Recently, I was at the library and I found myself flipping through the charming book The Cheapskate Next Door by Jeff Yeager. In that book, Yeager surveyed people who live significantly below their means and draws some general conclusions about the group.
Most of the results were pretty much what I expect, but I found one result pretty interesting. It popped up on page 46 of the library’s edition of the book:
“More than nine out of every ten cheapskates I surveyed said that their decision to live below their means isn’t really about money at all; their frugality and attitude toward money are rooted in higher values or beliefs they hold.”
This is absolutely true for me. My purpose in living well below my means is tied into my role as a parent and a husband. I want to provide for my family today as my children are growing, and I want to have a wonderful life with my wife after the children grow up and spread to the winds. I have some secondary purposes, too, but that’s really the primary purpose behind my financial choices.
But that’s far from the only reason.
There are many different core values that people hold closely to their hearts, values that trump their ordinary everyday impulses and decisions about how and where to spend their money. Having such an overriding core value makes it far easier to make smart financial decisions because it’s not just a sense of “long term planning” that’s pushing back against your impulses, it’s also a very strong value that’s at the core of your being.
Some of these core values might be ones that you disagree with. Many of these core values might not matter to you. However, each one of these values are ones that different people hold very dear to their hearts. What we’re looking for here is not examples of how other people are wrong or hold strange values, but to seek out core values that you might hold and see how they might guide smarter financial decisions for you.
What are you committed to? Let’s take a look.
Faith
The world is filled with an incredible variety of religious faiths. Even within faiths, the variety of denominations and groups is simply astounding. This world is an enormous mix of religious ideas, experiences, and doctrines.
What’s even more amazing is that many of these religions, from all over the world, still subscribe to many of the core principles of personal finance.
They speak of frugality, of being careful with the resources that you have available to you. They tell you clearly to avoid waste, both in terms of your money and possessions and of your time.
When they were filled, He said to His disciples, “Gather up the leftover fragments so that nothing will be lost.” – John 6:12
They speak of being very wary of debt, of not spending beyond your means, and of not owing excessive amounts to others and allowing those people to control your decisions and your life.
They say: ‘buying and selling is but a kind of usury’ – while Allah (God) has made buying and selling lawful and usury unlawful. – Quran 2:275
They speak of hard work, of the personal integrity that it brings you, and how it brings not only the simple rewards of maintaining your existence and improving your character but of the greater rewards it brings to society at large.
Sri Krishna said: You have a right to perform your prescribed duty, but you are not entitled to the fruits of action. Never consider yourself the cause of the results of your activities, and never be attached to not doing your duty. – Bhagwat Gita: Chapter Two verse 47
Somewhere around 80% of the world believes in some religion or another. Among those, many are strong adherents and take the meaning of their religion’s holy works into their heart. Many of those holy works guide followers to frugality, to debt freedom, to hard work and entrepreneurship, to the very things that are the bedrock of sound personal finance.
Environmentalism
Whenever you purchase a product, there’s virtually always an environmental impact, often one that’s greater than what you can see or even consider.
Take buying a simple apple at the grocery store. It was likely grown on an apple farm, possibly one in another country. There were lots of pesticides and herbicides used on that apple farm. That apple was picked and then likely taken to a factory somewhere to be cleaned and sometimes coated with a thin layer of wax as a preservative. That apple is then shipped to the local store, with the vehicles used producing all sorts of pollution. You don’t have to worry about things like the waste of packaging with an apple, either.
Those are the real consequences of the ordinary things we do every day. Every time we make a purchase, every time we drive our car, every time we turn on a light switch, it has an environmental impact. We’re often shielded from those things due to the distance – we don’t usually see the power plants that bring energy to our home, for instance – but those things do exist.
For many people, this fact is very troubling, and they respond in different ways. Some people avoid buying many things at all and live a very minimalist existence. Some people homestead and try as much as possible to live off of their land. Many people do these things to varying degrees, depending on how important environmentalism is to them.
Naturally, things like minimalism and homesteading are going to have a big impact on one’s finances. Minimalism in particular can involve spending very little money, giving you lots of space to conserve your money. The choice to conserve energy cuts down on your environmental impact and energy bill. The choice to minimize trash and waste cuts down on the amount of products with packaging that you purchase, thus curbing your spending. The list goes on and on, but the point is this: environmentalism often leads people directly into a frugal lifestyle, one that involves spending far less than they earn.
Family
This is my primary reason for being careful with my money. I want to have enough resources to provide for my family both today and tomorrow, regardless of whatever may come.
I’m not too worried about me personally. If I were single, I probably wouldn’t have this motivation very much at all. I can barely sit still as it is, so I’m pretty sure I can find work no matter what happens and I’ll make ends meet on my own.
But what about my wife? And, even more so, what about my children? My children can’t fend for themselves yet and their needs over the coming years are tremendous. I want to ensure as much as I can that they will get a great start in their adult life. I also want to ensure that when they do leave the nest, Sarah and I aren’t financially depleted.
That means that I need to keep an eye on my personal finances today. I need to spend less than I earn and put the rest away in a smart place so that it can be used in the future to build the life that my family and I want to have as my children progress through their teen years and become adults and then Sarah and I have an empty nest to deal with.
Charity and Unequal Distribution of Wealth
Many people are deeply bothered by the unequal distribution of wealth that is a part of our modern world, so they intentionally choose to spend as little as they can, plan minimally for the future, and use the remainder of their income and time to help those in need.
These tend to be people who are heavily dedicated to volunteerism and community service. They spend their weekends building Habitat for Humanity houses. They give lots of their money away to charities of all kinds. They tend to come off as having much less than they could actually afford based on their jobs, but that’s because they give a lot away.
Does this help the broad problem of unequal distribution of wealth? Not really. However, one looks at this problem from the perspective of the famous story about the starfish. There are thousands upon thousands of starfish on the beach. Will throwing one back in the water solve the overall problem? No, but it makes a gigantic difference to that starfish, and if you do it to enough starfish, you do start making a real difference.
Some people address this by getting involved in political solutions to these problems. They get involved in political causes to solve problems like unequal wealth distribution and spend their time and resources there. As always, though, in order to have time and resources to contribute to that cause, they have to be careful with their own finances.
Anti-Materialism / Anti-Consumerism
There are many people who are simply turned off by consumerism and owning excess material goods. The idea of owning more stuff than you can actually use on a frequent basis seems very excessive to them.
I have a friend who believes heavily in this. He has a tiny apartment but he honestly lives most of the time out of a few bags. All of his worldly possessions are in there. He has some nice things, but he doesn’t have very many things. He considers owning lots of possessions to be wasteful, mostly because you don’t have the time to really use and value those things. Thus, his response is to own only a few things. He has a laptop computer and an e-book reader. He has enough dishes to prepare and serve simple meals to a few people. He has maybe a week’s worth of clothes, mixed between summer and winter seasonal items.
He enjoys life, though. He reads all the time, borrowing books from the library or downloading them to his tablet. He goes on walks and runs all the time. He plays a lot of soccer and ultimate frisbee. He has a pretty interesting job as a software developer, so he’s not hurting for money. When he wants new shoes, he can buy them, for example.
Because of his anti-materialism stance, though, he’s able to sock away about 60% of his take-home pay, which means he’s not only living in accordance with his beliefs, he’s on the cusp of having tremendous personal freedom as well.
Stoicism
At Wikipedia, stoicism is described in this manner: “Stoicism is a school of Hellenistic philosophy founded in Athens by Zeno of Citium in the early 3rd century BC. The Stoics taught that destructive emotions resulted from errors in judgment, of the active relationship between cosmic determinism and human freedom, and the belief that it is virtuous to maintain a will (called prohairesis) that is in accord with nature. [...] [T]he Stoics presented their philosophy as a way of life, and they thought that the best indication of an individual’s philosophy was not what a person said but how that person behaved. To live a good life, one had to understand the rules of the natural order since they taught that everything was rooted in nature.”
To put it simply, Stoics believe that virtue is sufficient for happiness and they strive to spend their lives figuring out virtue, which often means carefully analyzing the pleasures and pains of life and pulling themselves back from those feelings to really understand them.
Compare this to Hedonism, which is a philosophy many people today live by: “Hedonism is a school of thought that argues that pleasure is the primary or most important intrinsic good.[1] A hedonist strives to maximize net pleasure (pleasure minus pain). [...] Ethical hedonism is the idea that all people have the right to do everything in their power to achieve the greatest amount of pleasure possible to them. It is also the idea that every person’s pleasure should far surpass their amount of pain.”
In other words, hedonists need only understand pleasure enough to know what things bring them deeper pleasure in life. They aren’t worried about other virtues.
But what about the Stoics? Stoics strive to develop self-control over their emotions so that self-destructive emotions do not control them. They push themselves to maintain control over their emotions, to not give into impulses, and to understand what drives them. Doing so gives them great autonomy – they’re not driven into actions by their emotions at all and thus avoid some very potentially negative choices.
Unsurprisingly, people who believe in Stoicism tend to be very careful with their finances. Since their driving philosophy in life is to avoid impulses and emotional responses to things, they tend to make very wise spending choices and that often results in spending substantially less than they earn and building toward great financial stability.
Learning
I feel the need here to mention a final area, exemplified by a person I once knew that I’ll call “David.” David made almost $100,000 a year, but you’d never know it because David wore beat up clothes and drove a rusted-out car. He seemed to subsist on a diet of beans and rice and tofu and occasionally an egg or two. Why? He said he didn’t need all of that stuff to be happy.
So, what made David happy? Learning things, and using those things he learned to answer questions and build things. He spent hours upon hours each day reading, doing experiments, designing things on his computer, and building things. He worked in a research lab that gave him a ton of latitude on what he did because they were eager to harness his ideas.
David was always thinking, always learning, always remixing ideas, and those ideas would sometimes pour out of him like a fire hose. He was constantly making prototypes of things, running experiments to see how things worked, and burying himself in books of all kinds.
He didn’t need much of a car to learn – just something to get back and forth. He didn’t need much of a wardrobe to learn – just enough to cover himself and keep warm. He didn’t need expensive meals to learn – just fuel for the body and mind. He didn’t need the countless things most of us have for entertainment – his entertainment was learning.
He wasn’t anti-social in any way, though. He was fun to have around and have conversations with. It was just very clear to him and to others that his true passion was learning, and he understood that passion so well that he was able to basically minimize the other elements of his life.
Accumulation of Wealth
There’s also the fact that some people are driven solely by their account balances. They derive real pleasure from seeing those numbers go higher and higher and higher and that alone becomes their driving force.
With that as a driving force, it makes sense how a person would avoid spending much money. It also makes sense how a person could transform that aim into working very hard, trying to build a great career or trying out entrepreneurial directions.
The catch, of course, is that this is a positive thing for many people but not a centrally driving thing. We all like to see a big account balance, of course, but for most of us, it’s not a central driver. It’s just a perk.
When it becomes your central driver, though, it can push you to make optimal personal finance choices almost constantly, because that central force trumps everything else.
Why Are You on Your Personal Finance Journey?
At this point, the question really turns to you. Why are you on this personal finance journey?
If you don’t really have a core value that you’re following that guides you toward being smart about your finances, you might succeed, but it’s very likely that personal finance is a temporary thing for you, just enough to get your head back above water. That’s not a bad thing per se; it just means that you’ll likely struggle in this way throughout your life. However, at the same time, you’ll be able to achieve other goals in your life and work toward other centrally motivating goals.
On the other hand, if any of those greater purposes listed above really resonates with you – and, trust me, you’ll know deep inside if it does – then use that purpose! Study it deeply and think about how that purpose can really guide your day-to-day decisions. Let that central purpose be a helping hand in figuring out what you should be doing in those thousands upon thousands of choices you make each and every day.
In any case, it’s still worth your time to gain some understanding of each of these greater purposes, as these are among the purposes and philosophies that drive people that you meet every day in every walk of life. You’ll meet people driven by faith, driven by family, driven by environmentalism, driven by philosophy, and so on. Understanding those drives will help you to understand them and will help you to understand yourself, too.
What drives you? Why are you on this personal finance journey? It might seem like a vague question, but it can lead directly to deeper meaning in your life.
Good luck!
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