Moneyville blogging contest runner up Larry Cuozzo is 43, a teacher and has built a net worth of $2 million without inheriting a penny. Here’s how he did it.
I’m a 43-year-old Toronto teacher and I have not inherited any money or won any lotteries. However, my wife and I have managed to build a net worth of $2 million by making the sort of choices any middle-class family can with a little discipline and planning.
There are no tricks, no need for high-risk investing and you and your family do not have to live in poverty to make it happen. I know because we did it. We have become financially independent at a relatively young age by saving, being disciplined and being lucky.
The $2 million is made up of our mortgage-free house in a Toronto suburb and the value of our pensions and investments. I admit we have been lucky in some respects with timing beyond our control but the principles remain the same.
It took us 38 years to hit the $1 million mark and another six to hit $2 million. I have no idea if this will continue. It doesn’t really matter. For the past 20 years, we have been able to contribute to society and enjoy life with much less money than we have now. I don’t see why that would change.
The guide for how to live our lives came from our parents. Mine emigrated from Italy in the 1960s and eventually settled in Scarborough. My wife grew up in Brantford. My parents taught me that it was important to develop realistic but optimistic financial goals because you can accomplish almost anything with effort, patience and planning.
In high school I started a disc jockey business with friends. The money I earned doing that, plus summer jobs, help from my parents and a small scholarship meant I could move away from home for university and still graduate debt free. This was my first lesson.
Lesson 1: If you can stay out of debt, everything you make belongs to you.
I enrolled in pre-business at the University of Western Ontario and my goal was to get in to the honours business administration program in third year. In the summer of first year, I became the manager of a College Pro window cleaning franchise, hoping to impress the business school selection committee. It worked and I graduated with a degree in business administration.
The degree opened doors and I found a job with a large consumer goods company as an assistant marketing manager. I quickly realized I hated my job. I enjoyed studying business and economics, but found the day-to-day life quite dull, even though it was well paid. Eventually, I quit and followed my future wife Liana into teaching. The cost was huge. It took five years before my salary as a teacher equalled my beginning salary in business. But here I learned another lesson.
Lesson 2: Don’t be afraid to invest in your career or future, even if in the short term it doesn’t pay off.
After teacher’s college I found a job in a small high school in a town about 90 minutes from home. I enjoyed teaching business and economics. Because it was a small school, I became a department head after three years, which would not have happened if I had been in a large school guaranteed personal loan approval.
One of the benefits of teaching in Ontario is the pension plan. Eleven per cent of your gross pay is automatically deducted and our school board matches this amount. This arrangement is fantastic.
First, it is a forced savings plan; teachers must contribute to this plan. Second, the Ontario Teacher’s Pension Plan can invest at very little cost. So, while many mutual funds charge fees of 2.5 per cent or more, the teacher’s plan fees are around 0.5 per cent. This makes a big difference and is the main reason the vast majority of mutual funds do not beat market indices over the long term.
If I had stayed in business, my employer would have provided a matching contribution to my Registered Retirement Saving Plan, up to 9 per cent of my gross annual pay. I would have taken advantage of this benefit and invested this money in financial products that do not charge high fees. This was my third lesson.
Lesson 3: Start saving for retirement early and let the compounding power of interest help you. Any saving is better than none and payroll deduction is a painless way since you don’t notice it.
In the early 1990s the Toronto-area real-estate bubble had burst and we were lucky to be looking for our first home. We had saved $59,000 and bought a tiny 900-square-foot home at Yonge and Sheppard, just steps to the subway, for $197,000. We saw the potential to live on the main floor while renting the basement, so we turned the basement into a rental suite. For the next six years a tenant helped us pay down the mortgage.
Lesson 4: Alternate sources of income are a good way to reduce your debt, pay down a mortgage or save for something you want.
By the late 1990s our mortgage was gone and we decided to have kids, so we needed a bigger house. We sold our first home for $255,000 and bought a monster in Markham for $455,000. It was 4,250 square feet, brand new and in the suburbs, close to my parents. We took out a mortgage of $180,000.
Six years and a second child later my wife decided to take an extended maternity leave. Our monster home was worth more than $700,000, but we decided to downsize. After a bidding war, our home sold for $721,000. (It’s a lot more fun being on the selling side during a bidding war.) Our new house cost $475,000, and we pocketed $201,000.
So, it was the summer of 2005, we owned our home mortgage-free and had a considerable nest egg set aside. When the value of our pension plans was added to our other assets, our family’s net worth surpassed the $1 million mark. We had reached my original goal of being financially secure by age 40.
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Larry Cuozzo teaches business and is a department head at an adult high school in Toronto. He enjoys taking charge of his personal financial affairs.