How much money can you amass living frugally?

miser11The answer, of course, is a lot … especially if you consider $1.4 million ‘a lot’ … and, who doesn’t?

KC (a regular at my new reader community: sent me an e-mail asking:

I saw this article:

[the headline reads: “How social worker Jane M. Buri saved $1.4 million, then gave it all away”] and I can’t begin to think how you could start to calculate whether this is indeed possible for a moderately paid social worker who lived frugally.

What are your thoughts?

Well, on the surface the lady appears to be a classic miser; she:

– never married, never had children, never missed a day of work

– drove a 30-year-old car, watched an ancient TV (she resisted replacing her old TV and icebox), lived four decades in a house bought with cash in 1969 (the furniture was her parents’)

– dressed plainly, wore costume jewelery, dyed and permed her own hair

– would buy five sandwiches for $5.95 from Arby’s (she’d eat one and freeze the four others for later; when she went out with friends, they nearly always split the bill)

I think this statement sums it up the best:

She lived, her friends say, nearly as a nun.

On the other hand; she also ‘lashed out’ from time to time; if you call eating out ‘lashing out’:

Nor did she deny herself small indulgences. Some weeks, she ate out three meals a day, friends said. She traveled to Europe, and to the Rose Parade in California. She bought a baby grand piano.

OK, this is a lesson in frugality: single woman, no mortgage or car payments for thirty years and 100% gainfully employed living frugally …

… does this mean that it’s surprising how much she managed to leave behind?

Well, we have a data point:

She got her first job as a social worker in 1954, according to St. Louis Public School records. She made $3,800 a year. Within 10 years, she was running the department and had doubled her salary.

Let’s assume that she grew her salary from 1964 until 2002 at 6% p.a. (which leaves her a finishing salary in 2000 of nearly $61,000); let’s also assume that despite her frugal habits that she still spent / donated half her money (after all, there “was nothing she wanted and didn’t buy” and she “kept stacking charity donation envelopes in her sun room, until, once a year, she sent them all in”) … which all means, that we are assuming that she saved ‘just’ 50% of her salary.

Putting this all into a spreadsheet (with the final assumption that she just managed to earn 6% on her money, compounded over the 50 years that we are talking about), I can see that $1.4 mill. is reasonable for her to leave behind; in fact – by pure coincidence, because of all the assumptions that I’ve made – that’s exactly what I came up with at my first attempt at running the numbers.

There’s no doubt that living this frugally for 50+ years, having no major expenses (family, house, car, etc.) is the secret to this kind of financial ‘success’ … she apparently enjoyed the life of a ‘nun’ … so might others … would you?

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17 thoughts on “How much money can you amass living frugally?

  1. Thanks a lot Adrian.

    I had no idea how to start checking this, but from your advice I’ve had a go at putting your ideas into a spreadsheet with a small adjustment – here in UK the tax and National Insurance takes about 30% of your salary so I thought I’d see the effect on after-tax income.

    Interestingly the figures still come in pretty close to allow the argument to still stand.

    Careful observers will notice that the salary figure doesn’t double ten years after she started work but it was simpler to undershoot that figure to enable the salary to increase by 6% per annum.

    I’ve set the spreadsheet up so that you can alter the key multiplier values in the top line so you can do a sensitivity analysis to re-run the figures with, say, a lower annual increase in salary or different tax or interest rates.

    I’ve posted my version of the spreadsheet on Google Docs at:

    Thanks again for your guidance.


  2. KC – Thanks; looks like I’ll have to learn how to ‘post’ a spreadsheet to Google Docs … now, my readers will be expecting ME to do it, as well! Any hints? πŸ˜›

    Seems that you got a slightly larger number than me (and, thanks for remembering to put in Income tax, which would be closer to 25% in the US), but we both forgot capital gains tax on her investment gains, so – all in all – you CAN save your way to $1.4 mill. over 30+ years of frugal living, which buys you what … ?

  3. Man, I would never want to live that frugally. I guess people think that i’m super frugal and living a little on the miserly side, since we are saving half of our net income per month. But, the thing is, we net 15-16k per month now. If I can’t find some kind of peace and enjoyment on half of that after growing up poor, then I have serious problems!

  4. I think Scott brings up a very good point- saving half your income is far easier if you make $180,000/year than if you are making $61,000/year.

    >I can’t find some kind of peace and enjoyment on half of that >after growing up poor, then I have serious problems!

    Enough is a powerful concept, once you have enough being frugal doesn’t significantly lower your happiness. Maybe Jane M. Buri had enough and wouldn’t have spent a dime more even if she made twice as much, it sounds possible to me. Enough is a personal thing after all.

    -Rick Francis

  5. I think your right Rick. I mean, If I my property had several more ‘toys’ laying around it that I had to spend thousands of dollars on, I really don’t think that I would walk around feeling more fulfilled or any happier. I think we all have a few hobby areas that we like or a few things that we are into and of course we will tend to want the ‘best’ in those hobbies or areas, but does that necessarily have to take up 15-40% of our monthly pay to do?

    Even if we brought home a third of what we do now, we would simply have a smaller mortgage, lower taxes, lower resulting insurance and lower costs in several other areas and we would be saving a large percentage of our salaries as well. This is were delayed gratification comes into play because if I dream about driving XYZ brand car, I know that if I keep delaying gratification and stick to the plan, one day soon, i’ll get to own that XYZ brand car! But i’m not going to live in someone’s basement or live the life of a nun for every one of my living years just to hoard a pile of cash that i’ll never use to live my life’s purpose. πŸ™‚

  6. Great article and a very close (and precise) calculation! In my opinion – it isn’t that hard to make a million dollars over a span of 30-40 years, especially if you’re living a ‘frugal’ life. As a matter of fact – you don’t have to live that kind of a life to make a million dollars. All you need is some consistent and disciplined saving habit till your retirement and let the money compound over time. However, the question is – how good will that be after 30 years? Inflation plays a big role. A person who had a million dollars in 1972 would need 3.5 million dollars today (in 2009) – if s/he wants to maintain the same standard of living/lifestyle as they did back then. Worth a thought?

  7. @ Rick – while I agree with you, there is a cruel financial joke; it goes something like this:

    – earn $50k, spend $50k?
    – earn $150k, spend $150k!

    The habits are made when you ARE earning $61k per year … at least, in my (and, Scott’s) experience.

    @ Scott – “Even if we brought home a third of what we do now, we would simply have a smaller mortgage, lower taxes, lower resulting insurance and lower costs in several other areas and we would be saving a large percentage of our salaries as well. This is were delayed gratification comes into play”

    Exactly πŸ™‚

  8. @Adrian (re: Rick and Scott). I once heard a finance writer saying the key rule to overcome this sort of problem is:

    Pay yourself first.

    Sadly I can’t remember the precise details he gave, but essentially he compared a guy with a family living in a smaller home with a lower salary; to a guy who just had a wife but had a big house and a higher salary.

    But the first guy always “paid himself first” and came out on top after, say, ten years.

    The first guy always took 10% of all income into the household and “salted it away” and he never broke this rule. He acted like the family had never received that money, and was unavailable to pay bills.

    The second guy had never heard of this idea, and deep in his psyche believed that all money coming in was available to be spent.

    The first guy ended up much richer overall, even though technically he was poorer and had more mouths to feed. So people with less income can end up richer, which is quite a profound observation.


  9. @ KC – Yes, I believe that the point of the original article is to illustrate how much you can amass by ‘paying yourself first’ (in this case, we assumed 50% of all income) and tithed (presumably, considerably more than the ‘standard’ 10%).

  10. @Adrian. Sorry for being so thick, but if paying yourself first is so obvious, then what did you mean by:

    “@ Rick – while I agree with you, there is a cruel financial joke; it goes something like this:

    – earn $50k, spend $50k?
    – earn $150k, spend $150k!”

    Weren’t you saying that everyone inevitably lives to the level of their current income, without recognising the importance of “paying yourself first” ?

    Surely “earn $150k, spend $150k” is the very anti-thesis of pay yourself first, and therefore needed remarking upon?


  11. @ KC – I was agreeing with you … I guess it came out badly when it came to actually keyboarding it πŸ™‚

  12. I could afford to be more frugal, for sure, but I don’t think I’d want to live quite as frugally as she did. I would have replaced the TV, updated the furniture, and got my hair done. I might even have gotten the car I really, really wanted if I were in her shoes. But, I don’t necessarily want to be single and not have a family for the rest of my life. I want a husband and a child (yes single, only one for me) so I don’t think a lot of what she did would be feasible in my situation. I certainly applaud her efforts and I’m glad that she didn’t go without the things she truly wanted, but if I had amassed that much money I would have likely enjoyed more of it.

  13. Pingback: A cruel financial joke?- 7million7years

  14. It totally amazes me how people think they have a right to dictate how people should live, and also to get into their business. Point : If the lady wanted to be a “miser”, she had that right.

    That having been said, I do not think the lady was that miserly. If she wanted something, she went ahead and got it or did it. The grand piano is an example. Her European and domestic travel is the other.

  15. Doesn’t matter how she did it. Main point is, she did it, and left it to help others.

    That is a fabulous thing to do.

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