The story of Ronald Read

In 2014, an American named Ronald Read passed away aged 92. 

Mr Read’s career consisted of 25 years as a gas station attendant followed by 17 years as a part-time janitor.

His death made headlines around the world.

Why?

Because despite his relatively humble career, he had amassed a secret fortune of $8 million.

$8 million!

How did he do it?

He implemented every action we prescribe in this newsletter, and he made money work for him.

Let’s recap those actions in the context of Mr Read’s life.

Spend less than you earn.

This is the bread and butter of making money work for you. Before mastering this skill, the rest are meaningless.

How do we spend less than we earn?

We optimise spend for happiness instead of comfort and convenience.

In a beautiful twist of fate, most things in life that bring genuine happiness cost very little and improve your health, and the health of our planet.

When not working, Mr Read was a voracious reader; a regular patron at his local coffee shop; spent his days chopping wood and collecting stamps; and financed his stepchildren’s college degrees.

His story is extreme, but we can learn plenty from it.

You likely have more hobbies and guilty pleasures than Mr Read, I know I do. But you can boost your happiness and spend less by focussing on the following:

• Learn new skills.

• Spend time in nature.

• Exercise regularly.

• Create strong social and community ties.

• Spend your money on others and good causes.

This list isn’t exhaustive.

But, as we engage in more of these activities, we have less time to spend money on quick dopamine hits.

Invest the rest and stay the course.

Mr Read was born in 1921. He lived through World War II, the Great Depression, the Cold War and the 2008 Financial Crash.

He experienced his fair share of bad news and plummeting stock prices.

But his commitment never wavered.

Mr Read bought a diversified portfolio of Blue-Chip stocks and held them for a very long time.

His investment philosophy encompassed all the rules we have previously covered:

• Start early.

• Keep it simple.

• Diversify.

• Get out of the way and let compounding work its magic.

Implement these rules and you have mastered 95% of what it takes to be a good investor.

You must decide what investments are right for you. We all have different risk tolerances and aspirations.

But, as a reminder, my portfolio is 90% index funds and 10% individual stocks.

Why do I do this?

Because, although beating the market is theoretically possible, I know it’s hard.

If humans continue to innovate, I will hit all my financial goals by achieving market returns with 90% of my money. The other 10% is for fun. I know I am unlikely to beat the market but having fun with 10% ensures I stay disciplined with the other 90.

We are all different. Find what works for you but remember that the biggest contributor to investing success is time.

Ronald Read’s wealth in numbers.

We don’t know how much and how often Ron invested. But using historical data I have calculated how much we would need to invest per year to emulate his outcome.

Assuming Ron began working and contributing to his investment portfolio at 18 and finished working at 60, then his investment journey started in 1939 and his contributions stopped in 1980.

I have used the S&P500 as a proxy for his portfolio and adjusted his hypothetical contributions by inflation.

If we could turn back time and start investing in 1939, we would have had to invest the equivalent of $4,068 per year, in today’s money, every year, for a 42-year working career to have $8m in the bank at the ripe old age of 92.

How this impacts us.

We know that Ronald Read was extremely frugal. Probably more frugal than any of us would choose to be.

We also know that he worked relatively humble jobs. Probably more humble jobs than most of us have.

His story is an example of the power of spending less than you earn and investing for the long-haul. And we can use his story to make informed decisions in our life.

If you are earning an above-average wage, you could be a below-average spender and probably be financially free within 10-15 years of work.

If you earn an average wage and spend an average amount of money, you could work for 42 years, contribute the equivalent of $4,000 per year to your investment portfolio and probably be left with a vast sum of money to put to good causes or pass onto your children.

The choice is yours.

Just remember that freedom is one of the biggest contributors to happiness.

And being financially secure is one of the best routes to achieve that freedom.

If somebody on a janitor’s wage can do it. I know you can too.