“I was working at a bus depot,” says Andrew Hallam, describing the summer that changed his life.
“I was 19, and I was saving money for college. It was a night shift, and there was a mechanic there [named Russ]. Everybody said to me — if Russ wants to talk to you about money, make sure you listen to him.”
Andrew harbored doubts.
“I thought, why would I listen to a mechanic about money?”
Fortunately, though, Andrew took their advice.
Russ became an unexpected mentor. He taught Andrew the power of investing small amounts over long periods of time. He encouraged Andrew to use part of his lunch money — $3.50 per day, or around $100 a month — to open his first investment account.
Andrew listened. He invested small sums throughout college, often as little as $100 a month.
After graduation, he accepted a job as an English teacher. His salary amounted to $28,000 per year in take-home pay (after taxes). Andrew saved nearly half.
He avoided rent payments, placing advertisements in the newspaper in search of house-sitting side gigs. He rode a bicycle to work; he showered and shaved after he arrived. He bought pasta and potatoes at the grocery store, but picked his own clams for added protein.
He repaid $12,000 in student loans within one year of graduation. Then he aggressively began investing in the market.
By his mid-30’s, Andrew became a millionaire on a teacher’s salary.
And by age 40, Andrew was more-than-comfortably financially independent.
In today’s interview, Andrew shares his story.
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Andrew wrote a book called Millionaire Teacher: Nine Rules of Wealth You Should Have Learned in School.
In the latter half of today’s episode, we cover the first three rules of wealth:
- Rule 1: Spend like you want to grow rich. (Don’t waste money on junk.)
- Rule 2: Use the greatest financial ally you have. (Time.)
- Rule 3: Small percentages pack big punches. (Avoid high-fee funds.)
In next week’s episode, we’ll cover Andrew’s other six rules for building wealth.
Enjoy!
— Paula
Resources Mentioned:
Books:
- Millionaire Teacher, by Andrew Hallam
- The Investor’s Dilemma, by Louis Lowenstein
- Your Complete Guide to Factor-Based Investing, by Larry Swedroe and Andrew Berkin
- A Random Walk Down Wall Street, by Burton Malkiel
Websites:
- HFRX Hedge Fund Indices
- SPIVA Performance Scorecard
- Portfolio Visualizer
- The Hulbert Financial Digest, from Mark Hulbert
- Moneychimp.com
Connect with Andrew:
- Andrew’s blog
- Millionaire Teacher on Facebook
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If you’ve been listening for a while, you’ve heard me interview many best-selling authors. Before I interview these guests, I need to read or refresh my memory of their books.
Sitting down to physically read the books can take a long time. That’s why I listen to their audiobooks, thanks to my subscription to an audiobook service called Audible. If you want to give them a try for free, head to audible.com/trynow for a free 30-day trial.
Camille
Thanks for this interview, Paula. I enjoy hearing from people who do not (or did not) make huge salaries and are still able to invest their way to financial security. It would be nice if you were able to get more details from your interviewees about their path to financial success. For example, Andrew said that he started bringing home $28,000 when he started teaching, that he saved 50% of his income, and that he had a seven-figure investment portfolio by age 35. How old was he when he started teaching and started doing this? Was he investing 50% of his income for 5 year? 10 years? 15 years?
Details like this are of interest to listeners like me because we want to have benchmarks in order to know if we’re on track or if the interviewee’s results were simply a result of a one-in-a-million investment that is unlikely to be replicated.
It would have been even better if he’d provided details of his salary increases between the time that he started working and hitting a seven-figure portfolio at age 35. However, I do appreciate that most financial bloggers (and most people) don’t like to divulge those kinds of financial details.
Keep up the good work with the podcasts, Paula!
Andrew Hallam
Hi Camille,
You asked great questions. But I’m glad Paula didn’t ask me those! Off the top of my head, without really reflecting, I wouldn’t have been able to answer them. 🙂
But I’ll do my best to do that here.
Like most professionals, I started to work in my early 20s. Unlike most people, I was (as Paula says) a “Frugal Weirdo.” But that was also necessary for me to achieve something so ambitious. I got married in my mid- 20s to a frugal partner. Now we had double the income, but not double the expenses. We kept saving and investing. Over time, we relaxed our frugal ways, but most of my friends would still call me frugal.
Over time, our salaries increased. We also took jobs at a private school that paid for our accommodation costs. That really juiced our savings. We didn’t have to live on campus, which was also a bonus!
Over the past 25 years (I’m 46 today) we invested an average of (much!) more than $20,000 a year.
But I’ll illustrate a cool point with a compound interest equation. If somebody had $20,000 at age 22 (that’s about what I had when I started to teach) and if they invested an average of $20,000 per year for 25 years, at 9% per year (that’s slightly lower than what the S&P 500 made from 1991 to 2016) then that money would have grown to just over $2 million.
But every person is different. Market returns will be different (perhaps worse, perhaps better). The important part is to invest regular amounts in low cost index funds (or buy cash flow positive real estate) and continue to rinse and repeat. Then (and this might be the most important part!) you need to recognize the importance of your time and the brevity of life. Spending time with the people we love is more important than sacrificing what’s important to build financial assets. Fortunately, I’ve bought the luxury of time. I think you can do that too!
Cheers,
Andrew
Mysticaltyger
Correction: Andrew said 12b1 fees aren’t part of the published expense ratio. That isn’t true. They are included in the total expense ratios published. I am not an index fund purist, but generally, funds with 12b-1 fees are not funds you want to invest in because their fees are too high. They typically have expense ratios at 1% or higher. I do invest in actively managed funds, but all the funds I invest in have below average expense ratios for their respective categories.
David
Thanks to Paul and Andrew for this informative and entertaining podcast – my favourite one to date. It inspired me to “buy” Andrew’s book with this month’s audible credit. Wierdly Looking forward to my morning commute to work now so I can listen to it.
David @ VapeHabitat
I can afford anything)) Good podcast. Made some things a bit easier for me
Travis
Paula – what are the chances that you could interview Bill and Acacia Catterly from Andrew Hallam’s book? I would love to hear their story!