Rules to Spend by

Ken Cutler

I USED TO GET PARADE magazine with the Sunday newspaper. On Sept. 28, 1997, it published an article by Andrew Tobias entitled, “Want to Amass a Fortune? No Problem!” I tore out the article and filed it away with others I’ve kept, because I thought Tobias made some points that would be worth periodically revisiting.

Early in the article, Tobias—who’s perhaps best known as the author of The Only Investment Guide You’ll Ever Need—addresses the question in the title. How can you amass a fortune? Here’s his answer: “Make a budget, scrimp and save, pay off your credit cards, quit smoking, fully fund your retirement plan. Make weekly or monthly contributions to a savings account and then, when you’ve accumulated a bit more, to a low-expense, no load mutual fund. And start early—tomorrow if you possibly can. There’s not much more to it than that. Well, a little maybe.”

That seems pretty basic and maybe not particularly profound, especially for readers of HumbleDollar. Tobias, however, goes on to make three other points I’ve found helpful. Please remember that the article was published more than a quarter-century ago, so some of his examples are a bit dated.

A luxury once sampled becomes a necessity. Tobias elaborates: “You say you don’t particularly mind not having a remote-control clicker for your TV? I can state with some assurance, in that case, that you’ve never had one. Touch tone dialing? Caller ID? Microwave ovens? It’s a cinch, obviously, to be happy without these things before they’ve been invented and quite possible to be happy without them even after they’ve been invented… but so awfully hard to be happy without them once you’ve gotten used to them.”

He goes on: “Pace yourself! Live a little beneath your means. Don’t go into hock buying some whiz-bang & olufsen sound system right out of college. Make do with one of those three-in-one $279 mail order deals like the one I still use. Tease yourself with anticipation.”

I don’t think TVs are even sold without a remote control these days. Here’s an updated example: When I was in high school, I was perfectly happy watching my favorite show, The Rockford Files, on the 10-inch black-and-white TV in our basement. There’s no way I’d enjoy that today.

The TV in our family room is a 32-inch color TV with high-definition display and, of course, a remote control. When we go on vacation, sometimes we book hotel rooms with TVs that have 43-inch or even 55-inch displays. Watching shows on those units is quite a treat for us since it’s an infrequent pleasure. If we had a 65-inch or 75-inch screen in our family room, that would become the new normal. Rather than being excited, I’d probably feel mildly annoyed watching the hotel’s smaller TV.

I like the idea of pacing our acquisition of material goods. The hedonic treadmill ensures that we will eventually—and often quickly—get used to any new trinket we obtain, so why rush things? Extending the pleasant anticipation of certain purchases can increase our happiness, while also benefiting the bottom line.

Learn the difference between frugal and cheap. Again, from Tobias: “Frugal is catching yourself before you say ‘and a Coke’ as you place your order with room service, because you notice that Cokes in your minibar are cheaper (and not subject to a service charge or tip). Frugal (or crazy) is running across the street in the morning to buy a couple of Cokes to restock the minibar before the guy comes to tick off what you’ve consumed. Frugal, indeed, is avoiding places with minibars in the first place. Frugal is turning off the lights when you leave the room. Cheap is buying your spouse something less nice than she’d like when you can easily afford to make her happy. Cheap is leaving a 10 percent tip. (Cheap enters the picture, I think, when other people are involved, not just yourself.)”

While being frugal is good, demanding that others fund our frugality is not. Skimping on tips for hard-working service providers is not an honorable way to save money. There are endless ways to be frugal without taking advantage of other people.

I get significant pleasure from being frugal at the grocery store, even while recognizing that there’s no substantive impact on our financial well-being. Also, the grocery store will not be harmed when we take advantage of a good deal that it offers. Groceries aside, who among us doesn’t enjoy talking—okay, bragging—to their friends about a great deal they got on a purchase?

Avoid waste. Tobias’s take: “Waste is bad. Waste impoverishes everyone. Leaving a tool outdoors to rust is a waste. Buying exercise equipment you never use is a waste. Letting the hot water run as you shave or leaving the TV on when no one’s watching is a waste. But spending money on a fancy dinner or piano lessons isn’t necessarily a waste. You’re simply transferring the money to other people; you’re satisfying one another’s needs.”

When I have to spend money on changing the car oil or doing other preventive maintenance, I’m not exactly thrilled, but I certainly don’t consider it a waste. In fact, I’m preventing future waste in the form of a disabled vehicle. When, however, I have to spend money multiple times to replace car mirrors because people in my family—including me—keep damaging them when pulling out of the garage, it definitely feels like a waste. The regrettable loss of time and money could have been avoided had we been just a wee bit more careful.

When we splurge on a cut of meat that’s higher quality than what we typically eat, that’s not a waste. When I throw out meat simply because it went bad after getting lost in the back of the freezer, that’s clearly a waste. When we buy in bulk but end up failing to use half of what we buy, that’s not smart shopping—that’s a waste. I have mixed emotions when I do my periodic refrigerator and pantry cleanouts. I get satisfaction by increasing the order in these spaces, but I’m dismayed to see the amount of wasted food I end up throwing out.

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. Check out Ken’s earlier articles.

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