Teenagers blithely skip off to uncertain futures, while their parents sit weeping curbside in the Volvo, because the adolescent brain isn’t yet formed enough to recognize and evaluate risk.
— Michael J. Fox

Over Christmas this past year I went down to Los Angeles to visit my best friend and his family. As a Christmas present to my two godkids, my wife and I took them to Disneyland. (Of course it was a gift to ourselves, as well.)

The rides and attractions were fun as always, but honestly I think I enjoyed our time standing in line even more — it was our chance to talk and catch up on anything and everything. I hadn’t seen the kids in far too long, and they had grown up to become wonderful, intelligent, fun, and polite teenagers. (Yes! Such a thing exists!) [Click to continue…]

Image by Art Spiegelman, from Maus

The miser, poor fool, not only starves his body, but also his own soul.
— Theodore Parker

The distinction between frugality and cheapness can be subtle at times. In my mind frugality is about wise use of resources, getting value for money, and (less obviously) value for time. Cheapness, by contrast, is characterized by short-sightedness, and putting money before all other concerns, including manners, self-respect, or common decency.

This is best illustrated by example:

Frugal — Cooking at home.
Cheap — Eating out, but stiffing the waiter on the tip.

Frugal — Netflix.
Cheap — Pirating.

Frugal — Sending a hand-made greeting card for your mother’s birthday.
Cheap — Just saying “Happy Birthday!” on Facebook, and only because they emailed you a reminder.

Frugal — Hosting a dinner party at home.
Cheap — Never buying a round when out with friends.

Frugal — Getting bargains on food at local ethnic groceries.
Cheap — Waiting in line for hours for a “free” $6 bucket of chicken.

Frugal — Paying a premium for quality goods that last, then maintaining them.
Cheap — Buying second-rate goods that soon wear out and wind up in the landfill.

Frugal — Lowering your thermostat a few degrees to save energy.
Cheap — Leaving a burner going on your stove 24/7 to save matches, because the pilot light is out and the landlord pays your gas bill.

(That last one is from the brilliant graphic novel Maus, by Art Spiegelman. If you haven’t read it, you really should.)

Image by Jost Amman, from the Book of Trades (1568)

The devil lies brooding in the miser’s chest.
— Thomas Fuller

A couple of days ago, I was chatting with my dad on the phone about my new house, and in particular, the virtues of the lovely wood-burning stove it came with. Dad agreed that a wood fire is cozy and pleasant, but then he said something odd: “I’ll bet firewood is expensive as hell out there in California.” (Dad lives in Mississippi.)

“I suppose it is, but only a fool would pay for it,” I replied. I’ve been getting mine from my own yard, and a giant pile of tree trimmings from the local golf course. Of course I have to chop it myself.

Then came the response I’ve been hearing more and more these past few years. “God, Son, when did you become so damn cheap?” [Click to continue…]

Image by Barry Moser

They did not know it was impossible, so they did it!
— Mark Twain

Just to drive the point home from the last post, Let’s see how the wealth ratio works out for the average American family.

Let’s say our hypothetical family makes $40,000 after taxes. That amounts to $3333 per month. Let’s also assume they’re already managing to squirrel away 10% every month. They might feel justified in being proud of this, by the way — it’s way above average. (By the way, the description in that article of “wary” Americans raising their savings rate to a stratospheric 5% is alarming, to say the least.) Suggesting they save 50% probably sounds like a fantasy to them, and 75% downright absurd. [Click to continue…]

Our frustration is greater when we have much and want more than when we have nothing and want some. We are less dissatisfied when we lack many things than when we seem to lack but one thing.
— Eric Hoffer

As I have noted in the past, the simplest, most reliable way to achieve financial independence quickly is to save most of what you earn. Truly aggressive savings rates (like 75%) can take you from flat broke to fully financially independent in a stunningly short period of time.

The trouble is that hearing someone toss around savings rates over 50% can lead to some serious sticker shock. When you’re living paycheck to paycheck, the idea can seem ludicrous. But like so many other pieces of the financial independence puzzle, looking at things from a slightly different angle can lead to a big change in perspective.

To demonstrate what I mean, let me introduce a concept I call the wealth ratio. Note well — if debt is a big part of what’s holding you back from saving more, you’ll want to pay extra close attention. [Click to continue…]