Hitting It Big …
A Few Dollars at a Time
Debt is a little bit like a disease. Curing it is great. Preventing it in the first place is even better. This is a story of prevention.
Sam is 30 and living in Miami with roughly $250,000 in savings. How did he do it? Did he win the lottery? Land a seven-figure job? Get a windfall from an inheritance? No. One of the most significant factors was meeting a financial planner, named Ben, when he was just 20 years old who taught him that a few dollars saved each week can really make or break your financial future."I had just leased a new car, which is pretty exciting when you're only 20. It had a nice sound system and a quick engine and it only cost a few hundred a month." Sam recalls. "But after Ben showed me the importance of saving and investing even small amounts at an early age, I looked at the car in a different light. Suddenly, I was a lot less interested in its shiny finish than I was in the couple hundred dollars that I could be saving each month."
But Sam would not be discouraged. Aside from about $10,000 in low-interest student loans, he had few financial obligations. And luckily, his financial "intervention" came at an early age. Ben encouraged Sam to invest $2,000 in an individual retirement account. Retirement wasn't exactly the first thing on 20-year-old Sam's mind, but that got him into the habit of investing — a habit he is now glad he formed.
"Just like waking up in the morning, for me, saving money is something I just do, almost automatically," Sam said.
Today, Sam is 30 years old, has zero debt and about $250,000 in savings.
"I could make up an exciting story about how I got to the point where I am," Sam says. "But the truth is, it just took some smart decisions."
When he graduated college, Sam went to pursue his dream of working as a television news reporter, taking a typical small-market TV job that paid just $14,000! Fortunately, the cost of living in the town was also low, and the lease on his car soon ended. He bought an old car for $1,100, which was good enough to drive the few miles to work and around town each day. He shared an apartment with a roommate and, even on his meager salary, managed to save $50 to $100 each month.
He later changed careers and moved to Miami. His salary had grown enough so that he had more disposable income than before. But instead of spending all of the additional income, Sam lived pretty much like he did when he made $14,000. That doesn't mean he didn't spend money and enjoy life. But when he wanted to buy a home, he selected a condo near his job — so close that he could walk or take the bus to work and live without a car. Sam also got a master's degree, which later helped him attain promotions and raises at work — but like everything else, he did it economically. Instead of leaving his job and salary, he attended a local public university on weekends, and — as many employers offer to do — his employer even paid half the cost of his education.
The real secret to his success, Sam says, was that he always paid himself first. He always maxed out his 401k. Before he paid his mortgage, before he traveled, before he ate out at a nice restaurant — all of which he still did — he contributed the maximum allowed to his 401k. He didn't even see that as a decision.
"It was a personal requirement," Sam said. "I just pretended that it wasn't a part of my income."
As he got raises at work, he traveled a bit more and eventually bought a car again — an old but reliable Honda — and he continued to save even more.
Accumulating $250,000 took some small sacrifices, but Sam sees those as nothing compared with the stress of living paycheck to paycheck like so many people do. He recently left his job to start a business, something he never could have done if he depended on his salary to get him through the month.
"As my own boss, I am the happiest I have ever been," Sam said. "It's something I couldn't have done if I didn't have my savings to fall back on just in case I don't earn a lot at first."
Sam has become a financial inspiration to his friends, including some who weren't as lucky as Sam to get good advice at such an early age. Sam tells them it's never too late to start. After all, look what he did in just 10 years.
