April 27, 2013


I didn’t start saving and investing particularly early, I just maintained this desire not to waste anything. So I got through my engineering degree debt-free — by working a lot and not owning a car — and worked pretty hard early on to move up a bit in the career, relocating from Canada to the United States, attracted by the higher salaries and lower cost of living.

Then my future wife and I moved in together and DIY-renovated a junky house into a nice one, kept old cars while our friends drove fancy ones, biked to work instead of driving, cooked at home and went out to restaurants less, and it all just added up to saving more than half of what we earned. We invested this surplus as we went, never inflating our already-luxurious lives, and eventually the passive income from stock dividends and a rental house was more than enough to pay for our needs (about $25,000 per year for our family of three, with a paid-off house and no other debt).

Our bread-and-butter living expenses are paid for by a single rental house we own, which generates about $25,000 per year after expenses. We also have stock index funds and 401(k) plans, which could boost that by about 50 percent without depleting principal if we ever needed it, but, so far, we can’t seem to spend more than $25,000 no matter how much we let loose. So the dividends just keep reinvesting.

Read the whole thing. This is a bit extreme — and if you’re managing rental property, you’re not entirely retired — but most people can save a lot more than they think they can, if they try.


“Little” things that are only a few hundred dollars a month add up to hundreds of thousands of dollars shockingly fast. But the lack of this understanding of the numbers is what keeps most middle-class people from getting ahead.

That’s the advice my grandfather gave me: People spend a lot of time agonizing over big purchases, he said, but it’s the nickel-and-dime stuff that gets you over time. He’s right about the importance of habit, too.

UPDATE: I’d note that this isn’t inconsistent with Robert Heinlein’s marital advice: “Budget the luxuries first.” The key word there is budget. If you do it right, you can probably manage to save more than you expect, without feeling deprived.

Plus, note this observation from David Freddoso: “In today’s America, it’s easier than ever to get by just barely, and harder than ever to get ahead.”

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