The 8 Strategies That Made George Washington One of the Richest Americans in History

We recently celebrated Independence Day -- a time when most of us give a bit of extra thought to the founders who gave our country its start. But while others tend to focus on their revolutionary ardor and politics, at the Fool, we're a bit more interested in finances.

In this segment from the episode of Motley Fool Answers, Robert Brokamp and Alison Southwick reflect on the fiscal life of President George Washington, who by various accounts had a staggering net worth of as much as a half-billion dollars in inflation-adjusted money. And he got there without taking advantage of his prominent position in the government. So, what can you learn from how the father of our country husbanded his fortune? Plenty.

A full transcript follows the video.

This video was recorded on July 3, 2018.

Alison Southwick: Last year Bro brought us estate planning lessons from Benjamin Franklin and this year he's reviving the founding fathers theme and we're learning money lessons from George Washington.

Robert Brokamp: Right. Since it's the week of July 4th, this is the time when Americans celebrate our independence and no person can claim more responsibility for that independence than George Washington.

When you think of Washington you may think of him as the general who led the colonial army, or the first president, or the puffy face you see as you put a dollar bill in your wallet. It was probably made puffy by his dentures.

But what you may not know is that Washington was one of the wealthiest presidents of all time. Estimates of his net worth range, adjusted for today's dollars, from $20 million to $525 million.

So how did he amass such wealth while also successfully rebelling against what was then the most powerful country on the planet and then helping create what is now the most powerful country on the planet? Here are eight lessons.

No. 1 is it always helps to have wealthy relatives.

Southwick: It never hurts.

Brokamp: It never hurts. It always helps to have a little head start in life. Washington's father was a relatively prosperous planter in Virginia. He did die when George was 11, which was originally a setback for George because he then couldn't go on to Europe to become educated like his older brothers did. He had to stay back. But some people look at that as actually a good thing for him because instead he had to learn more practical things like accounting and mathematics.

When his mother died about 15 years or so later, George inherited Mount Vernon, which is the estate about 15 minutes south of us, here, at Fool HQ. When Washington inherited Mount Vernon, the building was essentially a farmhouse on 2,000 acres and by the time he died it was a 21-room mansion with 8,000 acres.

And at the age of 28, Washington married Martha Custis who was a wealthy widow, who owned 18,000 acres spread over five plantations. Her main house was known as White House Plantation, and that's where they got married. In fact, it was the only building named White House that Washington was ever in because the other White House was finished a year after he died. In fact, George Washington is the only president to have never actually resided in Washington, D.C.

While George and Martha never had kids [it's possible that Washington may have been made sterile by either small pox or tuberculosis], she had children from her first marriage and Washington raised them as his own. And by all accounts, they were very happily married, but marrying her made Washington one of the wealthiest men in Virginia.

Southwick: So that lesson was marry rich? Is that marry for money?

Brokamp: Well, have wealthy relatives.

Southwick: Marry for money I think was that last lesson.

Brokamp: I think that's what the lesson was. It helps.

No. 2 is avoid debt. Like many of the landed gentry of his time -- many of the founding fathers -- Washington occasionally found himself in debt. In 1764 he owed £1,800 partially due to importing too many luxuries from Europe. He decided to get his act together. He cut back on his spending and he worked to avoid debt, though he still had occasions of being short on cash. Legend has it he actually had to borrow money to travel to New York for the first inauguration. The first inauguration was in New York. The second one was in Philadelphia.

But it was important to him that he pay his debts, though he wasn't as fastidious about collecting debts. He was known for forgiving debts or just forgetting. He actually didn't forget that he made them. He just didn't ask for the money back. And the very first item in his will was, "All my debts, of which there are few and none of magnitude, are to be punctually and speedily paid." He wanted to make sure that one of the first things that his executors did was to pay off his debts.

So he didn't like personal debt and he didn't like America's debt. One of the great achievements of his presidency was limiting the debt that the colonies incurred during the war, which according to Professor Ed Lengel was estimated to be [adjusted for inflation] in the trillions. But with the help of Alexander Hamilton they were able to pay off all that debt within six years.

No. 3 is keep good records. Another reason he was eventually able to pull himself out of debt is that he paid more attention to his finances; in particular, keeping good records. All kinds of different records. All kinds of different ledgers. He had a little book with him that he would write down all of his expenses and at the end of every day he would review the day's ledgers and sign off on them.

Southwick: He would sign off on his own ledgers?

Brokamp: Well, the ledgers for all his...

Southwick: For everything.

Brokamp: For all his businesses.

Southwick: That's like the Kaderlis.

Brokamp: As I'll get to later, he had a lot of businesses. When he was appointed general of the colonial armies, he said, "You don't have to pay me. I just want to be reimbursed for my expenses," so he kept pretty careful track of that.

In the first inauguration speech, he once again said, "Don't pay me a salary," but then Congress voted to pay him $25,000 which at the time was 2% of the federal budget.

Most of his papers exist at the Library of Congress. When the Library of Congress put all his ledgers, and journals, and account books and everything together [all his financial paperwork], it filled 34 volumes. He was pretty good at keeping track of things. In fact, the only significant documents about his life that don't exist are the letters that Martha and he wrote to each other. She burned most of them after he died.

From what I read, she said, "I had to share him with the rest of the world most of his life. This part I want to keep private."

No. 4 is diversify your assets. Like most farms in the 18th century, Mount Vernon and the other plantations focused on tobacco. The problem with that was you had to send the tobacco to England. Washington was never sure whether he was getting a good price for it, and also you often didn't get paid in cash. You got paid in goods. You sent off the tobacco, and then you got back stuff that you had ordered, but he wasn't convinced that he was getting the best equipment. Some of the stuff that got sent over wasn't of high quality.

Plus in the 1760s, the bottom fell out of the tobacco market. He was one of the first people to say, "I need to do something else." So he diversified, first into wheat, but then he moved on to all kinds of other businesses [fisheries, milling, horse breeding, hog production, spinning and weaving]. He co-founded the Great Dismal Swamp Company. Do you know where the Great Dismal Swamp is?

Southwick: No!

Brokamp: I had never heard of it, but it's actually in Virginia and North Carolina. The goal was to clear it and make it land worth farming on. Unfortunately it didn't work...

Southwick: Well, they should have renamed it. They had a branding problem.

Brokamp: A branding problem. But at the time of his death, he owned 52,000 acres of land as well as several other businesses.

No. 5 is diversify your human capital. We've talked about human capital before -- basically your ability to earn a paycheck. Besides running all these businesses, he thought he would have some time to become a politician, as he did, and he joined the military, serving in our military for a long time and then, of course, taking over the military. This obviously increased his standing in society, increased his connections, and he actually got land in return for serving in the French and Indian War as far as Pennsylvania. That's part of why he got some of his land.

No. 6 is own stocks and bonds, too. He didn't own just real estate. At the time of his death his portfolio of stocks and bonds was worth about $35,000 in those days. Not all of the investments turned out well. Some of the stocks that he owned did not fare so well. In his will he left some of these stocks to be used for charitable purposes; for example, The Alexandria Academy, which was a school for orphans and other poor kids. He left shares of the Bank of Alexandria, which was the first bank of Virginia, and the building still exists here in Old Town.

Southwick: Which one is it?

Brokamp: I think it's down on Cameron Street.

Southwick: Oh, cool!

Brokamp: He also bequeathed 50 shares of stock to the Potomac Company as an endowment for a university in Washington, D.C. and for years, even before he died, he said that [a good university was needed] in the central part of the country because otherwise people were going off to Europe to become educated and basically learning things that were not conducive to a good democracy.

Southwick: Oh, we know some of the things the French people believed back then.

Brokamp: That's right.

Southwick: Ben Franklin, we know what you did over there.

Brokamp: Unfortunately, the Potomac Company, which was meant to dredge up and build locks and canals up the Potomac... Some of those did get built. You can see them along the way like in Great Falls and places like that.

Southwick: Yeah!

Brokamp: It did not survive, but the idea of forming a university in Washington, D.C. did happen. It was originally called Columbian College and then in 1904 it was renamed to George Washington University.

Southwick: A fine university.

Brokamp: A fine university. So he had mixed success with his stocks, but I admire the fact that he did try to do something good with what he had.

No. 7 is to cash in on vices. Always a good strategy. Washington was only a moderate drinker, and he considered drunkenness one of the worst vices, but that didn't prevent him from making money from alcohol. He built a distillery that in the year before his death produced 11,000 gallons of whiskey which made it the most productive distillery in America.

Southwick: I think they've talked about opening it back up.

Brokamp: Oh, really?

Southwick: Yes! Rick's nodding his head. There's like a big boom, right now, for [craft beer], spirits, cider, and things like that. We may have to take a field trip.

Brokamp: I just came across this funny story. Like I said, he didn't like drunkenness. He had a gardener that he wanted to keep on the payroll who drank a little too much, so he wrote a contract with the guy. "Listen, if you can say sober most of the time, I'll pay you $4 and you can be drunk for four days at Christmastime. I'll pay you $2 at Easter time and you can be drunk for two days. Otherwise, I expect you to be sober."

No. 8 is have a solid estate plan. He left most of his estate to Martha including, as stated in his will, "My improved lot in the town of Alexandria situated on Pitt and Cameron Streets." Rick is a longtime Fool. Can you tell us what else was on the corner of Pitt and Cameron Streets in Alexandria?

Rick Engdahl: The Motley Fool office, I think.

Brokamp: That's right. It's the previous Motley Fool office. We were George Washington's neighbors.

Southwick: That's awesome!

Brokamp: That was so funny to see that actually written in his will.

Southwick: Yeah.

Brokamp: And in his will he apportioned out a lot of his estate for charitable consideration. He forgave a lot of debts. And he also freed his slaves, sort of. One thing we have to acknowledge is the fact that he owned slaves [and by the time he died it was more than 300] is a legitimate stain on his legacy. And when you talk about his financial success, it's no doubt in part to him having slave labor. What he put in his will was that once his wife passes away, his slaves would be freed and that they would be educated. So anyone who was younger would be educated. The older would be taken care of.

He had a very complicated story when it comes to slavery. He inherited his first slaves at age 11 when his dad died. Back then he thought it was the normal thing to do to have slaves. That changed over his lifetime partially being from the Revolutionary War because he interacted with people like Lafayette and Hamilton who despised slavery.

So, he then stopped buying more slaves. He stopped selling slaves. He refused to break up families. And even in his will he said no slave should be moved out of the state of Virginia. So in the end he tried to make it better, but still he didn't free them outright. He just freed them after his wife passed away.

Those are the lessons from George Washington. It took almost 40 years for his will to be settled. He named seven executors and by the time the will was eventually settled, only one of them was still alive; not because of any problems, necessarily. It was just his estate was so complicated it took that long.