By DAVID MOON, Moon Capital
January 25, 2004
We recently began doing investment work for a retired schoolteacher. He
had worked in public education his entire life, retiring almost 15 years
ago. He currently lives on his Social Security payments, augmented by a
small fixed pension. His life has been anything but mundane. He's
traveled and lived overseas. Been to Africa and Eastern Europe. Met
leaders from business and education. He is a fascinating individual, with
a life full of wonderful experiences - and probably another life full ahead of
him during the remainder of his retirement. As a schoolteacher, he never
earned more than $30,000 a year. He never inherited a nickel; never won
the lottery. He never took foolish risks with his money.
But his investment portfolio is worth more than a million dollars.
There is no special trick as to how he amassed this money. He simply
spent less money than he earned every year of his adult life. Even in
retirement, he continues to be a net saver. This is particularly
refreshing, since many of today's generation are net spenders most of their
He has a mindset of thrift and value - just as some people have a mindset of
flamboyance and spending.
The first time I met with this gentleman, he began asking me questions from
his prepared notes. He came thoroughly prepared for the meeting, as I
suspect he prepares for most things in his life. It wasn't so shocking
that he came to our initial meeting with notes; this is often the case.
But I have never seen anyone whose notes were written on the blank side of junk
mail. That's right; this guy saved any junk mail that had clear space on a
side or partial side of the paper. This erstwhile junk paper was reborn as
his free - and quite functional ' notepaper.
A famous and wealthy mutual fund manager used to save the springs from his
ball point pens, later using them for all sorts of things. Some of the
wealthiest people I know are among the most frugal with certain of their
spending habits. This doesn't mean that they aren't generous on the
contrary; they can afford to support more worthy causes because they prefer to
get full value any time they spend a dollar.
It's good to spend time thinking about and planning your 401(k), IRA and
personal investments. The decisions you make with these assets will
significantly impact both when and how you can retire. But the single most
influential decisions most people will ever make about their retirement assets
and income are completely unrelated to stocks, bonds and money market
funds. These are day-to-day decisions about the relationship between
income and lifestyle.
Charles Dickens observed: "Annual income, twenty pounds; annual expenditure,
nineteen pounds; result, happiness. Annual income, twenty pounds; annual
expenditure, twenty-one pounds; result, misery." It's a pretty simple
formula for improving one's financial condition. And it requires very
little marginal change.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).