Posted on 01/04/2004 1:31:24 PM PST by Holly_P
"On the day I made the final payment on the house, I sealed the envelope and put the stamp on it," said Karen Manzo, 58. "Then I got up and walked through the house as if I owned it."
"Because we did," said her husband, Joe, 56.
"That was a powerful moment for me," Karen said.
At a time when the average American family has credit-card debt estimated at $9,000, the Manzos walk a different path. Middle-class people who live completely without debt, they follow the frugal prescriptions of one of their favorite books, "The Millionaire Next Door," a 1996 bestseller written by two professors who studied the nation's affluent.
The way to become wealthy, the Manzos say, is to live as if they're not wealthy. Or, in the words of the book's authors Thomas Stanley and William Danko: "Being frugal is the cornerstone of wealth-building."
The Manzos have made investing mistakes and lost money during the stock market's downturn. But they expect their thrifty lifestyle to bring them to a prosperous retirement in 10 years.
"As a byproduct of just trying to be debt-free, we accumulate wealth," said Karen, a lab technician in New Jersey. They declined to reveal their incomes or assets. But their financial planner, Lauren Locker, said they have accumulated an impressive amount on moderate incomes: "We would all be lucky to be in their position," Locker said.
The Manzos' lifestyle would not work for everyone. Their wedding 30 years ago cost all of $700. They do without cable TV. Karen squeezes the toothpaste tube "till it screams" and buys her clothes at Burlington Coat Factory and Value City (her sister teasingly calls her Karen Kmart).
Their tidy house in Paterson, N.J., was paid off in 15 years. (Danko, a professor at the University at Albany, State University of New York, said millionaires typically own less expensive houses than they can afford.) Though the Manzos, who are childless, are comfortable there, many middle-income families with children would prefer to avoid Paterson's troubled schools.
The Manzos also track their spending meticulously in two spiral notebooks — one green, for money; the other black, because they're always in the black.
As a result, they are able to save all of Karen's paycheck — about 40 percent of their pretax income.
"I think some people feel, 'What's the good of having money if you don't spend it?"' said Joe Manzo, a quality manager at a factory. "But there's a price to be paid. Debt is a self-inflicted injury. It's the choices you make. I like SUVs, but I drive a '99 Ford Escort. Our identities aren't tied to possessions. You could lose your possessions. Who you are is not what you own."
His wife sums it up: "I want to be as common as an old shoe."
It's not that the Manzos never spend money. They go to Broadway shows, sponsor a scholarship at a Paterson Catholic school and have vacationed in Costa Rica, Panama and Europe. Being thrifty, Karen said, means "I can purchase anything I want because I have a financial nest egg."
Although the Manzos describe their income as average, "The Millionaire" book points out, "Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high."
The book gives the following yardstick for measuring assets: You should have an amount equal to your age times your annual income, divided by 10. So, for example, a 40-year-old couple with $100,000 income should have net worth of $400,000 — not including home equity.
If you have double that, you're wealthy. The Manzos say their assets put them in the wealthy zone — before the stock-market bubble burst.
"We made — and lost — a fortune in the stock market," Karen said. She ignored her husband's advice to sell tech stocks before their value collapsed in 2000.
After that, they went to Locker, the financial planner, for help. Karen also joined an investment club affiliated with the National Association of Investors, which advocates long-term investments in companies selling at the right price.
Karen's frugality was born of an Indiana childhood watching her parents struggle to raise five children on her father's salary as a draftsman. Her mother didn't hold down a job or even know how to drive. Karen wanted wider horizons and financial security.
She took 10 years to work her way through college. The fact that her education was so hard-won makes her even more determined not to squander the money it has helped her earn.
Her husband had help from his parents to pay for college, but it came at a great sacrifice to his father, a welder.
Karen is such a believer in debt-free living that she keeps a copy of "The Millionaire Next Door" at work to show to co-workers and summer interns. She recently spoke about her strategies to about 15 of Locker's clients. "She doesn't have a nickel of debt — there's not another client I have like that," Locker said.
But several of them told her they could not imagine cutting their spending so radically. Even if they could, they said, their spouses would be unlikely to go along.
The Manzos know they couldn't have reached their financial goals without working together — a point also made by "The Millionaire Next Door."
"We don't agree on everything, but these are the core beliefs that have sustained us for the 30 years we've been together," said Joe.
"There is no arguing about money," Karen said. "That argument is never in our household. One of the byproducts of a debt-free lifestyle is that you eliminate the Number One cause of marital breakdown."
That may be one reason why, in the book's words, "financially independent people are happier than those who are not financially secure."
"I'm definitely a contented person. I'm happy with my life," Karen said. "We have everything we want."
What would you have her do? Sit on the couch at home all day, eating BonBons and watch soaps?
My brother in law has no kids, he is a millionaire, fanatically frugal and UNCLE SAM is getting all his money after he assumes room temperature.
Living the life of a homeless bum (he lived with his mother until she had to move into the nursing home, and even then he would sneak in her room to take a shower) is not something to admire.
The following is the truth.
A little over forty four years ago the girl to be my wife and I picked cotton one Saturday morning until ten AM. We cleaned ourselves up, went to the local Baptist preacher, said our "I do's" and were back in the field by 1 PM and picked cotton until dark. We did not have the proverbial pot to @iss in or a window to throw it out of.
To those who never had the pleasure (not) of dragging a 13 foot tar bottom cotton sack with a 100 pounds of cotton in it, picking a grab row with one who believes it when a kid with a seventh grade education tells her you will make things better, then you have no concept of the blind faith that girl had.
That winter I hitch hiked north to Chicago with ten dollars in one shoe, twenty in the other and five bucks in my pocket. I got a bed at the YMCA , took the first job I found as a night janitor, in two weeks I got a one room apartment and had sent a bus ticket to the wife.
I vowed to make it so my wife someday would not have to ever again experience that life we had gotten out of, or of having to work out side the home. This was accomplished, we raised three great children, was very lucky in calculated choices made, and I retired at age 52. Though not rich, we have little to be concerned about financially or of becoming a burden to others at this stage of life in our sixties, and it feels simply great.
sw
The folks in N. Dallas/Plano, TX that have had their homes foreclosed on in record numbers should study this complex principle.
Trajan88
May I add, pay cash for it. I had just bought a very nice used car two weeks before my job went bye bye. If I had known I never would have bought it but at least I didn't have car payments to worry about because I had paid cash. Tuck away what you would pay in car payments for a couple of years and you can get something nice and worry free.
Car's drive a whole lot better when the bank doesn't own most of them.
There is the possibility that there was no choice about having children. The kids don't always come. The couple may have not intended to choose money over children, but that is how it worked out. Without kids they needed SOMETHING to strive for...
One of the benefits of choosing some other system besides monarchy.
Sounds like her life is about as exciting as one also. I'm going to write a book on an alternative startegy for anyone who wants a life that consists of more than counting your pennies.
Start your own business unless you want someone else in control of your life. Buy whatever you feel like buying and spend as much money as you want, however, do it after you have earned it, paid the taxes and socked away 20 or 30% of the net.
An even truer measure of net worth would include the present value of any future payments you've already earned but not yet received, such as retirement pensions and even social security.
Compared to these $20,000 weddings which are very common (and insane!), its quite cheap.
My parents can't keep from reminding me that they were married 62 years ago, for less than $50.00 including the honeymoon at the Lemmington Hotel in Minneapolis for which they still have the room receipt ($7.00).
How times have changed!
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