What does it take to go from $83 in savings to having more than $150,000 in the retirement kitty in less than two years? Discover her secrets.
Excerpt from September 2005 Rule Your Retirement Newsletter
1. Improve your job prospects. Lesley immigrated to the U.S. from Ireland with her American husband in 1979. They had three kids under the age of 4, with two more to follow. Their family income was $5,200 a year (less than $15,000 in today's dollars). Understandably, they had trouble making ends meet."One day, my father asked if I was going to keep going from financial disaster to financial disaster for the rest of my life," says Lesley. "I was working all kinds of odd jobs, from waitressing to assembling toys on a factory line, on night shifts so we didn't have to pay for day care."
For Lesley, the biggest obstacle was her lack of higher education. "In the U.S., I could not get the type of job I used to do in Ireland without a college degree." So she went back to school. She earned merit scholarships, almost straight A's (just one B), and was selected to the Phi Beta Kappa national honor society. With degree in hand, she was able to increase her income.
2. Read great books about money. Though Lesley was able to fatten her paycheck, she had difficulty increasing her savings. She credits several books for changing that situation, particularly Smart Women Finish Rich by David Bach, Rich Dad, Poor Dad by Robert Kiyosaki, 9 Steps to Financial Freedom by Suze Orman, and The Millionaire Next Door by Thomas Stanley and William Danko.
3. Track spending. Lesley followed Orman's advice to follow the money trail. "I took three months' worth of bank and credit card statements and divided them up into various categories. It was an eye-opener." She learned about how much she was spending on car repairs, utilities, and groceries and took some money-saving actions.
4. Wean your kids off the gravy train. Lesley also learned how much she was spending on her kids, even into adulthood. She still helps her kids; it's a priority for her. But she's limited her largesse.
"My children's well-being is extremely important to me and I can't bear to see them suffer financially," says Lesley. "So I had to build helping them into my financial planning because I was going to do it anyway. The difference was that it had to be done after I was taken care of. And most financial planning books miss that. Women use money based on their values until they realize that, it's difficult for them to organize their money properly."
5. Consider selling your house. Lesley remodeled and sold her "shabby farmhouse" for a very good price, and now rents half of a house from a friend, paying just one-third of what her house cost her. While most of us consider our houses assets, she considered hers a liability, something she learned from Rich Dad, Poor Dad.
"An asset is something that puts money in your pocket," she says. "A liability is something that takes money from your pocket. Until it's paid for, a house is a liability, a very large one. I am taking the money I'd be spending on a house and putting it into my 401(k) and then some."
6. Telecommute. We've all heard that expenses drop in retirement because we no longer have the daily commute to the office. Lesley decided not to wait until retirement to lose those expenses. "That is saving me an astonishing amount of money on gas," she says. "There are no more meals out at work or after work because I'm working late. My clothing expenses have dropped dramatically."
7. Max out your savings accounts. Lesley contributes as much as possible to her 401(k), which will be $18,000 for this year. "I can't believe how much I'm saving and how little I seem to miss the money that is taken out of my paycheck," she says. Plus, she appreciates the tax savings that come from deducting contributions. She figures that contributing to her 401(k) cuts her tax bill by almost $5,000 a year.
8. Save your marriage. OK, you shouldn't stay with someone just for your retirement. But divorce can wreak havoc on finances, especially for women because they have often sacrificed their careers to raise a family. Says Lesley, "I'm still not done with the financial hassles from my divorce, but I'm really doing well otherwise."
9. Reward yourself. Life for Lesley isn't just about frugality and self-denial. She visits South Africa twice a year to see her father. She has plans to take over one of the family farms. But she won't inherit outright. She'll have to buy it, which she's budgeting for.
10. Slow down, but don't retire. "I just can't see myself sitting around all day," says Lesley. "My dad retired at 70, and at 85 is still going strong. He said it was a big mistake for him to retire. I love my career and I'm very happy with my company, so it's quite likely I'll find something similar to do when I'm older. Just not all day, every day."
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