Because fortune is fickle, we should balance gratitude with prudence. Gratitude implies enjoying what you have now. Prudence means providing for the future (assuming you have one). I do not believe that man can be reduced to Homo economicus. And yet, financial awareness has its part in the well-ordered life. Here's what I find myself telling my three children from time to time, based on my own experience:1. Let your spending be guided by thrift. Thrift is knowing what you treasure and foregoing the rest. By this definition, thriftiness is not stinginess. Thrift is focused spending. Aristotle would say that it is the Golden Mean between penury and profligacy.
2. Here is what is meant by focused spending: Purchase experiences not things. When you do spend money, prefer to spend it on experiences rather than on things. Spend it on experiences that bring you closer to others, enrich your imagination, or recharge your batteries. When you do spend money on the few necessary things, spend it on that which promotes good experiences: a dwelling that becomes a home for people to gather; a car that people truly enjoy riding in (my convertible, for example, is a land boat); a vehicle that enables you to visit others and stay connected. The money you spend on most things, which are enjoyed for a moment or two then forgotten, is gone forever. (Wouldn't it have been better to rent the movie rather than buy it? Better to check the book out of the library rather than own it? Think of the clutter you'd avoid.) The money you spend on experiences (shared with others, travel, enriching your imagination, and out in nature) is not so transitory, but is incorporated into your memory, storytelling, and personality. It lives in the people you love after you are gone.
I learned how much stuff I had that was a burden rather than a treasure when I moved and performed a little experiment. I kept as much in boxes as I could for as long as I could to see if I would miss it. Turns out I didn't really need but a small percentage of the things I had previously coveted. A sobering and humbling realization, that.
3. The real deal Be smart about buying things on sale. If I buy a tie on sale for $10 and wear it only once because it's a so-so tie, I've paid $10 per wearing. If I buy a tie for $100 and wear it 20 times because I really like it, then I pay $5 per wearing. The $100 tie turned out to be half the cost of the "sale tie." The $100 tie was the better deal.
I was lured into buying a DVD on sale for $10. I took it home and never watched it. It sat on a shelf and my house became a warehouse for the manufacturer. Even if I had wanted to watch the movie one more time, I could have rented it for $1.99 and saved $8.
4. Avoid all finance charges and interest payments (except on a mortgage).
5. Credit cards are 30 day bank loans. Never, ever use a credit card to buy something if you cannot pay it off within 30 days.
6. Give Arthur Brooks has conducted studies showing that people who tithe to their church and give to charity are happier than those who do not. Just be discerning when donating. I am reminded of a joke:
A devastated-looking man knocks on the door of a woman known for her charity.Another relevant joke:
"Please, ma'am," he says when she opens up, "can you help this poor, tragic family down the block? The father just lost his job, and his wife is too ill to work. They're about to be turned out into the cold streets unless someone can pay their rent."
"That's the worst thing I've ever heard in my life!" says the woman. "May I ask who you are?"
"Their landlord."
Visiting a college campus, the prospective student spots a building called Hemingway Hall. "That's nice," he says, "a building named for Ernest Hemingway."And another:
"Actually," says the tour guide, "it's named for William Hemingway."
"Was he a writer, too?" the student asks.
"Yes. He wrote a big check."
The pastor decides to use one rich parishioner to set an example. "John," he says, "you're a successful businessman; surely you could contribute more to the building fund."
John replies, "But my mother is in a nursing home, my daughter just lost her job, and my son is starting college … If I can say no to them, I can say no to you too."
7. Circumcision principle Reduce your monthly expenses by 10 percent -- right now. Margaret O'Connor called it the "circumcision principle": you can cut 10 percent out of something and it will still work just fine.
8. Don't spend more than you earn. If you do, get out of debt as fast as you can. You have to be out of debt before you can seriously save.
9. Save for a rainy day -- preferably for a six-month-long rainy day. Do you have enough money in savings to allow you to survive for six months without a job?
10. Do not go to Costco and buy in bulk unless you will consume all the stuff in short order because of a party, family reunion, etc. The few times I've gone to Costco, I've spent more than I should have, and the large quantity of stuff has sat around and lost its freshness.
11. Save your receipts. Check your bank statements frequently, even daily, to make sure you are not being taken advantage of. I learned this lesson after an unpleasant experience with a restaurant in Kalamazoo, Michigan. I charged my modest dinner bill (about $14) to my credit card. After I left the restaurant, they changed the bill to correspond to the last four numbers of the credit card I had used (84.84) -- more than a $70 difference. Because I checked my balance early the next morning, I caught their dishonesty right away.
12. Credit scores are crazy things and you have to play the game to borrow money at a cheaper rate for your mortgage. Credit scores are built on monthly mortgage payments, monthly installment loans (like a car payment), and credit card habits. It goes without saying that you must pay bills on time to keep a good credit score. Apparently you also have a higher credit score if you have a few credit cards with some purchases on them. Part of the credit score is based on the percentage of available credit that you are using. Do not carry a balance of more than 30 percent on any credit card limit. Also make sure there are no errors on your credit report to your detriment.
13. Live your life in such a way that you will not be a financial burden to others, now or in the future, especially to your children.
14. Remember: your paycheck is your property. Watch all those deductions carefully, because they diminish your property. There's an apt joke: If you are truly serious about preparing your child for the future, don't bother to teach him to subtract — teach him to deduct.
Here's a joke at the expense of the IRS:
One day at a local café, a woman suddenly called out, "My daughter’s choking! She swallowed a nickel! Please, anyone, help!"
Immediately a man at a nearby table rushed up to her and said he was experienced in these situations. He calmly stepped over to the girl, then with no look of concern, wrapped his arms around her and squeezed. Out popped the nickel.
The man returned to his table as if nothing had happened.
"Thank you!" the mother cried. "Tell me, are you a doctor?"
"No," the man replied. "I work for the IRS."
15. Good habits So much thrift is habit. I save electricity and money by turning off lights when I leave a room and unplugging any converter or device that is generating heat when not in use -- a phone or iPod charger, for example. I reuse plastic containers and bags when possible.
16. Understand needs vis-a-vis wants. Some people can be stupidly penurious. Use common sense. If you need something, you will pay for it whether you buy it or not (a paraphrase of Benjamin Franklin's quip). There's an old joke:
Before my son could start going on job interviews, he needed to dress the part. That, he decided, required a $500 suit.
"What!?" I answered, gagging at the price tag. "I've bought cars for $500!"
"That's why I want the $500 suit," he said. "So I don't have to drive $500 cars."
17. Shopping sprees do not good therapy make. If you are depressed, talk to a friend or go to a therapist. A shopping spree may make you feel better today, but it will make your life worse in the long run, perpetuating the tendency to get depressed.
18. Don't do anything that will get you sued. At an anti-harassment seminar at work, I asked, "What's the difference between harassing a woman and complimenting a woman?" The lawyer answered, "A million dollars."
19. Don't acquire any addictions. They've proven to be the financial ruin of many. The following joke makes us laugh at something that's no joke:
A millionaire, a hard hat, and a drunk are at a bar. When they get their beers, they notice a fly in each mug. The millionaire politely asks the bartender for another beer, then proceeds to sip it. The hard hat spills out just enough to get rid of the fly and quaffs the rest. It's now the drunk's turn. He sticks his hand into the beer, grabs the fly by the wings, and shouts, "Spit it out! Spit it out!"20. Find your passion and you will know what to do about your job, career, and life. As Ralph Hauenstein likes to say, "Love your job and you will never work a day in your life."
21. When it comes to money, never be dishonest, but it's okay to be wily, like the woman in the following story:
Lying on his deathbed, the rich, miserly old man calls to his long-suffering wife. "I want to take all my money with me," he tells her. "So promise me you'll put it in the casket."
After the man dies, his widow attends the memorial service with her best friend. Just before the undertaker closes the coffin, she places a small metal box inside.
Her friend looks at her in horror. "Surely," she says, "you didn't put the money in there."
"I did promise him I would," the widow answers. "So I got it all together, deposited every penny in my account, and wrote him a check. If he can cash it, he can spend it."
Composed on St. Joseph's Feast Day, Saturday, March 19, 2011.
