The Motley Fool brings us the story of Lesley Wootton. Wootton and her family struggled for the better part of two decades—having low income (at one point being less than the equivalent of $15,000) and needing to take on odd jobs, factory night shifts, and waitressing. Then came the divorce.
By age 53, still reeling from the divorce, Wootton had a negative net worth and her retirement savings totaled $83.
Two years later, she was debt-free and had $150,000 in savings.
How did she do it?
Lesley got to where she was the old-fashioned way: denial, terror, confusion, and, finally, action out of sheer necessity. She buckled down, got a handle on her expenses, made cuts (some of which were difficult -- like telling her grown children that she could only provide for them after her financial needs were met), sold her biggest asset (her home) to live more cheaply as a renter, and reconceived what retirement would mean for her.
A more detailed article about Wootton broke out her turnaround into ten “steps”:
- “Improve your job prospects.” Wootton found her lack of college degree limited her job prospects in the U.S., so she went back to school.
- “Read great books about money.”
Wootton was partial to authors David Bach, Suze Orman, and Robert Kiyosaki, and she liked The Millionaire Next Door, by Thomas Stanley and William Danko.
- “Track spending.”
- “Wean your kids off the gravy train.” In tracking her spending, Wootton found how much she was continuing to spend on her kids, even into their adulthood—and cut back.
- “Consider selling your house.” Wootton cut her monthly housing expense by 2/3 by selling her house—and sharing rent with a friend.
- “Telecommute.” Wootton found that this not only saved her commute expenses but cut down her eating out and clothing expenses.
- “Max out your savings accounts.” Wootton is maxing out her 401(k) and said, “I can’t believe how much I’m saving and how little I seem to miss the money that is taken out of my paycheck.”
- “Save your marriage.” Wootton found the divorce “wreak[ed] havoc” on her finances.
- “Reward yourself.” Wootton balanced her frugality with visits to South Africa to see her father.
- “Slow down, but don’t retire.”
I might encapsulate the lessons from Wootton as:
- Buckle down—mentally and emotionally as well as anywhere else.
- Learn more about personal finance.
- Make a plan.
- Cut expenses.
- Improve income if possible.
- Save a ton—using automatic saving and investing.