Simple Living January 2009 by Janet Luhr

I just read an article about a young high school sophomore who planned to be a millionaire by age 30.  Don’t worry-becoming a millionaire is not the focus here.  Instead, I’m sharing his story so you can see what behaviors will lead you to your own financial independence.  Here’s the part of the young man’s story that jumped out at me.

He fervently read the biographies of millionaires like Donald Trump, Sam Walton, The Motley Fool duo, and other wealthy entrepreneurs.  Before long, their messages began to have an effect on him, and he soon became very interested in saving and investing.  Even his thrifty mother thought that his interest at times seemed extreme.

 Now I want you to sit up and notice this next paragraph:

One Christmas a few years ago, this young man’s sister gave him a $40.00 designer watch, and instead of him keeping it and showing off to his friends, he took it back to the store for a refund.  He purchased an old watch for $5, polished it up to make it look brand new, and then invested the remaining $35. He got back in a money market account.

The article goes on to say that although the mom never gave her son an allowance for chores, he consistently squirreled away birthday money and worked odd jobs to earn extra cash. 

Not two days after reading that article, I had my own similar, real –life experience with a friend.  I love my friend, but she just never seems to get ahead financially.  We were at a gathering that day and I said I was coming down with a cold.  She suggested we go to Whole Foods, which was two blocks away, so that I could check out a particular supplement that might help ward off my cold.  There we were, perusing the vitamin aisle, and we found two herbal cold remedies.  One I had heard of and the other was a mixture of Chinese herbs that I knew nothing about.  I was ready to buy just one bottle-the one I knew something about-but she strongly encouraged me to buy both.  I kept hesitating.  Each bottle cost about $6.

Later, she asked me why I hesitated about buying the Chinese herbs.  Was it because I was uncomfortable taking Chinese herbs?

“Heck no”, I said.  “I’ve taken plenty of them.  I even have my own Chinese herbs brewing pot.  It was because I want to spend money only on what I know will work or on what I really need.”  I didn’t know about those particular herbs.  “But the Chinese herbs were only $6!” She said incredulously, as if $6 was nothing.

When I pointed out that this is how I’ve always managed my money-not spending $6 here, $25 here, $50 there, and so on, she was surprised.  I never thought of that! She said.  I guess I should start thinking that way.”

Get my drift?  If you only spend money on what you absolutely need or absolutely love, you will suddenly have a whole lot more money to save.  It’s all of these little expenditures that, when saved, really add up.  And I mean really add up.  People who never seem to get ahead financially don’t think about it like that.  They think $6 or $25 is nothing, but they forget to think about how much all of these little expenses add up over time.

So, I have no doubt the high school sophomore will probably reach his goal because of his spending habits and his interest in finances.  And this is the lesson I hope you take with you from our current dismal economy:  Since practically everyone is cutting back on spending these days, use this time not to be miserable, but to learn a new way of managing your money and your life.

And once again, for the millionth time, I’m not talking about deprivation or being a miser or a pathetic penny pincher who nobody wants to be around.  I’m talking about watching all of those little “throwaway” expenses that really don’t add anything to your life.  Let’s take the kind’s $40 designer watch.  What kind of high school sophomore needs a designer watch, anyway?  And why do I need a $6 bottle of Chinese herbs I know nothing about?  I buy plenty of herbs and supplements, but only when I have been educated on their effectiveness. I‘d rather spend money on products and experiences that have real value to me, or that bring me true pleasure.

This subject got me thinking about the classic book the Millionaire Next Door by Thomas J. Stanley and William D. Danko.  The authors interviewed loads of people who are classified as millionaires, and they were surprised to find that they became millionaires for several reasons-but especially by not being seduced by consumerism.  They drove older cars, lived in normal, modest homes, and watched what they spent.

If you haven’t read it or if it’s been a while, I suggest reading it.  (go to Amazon.com, where I’ve seen used copies for as little as 20 cents.)  Most people are forced to spend less these days, so why not take full advantage of the situation and educate yourself about a better way to live?  Plus, conspicuous consumption is passee’ and uncool.  Thank heaven for a new era.

I decided to go right to the chapter is the book titled “Frugal Frugal Frugal”.  The authors ask the following question:  What are the three words that profile the affluent?  Answer:  Frugal Frugal Frugal .

They also write that the opposite of frugal is wasteful, and they define wasteful as a lifestyle marked by lavish spending and hyper consumption.

“Being frugal is the cornerstone of wealth-building,” write the authors.  The only reason why most of us think having a lot of money means being flashy is because that’s what we see in the media.  There, we’re indoctrinated with the belief that “if you don’t show it, you don’t have it.”  But in fact, save for movie stars and sports figures, the average wealthy person does not live a flashy lifestyle at all.  Unfortunately, most Americans deal with increases in their realized income by spending it.  “Their need for immediate gratification is great, “write the authors. Continued next month: