How to afford anything (but not everything)
You can have anything you want — but you can’t have everything you want. That’s the lesson I learned from a recent conversation with my cousin. And that’s the lesson photographer Ken Rockwell imparts in an essay that explains how to afford anything.
Our ability to buy expensive toys has nothing to do with how much money we do or don’t earn. Like everything in life, it has everything to do with how well you use what you have.
[…]What I’ll describe has always worked for me. I hope it helps you. Everyone’s situations are different, but hopefully my skinflint lifestyle will give you the idea. This is all about prioritization and not wasting what you do have, so if you prioritize differently or enjoy spending money on something I consider wasteful, go right ahead.
Rockwell says that it’s important to understand the difference between cheap and frugal. As we’ve discussed at Get Rich Slowly before, the cheapest option isn’t always the best. Sometimes the most expensive choice actually costs less in the long run. Cheap means focusing on price above all else; frugality means seeking value for your dollar.
In his essay, Rockwell provides real-life examples of how he’s made choices to save money so that he can afford anything he wants (especially cameras). Some of his anecdotes are funny. Some are inspiring. They’re all great examples of how to get rich slowly. Here are a few of his tips:
- It’s important to prioritize. Half of being able to afford what you want is to spend your money on what you really want.
- As Elizabeth Warren emphasizes in All Your Worth [my review], one of the best ways to be able to afford small expenses is to economize on large expenses. Rockwell says that this means never buying a new car. It also means buying less house than you can afford.
- Learn to practice patience and diligence. “When I buy a used car or camera,” Rockwell writes, “I may spend months looking until the perfect sample appears. When it does, I jump all over it, but if it doesn’t, I don’t worry.”
- Don’t get sucked into new luxuries. Luxuries have a tendency of becoming necessities.
- Don’t worry about what you own. “How rich you are is determined by how much money you have, not by what you own. What you own is how much you’ve given away to others!”
- Don’t be afraid to ask for a deal, says Rockwell. Last spring I shared tips from a reader who uses haggling to save big bucks. Another GRS reader e-mailed me yesterday with a similar story.
- Avoid addiction, including addictions to caffeine, nicotine, and television. “Watching television makes you stupid,” Rockwell says. I wouldn’t go that far, but I do know that since I’ve given it up, I’ve accomplished things I never dreamed possible — such as building this site.
- “If you really want something, buy it, or wait until you can. Don’t buy something that isn’t what you really want.”
“Most people are too stupid to be poor,” says Rockwell’s brother. He means that most of us are unwilling to make sacrifices now in order to have the things we really want in the future. Instead, we fritter our money away on stuff that doesn’t even matter, stuff that brings us little or no value. We settle.
To be able to afford the important things, you must be willing to give up others. Or, as Dave Ramsey puts it, “If you will live like no one else, later you can live like no one else.”
[Ken Rockwell: How to afford anything, submitted via e-mail by Dan K.]
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There are 61 comments to "How to afford anything (but not everything)".
He’s spot on about television. I know the benefits of quitting TV but still have trouble doing it. It’s really really tough. I agree on the prioritizing–for me it’s probably about traveling. That’s what I’d like to do more of. More than going out to dinner or having snazzy clothing. Traveling is my “camera,” so to speak.
I believe in prioritizing and sacrificing in order so that I could travel at least twice a year. For me travelling means going somewhere warm to avoid the cold Canadian winter’s. In order to do so I must sacrifice a few things like going out every weekend, eating out all the time, and consuming caffeine on a daily basis. I feel it is all worth it in the end, especially considering I will be in Jamaica in 2 weeks while all my friends will be complaining about how cold it is.
“Most people are too stupid to be poor” — your explication of this quote still doesn’t help me understand what the heck it means!
My grandma used to say “what you don’t have, you can do without”. I have found this is true for a lot of material possessions, but immaterial things like an education, or health and well-being related things like clean water–these are worthy of sacrifice to attain.
One problem seems to be the illusion that many people have that they are richer materially than they really are. Once reality sets in, it frees the mind to adapt to limitations. I run a bookstore, and every day I meet people who are actively pursuing some sort of knowledge, spurred by the current crisis. This gives me hope.
We all are impulsive buyers sometimes. If we hold it off for a couple of days to think it over before buying it, chances are high that we will not buy the same thing we were about to buy.
A woman’s job is to spend her husband’s money? What is this, 1920?
Watching television doesn’t make you stupid. There’s plenty of stupid television, but that doesn’t mean anyone who enjoys watching TV becomes transitively stupid.
I really liked this post. I too enjoy travel, but giving up TV and other daily luxuries have been difficult. But I’m working on it one day at a time.
Whenever my friends give me a look about not doing whatever they want to spend money on I tell them it’s so I can afford the things I want, like my house and not having to work as much in the future.
Very interesting, very true – and right in line with an editorial I read this morning: Want less, spend less.
Sara – That’s exactly the point; good for you. In one sentence you’ve summed up the essence of personal finance. You spend on your own values instead of allowing others to tell you what you’re supposed to want. Once we figure out this basic tenet, we’re no longer subject to advertisers (or our peers parroting the ads’ messages) telling us that in order to be happy and hip we must drive this car, drink this wine, or wear these clothes while we go to this trendy bar or restaurant.
TV and computer watching cost money as well. My electric bill DOUBLED after my mom moved in (TV and computer both on all day) and DH went back to school (another computer on 24 hours/day). I read library books and listen to my ipod a lot so I don’t get sucked into whatever stupid show is on TV.
Your post is good (except for the quote which took me a few read throughs to kinda understand) and goes pack to the principle of making CONSCIOUS choices. When I eat out I try to remind myself what the opportunity costs of the meal are. But sometimes I just can’t bring myself to cook if the cash is there to use.
As an aside, I changed my terminology from “I’m poor” or “I can’t afford that” to “that isn’t in my budget”. I found my friends who make less than I do were getting a little annoyed. I am NOT poor and I CAN afford it, but I am making a choice. Now when I complain that I want something but don’t have the money my friends are a lot more sympathetic.
Anne wrote: A woman’s job is to spend her husband’s money? What is this, 1920?
Yeah, that stuff is annoying (and some might say offensive). I think he’s trying to be funny but failing.
The idea of “wanting” concerns me a little. More specifically, the idea of wanting material things: cameras, video games, cars, electronics, etc. I think it’s ok to want: financial independence, being closer to your family, love, security, etc. , but the idea of controlling and managing your material wants so you can have some of them is hard to swallow.
It’s amazing how if you focus on substantive wants (the items listed above) how the material wants will kind of diminish
I’m not advocating being a monk or a cheapskate, but rather being frugal and having good life priorities.
Here’s an blog I wrote on being frugal: http://www.scordo.com/blog/2008/10/how-to-be-frugal-versus-cheap.html
Provocative. I like it. I’m going to see how I can incorporate these strategies into my daily life. I especially love the quote about the difference between wealth & how much you own.
Great post. Pretty much we do. We take very nice vacations but we save up for them, we plan a reasonable budget that allows us to splurge on good food, wonderful hotels, and superb experiences, then when we take our trip we have the cash set aside to pay for the trip in full.
I agree on the no new cars. We saved up cash for my nused car bought this year. I love having a nused car and I love not having a car payment.
I really would like to spend some money on our house, new furniture and some other upgrades, but we won’t do so unless we have cash set aside. I’m pondering putting these wants on our 2009 list along with more practical goals.
Also, having grown up without a t.v. I pretty much agree. Our t.v. will go away once we have kids and I know I spend too much time vegging out in front of the t.v.
This is similar to something I’ve told myself for years now: I can have anything I want, but not necessarily all at once. Or immediately. Sometimes it works better than other times- I need to start reminding myself more often.
While browsing my backlog of e-mail I found this link sent in by a reader:
How to save money for gadgets by cutting daily expenses
It shares a similar theme with Rockwell’s piece.
I think there’s no one thing that anyone can agree is THE place to save — we only have one car, but it was bought new and made my husband VERY happy. He has over the last 30+ years bought three cars new, but bought them all with cash and kept the firt two 10 years+ each and I expect this one, too is ours for a long term, so buying new doesn’t feel like an impediment to our getting rich slowly, and fits under prioritizing to afford the things that provide value and enjoyment.
Life is really all about making sacrifices. HOWEVER, what our society considers “sacrifices” aren’t really even sacrifices in most cases. We have so much material wealth in this country that we have come to think that living without things like televisions and computer are “sacrifices.” It’s insane!
In my family, we made some choices and are “sacrificing” (if you can call it that) so I can stay home full-time with our son. I believe almost anyone can do this if they take a good look at their life/financial situation and re-evaluate where their money is really going. That’s why we try to share our thought processes and frugal ideas through our blog, so that others can benefit from our experiences.
Momma at Engineer A Debt Free Life
http://www.engineeradebtfreelife.com
Thanks for this article! I’ve decided to afford a three week trip to the UK next year. I have friends getting married there, but it’s just the excuse I needed to make the trip happen.
I do plenty of travel in the US (including Cycle Oregon this year.. missed you, J.D.!) but haven’t been to Europe since 2001. That time has flown, and a lot has happened, and I want to get back now, not someday. So I’m making the trip my first priority (though I’ll still finish paying off my student loans next year, I think). I found a ticket already, so I’m committed, and I’m willing to stay in hostels and eat lunches from grocery stores to make the 3 weeks somewhat affordable. We’ll see how it goes!
Oh.. and I think the quote “Most people are too stupid to be poor” means that most people are unwilling to get by with little money. In the context of the article it makes a teeny bit more sense… the brother doesn’t make much money but spends what he does have very carefully (grocery food when traveling instead of restaurants, for example).
Impulse buying is a sort of hobby for some. It’s the act of buying, not the things owned to provide happyness.
For some rich people, the act of buying is simply a self reassurance of their financial success.
To put this advice in practice, a detached attitude towards thins is necessary.
I believe you can selectively watch quality TV programs and have them enrich your life. But I’m also a TV writer so I suppose I’m biased. (swinging pocket watch) Yes, keep watching… keep watching…
Your explanation on frugal vs cheap is helpfull. Too often we don’t look for value, we simply buy what we think we need. In other cases we buy what we need, but because we were cheap it doesn’t do the job.
In many cases our priorities are messed up.
I think there are two conditions where buying new may be a good idea. And they both have to occur. First, the car must be paid completely in cash (or pay it off within a few months), and second, you must run the car to the ground till all you can do is sell it for parts.
I think by maintaining a new car, you can easily have a car for 10, 15, even 20 years. And if don’t have a car payment, you can easily save up for another car at that point.
That principle, of course, applies with a fairly used car as well.
But I think the essay was really good otherwise.
Am I the only person that really didn’t like the article? An influential former manager once told me:
“you work to live, you don’t live to work”.
I feel like the author is putting just too much emphasis on having a huge bank account (even though he mentions that you can spend 99% of what you make, but not 101%). The section about kids really got to me as well. While I’m single w/ no kids, kids, from what I hear and a blessing. How can someone really put a $$ sign on that? I can understand if you make a conscious (and smart) decision to hold off on having kids until your financial situation improves, or if you decide not to have kids altogether because that’s just not your thing, but to not start a family just because it’s too “expensive” is ludicrous.
I think he offers some solid advice, buy what you can afford, get the right thing at the right time, etc., but that the same time, you can’t live your life trying to fatten your wallet. Spend wisely and enjoy your life, the only true way to enjoy the fruits of your labor are to spend them on the things you love!
Interesting article; I buy things the same way. Delayed gratification is so worth it!
I do have issues with a couple points: he got the marrying smart thing only half right– the best thing to do is marry a woman who makes more than you do AND spends her own money effectively. He wouldn’t buy a great camera body without the lens, or vice versa, right?
On the issue of kids, he recommends not having them. I think that’s only if you can’t educate them properly to make a valuable contribution to the world. Kids aren’t an expense, they’re an investment. Who’s going to take care of you in retirement? Hospital bills and assisted living and the waste that occurs in medical environments are pretty detrimental to the environment too.
Again, it demonstrates that while we shouldn’t spend money on everything, we can do very well by focusing on the things that have personal value to us. Great food for thought.
The one point I really disagree with in the “how to afford anything” original article is the “don’t have kids” line. Life and frugality isn’t about not spending money, as it’s said in the article it’s about value in spending it. Kids offer value in many ways no matter how much of a drain they are in a purely financial sense. IMHO there is no time that you can ever “afford” kids, at best you can gear yourself to be better off financially when you decide to have them. Amazingly enough, once you have them, you will find a way to “afford” them. In essence, I’d hate to see all the smart, responsible, frugal folks not produce and raise caring kids because they cost money. Such a loss would have a bigger environmental impact that what the author suggests.
Also, I had problems as well with the “too stupid to be poor” quote, but finally saw it as most people are so focused on spending all their money on living as richly as they can, they lose the freedom and choices available to them when they live off of less. I guess another way to put it is if you spend way less than you earn and can be comfortable doing it, you have much more freedom in what you can do in your life, which is a pretty smart way to live.
@26,
He even says that he doesn’t believe everything he writes.
Everyone has there own theories on life and work balance. It all comes down to what do you really want? But between the advertisements, religions, family pressure, and social obligations you forget your wants, turn into a frantic spending chicken with now budget.
If everyone could figure out exactly what they wanted, they would be a lot better off.
-ThatGuy
Stuff is just that — stuff. You have to prioritize. My wife and I realized this when we started paying off debt about six months ago. We had too much stuff, including wedding gifts we hadn’t even opened. How’s that breadmaker doing sitting in the box? Seriously, we can have all the stuff we want later in life when money isn’t as much of a concern.
Striking a balance and weighing priorities are life long tasks, I’m still in the infancy stage. I got myself in a lot of debt by mistaking wants for needs, it’s hard for me now to accept that wants are OK in limited quantities. Right now I’m in the accumulate cash mode, making up for lost time. But at a certain point I will need something to spend that cash on or I’ll become a miser. I’ve cut out the unnecessary spending to save for something more important, only I haven’t figured out what that important thing is.
Wow. TV is once again presented as a waste of time on this blog. Am I the only GRS reader who really enjoys watching TV (even lame shows that I know are not very good)? At the end of the day, after taking care of my 6 month old son, all I have the energy to do sometimes is sit in front of the boob tube. Maybe I’m just an underachiever, but I like “wasting” time this way. Perhaps I could be writing poetry or something else deemed more valuable, but I’m not going to apologize for and be embarrassed by liking low brow entertainment. It’s not the only kind of entertainment I like (as Whitman said, I am large. I contain multitudes). I also go to symphonies, drink snooty wines, speak foreign languages, etc., but that doesn’t make me look down upon television.
Is going to watch a game also a waste of time? That’s pretty passive entertainment as well. Ultimately my question is: why do we always expect ourselves to be productive? Is there any shame in wasting time?
Jane, I don’t think there’s anything wrong with watching television as long as you’re meeting your goals. As I say, I don’t go as far in complaining about it as Rockwell does in his essay. It’s not for me, and that’s fine. I know that other people enjoy it, and that’s fine, too. I think the key, as with all things, is to enjoy it in moderation.
It’s slightly off topic, but in reagrds to frugal vs. cheap-
I just discovered that the $10 Nordstrom pantyhose last 4 times longer (on me) than the drugstore ($4) brand!! So that means that by spending twice as much on the front end I’m actually SAVING twice as much over time.
I have two theories as to why these nylons last so much longer.
1) They are made with higher quality materials
2) They have more sizes (6 as opposed to 4) so buying the correct size is easier and you don’t wear through them quicker because they’re a smidge tight, or wev.
Anyways, that’s a helpful tip from me to you 😀
I think the principles in this post are somewhat akin to the diet principles put forth in the Best Life Diet. Before making any lifestyle changes, the key is to understand why the bloating (food or debt, take your pick) has occurred. Why does one spend unwisely? After that is answered, then one can begin to make small lifestyle changes over time.
Just up and amending one’s spending (or eating habits for that matter) habits as a complete wholesale change often doesn’t work.
Understanding the cause, making regular, small adjustments over time (and sticking to them) can certainly help in the long run.
… I forgot who made the comment, but Kudos to identifying that we Americans seldom have to any type of “sacrificing.”
I have to say, I didn’t really like the article. Maybe because of his tone which I found condescending, or maybe because like poster #26, his section on kids got to me. He has a pretty dismal view of life. But what I really don’t get, is at the bottom of his page, he has a link where you can click to help support his growing family. Click it, and there’s a baby…and then he asks for donations of 5 dollars to help!?! I thought he had it all figured out, cars, traveling, TV, the way cancer will never be cured…I don’t get it…
Jane,
I will second what JD says. I don’t like watching television, but that is for MYSELF. There are plenty of television shows more enriching than many of the fluff novels I’ve read. I just hate the feeling of looking up and an hour is gone. I am the same way with computers and video games. I’m not anti-any of these, but I set limits for myself and my family.
avoid addiction to caffeine… HAHAHAHAHAHA!
i’m not addicted, just really dependent.
but really, i’ve had a similar view of things for years. husband was a quick convert when he saw the big-picture benefits of blowing off the trivial things we didn’t really need. my family seems to think we’re loaded- or were before the big change. not so. we just chose our spending wisely to focus on what we wanted.
I’m not quite a card-carrying feminist, as feminist organizations don’t often issue cards, but I can see what he meant by women spending their husbands’ money. There are still plenty of women out there who think men exist to give them cashola. There is a whole ‘nother group of women who run the household while their husbands make the paycheck, so by extension the wives physically pay a lot of the bills too, as that’s part of the work they took on in the division of labor. So, jokingly or not, it’s sort of true.
His post reminds me of something I wrote a couple of days ago about how Big Business has changed the meaning of the word “savings” to mean “getting a discount on purchases” rather than “money in a savings account.” I can’t help wondering if that little linguistic trick isn’t part of what’s behind America’s abysmally low savings rate. OK, we all decide whether to be wise with our money, but we tend to think in the language we hear most often in the course of our daily lives, and if we hear the word used that way often enough, our perspective is warped on what being wise with one’s finances really means.
Yeah, I don’t understand why so many frugality/personal finance fans are also the “Man who doesn’t own a TV constantly telling people he doesn’t own a TV” guy. Seems like the two groups shouldn’t overlap as much as they do. Especially in this day, which is the golden age of television. Shows like Dexter and The Wire and Generation Kill are better than any movies put out in the last few years.
And as you say, there are times when I have no energy to do anything productive, or I have nothing pressing that needs doing, but I don’t feel like going to bed. Is TV really a worse use of that time than reading or surfing the web? I also like to have hockey or football games on in the background while I’m working on the computer.
In short, TV doesn’t make you stupid. But apparently getting rid of your TV makes you pretentious.
Oh, and as for the kid thing, contrary to some people’s opinion, parents are often aware that choosing to have kids is not the best choice ecologically. At the same time, if we want our species to continue, someone’s got to have them. We just haven’t figured out a fair and just way to decide who does and who doesn’t, yet. It doesn’t help that we still subscribe to a lot of myths about what makes kids turn out the way they do, so it’s likely that in the end we would choose the wrong people as “ideal breeders” and then we’d all die out, or turn terminally mean, or something.
The sad part is that so many people of means make stupid choices that waste more resources in the act of childrearing than needed to be expended. If you can nurse your infant and you don’t, a bunch of people in Iraq just died so you could have cheap oil for the plastic in your baby’s bottles. If you could cloth-diaper and you didn’t, wow, you just contributed to five percent of the landfill. Et cetera. It’s not just the having the kids, it’s what you decide to do with them. But that’s become a consumer item just like Coke or Pepsi–it’s a “life choice” to be a wastrel, a “personal decision” that no one has the right to question. If someone like that gets oversensitive at this guy’s opinion on having kids… well… I don’t think the guy’s the problem.
On the t.v. issue, the NYT recently covered a study that showed that happy people watch less t.v. http://www.nytimes.com/2008/11/20/health/research/20happy.html?scp=1&sq=happy%20less%20t.v.&st=cse
I used to be an anti-television zealot, and you can probably still sense that in some of my posts. I try to stay pretty neutral on the subject, though. (But not all of my guest posters do!)
The truth is, watching television can be fun and educational. Though I don’t watch broadcast TV myself (except for the Oscars and the Olympics), I do watch TV shows on DVD. I enjoy it.
The key is to find balance, as I said before, and to know what works for you. I can’t work or think while the TV is on, so I have to stay away from it in order to be productive. The same is true with talk radio. Kris can listen to NPR all day long and it doesn’t affect her. I have to leave the room or I can’t write or think or read. (I’m fine with music, though.)
Ken Rockwell’s article contains a lot of head-scratching stuff. You’ll note that I didn’t link to some of his points, such as the one about kids. But while his details might sometimes be questionable, I think he’s spot-on with the big picture.
Great simple explanation between cheap and frugal. Many people think they save on buying cheap, but that’s not always the case. If you buy something cheap, it may break more easily and end up costing more in the long run. All depends on the product, and of course good consumer research should be involved.
Cheap is often also in how you treat situations or people. A coworker of DH is selling his house and asked his housekeeper to sell his furniture. He apparently had more important things to do. When she didn’t get top dollar for everything (though she did get fair value IMHO) he chewed her out. He is burning his bridges behind him and this behavior will most likely cost him in the long run, maybe not in this situation but eventually. If you try to wring every last penny out of each situation and relationship, eventually you will have to go back for some reason/ask a favor/etc. and find ill will that will cost you more in the long run.
Frugal is prudent. I don’t know too many truely “cheap” people who are generous, and that includes generousity of spirit. We all have our cheap moments, but I think you can all picture the terminally cheap person I describe.
“How rich you are is determined by how much money you have, not by what you own. What you own is how much you’ve given away to others!”
In the context he intended it (keeping up with the Joneses), this statement is fine. But as a stand-alone statement it is the opposite of money wisdom. Money is not an end in itself – money by itself is useless. It is only what money can get for you that gives it value. So, what you own is not only just as valuable as how much money you have, it’s actually the only part of your money that is currently doing you any good!
I have a great laptop and a dependable car and a comfortable house in a good neighborhood. And high-quality insurance coverage on eventualities I can’t afford to deal with. All of those things are doing something very important for me – so important that if I lost them, I would immediately exchange any cash I had on hand with equivalent replacements for them. They are *working* for me. On the other hand, the cash I have on hand isn’t contributing to my life at all. At best, some of it is reproducing so that I can convert it into even more goods and services at a later date.
So, the reverse of his statement is more generally true: How much money you have is irrelevant; it’s how much stuff you have that’s important!
As a long time Ken Rockwell reader, maybe I can cut through the haze so many commenters have trouble seeing through.
Kids: Not cost effective in modern times. Once helped on farm, or provided other meaningful and absolutely necessary labor. Children “paid” for themselves until they were adults. Today, kids don’t contribute to the household because the parents can make money and provide for the family. Children are now a burden, but of course they are a welcome burden.
All he is saying is that if you want to save money, don’t have children, and there’s no way to argue with that logic because children are a time and money sink. Ken also has a running post with pictures of his children in various mundane poses and constantly compliments his wife.
He recognizes that his wife, like many other wives, manages the household, including executing the ‘monetary policy.’ He’s not implying that wives stay at home and wait for their bread-winning husbands to come home so the wife can spend his money. That misperception is long dead.
He quit his job as en engineer to help photographers. He reviews equipment and provides very useful advice, which he could not do if he had a full-time job. Therefore, he relies on donations to continue the website in its current form.
I’m with you Samir (#26), I didn’t care for the article at all once I got to the part about a woman’s role and not having children. It was interesting to read what he has been able to accomplish and how he was able to accomplish it and it’s still certainly useful information, but my overall impression was ruined by those two comments.
Fortunately for Ken he has someone to explain Ken to you (#47). However, I would argue with “slowth” (#47) that there was no “haze” to cut through. If his opinion needs to be explained in more detail then he should have provided that in the article.
Apologies to J.D. My first comment here and it’s negative. 🙂
Hi Gwen, I certainly understand your concern with how his comments appear at first glance. I only responded with my recent post because I think this negative first impression is unfortunate.
The ‘haze’ I’m referring to is the fact the Rockwell doesn’t organize his site well enough so that readers can understand his positions. It’s primarily a technical site, but he peppers his opinions throughout all of his posts, so it’s sort of like rearranging the chapters of War and Peace and then trying to decipher the meaning.
He could probably learn a thing or two from J.D. about presenting his ‘mission statement’ but I don’t think he really cares. Readers visit for camera equipment reviews, and that he organizes well.
It’s all about priorities. Some expenses are worth it to me because they are things or experiences I value and enjoy, regardless of how anyone else feels about them. Other things (like an iPhone, for example) are not important to me so I don’t choose to spend money on them even as my friends fawn over them.
Even people I know with quite a bit of money won’t pay big bucks on something if they don’t think it’s worth the price. It needs to be a good value and something they really want or need.
I am always being called cheap by my family members because I hold off on buying little, meaningless things. I’d rather save so that I can afford things that I really want. Growing up, I would forgo buying video games, CDs, and movies, just making do with what I received as gifts. I used that money to buy a brand new car when I was 22. Looking back, I wish I had even used less money for a car and saved it instead for a larger home down payment.
Slowth, thank you for the clarification of your comments – very kind of you to respond.
🙂
…one of the best ways to be able to afford small expenses is to economize on large expenses. Rockwell says that this means never buying a new car.
Well, I did buy a new car, back in December 1994. But I paid cash for it, and I’m still driving it, and probably will continue to drive it for at least another two to five years, or until repairs start to get too frequent and too expensive to justify hanging on to it.
And when that time comes, I’ll buy another new car, and pay cash, and start the cycle all over (only this time with a smaller, less expensive, more fuel-efficient car than the one I have now).
Avoid addiction, including addictions to caffeine…
[laughs] Well I’m doomed, aren’t I?
I suggest amending that to “Avoid addiction to expensive foo-foo coffee drinks purchased at Starbucks, for they will make your butt large and your bank balance small.”
My insulated stainless-steel travel mug is this caffeine junkie’s best friend (and I’ve been using the same one for 13 years, so I think it’s paid for itself).
Shara @ 11: As an aside, I changed my terminology from “I’m poor” or “I can’t afford that” to “that isn’t in my budget”…. I am NOT poor and I CAN afford it, but I am making a choice.
I’ve done the same thing. I lived with a “poor” mindset for most of my adult life, even as my income rose, my debts disappeared, and I slowly managed to set saved money.
And the funny thing was, frugality was much harder when I had a poverty mindset. When I identified as poor, I wanted more of the stuff I was sure I couldn’t afford. I was focused on what I didn’t have, or couldn’t have, instead of what I actually did have. And I tended to make a lot of small impulse purchases, despite being a miser–it was my release valve, I guess.
Once I realized that I actually had everything I really needed, and wasn’t poor at all, frugality became much easier–it became a choice, rather than a grim necessity. By the time I realized I had plenty of money to buy things I’d wanted, I no longer wanted them; it was more satisfying to put the money toward my long-term financial goals and watch it grow. It also became easier to spend money on big things I genuinely enjoy–such as travel–while at the same time no longer nickel-and-diming myself with small, cheap impulse buys.
I went with a friend to help her buy a flat-screen TV last week. She was excited beacause she was getting “such a great deal.” And I thought about my old 19″ TV, and considered replacing it–I had the money, after all; I could have paid cash, and maybe negotiated a lower price. But as I stood there I thought, “I don’t need this. And I can do much better things with the money.” So instead, I came home and earmarked that money toward an upcoming stock purchase.
When I was “poor,” I wanted to be able to buy expensive consumer goods–that was how I defined wealth. But these days I’m indifferent to those things; I get a lot more satisfaction out of watching my net worth–my real wealth–grow.
I agree about addictions and thank my lucky stars I’ve never been addicted to anything (except maybe chocolate but even that, not now).
The latest thing I’m thinking of quitting is television. I mean, the thing hasn’t even had an aerial put into it since April and I only watch DVDs on it – which I can also do on my computer – so I’m seriously thinking of selling it and making more space in my rather small lounge.
Everybody says that buying a new car is a waste of money, but a car is something that’s important to me. I bought a new car (actually, I’m leasing, which I know is even more appalling to the personal finance community), and I love it. It’s a pretty sweet car, and my coworkers (who have a pretty good idea how much money I make) often express surprise/envy that I can afford such a great car.
They probably think I’m one of those people who spend like there’s no tomorrow, live paycheck-to-paycheck, and are in a ton of credit card debt. The truth, though, is that I put 20% of my income into my 401(k), max out my Roth IRA every year, pay off my credit cards every month, and still put enough in savings to have a 6-month emergency fund even after I put 20% down on my house earlier this year. Sure, I spend a lot of money on my car, but I bring my lunch to work every day (peanut butter and jelly for less than $1/day) and never eat out, I pay $5/month for my Virgin Mobile cell phone service (supplementing my paid airtime with free minutes from Sugar Mama), I don’t own a TV, and I keep my house at 56 degrees all winter. I choose to be able to afford my car, by sacrificing the things that aren’t that important to me.
Even though I live “poor” in many areas of my life, I feel rich because I can afford just about anything I want (like my car) — even if I can’t afford everything I want.
As a woman who is currently the sole wage-earner supporting my partner, I’m rather irritated by his assumptions about gender roles. I’m not all the way up to “offended” (though I sympathize with those who are), but I am irritated.
You know, the last two times I bought a car I set out assuming that I would buy a used one, because I had always heard what a waste of money the new car is. In reality I was very unimpressed with the savings that was apparently available to me as a buyer. Unless I wanted to shop around a *lot*, meet with private sellers and get independent mechanical inspections, I was going to save only 10-20% of the purchase price by buying used and take on additional risk at the same time. So I bought new and never regretted it. I’ll take a fresh look each time I do this, but my bias has now changed… I need to be convinced of the value proposition of the used car. Part of this is about getting a good price for a new car, of course. There’s no reason to may more than $100 or so over invoice, if you are over invoice at all.
I rarely comment here, but Dana’s comments (#41) struck me as rather harsh, and misleading.
Because of the manufacturing and cleaning processes for cloth diapers, there is minimal difference in the environmental impact between using cloth or disposable diapers. And the net environmental effect of either one is relatively small to start with (as a 2005 British Environment Agency report said, “For one child, over two and a half years, these impacts are roughly comparable with driving a car between 1,300 and 2,200 miles.”).
It is also unfair say that if you buy 5 or 6 baby bottles (or 5 or 6 hundred, for that matter) you caused the deaths of
“a bunch of people in Iraq.”
I don’t this sort of judgmentalism is helpful. You don’t get people to change by attacking them, particularly when your attacks are unfounded. Also, when you make these unsolicited judgments on relatively small points, you need to be prepared for the responsive attack on your own actions. For example, anyone who has taken one airplane flight has caused more environmental harm than one baby’s disposable diapers or plastic bottles.
Let’s quit being so self-righteous. Let’s quit demonizing people who didn’t take the exact same path that one of us chose to take. We don’t know the reasons behind their actions, or indeed what else they do that we can’t see, that may very well be far more “righteous” than our own actions.
We tend to judge other people by one-off actions that we observe, and so we judge them harshly; while we judge ourselves by our intentions, and so we judge ourselves lightly. Can’t we try to cut others the same slack that we cut ourselves?
Very sound advice! Going back to the basics (e.g., spend less than you make, avoiding impulse purchases, researching planned purchases) is an important component of a healthy financial life.
Lots of good comments in both articles and many of the responses. I agree with Melissa @53 – when you can’t afford things you are more likely to covet them, even if they’re not what you really want.
And the stores make it so easy for you to get into debt for that ‘must-have’ celebrity endorsed item that you don’t get much use out of.
I agree with Ken Rothwell’s suggestion to buy less house than you can afford. Here in Greece so many incomers build houses big enough to put up guests, which means that for most of the year they’ve got more real estate than they need, but they had to put in the plumbing and furnishing, and pay the taxes on the bigger floor space.
It would actually be much cheaper to rent an apartment for visitors rather than build a personal hotel.
But as others have commented, each to his own.
Employ the power of CASH.
You will find that spending frivolously is a lot harder to do when you are physically handling cash.
1. Cash is Emotional
2. Cash is Visual
Credit cards often desensitize your psychological concept of the actual $$ that you part with– making it easier to make trivial purchases.
Great post– very insightful and useful content! I jotted down a few notes.