Tuesday, December 5, 2017

Cheapness With No Purpose

Taking the owners manual when you sell the car is just cheapness with no purpose.

I wrote before how I was approached by a casting director for a reality TV show.  They wanted to do a show about people who are stingy or cheap.  She indicated in her email that they were looking for people who annoy their family members with their thriftiness.  I got the impression what they wanted was some cranky old Dad who collected pocket lint and yelled at the children to turn the lights off.  And the kids would all say "Oh Dad!" - and it would all be so hilariously funny on reality TV, which of course is not real.

But this got me to thinking, that there are indeed people who are cheap for no apparent real purpose.  Or to put it more precisely, they are cheap, but they receive no benefit from their cheapness. Back when I was a kid in the 1960s, I remember a friend's Dad was selling his car and he took out the owners manual from the glove box. I asked him why he did this, and he said, "it's free so I might as well keep it!"

And I thought, "You might as well just take the spare tire and the jack as well."  And I'm sure there are some people who do just that sort of thing.  And I've seen this in my life, people hoarding old parts from cars they sold off years ago, as if they somehow got a bargain in the deal by keeping things like extra sets of keys or whatnot.  For some reason, rental car companies do this when they sell their cars - stripping out every accessory from the car, such as the floor mats, before it goes on the sales lot.  They usually also keep one of the extra keys for some reason which is a real pain in the ass in an era where an extra key can cost $200 or more at the dealer.

These sort of things are cheap, but with no real purpose.  There's no gain to the individual, and in fact it often is just a pain in the ass, hoarding old owner's manuals and bits from your cars that are no longer of any use to you, and just clutter up your life.

Similarly, even if such things might benefit you incidentally, if you neglect larger items, they seem kind of pointless.  For example, my Dad always yelled at us for leaving lights on, but he left thermostat set at 72 in a house with resistive heat.  The 60-watt light bulb in the living room wasn't causing his electric bill to skyrocket, it was a horribly inefficient heating system and the fact that they had the house so warm in the winter, you could walk around in your underwear without being cold.

Being rationally stingy means perceiving where the real savings are, and in that example, the savings would be in turning down the thermostat, insulating the house, or putting in a more efficient heating system.  Yes, you should turn off lights when they're not in use, but plugging tiny holes in the dam doesn't make any sense when there's a huge breach pouring water.

And of course, today, with LED lights, the savings in turning off lights is becoming less and less important.  A whole generation will be raised not at being yelled at by their Dad for leaving the lights on!

Some readers have taking me to task for not being cheap in every area of my life.  They argue that I should always be looking for the least-cost option, the cheapest thing to do, or avoiding engaging in some activities entirely, just to save money.  I think this misses the point of my blog, which was to live a better and more rich life for less money, not to live like a monk and deprive yourself.

The secret is to save money on things in life where it really doesn't count and thus save money to do things that you really want to do.  I run into a lot of people who do just the opposite.  They complain they have no time or money to do the things they truly want to do with their lives, but spend inordinate sums on things that really are of no use to them. Or worse yet spend inordinate sums of money on things that actually harm them.  Or just squander money on status items to impress others, but not satisfy themselves.

And sometimes this means you miss out on real savings and real opportunities.  Take replacement windows, for example.  We spent about $3500 replacing the windows on our house with more energy-efficient ones, saving a ton of money by doing the installation ourselves.   But the real deal is, every month, our utility bill is about $50 less than before - so it pays for itself.   But many people, convinced that they could not "afford" to replace the windows, would spend the $50 more a month on the utility bill instead - they can afford, so they think, small charges, but can't make big capital expenditures, unless of course, they financed it on a high-interest-rate consumer loan.

It is like the thinking of a server we met on the island.  It was her first day on the job and she said she didn't like paying the daily $6 toll.   We pointed out that an annual pass was only $45, and she said, "well, I'll have to wait until payday to buy that, as I can't afford it right now!"   Payday was at least a week away, yet she was convinced that paying $6 a day for a week was a better deal than coughing up $45 all at once.   But she had the latest smart phone, of course.

Spending is like that - it kills you in little dribs and drabs, not in huge big-ticket items.  That is one reason so many people in the financial press like to attack things like Starbucks.   Buying a coffee at Starbucks isn't going to destroy your finances.  But buying one ever single day of your life while not funding your retirement, is.  It is the slow death of 1,000 cuts.   Recurring expenses like cable TV, cell phone plans, convenience foods, and the like - they are "only" a few dollars a day, but the days pile up and they turn into huge expenses, over time.

And this is where it pays to be cheap.   Which would you rather do, have a coffee at a gourmet coffee shop and eat lunch at a restaurant near work every day for a year, or brown-bag your lunch and bring a thermos and go to Disney with the family?   If your choice is the former, then good for you - but bear in mind it was a choice, not a mandate.  No whining about "living paycheck to paycheck" when you fritter away your cash on a daily basis on trivial things.