jim, as I said, never read any how-to financial success blogs. He just made it up as he went along. And so it was interesting to me to hear two more recipes for success you don’t see mentioned in books or the blogosphere.

4. They never moved

They bought their house more than 30 years ago and never moved. There was a time when a bigger house would have been “more comfortable” and now that they’re empty nesters, they could downsize. However, they’re “people people” and their neighbors are their friends. It’s telling that almost everyone along their street has lived there more than 20 years.

It’s not just that. Moving, Jim pointed out, costs money… serious money. Not only do you have a 6 percent hit to your biggest asset in the form or real estate commissions, he says, you also have the closing fees on the new place. But that pales in comparison to the cost of making the new house a home. It’s rare that the old drapes will do, and it’s not long before carpets and furniture get added to the list. All-in, the total cost of a house change is well over $20, 000, and that’s conservative. Over time, that becomes $50, 000 or more in end-game money… per move! And for what? Be satisfied with what you have and look after it.

5. They’re still together

As our interview wound down, I couldn’t think of anything else to ask and a comfortable silence sat down and joined the conversation.

Then Jim continued. “And we never pissed away any of our assets in a divorce.”

You never read that, but he’s right. When he looks around at acquaintances getting divorced, he can’t help but notice the hurt that puts on their net worth.

Soon they celebrate their 49th anniversary. Their house is middle class, their cars are more than 10 years old, they rarely “go out, ” and the way they dress and live would probably bore a younger generation.

But those are the things that made him our millionaire next door.

11 Responses to “Meet Jim, my millionaire next door”

  1. Anonymous

    This article reminds me of a story I read years ago. A doctor was getting set to retire in his mid 50s. When his colleagues asked him how he managed it, he replied, “One wife, one house.” Remember, Warren Buffet still lives in his first house.

  2. Anonymous

    KT –

    That’s a valid point… to some degree.

    In 2001, less than two years into my career as a public school teacher and our marriage, my wife and I faced massive complications from her nearly life long bout with diabetes, with kidney disease, and numerous procedures to save her eyesight. She ended up going blind in one eye, and was put on medications that prolonged her kidneys. She was out of work for months, and we were barely making it with our combined salaries before the medical problems began with both our salaries. Putting money away for retirement was a pipe dream, and we struggled and ran up credit card debt to survive.

    So, I gave up my dream of being a teacher and switched careers into IT, spent two years self-studying to get certified, worked side jobs, and got my first IT job in 2004, got laid off two and a half months into it, and didn’t find work again until 2005, and moved four times in 2 years. In 2005, my wife had to quit work due to health reasons.

    Despite all of this, our credit card debt was paid off in 2007, and we built a real emergency fund we were putting serious money away for retirement by 2008 due to living well below our means, and desperately fighting to get us on solid ground for the next time crap hit the fan.

    Last year, it did. The kidney medication stopped working, and my wife went on dialysis, and needed a series of operations. Compared to 2001, financially things were uneventful. We weren’t dependent on income from my wife because we fashioned our lives to not need it. We had savings for the surge of medical expenses, which didn’t matter because we live well below our means, so it just ate into our monthly buffer. When all our friends were buying massive 400K houses and buying Acuras, we kept our 150K house and paid off the second mortgage and my Civic I still drive today, without a thought of upgrading it. The carpet in my house is largely the same carpet the previous owners had, aside from where we had to replace it when our dying cat years ago urinated all over the place, and it was impossible to get the stench out despite our absolute best efforts.

    Last year, we still maxed our IRAs and 401k out just as we have been since 2008, we never feared about how we were gonna pay the bills, etc. You see how, but there’s also a why. Because we know what we do today impacts our ability to handle what happens well into the future, and we’re not gonna be stuck like we were back in 2001.

    My point is horrible things can happen that can knock you off track, but that doesn’t mean you’re completely powerless to prevent that from happening every time, either. Sometimes it might seem like you are powerless, but often times it’s because it takes years of accumulated good decisions to overcome unforeseen crises. What happened to us could have been an excuse for why we’re not on track for retirement, or were not financially prepared for when my wife’s kidney’s did fail, but we’re okay now because we made smart decisions and made sacrifices over the last decade.

  3. Anonymous

    I never got married… exactly for that reason that a divorce would wipe me out financially.

    I did move around a lot when I was young – job insecurity forced me to relocate. However I rented until I found a stable job, then bought a home and stayed there.

  4. Anonymous

    Try this. Lose your job in a layoff, and your health insurance with it. Now go ahead and get cancer or injure your back. Come back here in two years and fill us in on how the millionaire thing is working out.

  5. Anonymous

    Now we know how much “good health” is worth. One bout of cancer and you can kiss all that life savings goodbye.

    I’m happy for “Jim”, but there is a lot of luck involved here – though the prerequisite of being a diligent saver is absolutely required as well (so good for Jim!)

  6. Anonymous

    This post really resonates with me for many reasons. My husband and I bought our house 15 years ago and never “traded up” when all our friends were moving to bigger houses. I reasoned that you do lose 6% in fees and that I’d rather spend that money on fixing up our existing house (using sweat equity). And that’s what we did. I didn’t feel smart at the time, but now I do!

  7. Anonymous

    What I got out of this article was the basics still work. No debt, invest and most importantly spend less than you make. Good article. Thanks for sharing.

  8. Anonymous

    Jenny, you’re right. Jim, as it turns out, actually did splurge on a toy: he has a Corvette ZR-1, on which he puts (I think) 3,000 miles a year, in good weather. But he bought it used, and for cash. As a toy.

    He’s an investor, not a miser.

  9. Anonymous

    Great article!

    A commenter on another article on a different blog attacked me for declaring that there aren’t nearly as many people who can afford luxury cars as drive them in the US. He cited the fact that there are 9 million millionaires to support his view that there’s a huge legitimate market for responsible luxury-car buying.

    I pointed out that the vast majority of those millionaires were retirees and near-retirees. If you are retiring now and want a comfortable retirement, then YES, you should be a millionaire. And if you WERE the kind of person to buy (or more realistically, lease) recent-model luxury cars, you wouldn’t have ever BECOME a millionaire.

  10. Anonymous

    Great article. Jim was lucky he met someone so compatible financially! Even luckier for their long life together.

    I’d like to comment on point #3 though. Specifically “nothing spectacular happened”. That’s a really hard barrier for people to overcome. Not everyone can operate with that much faith.

    I believe there are ways to “measure results” that show fantastic things happening over that “short” a period of time; if we focus on different metrics. If we were, for example, to track (dividend) income instead of net worth, we might see some pretty spectacular things happening over the first decade. And, once building that habit for a decade, you’d see why you can expect that the second decade is even better.

    I’ve put some of these thoughts into a slide share here, and will be sharing more information soon on my website about these ideas so that people can learn to be motivated to save instead of being afraid of their statements.

    David Bressler

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