An Unlikely Millionaire

A few weeks ago, I struck up an email conversation with an ESI Money reader.

As we exchanged messages, she told me about some of the ups and downs she’s experienced in life. After hearing more of her story, I asked if she’d be willing to share what she’s learned with ESI Money readers.

She graciously agreed, and that’s what I’m sharing today.

She titled her post “A Cautionary Tale,” and much of it has a “don’t do what I did” feel to it.

There’s just one problem with that framing: she’s a multi-millionaire.

I think she’s done quite well for herself and, like many of us, is probably harder on herself than she needs to be.

What follows is a story filled with ups and downs, good luck and bad luck, smart moves and poor decisions. But in the end, the results speak for themselves.

She wound up in a pretty good place, which is why I’m calling her an unlikely millionaire. 🙂

Here’s her story…

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Dear Mr. ESI,

The success stories chronicled in your Millionaire Interviews and Millionaire Scale-Up Interviews are endlessly interesting, as is the entire FIRE movement.

However, I wonder whether a not-so-successful story like mine might also be useful to your readers—primarily as an example of what not to do. As the old-school television evangelists used to preach, “Don’t sin like I did, brothers and sisters. I have seen the light! You, too, can be saved!”

I consider myself a financial cautionary tale: FORL—Financially OK, Retired Late.

Both good and bad luck contributed to my situation, as did a collection of good and bad decisions.

Where I Am Today

I’m an 81-year-old retired Realtor living in a high-cost area of Southern California, not far from the ocean. I own a single-level, twin-home-style condominium that I purchased 27 years ago.

Like many Southern Californians, I couldn’t afford to buy my own home at today’s price. Purchasing it when I did belongs squarely under the heading of Good Luck.

After two failed marriages, I’ve also been very happily on my own since 1994. Divorces are extremely expensive, so proceed with caution when choosing a mate. Some women marry well and divorce even better, but apparently I missed that seminar. Instead, I experienced severe financial setbacks and narrowly escaped having to pay alimony.

Starting Over With Six Dollars

I hit financial rock bottom at age 22.

I was trapped in a failing marriage and then fractured my C-1 vertebra—commonly known as breaking your neck—in a car accident. After a lengthy hospital recovery, I arrived on my parents’ doorstep one Friday with six dollars in my pocket.

Had they not taken me in, I might have foundered or worse.

By Monday afternoon, I had secured an office job and started moving forward again.

On the positive side, I was long gone by the time my first husband went to prison for a violent attack on a government agent. I left the marriage with my sterling silver flatware, a dozen vinyl records, and most of my clothes.

That was a good decision. I still have the flatware, and the price of silver has increased.

As Kenny Rogers sings in “The Gambler,” you need to know when to walk away and when to run.

My Worst Financial Decisions

My biggest mistakes involved poor marriage choices, a lack of career direction, and failing to fight for my own Social Security record.

1. Marrying at 19

My first mistake was marrying at 19, before my brain had fully formed and before I had enough life experience to understand what I was doing.

2. Marrying Again at 26

My second mistake was marrying at 26 to a man who didn’t particularly enjoy working or helping to raise our chronically ill child.

That created both emotional and financial consequences that lasted for years.

3. Failing to Choose a Solid Career Path

I also failed to choose a clear career path early in life.

In the 1960s, girls were generally expected to become teachers, secretaries, or nurses. Pursuing anything else required vision and foresight, neither of which I possessed at the time.

My parents strongly encouraged me to become a teacher. As a result, I had earned an undergraduate degree and teaching credential by age 20.

Unfortunately, I was completely unsuited for the profession. I also didn’t have the wisdom to step back and identify a better career. After teaching for one year, I took what I jokingly call “early retirement” and bolted.

Once I rebooted my life, I accepted almost any job that presented itself and kept moving. Most of these positions were all flash and no cash.

Over the years, I worked in public relations, played piano in a bar, worked as a fashion coordinator and model, served as a radio station music director, became an office minion, reviewed books, organized special events, accompanied classes at a dance school, worked as a classical music clerk at Capitol

Records, wrote advertising copy, and served as a small-time newspaper restaurant critic and wine writer.

My working life was certainly varied, although not especially lucrative.

4. Not Fighting for My Own Social Security

One of my largest financial mistakes was failing to insist that income be reported under my name so I could build my own Social Security record.

My second husband worked in real estate, while I took what I called “jobettes”—small jobs that could be fitted around caring for our daughter and managing her illnesses.

We were advised to incorporate, so our combined earnings were paid into a corporation. My husband then flatly refused to allow me to draw a salary from the corporation. He decided unilaterally that there was no reason for “us” to pay separate Social Security and Medicare taxes on my account.

Because he earned most of the money, he won the argument.

His successful negotiating tactic was to bellow until I gave up.

As a result, my Social Security record shows no contributions for approximately 20 years. That gap significantly reduced the amount of Social Security I receive today.

It was a major financial mistake, and I’m ashamed that I allowed it to happen.

My Best Decisions

Fortunately, I also made some good decisions—or, in one case, was fortunate enough to be born to the right people.

My best decisions and circumstances involved my parents, my choice of where to live, my eventual real estate career, and my early start in the stock market.

1. Choosing the Right Parents

My parents were sturdy, hardworking people who had lifted themselves from childhoods of threadbare poverty to become college-educated teachers and Realtors. They and their siblings were the first members of their families to graduate from college.

Our father eventually left teaching for government service. He said his goal was to educate his three daughters so thoroughly that someone could give each of us a suit of clothes, place us on a flat rock, and we would still never miss a meal.

To my knowledge, none of us ever has.

He also advised us to spend less than we earned, although I failed him on that count a couple of times.

2. Moving to Southern California

I visited Southern California when I was 17 and immediately knew it was where I belonged. The freeways were still lined with orange groves in those days.

I managed to immigrate permanently in 1970 and have never regretted it for a moment.

California is expensive, but it has been home for more than half a century.

3. Finding My Career in Real Estate

After years of writing advertising copy, I earned my real estate license at age 46. By that time, I understood that I would need to support my little family on my own once I emerged from my second divorce.

After a couple of years, approximately 90% to 95% of my business came from repeat clients and referrals. That was how I managed to build a sustainable career.

When you’re a real estate agent, you wake up every morning unemployed. However, the profession doesn’t have much age discrimination as long as you keep your marbles and continue serving your clients well.

I learned never to look down, lest I frighten myself by realizing how precarious my finances were.

I worked full-time until age 70. My primary goal was to accumulate enough money to support my daughter’s medical needs after my death.

Life, unfortunately, had other plans.

4. Starting Early in the Stock Market

When I was rebuilding my life after my first divorce, my father suggested that I invest in the stock market because investing had worked well for him.

I scraped together $125 while earning a salary of $400 per month and bought shares of Brazilian Light and Power through his stockbroker. The investment had been recommended by The Wall Street Journal.

I was 23 years old and have maintained at least some stock market holdings ever since.

Before my assets became large enough to qualify for professional wealth management, I selected my own stocks and invested entirely in equities. I read widely, including The Wall Street Journal, Forbes, Fortune, my local city’s business journal, and a periodical called Bottom Line.

I won more often than I lost, which bordered on miraculous considering my lack of formal education in finance.

Like almost every investor, I sold certain investments too early—looking at you, Costco—and held others too long. Lucent would be the prime example of the latter.

My father, who strongly influenced my financial style, used to say:

“Nobody gets the whole hog. Just take your slice of ham out of the middle and be happy about it.”

That philosophy worked in my favor with Lucent.

When my daughter became engaged, I sold a substantial portion of my Lucent stock to pay for a first-rate wedding. Had I not done that, I probably would have continued holding the shares and lost a bundle when the stock cratered.

I would’ve had nothing to show for the loss.

Selling wasn’t foresight on my part. It was blind luck. But at least the money paid for a wonderful family experience before the investment collapsed.

5. Turning to Professional Management

As my real estate career became busier, my investment portfolio eventually grew large enough to qualify for wealth management through Charles Schwab.

I decided it was time to leave the driving to them. For the most part, I’ve been pleased with their work and with the diversification they’ve provided.

I also became less of a cowboy as I got older.

When you’re young, you have time to recover if an investment turns out to be a clinker. At my age, there isn’t enough time to make the money back if I choose poorly, lose my judgment, or fall for a scam.

It’s easier to take a flier when you’re younger.

My Current Investments

My current asset allocation is as follows:

• Large-cap equity: 32.3%
• Small-cap equity: 11.8%
• International equity: 19.0%
• Fixed income: 36.2%
• Cash investments: 0.8%

I selected the individual stocks myself. Schwab selected most of the funds and other investments.

In dollar terms, my assets are:

• Individual equities: $139,273
• ETFs and closed-end funds: $278,246
• Mutual funds: $848,764
• U.S. Treasury bonds: $94,023
• Cash and money market funds: $37,057
• Certificates of deposit: $78,212
• Credit union savings: $1,000
• Apple savings account: $2,296
• Raw land: $20,000

Total invested and financial assets: $1,498,871

My home is worth approximately $1.6 million and has no mortgage.

That gives me an estimated total net worth of: $3,098,871

Investments I Missed

There are many boats I missed, including anything related to cryptocurrency.

My policy has always been that if I don’t understand an investment, I don’t put my money into it. I realize that some people consider this an antiquated point of view, but it has served me reasonably well.

If cocktail-party conversation is to be believed, the world is filled with investors who possessed extraordinary foresight and are now awash in cryptocurrency profits.

I never ask how much of that supposed profit they’ve actually taken off the table.

During my real estate career, I also encountered many homeowners who diligently tracked nearby property sales. When the local market declined, they would moan about how much money they had “lost.”

I would point out that they hadn’t lost a dime unless they sold at a loss. Conversely, they hadn’t made a dime until they sold at a profit.

The value shown on paper isn’t necessarily the amount that ends up in your pocket.

Avoiding Credit Card Debt

One of my best lifelong financial habits has been avoiding credit card debt.

My parents never had a credit card, and they successfully inoculated me with the belief that credit card debt is the devil on four wheels.

No matter how poor I became, I never paid a single dollar of credit card interest.

Establishing credit in 1968 was challenging. I was a newly divorced woman earning a small salary who had just moved across the country. I couldn’t bring myself to ask my father to co-sign for me, even though requiring a father or husband to co-sign was common at the time.

JCPenney was the only company willing to grant me a credit card. It came with a $100 limit.

Each month, I bought a couple of pairs of pantyhose, which were required workwear, and paid the bill immediately when it arrived.

It was a happy day when credit card companies began soliciting me instead.

The Role of Luck

Luck—both good and bad—played a major role in my financial life.

Anyone who claims that people entirely make their own luck has probably never been smote.

Good Luck

My mother lived until four days before her 101st birthday.

After age 95, she required expensive, around-the-clock care so she could remain in her home. Fortunately, she had the resources to pay for it because she and my father had followed the ESI principles long before ESI had a name.

From their estate, each of their three daughters inherited $500,000. That amount didn’t include college funds established for three grandchildren or early inheritances distributed during my parents’ lifetimes.

Their planning made an enormous difference in the lives of their children and grandchildren.

Bad Luck

My treasured daughter was chronically ill from childhood and suffered from a cascade of autoimmune diseases.

Her health care was massively expensive. As an independent contractor, I paid high insurance premiums while receiving less-than-wonderful coverage, even after she qualified as my dependent.

My family helped considerably with the cost of her medical treatment. That was an enormous stroke of good luck for both her and me.

But at age 45, my daughter died quietly in her sleep from lupus.

That was the Black Swan event of my life. My pilot light went out that day.

People sometimes speak casually about how discipline, planning, and positive thinking allow us to control our destiny. Those things certainly matter, but they don’t protect us from every tragedy.

Sometimes life simply smites you.

Charitable Giving

I support my church and two music programs in a modest way.

When I see an individual need, I’ll occasionally send an unsolicited contribution directly to the person, with no strings attached, even though the gift isn’t tax-deductible.

Someone once did that for me when I was poor, so I’m paying the kindness forward.

Longevity runs strongly through the female side of my family, however, so I’m reluctant to spend or donate very large sums. My mother nearly reached 101, and I have to consider the possibility that I could live for many more years. I don’t want to outlive my money.

My Hints for Financial Success

If maximizing net worth is your overriding goal, I recommend the following:

1. Choose a mate you won’t have to divorce.
2. Don’t have children or pets.
3. Don’t develop a taste for good wine, fine bourbon, or great food.
4. Buy your clothes at TJ Maxx, Marshalls, and Costco.
5. Stay home and don’t travel.
6. Don’t spend money on live music or theater.
7. Avoid car accidents.
8. Don’t buy new cars.
9. Don’t become sick or old.
10. Live in a state with lower taxes than California.

However, if you prefer an enriched, interesting, textured life that allows room for joy, pleasure, and occasional frivolity, you should probably ignore numbers two through six.

And as for number ten?

California is pretty nice.