Theodore R. Johnson never made more than $14,000 a year, but he invested wisely so wisely that he made $70 million by the time he was 90 in 1991.
He donated a large portion of his fortune for education. The money would provide scholarships for students who may not qualify for scholarships or whose families cannot afford to send them to school. I read about this inspiring story at the New York Time article "Retiree Donates Fortune to Education"
He had already set-up trust funds for his son, grandchildren and nephew as well.
Mr. Johnson grew up in a middle-class family. After graduating college in 1924, he went to work for a tiny West Coast outfit called United Parcel Service, which had brown trucks even then. He worked his way up at U.P.S. to VP for industrial relations by the time he retired in 1952. He was 52 at the time, and moved with his wife and son to Florida.
His annual salary was $14,000 then, but he had bought as much of the company's stock as he could and had about $700,000 when he retired. UPS was a private company, but employees had the right to buy stock. While enjoying his retirement, he watched the company grow and the value of his stock holdings grow with it. His salary may not be modest but not everyone with his salary managed to accumulate a $70,000,000 fortune. That $14,000/year in 1952 is equivalent to roughly $140,000 today.
One of Johnson’s mentors advised him to save and invest 20 percent of his income over the course of his career so that it would compound over time.
Johnson protested: “I can’t live on 20 percent less income,” he said. But his mentor assured him he could.
Over time, as saving that extra money became a habit, he’d learn to live without it. He lived a frugal life despite all his promotions and salary raises during the years. He also took every chance to buy UPS stock during his career at the company. While enjoying his retirement, he watched the company grow and the value of his stock holdings with it. However, despite his immense wealth, he continued to live frugally.
He wanted to create a lasting legacy. Along with his wife, he created a charitable foundation for education and donated half his fortune to it. This is why he ended up donating so much money, despite retiring early.
Of course, there is an element of survivorship bias here. Investing so much in employer stock is risky, because it could have gone either way. While UPS stock was privately held and did very well, it could've turned otherwise. Still, I find this story inspiring. It creates a blueprint for frugal living, consistent saving and investing, and sticking to your strategy. If you are patient, and think in terms of decades, your investments would compound to pretty neat amounts. I would personally invest in a diversified portfolio of investments over one company. However, the nature of investments is such that in a diversified portfolio one would likely end up with a few successful outliers that end up accounting for a large portion of ending net worth. That's merely as a result of their success.
There are several important lessons from this story.
1. Pay yourself first
Dedicate a certain portion of your paycheck for saving and investment, and stick to it.
2. Invest Regularly
You need to invest regularly, and stick with your investments. That consistency compounds over time.
3. Be Patient
In order to take full advantage of the power of compounding, you need to patiently stick to your investment strategy, and hold on to your investments.
4. Give back
A person is not an island. While a large part of success is due to individual drive, it's also a result of the environment we are in, and the people that shared knowledge and resources with us to get us started and help us succeed. It is important to give back to society that has helped us succeed.
