The Party Animal Saver

I recently got a call from an old friend of mine. We grew up in the same small farming town, attended the same secondary schools, and had the same friends growing up in that small town. Most, if not all of, the kids we had fun and games with still live in that same town. They never got out, and probably never wanted to.

My friend Steve and I both did. He joined the army and I went right to college. Steve saw the world and I learned about finance. We stayed in touch the entire time, and when his tour was finished he went to college on the GI Bill. It covered most of his expenses, and what it didn't cover he earned, working the midnight shift driving the campus bus. Steve initially studied English Literature, but in the eleventh hour switched his major to Engineering.

Steve's grandfather had been a coal miner in Pennsylvania. Talking to Steve, you can get a glimpse of that hardworking, solitary, risk-taking whim so often seen in men and women who put their lives at risk for the hope of a better future. I think it was that same impulse that drove him into the military, and ultimately, by the time he finished his tour of duty, to being the longest serving soldier on the DMZ between North and South Korea. He is an extremely intelligent, loyal, and hard working individual.

He also loves to party all night. He is completely disorganized: forgets to pay his bills, loses his wallet and keys constantly, spends every dime he brings home well before its time, and spills his coffee all over whatever electronic gadget he happens to have on his desk.

The occasion of his recent call was to tell me he had just been given the opportunity to move to Columbia to open the new South American branch of his engineering firm. He's been working at the firm since he graduated from college about 8 years ago, starting out as a grunt and steadily promoted to managing the Philadelphia office of his firm.

When he did start at the firm all those years ago, he had a conversation with an old army buddy who had attended the University of Virginia after completing his tour, and now worked on Wall Street. Steve's friend told him "Look Steve, you're basically an animal, and anything you bring home you are going to immediately devour. Do yourself a favor: max out whatever retirement plan options you have through your employer, and send $200 a paycheck to an account at ING Direct (who at the time was paying the highest yield). You won't miss it if you do it right from the start, and you won't know what you spent your take home pay on anyway." Steve's army buddy went through the process of helping him set up these two accounts, and since that day it has been on autopilot.

Steve hasn't withdrawn anything from his ING Direct account since he opened it, and I don't think he even looks at his 401k statements. To him, it's all money in the bank that he won't need for a long time, but when that time comes he should have plenty of it. I think when he started working the 401k max was $12,000, assuming he never raised it and a 9% rate of return, he probably has about $145,000 in his retirement account. Assuming an average rate of 4% on his savings account, at $200 a pay and 24 pays a year, he likely has about $40,000 in the account. Not bad for a guy who spends every dime he brings in the door! Even more impressive, at this rate, in another 8 years, he'll have about $430,000 in his retirement account and $108,000 in his savings account. Talk about a reason to party!

Steve is a good example of someone who is using the modern tools for wealth building that are available to everyone. These are tools that barely existed for the baby boomer generation, and did not exist for their parents. Unfortunately, too many people in our generation, the generation who will soon be the powerhouse of our economy, are uninformed and underutilizing these tools. As a result, they will be working long after the 'Steves' and 'me's' of the world have left working for new fun and games. Only this time it won’t be a small country-farming town, it’ll be on a South American beach!