Going from Frugal to Rich

Posted by M.S. on April 24, 2009

When we were married in 1977, after graduating from college, our entire savings was $500.

We promptly spent that $ 500 on a used and functional (but very ugly) pea-green colored Plymouth Duster car. You know the type—similar to the one on the Dukes of Hazards.  The “ugly” car worked fine and got me where I wanted to go. It wasn’t pretty and it wasn’t new, but it worked.

My husband was a salesman, so his company gave him a car.  So—at that point we had 2 great cars at a total cash outlay of $ 500. Not bad.  But, now we were BROKE.

Both my husband and I had majored in Business is college because it gave us  a marketable skill (we could get a job) and it would help us understand the workings of personal finance and building wealth. We learned that rich people do things differently than people that were always struggling to pay the bills.

The # 1 thing that has influenced ALL our buying decisions is this: Whenever possible, spend your money on items that will go UP in value—not on things that go DOWN in value.  Thus–the $ 500 “ugly” car. It would have been throwing money in the garbage can to buy a brand new expensive car!  We wanted to BE rich– not just LOOK Rich!

Our goal was to purchase real estate as soon as possible to build equity and have a place of our own. That required some serious saving for a down payment.   We figured we needed to save more than 10%  on a $ 70,000 purchase price for all the costs .   That meant we would need to save approximately $ 12,000 by the end of ONE YEAR–that’s $ 1,000 a MONTH.

Considering we were each only earning about $ 14,000 a year in 1977—that was almost 50% of our pay we wanted to save!

AND WE DID IT!

Not only did we do it ONCE—we repeated that procedure 3 times in a 5-year period!

The primary motivator behind our intense saving effort was we did NOT want to rent an apartment more than one year—since the rent money was making the landlord rich—not us.

We bought duplexes rather than single-family homes because we could own, rent and control a larger value property.  We would rent half the building, until we moved out, then we’d rent it all, so the tenants were paying the mortgage off!   What a deal!   Frugal to Rich!