By A. Type
A lot is written about the way entrepreneurs get rich, but not much about people on a wage or salary. That's me. I have never owned a business, never taken huge risks with money, never lost a lot either. In my 46 years I have become financially independent in a fairly riskless manner.
I spent $7 a week on comics and sweets (life was simpler then) , and saved $10. In the bank those days you could get 10% interest, so by the end of my first year I had over $570 saved. I spent all my pocket money, which was $1 a week. $8 on sweets and comics made me popular with the other kids on the (poor) street.
On school holidays I worked in a factory assembling packets of shoelaces. No child labour issues then. I remember time marching very slowly and thinking that I was going to concentrate on schoolwork so I didn't have to do this as an adult. But it paid a massive $1.99 an hour, big money for an 11 year old. Three weeks of that was $240. It was all saved.
After school I worked in a supermarket packing groceries for 0.99c an hour. I saved $350 in my first year. At age 12, with mum and dad's permission, I bought my first shares in UEB Industries, a paper company, 500 of my savings. I was lucky and they quickly rose by 40% to $700.
Stocks and laddering
Before I became a teenager, I had over $1,300 in the bank. I splashed out on a new bike ($130) and kept on rolling over term deposits and buying shares I could afford. I had a simple system: Back in those days all company news was in the daily paper I delivered. The simple act of reading the business news every day made me as informed as the average investor. I bought companies that looked relatively cheap, paid dividends and where I understood what they did to make money. That basic philosophy hasn't changed in 36 years.
Fast forward to 30. I studied until 23 and worked part time all the way through university. There were no fees in those days and I worked 20-30 hours a week in a hotel, doing all sorts of jobs. I loved the jobs with tips. In those days tips were virtually unheard of and tax free. I also worked Saturday mornings in a department store. I had a policy of never working past midday on weekends, leaving the rest of the weekend for fun. Even now I very rarely work weekends. Typically 40-50% of my earnings was saved, so by the time I left university I had $50,000 in the bank.
At 24 I got my first job with Wang computers, in sales. I took the job because it offered the best chance of making good money quickly. They had bonus systems for exceeding targets and I got paid $120,000 in my first year selling personal computers to businesses. I couldn't believe how much money that was. For three years I was over 100% of my sales target, which I thought pretty easy to achieve. Sales positions pay well because there is a stigma in this country about out and out selling to people.
My theory is that most people are scared of people per se, and very scared about selling them anything. So there is a scarcity of people happy to be selling. So, if you do it well enough, it pays well.
By 27 I had over $350,000 saved. In hindsight I should have bought a house, which was easily achieved then with that money. But I was too scared to buy anything that expensive, so it stayed in the bank and in shares.
At 28 I moved into stock broking. Why? Because it was still selling, but paid better, much better. It was also free information on investing in shares and funds. I kept @50% of my money in the bank and 50% in shares. By the time I was 33 I had saved over $1m. Then I bought property (more on this to follow in part 2).
No magic tricks
There is no magic here, just hard work from an early age, a savings mentality and an eye for an opportunity. I was also very focused on not losing money. I hate losing money, hence bank deposits and shares I understood.
Education was also key. Having a post graduate degree with honours helped get jobs, as it showed I was smart enough to learn on the job, even though it was in a subject with no immediate relevance to technology or stockbroking.
So by 33 I had made my first million. Then the money really started rolling in, and never by taking big risks.
33 Comments
Great story. Saving and investing a high proportion of your salary is something anyone can do and is guaranteed to work over time.
As I pointed out the other day, the maths is simple, Saving 50% of your income will mean that after 17 years, you will no longer have to work for money. Sounds way better than than working for 45+ years.
ohh how times have changed for the young. Yes this is a non remarkable story for our age group but would make me sick if I was starting out today. Mores so the people stuck in a ballon comments that will follow. kiwimm "Anyone can do and is guaranteed to work over time.."
To reflect anything more than the good financial times we have had in the past twenty years I don't really see the lesson in all this for the current people starting out...
I work with and see hardworking and talented people & applications aross my desk daily for the same positions..most will never get the oppertunity to earn six figures (unless we get hyper inflation)...let alone pay for a house in my lifetime at current asset values.
Hardworking is part of the equation. Talented comes from that. The rest is:
- the ability to live below your means in the face of a marketing onslaught designed to make you spend all and more than you have (debt)
- investing in steady growth assets (no quick wins)
- staying the course
These are uncommon qualities and sticking to them will see you get ahead.
This is why people have no empathy for younger generations they are too stuck within their own time warp and experience.
House to income ratios have radically changed, say for Auckland as an example, really only change from 2003 onwards, a mere ten years ago. Good article on here a week ago highlighted the fact.
All asset classes have seen acceleration in so called values as a result of QE. So much harder today to buy in let alone expect a growth in assets.
Competition in all lines of work and business mean continuity of income is far from assured if you can secure it when you are young. Qualification inflation means debt from education prior to working put these young people well behind financially. At least the trades are getting a chance now although most are importing their labour.
The young with student debt are delaying from buying a home.
Real income have fallen continually during my working life, i'm 41.
Yes great contribution on taking your opportunities, did well being in sale in their mid-twenties on 120k, approx. twenty years ago, what is that worth in todays dollars? :-) Not to hard to save back then I know...
I was advising a star sales manager late last week who today earns less in nominal dollars.
The math is simple, if you are on a salary starting out being frugal and investing today may help you survive however don't expect to replicate this contributors financial independence.
$120k in 1991 is the equivalent of $191k today. With that, free university, much cheaper housing, low inflation, strong and reliable share growth, really high savings interest rates (the 90-day rate was around 9-10% for most of the '90s, imagine that these days!), good credit liquidity, strong local industry and businesses, and really strong economic growth, the early 90s was a very lucky time to be making your way. Feel free to take all the credit for it though. :-)
Speckles - I have to strongly disagree with you.
Does an athlete get to the top by modelling themsleves on the those who are in the lower ranks of their sport or by modelling themselves on those who are at the top?
The same principles apply regardless of what it is you want to achieve. If people want to be financially free they have to have a plan and goals. If your plan isn't working then you have to change/tweak your plan.
The definition of insanity is to keep doing the same thing over and over again expecting the same result.
Hey speckles - I'm not sure if I'm "stuck in a ballon" [sic] by replying or not, but where I work, we pay 50k and more p.a. to youngish people who have "got it". We're desperately trying to find staff....but it's not easy.
And I'm pretty sure if you wanted to move into sales, and are good at it, 100k would be bottom level income.
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515 Contract/Temp, Full Time, Part Time and Casual/Vacation Sales jobs in New Zealand paying at least $70k per yearThey can't all be fake jobs, can they?
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Why on earth would you buy a house at current values?
http://www.oecd.org/eco/outlook/focusonhouseprices.htm
Unless it was no great financial burden to you. Self destructive urge?
actually do the math on current day asset values, 100k is chump change, less tax, cost of living and look at disposal income...it an't going today make you financially independent like the writer yet most earn way less!! I mention a sale manager above, who was earning just on 100K.
The writer in part 2 most likely will talk about how he made money in property...everyone will say how sharp.. again when it was all so easy..I know I did the same...
I guess I'm just a loser then - I earn less, way less, than your 100k "chump change". Woe is me. But there's no way I could dispose of it all without being recklessly extravagant.
It all depends on how you define things I guess...I consider driving a car to work on a fine day "recklessly extravagant".
Not a loser at all...if it works for you..a key is timing, when you secure assets, a property etc., it an't all about income etc..also you may have more free time..many have no choice but to drive to work..so you may actually be very wealth and never required the income, asset rich by any chance?
Gotta disagree Speckles. Maybe the good old days were the good old days like you say. But they were not for me. I was very (very) low income until I was about 40. But always spent less than my income which I see was the core point of this article. I managed to build a good house on a big block of land when I was 25. Including carrying a house load of concrete blocks 200 meters through the mud. One by one! Blah Blah.
We did have a car, but I biked to work on an old 10 speed I managed to purchase. But times were good for us, on a no cash basis.
I won't criticise those starting out here, but would suggest you show them this article. There are ways to get things done.
Good for you.. now suggest how someone young, also say 25 today... how you would secure that big block of land you did...
Income to asset(land) values in your favour or outside help were you answer?
I would never, as a advisor, in good conscience, show them this article.
Yes some good lessons but the outcomes will be way different today.
Speckles, you miss the point. You seem to be looking for excuses why it can't be done. If housing is too expensive now then don't buy. Keep building your stash until you are comfortable to buy.
In Auckland, renting is cheaper than buying so I am happy renting and investing the difference. If necessary, I will rent until I retire. Once I am not required to be in a particular place for work, I can buy a property by the beach and enjoy spending time there playing with the kids. Or retire to another country where property is cheaper. The opportunities are there if you choose to seize them. The best time for action is now.
I did a lot of somersaults Speckles. Including changing town. No secrets. Three jobs between two of us. etc etc. Lived in very basic places.
I see that you won't be showing this article to whoever it is you advise. "Would Never" to quote you. Shame on you. And please hand in your registration for whatever it is.
"Never" showing people alternative information is just nasty. And please don't use the word 'advise' It seems your spiel to them is 'sales' Is your income commission by any chance ?
Speckles. Thank you for providing a fantastic example of the type of mentality and ideas that should be avoided at all costs. Your kind of negativity and poor attitude is all too common in NZ and unfortunately people like you will never get it.
"most will never get the oppertunity to earn six figures" - it's more than a little ironic that someone like you doesn't even know how to spell opportunity.
Great reading, your story and mine have many similarities, except you did better :-)
Good themes I liked in your article include:
Start young - no paper round or supermarket where I grew up - so I trapped possums and drove tractors.
Work while you learn - I pumped gas at Uni. From midnight til dawn because it paid better.
Willingness to adapt - I went from electronics, to computers (because I discovered the programmers were making more than the engineers where I worked) to sales (once I found out how much the guys selling the stuff I made were earning!)
Sales - yep that's the way to make money, and you don't need to be the stereotypical greasy sales guy. I was a technical geek (OK I knew how to drive an expense account too) My customers loved me "You're not like the others" they'd say. I used to actually say "No" when I couldn't deliver what they wanted. So they knew "Yes" meant "It will happen".
Avoid debt - although you don't specifically say it, you did it. Apart from a brief period after buying my first house, I've always maintained positive net worth. And I filled that house with flatmates to pay off the debt as fast as I could.
Are we just all patting each other on the back here, or are the young people who need to read this stuff listening in?
A partner in a large farming accounting practice recently said that the drawings (personal spending from farm income) of contract milkers, sharemilkers and farm owners were all around the same in his practice. Years ago there would have been a noticeable difference.
Attitude/motivation is a big part of it. The folks in this link aren't wage and salary earners but perhaps answer Andrewj's question the other day re who in their right mind would buy a farm.
http://www.stuff.co.nz/business/farming/dairy/8764330/Skills-with-peopl…
You don't have to come from a farming background to do well in dairying. Five years after leaving a career in deep sea fishing he takes out NZ Sharemilker/Equity Farmer of the Year. Mr Moore, who switched careers from deep sea fishing to dairy farming five years ago, won the Southland Farm Manager of the Year title in 2010 on the same farm he now 50 per cent sharemilks 950 cows. http://www.stuff.co.nz/southland-times/news/8715706/Southland-farmers-t…
The trend that CA told you is true, I have seen that as well yet his advice ignores the wealth effect - which stakeholder made the real wealth.
Self employment in your example I note :-)
ps Some starting to take it a little personal....I guess it reflects a belief system.
Yes speckles, I did use self employment, but for a reason ;-) There is a growing trend for folks from non dairy backgrounds making career changes and doing very well in a relatively short time, in the dairy industry.
As employers of 50/50 sharemilkers our sharemilkers returns on investment etc are substantially higher than ours. However, that's not an issue for us. We were once 50/50 sharemilkers also. :-)
Most of the comment on this site is negative towards dairy - yet there are opportunities to get ahead, in the dairy industry that I am not aware of exist anywhere else. :-)
Having family non farming 20 & 30 year olds there seems to be a difference in home ownership opportunities between those living in provincial towns/cities and those living in Auckland.
In the latest run up in property values I have one client that started in sharemilking and after property transactions cash up made 15 million in the space of the past ten years through dairy.
Great young guy and help him use the cash resources to buy property in the US which we are now systemically unwiding as that market recovers. The property market and the increase in values did most of the heavy work for him in the wealth stakes.
You are right there are many opportunities in dairy although equally as many are burnout by it. It is one of several areas I can think of with an equity mix which offer opportunities. Which I advise on.
For many young people the key has been timing, people now in their mid 40s had a lot less competetion for places in the work force. IT had barely taken off in NZ, marketing as a profession was in its infancy..easy money. That changed within five years if you entered these professions. The returns normalised and they have someone always available to take their place.
If you studied... when you studied..student loan debt has been another large factor and if people entered the property market pre or post 2002.
Self employment worked for me however todays life cycle of a business is so much shorter and it is an intrenational market place.
It is a tougher world, I don't see the standard sales job is going to help given relativities..for most, it is not playing the percentages.
if you have the drive and ability self employment does hold opportunities.
I played devils adocate here for a reason..as expected most did not get it..the middle class
is sleepwalking to their demise.
Saving money is easy. Example from today. Co-worker had an $8 sandwich for lunch and now feeling fat so driving their car (parking $12/day, total operating cost 90c/km) to the gym ($20/week). I had beef and vegetable stew made in the slow cooker overnight ($2/portion) and will cycle home (total operating cost 5c/km) and no need for the gym.
So that's about $25/day saving. Over 200 working days that's $5000/year for my stash.
Some of these comments are head in the sand, and this article is not a great example of how to get ahead, as the anecdote given is ridiculously more unobtainable in 2013 than it was in the early 90s. To put it in perspective, if you took this person's wage back then relative to the cost of a house in Auckland, and gave them the equivalent wage now, that would be somewhere around $600k a year. It'd be like having an article written by Sam Morgan saying the secret to being a multi-millionare lied in making an online auction site, when clearly there's only place for a very small number of those in a certain market.
While it's self evident that a decent attitude, wise investment strategy and discipline are contributors to wealth you're kidding yourself if you also don't factor in the environmental conditions required for success. And that's what most of these "I succeeded by pulling myself up by my boostraps" anecdotal editorials either become fodder for people to have a whinge about the youth of today, or any useful message gets totally lost to people who find the story out of touch with modern reality.
Wages are down 20% in real terms since the late 80s, and housing costs have tripled. There's a lot less fat in there to become a millionare, and THAT is the discussion we probably should be having as a society, as to the whys and how we can reverse that trend.
Or maybe people should just go buy the book "The Secret" and will their fortune into existence.
I agree with you Milk and the realities are as they are. So it's harder now - do you just give up ?
I think because it's harder - the article has even more validity. You have to focus and turn every effort into providing for your future.
You can have your discussion about society. Quite valid. But that does nothing in the meantime for the kids starting out.
Interesting thread. I tend to agree with Speckles. Its harder these days starting out. Part of the problem is that the banks only tend to lend to businesses using property as security.........http://www.nzherald.co.nz/unemployment/news/article.cfm?c_id=353&objectid=10889131
Also alot of BB's now are buying up all the businesses (heard that Bayleys business sales ad on the radio?) Youth unempolyment is also rife at the moment.
Before anyone calls me a whiney GenY - I've worked also hard/smart and also taken risks and I'm on track to semi retire at 40 (if i wanted to :)- but my point is it ain't that easy getting ahead these days compared to say 20-30 years ago.'
Well done to the author of this story!
You're a few years older than me so you must have gotten your first job in about 1990?
Getting paid $120k in your first job in1990??? Most graduates would have been lucky to get 1/5 or 1/4 of that if they could get a job at all. That's like getting $200K straight out of uni today.
And then 4 years later you moved to a job that paid "better, much better."
On salaries like that you should be a multi-squillionaire by now. You might have worked/saved hard, but given salaries many times greater than 99% of people could ever hope for I'm not sure what the point is?
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