Teach the Children: The Millionaire Next Door Could Be You

By Dan Kadlec

May 9, 2018

Is your ordinary neighbor worth $1 million?

The millionaire next door has become something of cliché in recent years, largely because that level of net worth no longer raises eyebrows and, honestly, is achievable for just about anyone that starts saving early in life.

There is perhaps no better example than Brooklyn secretary Sylvia Bloom, who passed away two years ago and to the surprise of all who knew her, left more than $8 million to a few charities. Even her husband, who passed away 14 years earlier, had no inkling of the nest egg that his wife had been stockpiling.

Bloom was 96 when she passed. She had worked 67 years for the same firm, dutifully saving and investing small sums from every paycheck. She lived frugally, clinging to her modest rent-controlled apartment and taking the bus or subway—never a cab.

Her remarkable savings achievement was reported recently in The New York Times along with similar stories of ordinary folks whose wealth far surpassed their lifestyle. Those included Leonard Gigowski, a modest Wisconsin shopkeeper who left behind $13 million, and Grace Groner, who shopped at thrift stores and lived in a one-bedroom home in Lake Forest, Ill., and upon passing at age 100 left $7 million to her alma mater.

The millionaire next door was an unrecognized phenomenon when authors Thomas J. Stanley and William D. Danko published their book by that name in 2010. According to Stanley and Danko, 80% of people in the U.S. with a net worth equal to or greater than $1 million are ordinary people who have built their wealth in a single generation.

The book defines the “millionaire next door” as someone who doesn’t look the part. He or she makes no display of wealth. They do not drive a Bimmer or a Benz; like Sylvia Bloom, they might not drive at all. They eschew expensive jewelry and big homes. They choose to live in a regular middle-class or lower-middle-class neighborhood. The most important factor in building their wealth…

• • •

…is under-consumption.

Living an understated lifestyle briefly came into vogue during the Great Recession. Since then, a long bull market in stocks, rising housing prices and generally improved wages and employment have wiped away many of lessons of frugality. Credit card debt is up 3% from last year and stands a record high.

Now is a great time to remind young people of the long-term benefits of saving. Putting away $1 million over a lifetime is fairly painless. Author David Bach famously calculated that one could get there simply by skipping their daily Starbucks latte and putting the savings in a 401(k) plan with a dollar-for-dollar match.

Let’s look again at Sylvia Bloom, who never earned more than a secretary’s wage. At death, her estate was worth $9 million. Bloom wasn’t perfect. Hiding her nest egg from her spouse has a term: financial infidelity. For the most part, couples should know what their mate is doing when it comes to big money choices.

On the other hand, financial infidelity is much more likely to lead to disharmony and ruin when a partner is secretly spending—not secretly saving.

One in three adults with combined finances admit to financial infidelity, according to a survey from the National Endowment for Financial Education. When financial deceptions occur, 76% say it strains the relationship. Disagreements over money are the strongest predictor of divorce. It isn’t enough to just teach how money works; we have to teach how to talk about it too.

At first glance, Bloom’s saving effort may seem Herculean. But stocks returned an average annual 11% over her 67 working years. She could have built that nest egg saving nothing more than $55 a month. That is less than $2 a day—or in David Bach’s terms, the mere savings from skipping a Starbucks latte only every other day.

Bloom’s success was mostly about persistence, not brilliance. That is the lesson young people with decades of earning in front of them should take away from her story. Staying with her saving and investment approach all those years took discipline and humility. That was the true source of Bloom’s wealth—and others can, and should, copy her strategy.

More on the millionaires next door:

How to Teach Money Management in a Modern Family

This Rapper Drives a ’98 Honda to Make a Point About Financial Literacy

 

Posted in Youth on May, 2018