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Episode 169: Rags to Riches (R2R)

Getting rich off stocks

SHOW NOTES

This episode, I look at some real-life examples of people who came from humble backgrounds and ended their lives as millionaires. I discover how they amassed so much wealth, the power of compounding interest, and if you really can become a millionaire without a large inheritance.

 

The best way to build wealth is over a long period, investing early, using compounding interest, and reinvesting any stock dividends.

 

In this episode, I look at some real-life examples of people who came from humble backgrounds, worked reasonably normal jobs, and still managed to end their lives as millionaires…

 

“Start investing early and let your money work for you.” – Ben Jones


Time Stamps:

00:37 – The power of compounding interest.

01:20 – How Grace Groner was able to give away so much money.

02:40 – What a stock split means.

03:04 – Why Warren Buffet’s Berkshire Hathaway Class A stock is so expensive.

04:09 – The power of reinvesting stock dividends.

04:55 – The foundation Grace Groner gave 7 million dollars to.

05:26 – Horatio Alger and how lucky you need to become rich.

07:29 – How Sylvia Bloom became a successful investor.

09:07 – How a janitor became a millionaire.

 

Resources:

The Millionaire Next Door

Grace Groner

 

Connect with Ben Jones:

 

TRANSCRIPT

DADWelcome back to Money with Mak & G.  Thanks for being here. I have to admit I got jazzed up about talking about how the couple last episode implemented some super simple items in their life in order to make their financial dreams come true and retire early.  I’ve seen it in varying degrees when someone put their mind to cleaning up their debt, saving more, or getting that vacation home.  A little focus and effort, with fun along the way, and WAM, life is better!!!! It’s a little bit like the book Millionaire Next Door.  They don’t have three eyes and 6 legs.  They don’t have green skin.  They just make adjustments to their lives and stay focused, and disciplined and the next thing you know they have a couple of million invested.  You don’t always know who they are, because they don’t look or necessarily act any different than us at a party or online.

We all know we have computers, Tik Tok, Insta, Pinterest, Facebook, and more.  Things do change.  But, the compounding of your investments, that hasn’t changed.  Start investing early, and let your money WORK FOR YOU!!

Have you ever of Grace Groner?  She has her own Wikipedia page.  And, if you read the information on the page, in the upper right-hand corner online, you’d find out she was born in 1909 and passed away in 2010 at 100.  That’s interesting, but what’s more interesting is that she was a secretary and was known for philanthropy.  What? Does that sound right?  She didn’t inherit any big money, so why would anybody think that someone on a secretary’s salary is known for philanthropy?  Maybe she was a little like Mother Theresa and gave her time to hundreds if not thousands in need.  Nope.  We’re talking about money, so it has something to do with the green paper found in our actual or virtual wallets.

Grace had a twin sister and when they were 12, their parents passed away.  But, they were taken in by a prominent member of the farming community of Lake County Illinois. So, it wasn’t a big community with a ton of opportunity.  However, this prominent member of the community raised these twin sisters and paid to have them attend Lake Forest College. Grace graduated in 1931. In 1935, she purchased 3, sixty dollar shares of Abbott Labs. Ok, $60 back then is worth quite a lot. Depending on your calculation it’s over $1,000 and could be $10s of thousands today.  But, she worked at Abbott Labs for 43 years and the stock split many times.  A stock split means the company decides to break one share of stock into multiple shares. It’s usually because the price was getting high and difficult for the general investing public to purchase it. When the price comes down by about half in a 2 to 1 split, more people tend to be able to afford it, which can increase demand, which will increase the price, if the company is doing well.

Remember Warren Buffet, one of the greatest investors of all time?  He has a stock called Berkshire Hathaway, Class A, that sells for over $430,000 right now.  Can you buy that?  Probably not.  And, he doesn’t really care.  He thinks there are extra administrative costs to splitting a stock.  But, he has a philosophy that he only wants investors who are serious about buying and holding his shares.  So, he believes he serious investors won’t care.  That’s what he wants. But, he did start another stock which is class B, which is around $300, if you want to invest in that.  When I was old enough to start investing, I met a man while in Costa Rica who was talking about Buffet and this stock. At that time it was around $30k, which was a lot of money, but I guess I missed out on that one!

Ok, back to Grace. She didn’t take out any money from those original shares she purchased, and any dividends got re-invested.  That means it went into buying more shares. A lot of companies had these programs, so she would simply buy partial shares with any money she received.  She let her money work. She didn’t need much, because she received a cottage from her adopted family through inheritance and bought clothes at rummage sales.  She did travel all over the place but was frugal with her money.  It was said she had mismatched dishes in the kitsch and an old TV set in the family room.  And, instead of owning a car, she chose to walk.  However, she did have the money while living to donate $200k to help start a college fund at Lake Forest.  Plus it sounds like she spent some money attending football games at Lake Forest for entertainment.  

When she passed away at 100 years old, she left $7 million to a foundation to help numerous Lake Forest students with their studies, whether it be those in pharmacy school, study abroad, or other study programs. Yep, $7 million smackeroos.  It was estimated that her gift would help some 1,300 students.  How amazing is that? 

I love those stories about coming from humble beginnings, but making a real difference.  It may not be considered a Rags to Riches story exactly, but it does remind me of a guy named Horatio Alger.  He’s the author that has been attributed to starting this “theme” of rags to riches which is the idea of coming from nothing, through hard work you can improve your place in life.  But, it’s sometimes called the “Horatio Alger myth”, because his writings always had a pivotal moment of luck or some successful outcome that related to a unique situation. He wrote about teenage boys, who after some twist of fate, act with traditional virtues like being honest, giving to others, or not thinking of themselves but being concerned for others which ultimately leads to financial success.  For example, let’s say a character finds a large sum of money that was lost and it is returned to the owner. Or someone is saved when a carriage, yes the one with horses, overturns and this individual is then recognized by a wealthy individual, who gives this homeless kid an opportunity.  He was famous in the 19th and early 20th centuries so there weren’t any Teslas driving around.  But, you get the picture.

For us, a novel like that may seem foreign. We’re surrounded by opportunities everywhere because society has changed considerably, but there are still rags to riches stories.  Grace had the luck in choosing her major investment in the company she worked at that turned out to be huge.  But, her story is still one of being frugal, thinking of others, and investing diligently while letting her money work for her. How cool is that??

Luck is fantastic. I remember having a conversation with my friend Claudia and her husband Danny in Switzerland many years ago. He was a very successful investment strategist at JP Morgan and had years of formal and real-life education. I remember him saying something that always stuck with me.  He said he’d rather be lucky than smart.  I thought that was interesting coming from a guy who was very smart and very successful.  But, here’s the difference. He worked hard and got educated.  He wasn’t planning on only luck.  Maybe we need another story about being smart and learning along the way.

So, how about Sylvia Bloom?  She’s not a household name, but she should be.  Ok, she was a secretary as well, but her story is slightly different.  She worked at a Wall Street Firm and was responsible for administratively managing her boss’s stock investments.  She was in charge of taking care of all the paperwork.  She paid attention to his investing and learned from it.  She took that information and replicated it.  She invested in much smaller amounts but learned from her boss’s insights.  Plus, she reinvested her dividends instead of spending the profits she earned. She worked for the same firm for 67 years and passed away in 2016.  She was worth a mere $9 million and left $8.2 million to charity.  She was also frugal but not cheap.  There’s a big difference.  Frugal is choosing wisely, cheap is only choosing something because it’s less expensive.  Sylvia was known to dress well, and though not as accepted today, she owned a fur, which was an off-brand.  Frugal, chose wisely which clearly shows she made choices.  Presenting herself in a positive manner with rather nice clothes was a choice.  When it was all over, her closest friends and family were shocked to hear of her fortune, as she could have lived on Park Avenue with her firefighter husband, but it was a modest home, with modest furniture and modest possessions.

So, she got educated, remained disciplined, spent less than she made, and let her money work for her. I know as a kid I wanted things right now.  Patience is a virtue in investing.  Sometimes you can get lucky, but get educated and let time work to your advantage.

Ok, in 2014, Mr. Ronald Read passed away.  I love giving him a shout-out, because he deserves it. We did a much deeper exploration of Ronald in a prior episode, but this guy worked as a gas station attendant and janitor.  He lived Frugally and invested in stocks while learning about the stock market.  He was 92 and we died, he put together $8 million and left over $1 million to his local library and almost $5 million to the local hospital.  He was frugal, spent time learning, invested, and let his money work for him. Rags to Riches, yes possibly, or maybe just a little focus and time.

Before I go, I ran across some “Rags to Riches” scenarios for those well known celebrities.  I was surprised and a little intrigued at where some of the most famous actors, singers, and performers came from.  So, I wanted to see if any of them may surprise you. I want to dig in a bit more on them because I’m a bit curious, so who knows what will come next? Here you go:

  1. Hillary Swank, Actress known for Million Dollar Baby (it’s not about money, but I thought I’d use it)
  2. Jim Carey, Comedian known for The Mask, Cable Guy, and Dumb and Dumber (I didn’t always get his humor, but that rubber face can not be denied)
  3. Shania Twain, Country Music Singer, known for many hits including Man! I Feel Like a Woman
  4. Tom Cruise is, Actor known for Mission Impossible movies, the Firm, Top Gun, Risky Business and many more huge box office hits. Someone played a YouTube video of him running in his various movies, it’s kind of funny
  5. J.K. Rowling, Writer known for Harry Potter and expanding the creative brain power of millions of kids.  Thank you!

Hard to believe, but each of them has a story.  More to come.

Thanks for being here, and we’ll see you next time for more Money With Mak & G!!!  BYE!!!

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