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Living on a Budget
by Jeff Yeager, AARP The Magazine
"Sure, we could afford to spend more," Bruce Ostyn told me as he rinsed the plates from dinner in a shallow plastic dishpan. "But why would we? It wouldn't make us any happier."
Ostyn then headed to the patio to carefully redistribute the wash water to some thirsty potted plants. When I tried earlier in the evening to be a helpful houseguest and put the dinner dishes in the dishwasher, I was promptly reprimanded. The appliance wasted too much water and electricity. "Besides, it's full," Ostyn noted. "We use it to store ramen noodles and other bulk foods for our camping trips." You never know what you'll find in a casa de cheapskate.
Frugality, formerly an everyday virtue, hasn't gotten much respect in recent decades. Yet when the stock-market crash of 2008 pushed a stalled economy into the Great Recession, bam!—suddenly thrift was in vogue again. A recent Gallup Poll found that 62 percent of us would rather save money than spend it, up from 48 percent in 2001.
Being a cheapskate is my chosen profession, come by honestly from a boyhood in the farmlands of Ohio—where you learn to use it up, wear it out, make it do, or do without—and 24 years running nonprofit groups. In the spring of 2008, as the Dow seesawed, I crisscrossed the country on a 30-year-old bicycle to research my second book, The Cheapskate Next Door. I had surveyed more than 300 of my "Miser Advisers"—a network of super thrifty folks I've developed—about their financial habits, and I wanted to take a closer look at them. I met near-millionaires and people who earned so little they could qualify for public assistance but chose not to—they had more than enough to live as they wished. What they all had in common: they've found ways to be wealthy that don't depend on earning more cash or buying more things.
That's right—the reality of the frugal life upends stereotypes. These aren't latter-day Scrooges, though I've yet to meet one who doesn't sport apparel dating to the Carter administration, or earlier. For its adherents, thrift is more about knowing what you cherish, then skipping the rest.
Ostyn, 59, and his longtime partner, Daniel Newman, 45, are prime examples of people who enjoy the good life while spending far less than their neighbors. The couple live in southern Arizona, in an average-size but Architectural Digest—gorgeous ranch-style house (which they paid for in cash). They travel throughout North America for at least two months every year, following the migratory birds they love to watch and sleeping in the comfortable camper kit they installed on their pickup. The pair run their own interior-design service, a venture that typically nets them a modest $20,000 to $40,000 a year, but they still put "at least 25 percent into savings," says Ostyn.
Among their savings secrets: Live cell-phone free ("It's a quality-of-life issue, too"), wear your clothing until it's truly worn ("It's like losing a friend when we consign a shirt to the rag bin"), and save twice the amount needed for a major purchase before you buy it ("It lets you make sure you really want it, and—if you do buy it—you don't feel broke afterward").
"For us," Newman told me, "a true sign of wealth is free time—freedom from drudgery and unwanted commitments. In terms of baubles, we might be living below our means, but in terms of the things that really matter, the Queen of England doesn't have it any better."
You don't need to go back to the Puritans or Poor Richard's Almanack to find when penny-pinching was last a source of pride. The YMCA and other civic groups launched National Thrift Week in 1916 to promote frugality "For Success and Happiness"—or so the official slogan proclaimed. Thrift Week celebrations were held throughout the land, and they included sexy-sounding events such as Have a Bank Account Day and Pay Bills Promptly Day.
National Thrift Week had a long run—until 1966. That year, it so happens, "Time" magazine ran a cover story entitled "What's Good for the Economy." An excerpt: "For 62 fat months, prosperity has fed itself because Americans have spent, lent, borrowed and invested with confidence. They have felt correctly that jobs, production, profits and paychecks would continue to go up and up." Meanwhile, household debt as a percentage of disposable income had nearly doubled since 1950, from roughly 35 percent to nearly 70 percent. Thrift Week had been replaced by a newer national mandate for success and happiness: Spend more than you can afford, and our economy will boom.
Fast-forward to today, with personal bankruptcies and home foreclosures near all-time highs. The average U.S. household owes about $7,500 in credit-card debt. Almost half of workers live paycheck to paycheck. Sometime in the 1990s, says Boston College sociology professor Juliet Schor, Ph.D., consumers went into overdrive, egged on by easy credit and real-estate values on steroids.
According to Schor, author of The Overspent American: Why We Want What We Don't Need, keeping up with the Joneses suddenly wasn't enough anymore. Now we had to surpass them, to live, as Robin Leach would say, the lifestyles of the rich and famous.
How long ago that now seems.
A familiar line item in the budgets of the thrift mavens I met is zero. They spend nothing, or close to it, on fast food, clothing, or the latest whatsit. "Like a lot of moms," says Welmoed Sisson of Gaithersburg, Maryland, "I love shopping with my daughter, but it's just to laugh about how much stuff people buy that's totally unnecessary, not to buy things ourselves. It took me a while to explain to our kids that if a company needs to advertise all over the place, it's something that people really don't need. But eventually they got it." Confirmation came when her daughter scored a thrift-store find: an elegant black dress for $12.50 that she wore to her senior prom.
Sisson and her husband, Bob, both in their early 50s, display the zeal of converts. Bob quit a high-level corporate job a decade ago. Together the couple started a home-inspection business and now typically earn around $80,000 a year. Three years ago they moved from an 8,000-square-foot home to one about a third that size.
"Moving made us realize how much we owned that wasn't being used and wasn't necessary," says Welmoed. "When you look at how much most of us have compared with world standards, it's almost embarrassing."
One of the joys the Sissons discovered as they downsized their lifestyle was each other's company. "We started eating nearly all of our dinners here at home, as a family, and—I'm not exaggerating—sitting around the table for a good hour after the meal was finished, just talking about our days," says Welmoed. "We started sharing so much more as a family."
For many cheapskates the formula is simple: spending less money creates more time. "The relentless pressure to buy more crap makes things like sleep, free time, and relationships the real luxuries these days," says Jacquie Phelan, 55, a professional mountain biker I met in Fairfax, California, outside the rustic home she proudly calls the Taj Mahovel. The only way most people can afford simple pleasures, she adds, is to "spend less, not earn more."
In 1992 Vicki Robin and Joe Dominguez published Your Money or Your Life and became champions of the neglected notion that your time is more valuable than money. A bestseller when it first came out, the book was reissued in 2008 and once again climbed the charts.
Robin, who now lives in a sustainability-minded community on Whidbey Island in Washington State, sees the tight economy slowly changing more people's minds about what she calls "the true cost of stuff." The current flood of books about de-cluttering your life is evidence, she says, that Americans are realizing less can be more. "For years we cheapskates picked on gas-guzzling SUVs as symbols of excessive consumption," Robin says. "When GM announced it will shut down Hummer production, some called it the result of higher fuel prices. I call it a return to common sense."
In her research for The Overspent American, Schor concluded that many of us could trim spending by 20 percent and not feel it. "Most people are caught up in fantasy desires," she says. "We tell ourselves we want an expensive car because it's safer, or a gourmet kitchen because we want to do more cooking, but that's rarely the truth." To prevent buyer's remorse, Schor suggests putting off until tomorrow what you're tempted to buy today. "Every parent knows that children will probably lose interest in an item if told to wait," she says. "Adults are really no different."
Schor is board cochair of the Center for a New American Dream, a nonprofit group that's out to help people "consume responsibly." A survey it sponsored revealed that 86 percent of Americans feel the phrase "more of what matters in life" fits their concept of the American dream better than the term "more is better."
What matters most to many folks I met, like Bruce Jackson of Lewisburg, Pennsylvania, is sharing their wealth with others. A 64-year-old retiree, he relies on Social Security to cover most of his needs (apart from medical expenses). A key to his financial independence was his decision to buy a duplex and rent out half: the income stream helped him pay off his mortgage in eight years. Living in Lewisburg also helps minimize expenses. Bucknell University, a rich source of free or inexpensive entertainment, is close by, and Jackson's "two-mile rule" means he walks or bicycles to any destination within that radius whenever possible.
The satisfaction of giving drives his choices. He estimates he donates 15 percent of his income to assorted charities and the church he attends (the average of those I surveyed was nearly 5 percent; the national average, less than 3 percent). "Most of my estate is slated to go to charities," he says. "The more careful I am with my money, the more I can pass on to someone else who really needs it."
Have we reached the tipping point—or perhaps the "no-tipping" point—where thrift is here to stay? Schor thinks the stigma of "cheap" may be fading. "With friends it's easier to raise whether you can afford to go out," she says. "Frugality is hipper now." There's even a movement afoot to resurrect National Thrift Week. Maybe we'll celebrate Keep a Budget Day once again. But Lauren Weber has her doubts. Weber, a historian of thrift, is the author of In Cheap We Trust. "History shows that in hard times, we hunker down and make do with less," she says. "It also shows that as soon as the danger passes, we cheerfully reset our appetites a notch or two higher."
Maybe so, but when the economy roars again, I'm certain my fellow cheapskates will persist. We have it too good. My questionnaire ends with a hypothetical: Someone drops a million dollars on you—how would it change your life? More than 9 out of 10 replies said, in so many words, that money cannot alter their lives. They already have what they want.
Bruce Ostyn and Daniel Newman put it this way: "Honestly, it would change our lives very little. It would just serve to reinforce what we have already learned—that we have enough right where we are, and we realize that is a gift most people don't ever choose to receive."
Jeff Yeager is the author of The Ultimate Cheapskate's Road Map to True Riches and The Cheapskate Next Door. Read his tips on living below your means at aarp.org/savingschallenge.
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