This is the third in a series of posts that discuss financial overachievement.
“You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
–Warren Buffett
Eight million dollars is a lot of money.
What kind of person might be worth eight million? Maybe a tech entrepreneur? Or a movie star?
How about a janitor?
This is the inspiring tale of Ronald Read, a janitor, and an advertisement for living frugally and within your means. For most people, that is the key to financial overachievement.
Still, his strategy does not work unless you accomplish four basic tasks. We will discuss each of those later.
RONALD READ: CLASSIC OVERACHIEVER
Financial overachievement is an essential skill for people of modest means. They don’t have as much room for error as their wealthy neighbors. So, Read’s example is helpful for those who want to be overachievers but who do not make a lot of money.
Read’s career was as modest as it gets.
He died June 2, 2014, at age 92 years, in Dummerston, Vermont. But nearly everyone in the town was surprised when it turned out that he left an estate worth $8,000,000. Today that amount would likely be worth more than $10,000,000.
It turned out he was a charitable man too. At his death, $1,200,000 was left to the Brooks Memorial Library, and $4,800,000 went to Brattleboro Memorial Hospital. The remainder of his estate went to his stepchildren and caregivers.
BEGINNINGS AND LIFE
Read was born into an impoverished family, and he learned about the value of thrift early. His parents managed a farm and lived a hardscrabble existence while he was growing up, and the family was always just scraping by.
He graduated high school in 1940, the first of his family to do so, and then enlisted in the Army after World War II broke out. He was eventually deployed to North Africa, Italy, and the Pacific Theater. Finally, he ended up working in Italy as a military policeman toward the end of the War.
The return home upon discharge was anticlimactic. He began to work at a gas station as an attendant and a mechanic. Later he and his brother purchased the station where he worked.
He met his future wife and her two children at the station when she decided to buy gas one day. They remained together until she died in 1970.
He retired from the station in 1979. However, after a year, he went back to work for JC Penny as maintenance and custodial worker. He finally retired in 1997 after 18 years working there.
FRUGALITY
Mr. Read was famously frugal. For instance, he saved money by chopping his wood instead of leaving the task to others. And he was known to use safety pins on his decaying jacket to keep wearing it. He also had a collection of well-worn ratty flannel shirts that he kept using long past their prime. And he had a reputation for parking only where he would not have to pay the parking meters.
But he did dine out from time to time. For example, in the Memorial Hospital coffee shop, he would order a single cup of coffee every morning and an English muffin with peanut butter.
Living it up.
And he later discovered the library where he could read books for free. He became a voracious reader. No doubt, some of the books he read were investment books, and they helped lead to his financial overachievement.
LONG TERM INVESTMENTS
Unbeknownst to others, Mr. Read had a habit of using his savings to invest in blue-chip stocks. And he did so throughout his life.
He preferred businesses that were not in the technology sector. And the businesses had to have long histories of success and stability. So invariably, he chose companies where he could collect and reinvest dividends. That and his frugality built his extraordinary financial success.
ADHERENCE TO CLASSIC FINANCE/INVESTMENT PRINCIPLES/CONSISTENCY
Think for a moment about the events that Mr. Read lived through: World War Two, the Korean and Vietnam wars, the Cuban Missile Crisis, and two brutal financial events: The Great Depression and the Great Recession in 2009.
He decided to deal with these ever-changing and often traumatic events by sticking with some basic life and financial principles that made sense to him. So he saved his money, invested over time consistently, and always for the long term.
CONTRIBUTING FACTORS FOR OVERACHIEVEMENT
You have read elsewhere in MMH that many of the wealthy are optimists. Sometimes that optimism is reflected in gratitude and charity. That appears to be the case with Mr. Read. For example, about three-quarters of his estate went to charitable causes. And given his involvement and connection to the community, it is fair to think that he had significant care and concern for others.
Mr. Read was also the beneficiary of good health and long life. His work career spanned almost 50 years, so he earned money for a long time, and it appears that he invested from the very beginning.
ANALYSIS
This case study is not about financial alchemy. While it seems unbelievable that someone with such a modest salary would die a multi-millionaire, several factors contributed.
The formula Mr. Read followed involves four conditions that go along with financial overachievement—especially for people of modest means:
• Frugal habits are applied over a lifetime, not just a short period
• Savings are consistently invested in assets that appreciate over the long term
• A long work and life span that allows those assets to compound. The investor/owner lives long enough to benefit from the assets saved to compound significantly (one of many reasons that people with health issues often don’t die wealthy.)
• A lifestyle that allows for savings to occur.
That last part is tricky. There is no bright line that can be defined for what is basic living and what is not. Read’s lifestyle was so basic that it is unacceptable for most people. For instance, I would not use safety pins to keep my clothing together, and I don’t know anyone who would.
But the issue of lifestyle matters. The lower the cost of living and the higher the percentage of income saved, the more likely the strategy will succeed.
There is a whole financial movement based on saving as much as possible, with the idea of retiring early. To do that, people live simply, and as frugally as possible.
Of course, a second part of the strategy works too, but in a different way. Instead, some people pursue financial independence by increasing their income as much as possible. They accomplish that by taking second jobs, establishing businesses, and side hustles.
CONCLUSION
While it is not common for someone like Mr. Read to die wealthy, it happens much more often than you might think. The four factors we discussed allowed the individuals noted in the link to overachieve.
Taken together, the factors represent catalysts for financial overachievement.
Disclaimer: consult with a financial fiduciary before taking any steps outlined here. Not all advice may be suitable for your circumstances or investment style.
Photo credit: Fabian Blank
License: Unsplash