The Wealthy Janitor, Part 1

October 8, 2007 · Filed Under · 4 Comments 

The Wealthy JanitorI have a friend who has worked as a janitor at a local elementary school for over 25 years. His current salary is about $36k a year, which in California, is not much. His wife does not work, he has no debt, owns his house outright, owns 2 modest cars, and will retire in a couple years with a substantial nest egg. Through many conversations with him over the past 6 years I have documented his best pieces of advice he has given me on savings and wealth building. This is part one of this new series. I will add another piece of advice bi-weekly.

Start Early, Just Do It!

The first piece of advice I remember him telling me was, “Kyle, you are young, time is your friend, start investing now.” He would also tell me that the amount invested could be small at first, just do something. I never really gave this advice much credence until I opened up my first IRA and added to it for a couple years. When I got my quarterly statements I started to see the power of compounded interest and dividends. More than what mutual fund or stock you invest in, the age at which you start determines how much wealth you will be able to accumulate through your working years. Start now if you have not already!

A Great Example:

My friend Jim is 23, just out of college, and starts putting away $100 a month in a retirement plan and it grows at 9% annually. When he reaches 33 years of age he decides to stop investing money in his retirement and instead puts money into his Alpaca farm. Another friend, Linda, is 33 years old, and just recently got out of credit card debt. She opens up her first IRA and adds $100 a month until retirement. Linda’s IRA also grows at 9% per year.  For this example, both Jim and Linda retire at age 65. At that time, Jim will have $313,000 and Linda will only have $215,000. Amazing! Start early, start early, start early! Even if you have credit card debt, try to budget some monthly income to your retirement account. Think it is impossible? Check out 7 Ways To Reduce Monthly Costs to free up some money for your retirement planning.

 Look for Step 2 in a couple days!

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Comments

4 Responses to “The Wealthy Janitor, Part 1”

  1. Mrs. Micah on October 8th, 2007 11:55 am

    Isn’t compound interest exciting? Somedays that keeps me going when I’m feeling like we’ll never have any financial security.

  2. Kyle on October 8th, 2007 12:39 pm

    When you think long-term, it really is a powerful thing! I just wish I had started when I was 24 instead of when I was 31. I can never get back those 7 years. Oh well….gotta move forward.

  3. Mrs. Micah on October 8th, 2007 12:40 pm

    *Mrs. Micah does the ‘I’m 22′ dance* But in a happy way, not a rubbing it in way.

  4. Kacie on October 8th, 2007 2:02 pm

    I agree–start now! And if you’re young, you’re certainly at an advantage. The same rule applies for some life insurance policies.

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