Sunday, December 27, 2015

Stephen's Story, Financial Planning


*The following is a fictional account. But the details are based on a blend of true stories I've heard over the years.

Debt Free and Rich with Low Income: How did he do it? 


Hello! I'm 53 years old this year (2015). I've never won the lottery, or had a big investment payoff, and I've never earned more than $17 an hour. I'm debt free, I own three homes (paid in full). I've never paid a dime of interest on a car. And if you count my investments and retirement accounts, I'm currently worth $2.5 million.

My name is Stephen Wage, and this is my story.



The Car Fund


I started working part time when I was 15 years old, as a stocker in a Ralph's Grocery Store. I took the bus everywhere until I could afford a $500.00 car. At 15.5 I had my permit, and by 16 I had my license. I drove that cash car while I made monthly payments to myself into a savings account. That went on until 17.5 years old, at which time I had saved up and bought a $2,000.00 car.

In 1979, that was a big deal, and a nice car. A brand new car was going for less than $5,000.00.


The Individual Retirement Account (IRA)


In 1981, at the age of 19 I had heard of a new account that had become available to me, called an Individual Retirement Account (IRA). My local bank was offering a special called a Golden IRA. They said anyone who would put in an opening deposit of $2,000.00 would receive a guaranteed 10.00% Annual Percentage Rate (APR) on that money until they turned 65 years old.

That may sound enticing right now, but at the time, Certificates of Deposit were going for 23.00%. But I figured that couldn't last forever, so I decided to head to the bank.

My friends and I were on our way to the beach for a full day of beer and surfing. I told them I had to stop by the bank to open an IRA and they thought I was nuts. They went on without me. Eventually I caught up with them.

Over the years time went on, I moved up to Cashier and got many raises. Eventually I was making $17/Hr at Ralph's.


Debt Free Home Buying


When I bought my first home I knew I couldn't pay cash. I knew I could afford $1,000.00 a month. So I shopped for a condo at $800.00 month, but made the $1,000.00 payment anyway. I paid that one off in 15 years.

I got a second condo (newer one with more toys), but still $800.00 month. I made the $1,000.00 a month payment, but rented the first one out and added the rental income to the payment on the new condo. I had that one paid off in five years.

By then I was getting older, and wanted more space. So I bought a 4 bedroom house, at $1,500 a month, rented the first two condos out for $1,000.00 a month each. Then paid $3,000.00 a month on the house. Paid it off in 10 years.


More of the same: Results


So now? I continue to rent the first two condos out, and that money goes into a housing fund. I've nearly got enough to buy a third condo for cash, then I'll have three condos paying into the housing fund.

I've never paid anything other than cash for cars. By making the monthly payment on my $500 car, I saved up for a car that lasted longer. Each car was nicer and lasted longer. Eventually I was buying my brand new BMW 745 iL for cash too.

That IRA? Well I never put one more dollar of my own money into it. Just the first $2,000. It then started earning interest at 10% and it's now worth $65,000, so far (I'm not 65 yet). Why? Compound interest. Every month since 1981, my money earned interest. That interest became part of the balance. So that interest earned interest. Etc. Etc. I made other investments, 401(k), just like the first one.

My beach friends still drink, but gave up surfing because they are out of shape. They are all broke, every last one of them. Very sad to watch. Most of them have no idea how much I really own. I didn't lie to them. I told them I moved (I just left out the fact I kept both places, and now all three).

Me? I still work 45 hours a week at Ralph's Grocery Store. Why work with my financial status? I don't have to. But what would I do with my time? Watch TV? Golf?

So I go to work. It's still interesting. The bad days are never that bad, because you always know you really could leave whenever you want. But I'm irreplaceable at the store, I know where everything is. Same store since 1977.

Every so often, I take 2-3 months and go on a tour around the world. But not every year, just every few years. I don't drive the BMW that often anymore, I've decided I enjoyed my new Ford Flex much better anyway. I saw it at a Car Convention and bought it on the spot. It was special ordered with my preferences, and delivered to my home, no loan paperwork to sign, paid by Credit Card at the event. I got a lot of rewards points with that purchase, and of course I pay my Amex Card off in full every month (I NEVER pay interest on a credit card).

So... that's my story... Your Turn: What's your story?


How have you handled money? Good, bad, neutral... what lesson's have you learned?


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By Darrell Wolfe

Storyteller, Creative, INFJIntellection, Ideation, Input, Learner, Achiever





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