Steal These 3 Invaluable Investing Tips From a Millionaire Next Door

This millionaire next door is investing in National Bank of Canada (TSX:NA) and Fairfax Financial Holdings Ltd. (TSX:FFH). Here’s why.

| More on:

Thomas J. Stanley and William D. Danko really opened eyes with their 1996 book The Millionaire Next Door.

The book pointed out that the vast majority of America’s wealthy didn’t live in giant mansions or drive $300,000 Lamborghinis. They were regular folks just like you or me who worked average jobs. They were teachers or plumbers, not high-powered business tycoons. They were just really good at saving.

I recently spent some time with Jerry, a true millionaire next door. On the surface, he’s not a very impressive guy. He wears beat-up, old work clothes almost everywhere. His car is likely older than yours. And his house is certainly no bigger than average.

Still, Jerry has amassed a $2.5 million dollar fortune — without going to college — despite only recently celebrating his 50th birthday. He has a goal of hitting $5 million by the time he’s 65.

Jerry attributes his success to three main factors that are as simple as they are powerful. They’re too good not to share.

Live frugally

Jerry has always made sure to put himself in a situation where it’s easy to save.

He started off sharing a house with three co-workers. Jerry was on the lease, and he charged the three of them enough to pay for the rent and the utilities. He lived for free.

After Jerry got married, he and his wife made sure to buy a house they could easily afford. They also saved money by eating almost every meal at home. When they wanted an outing, they’d go to a friend’s house or organize a potluck. And despite pressure to put his kids in every activity imaginable, Jerry told each of his children to pick one sport each.

Jerry’s goal was to save 50% of every dollar he made after taxes. It was a sacrifice, but it’s one he’d gladly make again.

Pick a smart career

Even before his 18th birthday, Jerry had experienced the ups and downs of Alberta’s energy sector. His father worked in oil for years, and his family often struggled during lean times.

Jerry vowed to get into something that was more steady. After a summer helping out a plumber, Jerry was hooked. He entered the apprenticeship program, and four years later became a journeyman plumber. After a decade working for someone else, he started his company.

Plumbing did have a few ups and downs, but it was good, consistent work. Jerry slowly expanded his business over the years and now has a half-dozen employees.

Invest in sound stocks

After an ill-fated “can’t miss” mining stock took most of Jerry’s savings as a 21-year-old, he vowed to invest smarter. He discovered dividend investing and was hooked.

These days, Jerry earns enough from dividends to easily maintain his lifestyle. His goal is to collect six figures each year from dividends by the time he’s ready to retire.

One of Jerry’s favourite dividend stocks is National Bank of Canada (TSX:NA), which he likes because of its Canadian focus and its persistently cheap valuation. Shares currently trade hands at just over 10 times 2017’s projected earnings and pay a 3.8% dividend. Dividend growth over the years has been fantastic as well.

The other reason why Jerry likes National Bank is because it has somewhat lagged its peers over the last five years. He’s a big believer in stocks eventually reverting to the mean.

Another favourite stock of Jerry’s is Fairfax Financial Holdings Ltd. (TSX:FFH). Jerry is a big fan of Prem Watsa, Fairfax’s CEO, who has used Warren Buffett-inspired thinking to build one of Canada’s top insurers. He also likes Fairfax’s current strategy of using low interest rates to finance acquisitions. It recently agreed to pay US$4.9 billion for Allied World.

Fairfax shares currently trade hands at $624 each, which is close to a 52-week low. After recent write-offs, book value is approximately $540 per share. Getting Fairfax at just 1.15 times book value is a smart buy.

Jerry is heavily invested in both stocks and has recently been buying more of each.

It doesn’t have to be hard to get ahead. Just follow Jerry’s lead and make smart money decisions and then invest aggressively. We can help with that last part.

Should you invest $1,000 in Fairfax Financial right now?

Before you buy stock in Fairfax Financial, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Fairfax Financial wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nelson Smith has no position in any stocks mentioned. Fairfax is a recommendation of Stock Advisor Canada.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How I’d Invest $7,000 in My TFSA for $660 in Tax-Free Annual Income

Canadians looking for ways to make the most of the new TFSA contribution room should consider investing in these two…

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

This Dividend King Paying 7.5% in Monthly Income Is a Must-Have

This high-yield TSX stock might not be a textbook Dividend King, but its reliable monthly payouts and improving financials make…

Read more »

path road success business
Dividend Stocks

How to Invest $50,000 of Tax-Free Cash as Canada-US Trade Uncertainty Escalates

Few Canadian stocks are as easy a choice as this one, making it perfect during volatile periods.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Generate $200 in Monthly Income With a $7,000 Investment

Want to establish $200 in monthly income (or even more?) Here's an easy way to start today that will provide…

Read more »

Printing canadian dollar bills on a print machine
Dividend Stocks

Got $25,000? Turn it Into $250,000 in a TFSA as the Canadian Dollar Rises

Investing doesn't have to be risky or difficult, especially with this top stock.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Where Will Loblaw Be in 3 Years?

Loblaw (TSX:L) stock could be a stellar performer as tariffs and headwinds move in on Canada's economy.

Read more »

customer uses bank ATM
Dividend Stocks

Where Will National Bank Be in 5 Years?

National Bank of Canada (TSX:NA) stock still looks like a great deal at these levels.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

The Smartest Industrial Stock to Buy With $3,000 Right Now

Aecon is a value stock that's benefiting from strong infrastructure spending today and in the years to come.

Read more »