Financial Advice from a Millionaire Who Used to be Homeless
When Crystal Stranger was a teenager, she was officially homeless, living in a 17-foot trailer. She was working three jobs at the time, and spending her spare time reading every investment book in the library. Armed with knowledge of stock investing and a willingness to work hard, she saved enough money in a year for a down payment and bought her first house at age 21. She was a millionaire by 26.
Stranger has owned several businesses and a large real estate portfolio, and she went on to become an enrolled agent. She’s written books, including a small business tax guide and a financial guide for women.
She now works as tax operations director for 1st Tax Inc., offers business plan bootcamps and is a frequent speaker for organizations. She lives in New Mexico with her husband and their 3-year-old daughter; they have another girl due in January.
GoodCall caught up with Stranger to learn a little from her life experiences and vast personal finance knowledge. Some comments have been edited for clarity or brevity.
GoodCall: How have your experiences when you were young affected your life today?
Stranger: My experiences when I was young certainly sculpted my world view in a way that was very different from my friends at the time. There definitely were tough times when my interests really alienated me from the people I knew. But I also developed a mentality of “why not?” that has allowed me to experience so much, I don’t regret the awkward moments at all. I would hope to raise my children with a similar world view, that they can do anything they put their minds to and teach them how to go beyond the daydream space that most people get stuck in.
GC: You bought your house when you were 21. Most people today would say young people won’t or can’t buy and choose to rent instead. What are your thoughts?
I was really determined to buy a house. For me it was symbolic as growing up we lived in rental houses forever and I wanted something more tangible in my own life. …
Still in many urban areas it just doesn’t make sense to buy, my rule of thumb is that if it costs more than 50% more to buy (including mortgage, insurance, taxes, and a maintenance reserve) over renting it isn’t worth it. But if you live in an area where you can buy for reasonably close in price to renting, or even less, it is the best decision you could make.
It is very cultural too. In Scandinavia it is common for young people to buy an apartment right out of college, sometimes even while still in university. This way they develop equity for that bigger house when they have a family. I would love to see this trend spread to the US.
GC: What advice would you give to someone who’s just coming out of high school about personal finance?
I would tell them to get started managing their own money, for the learning experience if nothing else. A lot of succeeding in the financial world is being able to see trends play out on a broader timeline. Most advisers recommend putting any amount away you can in a Roth IRA as young as possible, but I really think this is more beneficial if you use this in an account that you can make choices and learn from that. Better to learn lessons of what advice to follow and what to avoid with losses and gains in the hundreds than later in life with the risk being in the hundreds of thousands.
GC: What problems do you see with our economy and trends in consumer spending today?
As the economy improves and loan restrictions loosen, it is easy to envision people getting crazy again with credit card and home equity debt. I think it is a bit of a natural cycle, people have been very conservative, in general, over the last seven or eight years, and now there is a pent up desire to spend.
Some of this is needed, like right now the cost of used cars seems higher than normal compared with new cars, as more people have been buying used rather than new. We actually are buying a new Toyota pickup and it is crazy to me that the 3-year-old models are only roughly $2,000 less than what we are paying. Doesn’t make any sense.
There are lots of irrational aspects today in both consumer spending and the broader economy. Like how interest rates went up (recently) but the price of gold went down. The natural correlation of this should have them moving together as rising interest rates should indicate inflation, which would increase the value of gold.
This makes me nervous in the same way I felt nervous when I saw home ownership costs getting to be double or even triple the cost of renting back in the mid-2000s. The economy is so fundamentally strong right now I don’t think this will manifest itself as a real issue for years to come, but I am watching these issues as eventually there will be a problem from these irrationalities of the market.
GC: What are some things most people don’t know about their finances that they need to work on?
There is a lot of money to be found in small areas, like cutting out bank fees and watching cell phone or cable bills. Often the plans signed up for when opening these accounts change over time, and the pricing goes way up. Better deals can often be found with a little comparison shopping, or just calling the company to find out about updated specials. While it’s not fun to call and deal with these small amounts, they add up over time, and I would guess that most consumers probably have at least $100 a month they can trim off their bills if they pay attention. This extra $1,200 a year would go a long way for many people to have emergency or retirement savings.
GC: What books or thought leaders would you recommend?
I always go back to the classics for investment books. “The Intelligent Investor” by Benjamin Graham is a tough, technical read, but more comprehensive than anything else – a college degree in investing in one book. Peter Lynch’s books are a bit more palatable and an easier place to start as he gives explanations that are easier to follow.
For real estate investing, my old favorite was William Nickerson’s “How I Turned $1,000 into a Million in Real Estate in My Spare Time.” While some of the advice is comically dated, the fundamentals in that book are a conservative way to make it work…. His way of breaking down the numbers of real estate investments are especially valuable, as it is a no-nonsense way of evaluating a property that anyone with the most basic math skills can follow.
I’m also big on inspirational reading, as often the biggest obstacles to overcome are the internal fears when growing to a new level of success. Tony Robbins is great for this, and his books have helped many. The book that was most personally life-changing was a thrift store find: “The Dynamic Laws of Prosperity” by Catherine Ponder. I’ve re-read that book a million times when I had a rough moment, and it has often given me a new outlook when I needed it most.
GC: What else would you like to add?
Very few people have become rich from being pessimists. I think a big part of success is being optimistic and looking for opportunities. Finances can be a scary subject, but finding a playful way to look at it and to see mistakes as learning experiences is a big part of the process.
Many people act like 5-year-olds losing a game of Monopoly, throw the board away and say they never want to play again. Cutting up credit cards or keeping all money in cash is the adult version of these kinds of children’s game tantrums.
You have to be able to forgive yourself when you make mistakes and move forward to playing the next round. Because if you don’t play the game you can’t win.