How we bought our investment properties with lunch money

Saving a few dollars here and there may not seem like much. And I would certainly agree that buying lunch every day won't make much difference in the grand scheme of things.

However, the same discipline that pushes you to bring your own lunch every day is what's needed to carry your own water bottle instead of buying bottled water; to buying a used car instead of leasing a much more expensive new car; to watching movies on Netflix instead of spending $100 at the theater for a family of 4 for each movie, etc, etc.

It's not any one thing that makes the difference. It's all the things combined, done over a long period of time. It's the principle and mentality of saving money first, making it grow, and then spending some of it later.

Consider some of the ways my wife and I have saved a few dollars here and there, over the last 20 years, most of which can be done by any middle class couple, and are probably being done by you right now:

1. We both brought lunches to work. She did it for 19 years, and I'm going past 20. Breakfast is a homemade smoothie for me, and maybe a piece of fruit or a $1 street cart coffee for her.

I see many of my colleagues spending $5 for breakfast and $10 for lunch every single day. That's $15 per day, times 20 workdays in a month equals $300 per month, $3600 per year, per person.

(Don't even get me started on their Starbucks or D and D iced mochasomething habits. Easily another $5 every single day. I'm guessing. I've never had one because I'm afraid of getting dependent on coffee.)

Bringing your own lunch is easily a fraction of that cost. Let's say we saved $2000 per person per year, for a total of $4000 per year for 2 of us. That's $60,000 after 15 years, not counting compound interest, which would easily have made it $100,000.

2. We used to buy new cars. But, we were also keeping them for an average of about 7 years. I calculated that we averaged about $300 per month for each car after all was said and done. (Not including gas and insurance.)

To lease the same cars would've cost over $400 a month.

Now, we buy nice used cars, even as our financial situation has gotten much better. If we manage to keep our current used cars for 7 years, we will average less than $300 per month for each car.

We could certainly have afforded to lease 2 new BMWs all this time, at about $500 per month for each car, given our upper middle class salaries.

That's a savings of $200 per car per month, $400 per month for both cars. That works out to $4800 per year, $72,000 after 15 years, or well over $100,000 if invested correctly.

(For the record, we're at about $200,000 saved between items 1 and 2, after just 15 years.)

3. I've been buzzing my own hair on a weekly basis since I was 18. It was out of practicality at first. I didn't want to spend the extra 10 minutes each morning fussing with hair anymore.

It became a great money saving habit that's stuck with me all this time.

That's 24 years of saving $10 per shave per week. $520 per year, $12,480 after 15 years, without counting interest.

4. We've been taking road trips as vacations ever since our girls were born. We did it for practical reasons (babies/toddlers don't fly well. You're welcome) as well as for financial reasons.

I'm going to guess we easily saved $10,000 per year vs taking fancy overseas vacations. That's $100,000 after 10 years (the girls aren't 15 yet), again not counting interest.

5. We recycle and reuse everything. It is the principle of it. It's our mentality. Quite often we do it for environmental as well as the obvious financial reasons.  I have no idea how much money this saves.  It's a part of our every day life. 

(I sometimes bring home old newspapers and plastic bottles from work, because most cops simply toss them in the trash. No, we don't redeem the bottles, although we used to, until those recyclers with whole shopping carts full of bottles started filling up all the recycling machines. Lol. Now, we just put them out in our recycling can, where the recyclers can then pick through.)

6. Our kids get books and some new clothes for birthdays and Xmas. The little one usually gets hand me downs.

We also make it a point to tell our relatives to not buy toys for them. That saves everybody money, and is also better for the environment because you know where those toys end up within a month.

7. Our biggest money saver has been our home. Most banks will give you 4 times your income in mortgage. And that's exactly how much most people buy-4 times their income, the max mortgage they can qualify for.

We bought our current home based on my salary alone, while saving most of her salary, which was always significantly more than mine.

Therefore, we had a mortgage that was about the same amount as our combined annual income. That's 1 times our income, only a fourth of what the typical American couple spends on their mortgage.

That move alone probably saved hundreds of thousands in down payment and tens of thousands in interest every year.

8. Etc, etc, etc.

So, what does all this mean? And, why do I use 15 years as the benchmark?

The point is this:

Most people don't think saving a dollar here and there makes any difference. And, I agree with that.

However, when you make saving dollars a mentality and a lifestyle, it becomes something else entirely.

We bought our first investment property in our 15th year of work, for a total out of pocket sum of about $80k.

That's about the same amount of money we theoretically saved by bringing our own lunches for 15 years. (Scroll back to item 1)

We basically purchased a $300k condo using our lunch money as downpayment.

(That was late 2011. It's currently worth over $650k, an increase of over $350k. That's not including the $700 average monthly cash flow we've been getting from it, which would add up to about $385k in gains over the 5.5 years. So, we basically turned our lunch money into $385k, and it has been making a nearly 100% return every year. In addition, it's been virtually all tax free!)

You can say we bought the other properties with the money we saved by being frugal with our cars and vacations, not buying tons of toys for our girls, doing my own hair every week, etc. And, they've all made similar returns as that first property, only the properties have gotten larger over the years. (We're currently selling our 3 family. It's doubled in value in 3.5 years)

Summary:

It's not about saving a dollar here and there, once in a while. Its about saving dollars everywhere, all the time, and investing it and letting it grow.

It's the principle of it. It's the mentality of being frugal that's allowed us to save enough money to purchase our investment properties, which has expedited my wife's early retirement, and which will continue to add to our retirement savings long into the future.

PS:
For the record, I think we are frugal, not cheap.  We may not spend much on ourselves, but we do go out with friends and we never stiff anybody.  In fact, I'd say we've picked up more than our fair share of tabs.

And, I know some would argue that we're being too frugal and "missing out on life." We know we could've spent a lot more money on ourselves. But, I would argue that what's "fun" and what's important in life are different for everyone.

My wife is now able to spend every day with our kids, helping them with their homework, and we're both around every day to guide them through a very important period in their lives.

And, certainly, being able to live a middle to upper middle class lifestyle in NYC - we did splurge on 2 nice used cars, a nice house, moderate vacations every year, we go out to eat whenever we want (except we often opt for a nice home cooked meal instead), we have a well stocked beer fridge, etc - is nowhere near the definition of "missing out on life."

In addition, we do plan for me to really retire any year now, and then we'll be posting vacation pictures on Facebook just like everybody else!