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THERE IS NOTHING special about my story—no amazing tales of picking stocks, no glorious path of salary increases. Instead, there was just the challenge of living well below my means and consistently putting my money to work for a better tomorrow.
Growing up, I don’t recall any major family financial issues. Of course, my parents would likely have shielded me from any challenges that they endured. I know that they sacrificed to make college available to all four of their children, ensuring we weren’t encumbered by student loans as we made our way into the real world. Their four children branched out on divergent paths—one in banking, one in health care, one in education and, bringing up the rear, I spent my career in manufacturing as a planner, primarily a production planner.
I had a passbook savings account for my “college” money and, when I started working in high school, that’s where my money would get deposited. My main financial memories come from my mom. She said that I needed to spend less than I earned, so I could save. She had also inherited 645 shares of General Motors stock. That prompted me to start following GM. I looked up the closing stock price each day in the newspaper, graphing it to see if I could predict which direction it would take.
Imagine my horror when one day the stock price suddenly plunged. When I brought this to my mother’s attention, she told me that the stock had split two-for-one. When I confirmed that she now had 1,290 shares, she was amazed that I’d somehow picked up how many shares she owned. I never was able to determine future stock price directions from my graphs so, after many months, I quit charting the price. Still, I continued to follow GM stock until many years later, when the company filed for bankruptcy protection.
As for my father, by the time I was in high school, I knew he bought stock in various companies. Most notably, he purchased Home Depot early on and never sold it. Those shares eventually were divided among his four children. We were all in our 50s at the time of his passing, so although it was a significant inheritance, it wasn’t so large as to be life-changing.
From the time I was age 10, my parents had always had a whole-life insurance policy on me. Before I graduated from college, they scheduled for me to meet with the insurance agent, so he could explain life, health and disability insurance. The meeting would have a profound impact on my financial future.
In addition to explaining various kinds of insurance, he gave me my first introduction to personal finance. The finance and investing classes I’d taken in school covered a lot more ground. Still, perhaps they provided me with the background needed to truly grasp what the agent told me.
He introduced me to the rule of 72 and challenged me to save $30,000 by the time I was age 30, so I’d have money to invest in some kind of appreciating asset. It was a benchmark I failed to achieve. Nonetheless, the insurance agent taught me a lesson I’ve never forgotten and which I diligently followed for the rest of my career: It was imperative to save money and live on less than I earned.
My first job was in the textile industry, making carpet with my uncle. We were a two-person company with no thought of a 401(k). Still, my uncle told me about a seminar at a local bank where I could learn about IRAs. I remember picking up a brochure there and thinking that this would be a good start toward my $30,000 challenge.
When the time came to choose a fund, I’d narrowed it down to American Capital Pace or Fidelity Magellan Fund. At that time, it seemed all funds had a sales load, typically 5.75%. I ended up choosing American Capital Pace. The first year, I contributed the $2,000 IRA maximum and resolved to send monthly checks until I reached the next year’s $2,000 limit.
Unfortunately, our company’s principal customer was bought out and the new management chose a different carpet source. My uncle and I both took a 50% pay cut until we had new customers lined up. But at the same time, I started looking for other opportunities.
I was fortunate to find a new company in the area that had nothing to do with carpet. It was a Japanese injection molding company that made plastic cases to house CRT computer monitors and television sets. I was hired to be a production planner and trained by my Japanese advisor, Endo-San. The Japanese employees never claimed the title of manager or supervisor, only advisor. It was the most formative part of my career.
A few years later, when Endo-San was rotated to a plant in Ireland, I wrote him a thank-you note. I mentioned that he was a “stern taskmaster,” which he took as the compliment I’d intended. Endo-San held me to much higher standards than my peers, but that was how he taught me to check all details, reconfirm all details, follow up on all details and never accept less than the highest level of results.
With my new job and better salary, I was again able to scrape up money for my annual IRA investment. The company didn’t offer a 401(k), so I concentrated on contributing the $2,000 a year then allowed for IRAs.
After a few years, I saw that American Capital Pace’s performance was falling behind, so I rolled my IRA over to an index fund at another company. At the same time, I read everything I could find about mutual funds. I was learning more, including how I would be better off in a no-load fund instead of paying a 5.75% sales charge.
During this education, I also learned that Fidelity Magellan was a fantastic fund and that perhaps I’d made the wrong choice. My reading uncovered another Fidelity fund with similar objectives, Fidelity Contrafund. It was a no-load fund. I decided to start putting new IRA money into Contrafund in 1994 and continued this until 1997.
In 1998, Roth IRAs became available, and I bought Contrafund in my new Roth. In the early 2000s, the government started raising the annual IRA limit, and I duly increased my contributions. My savings discipline continued to improve. It was no longer taking me until April 15 to hit the annual limit. I was contributing the maximum earlier and earlier.
Eventually, I had next year’s annual IRA savings ready to go by December of the current year. No matter what the stock market was doing, I mailed the check during the first week of January. I continued this practice for the rest of my career.
Meanwhile, my Japanese employer finally set up a 401(k). We were called into the cafeteria for the monthly all-employee meeting and told about the 401(k), along with all the supporting information and the forms we needed to fill out. After the meeting, the hourly workers returned to the production line, while the salaried workers had lunch since they were already in the cafeteria.
Except for me. I took the forms back to our open-plan office, went through all the information, figured out what needed to be filled out, and then took the forms to the office typewriter and typed them up. At the time, it was common for companies to restrict your deferral rate for the 401(k), and our maximum allowed savings was 15%. I signed up to contribute 15% of each paycheck, with the money going into index funds.
I dropped the completed forms on the human resources desk and headed to the cafeteria for my normal brown bag lunch. After the company controller finished his lunch, he went to his desk to fill out the 401(k) paperwork. As he handed his completed forms to HR, he commented that he was the first to sign up for the 401(k). Nope. When the HR staff had returned from lunch, my completed forms were already waiting on their desk.
From then on, including at subsequent employers, I maxed out my 401(k) based on what my company would allow me to defer. I also kept contributing to my Roth IRA. It wasn’t until 2012—a glorious year—that the company increased the deferral rate so we could save up to 50% of our salary.
From that point until I retired, I was able to hit the maximum annual 401(k) contribution. Once I turned age 50, I added the catch-up amounts to both the 401(k) and my IRA. Doing this never prevented me from living my life, going on trips or doing fun things. I never felt that my frugal lifestyle caused me to miss out on anything.
My greatest blessing is being married to the most wonderful woman. Like me, she also lives below her means. She came from a family that was good at saving money, but not investing. They wanted their money to always be safe, so their only investments were bank certificates of deposit.
Two years after I joined the company’s 401(k), she was comparing her 401(k) balance after five years of investing to my 401(k) after only two years. She was flabbergasted that my account balance was greater than hers. With some gentle guidance, she too was soon increasing her deferral rate and investing in stock index funds.
Although I never got close to a six-figure income, I feel I’ve done all right. I retired at year-end 2021. My wife continues to work, which ensures the family has health insurance. My investments have increased enough that—like many of my older peers—I’m now fretting over taxes, required minimum distributions and Roth conversions.
One new concern: After my wife and I are gone, our son—currently age 14—will be compelled to pull everything out of our retirement accounts within 10 years, and thus will have the opportunity to blow it all.
I’m saving various personal finance articles for our son in the hopes that, if I should cross the river before he begins his money journey, he’ll have something to refer to and perhaps learn from. Along with those articles, I plan to include this essay. Maybe he’ll read some of what I’ve written and take it to heart. I hope he embraces his money journey as fervently as I have mine—and that he enjoys even more success.
E. Smith Smallwood retired in 2021 after spending 26 years as a production planner supplying the automotive and heavy-duty truck industries. Along with his wife and son, he lives near Charleston, South Carolina, where he spends his time volunteering as an assistant scout master for a Boy Scouts troop and as a high school band booster. He also enjoys reading about U.S. history and personal finance.
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Beautiful article and wonderful journey. Thanks for sharing!
I disagree with you on one thing…your story IS special. You are in the minority of folks who consciously lived beneath your means and saved the difference, year in and year out. I’ve always told my kids it’s not what you make, it’s what you spend that will get you in trouble. I lived with roommates when I was first out of college. Would I have rather had my own place? Sure, but that was a poor choice. Living with the roommates cut one of the biggest costs of a young single person, and allowed me to start saving.
Mr. Smallwood – I, too, have succeeded by starting my saving at an early age and by making it a priority. My father was our encourager – having worked for GM for 37 years. He gave my brothers and I lots of tips over the years. I’m still of the impression that one of the biggest impediments to being properly postured for retirement is starting one’s saving efforts too late in life.
I never tire of reading about people who win at life by pursuing diligence in simple things. Thank you for sharing your story.
Thanks for a great article, Smith. Sort of like the tortoise and the hare, slow and steady. And, like I grill certain meats “low and slow.” I hope your son inherits you and your wife’s “savers” gene. You have proven steady, regular savings and investing over time is how to do it. Thanks again, and enjoy retirement!
Hi, Smith. I very much enjoyed your article. You’ve set a fine example for your son and I bet he’ll learn more from that than any other source. Kids tend to pay more attention to what we do than what we say!
Great story. It seems a lot of us “wandered in the wilderness” for a few years before finding our path. Your comments on Fidelity reminded me that I too had that opportunity, but passed on it. Like a kid in a candy store I just had so many great recommendations from financial magazines (Money, Forbes, etc.) at the time and tried so many things before ending up at Vanguard. Enjoy your retirement and keep writing!
My experience much resembles yours regarding the parents thing. They provided more than I needed and I invested young and often so reaped the rewards of compounding with a few hiccups along the way due to unprofitable individual investments. Lessons learned, thankfully.
I love examples of people accomplishing things others claim are too hard or they can’t do. Well done! Looks like you were able to retiree early as well. 👍
Enjoyable read, and congrats on your retirement and accomplishments as a saver.
I wrote an article here several months ago about setting up a trust for my 20-something daughter, in large part so that she wouldn’t be able to “blow it all.” Also, she’s not super-organized, and the trustee will make sure that the required distributions are made within ten years. (The great bulk of our estate at the moment is in retirement accounts, and I’m not sure we’ll be able to make Roth conversions quickly enough.)
Just as an aside I just read “Simple Wealth, Inevitable Wealth”-A MUST READ.
This is a wonderful educational site
Enjoyable article. I remember the white passbook from my childhood savings account and how thrilled I was when it finally showed a balance above $100. I wouldn’t be surprised if your son picks up on your prudent approach and interest in personal finance, especially when you give him this article.
So did you ever end up buying life insurance?
A very nice article. I appreciate you sharing your story as it exemplifies that staying focused and making reasonable efforts to educate yourself and save for retirement are the main determinants in achieving success. Massive financial windfalls and stupendous investments (while nice) aren’t usually required for most of us.