Outsaving the Joneses

But it will take more than white papers and wonkery to change social norms. So what societal forces could be harnessed to make economizing admirable? A couple seem promising. One is environmentalism: The mantra of "reduce, reuse, recycle" is also a formula for saving money because wasting resources not only is personally profligate but also harms everyone by hurting the planet. In Hollywood, a Prius is far hipper than a Hummer. Another force might be retirement anxiety: If you don't save enough to pay all your own bills, then you're forcing your kids and mine to pay them, and that's not right.

A Return to Thrift, by Geoff Colvin, The Washington Post, 10/21/2008

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"Frugal" is not a dirty word. "Thrifty" is not a dirty word. However, "debt" is.

All of you know people who refinanced their home so that they could free up money to buy, say, a car. In effect, they turned something that appreciates or gains in value (the equity in their home) into something that depreciates or loses value.

I think that the global meltdown of 2008 is a wake-up call to change our profligate habits. We Americans are ready to rediscover thrift. And the first thing that we have to do is take stock of our situation.

How rich (or poor) are you?

The Millionaire Next Door: The surprising secrets of America's wealthy, by Thomas J Stanley and William D. Danko, contains a formula for computing one's expected net worth. (Expected net worth is how much you should be worth considering your age and income.) It is as follows:

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

For example, if Joe Blow is 30 and earns $50,000 a year, his net worth should be $150,000.

30 (Joe Blow's age)
x 50,000 (Joe Blow's annual income)
= 1,500,000

1,500,000 divided by 10
= 150,000

The authors have developed a simple rule of thumb:

• If your net worth equals the average calculated by the formula above, you are an AAW (average accumulator of wealth)
• if your net worth is twice the average, you are a PAW (prodigious accumulator of wealth)
• if your net worth is half the average, you are a UAW (under accumulator of wealth)

If you want to calculate your expected net worth, you can do it here.


Here are 2003 statistics on the net worth of U.S. households.

Source: Claritas, December 2003 data

So, now that you know where you stand, you can start your own thrift program. There is a video and how-to on WikiHow. You don't have to buy anything to be happy. Here's how to buy nothing.

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"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

-- Mr Micawber in Charles Dickens' David Copperfield

The electoral map turns blue ...

And therefore it also turns green ...

Scale down your holidays ... and other good ideas

The Green Tightwad has been remiss, I admit.

The darn U.S. election has been a major distraction. (I am for the candidate with only one house, one car and one wife.)

But I couldn't help notice the excellent piece in the Washington Post, 20 Steps to Toughen Up Against Hard Times, by Elizabeth Razzi. Here are my favorites among Razzi's money-saving tips:

• Caulk, repair and paint (or seal) exterior surfaces. A paint brush now avoids a carpenter later.
• The latest thing in kitchens: less remodeling, more cooking.
• Search and destroy water leaks.
• Go to http://www.dmachoice.org to have all catalogues stopped.
• Tone down the holiday decorations. Fifty bucks on a fog machine? Not this Halloween...
• Count the holiday kilowatts. If you need new holiday lights, choose LED bulbs.

I would add a few of my own:

• Maybe it's time to give up your land line and just use a mobile phone.
• If you want to trim your energy use, learn to use a pressure cooker. It's the ultimate green cooking machine. You can cut cooking times up to 70 percent. Today's pressure cookers are safe and easy to use. And because food is cooked above the boiling point of water, you can kill bacteria and viruses.
  
• While we're on the subject of cooking ... if you haven't yet, learn to bake. Even if it's with a mix. Have you checked the prices on cookies and other baked goods lately?
  
• Make more of what you cook for dinner so you can take it to work the next day.
  
• Ask yourself before every purchase: "What bad thing will happen to me if I don't buy this?" If the answer is "nothing," don't buy it.
• Turn off the television. If you want background sound, listen to public radio.
  
• Turn a critical eye to your possessions. If you have fewer possessions, you have fewer stuff to keep clean. Donate your stuff to Goodwill and get a tax deduction for it.
• Plan your meals around what's on sale at your grocery store that week.