Spiritual Secret to Successful Money Management - Part 4 of 7: Underspend

Underspend! Deliberately underspend! Humble yourself by choosing to live BELOW your affordable lifestyle. It’s simple, but not easy. Voluntary frugality is one of the biggest secrets to financial success. In the perennial best seller, The Millionaire Next Door, you can read about the inner-workings of wealthy households. It’s a good read. Contrary to what advertisers would have us believe, riches and hyper-consumption don’t go hand-in-hand. Quite the opposite! Most millionaires purchase used cars—not new—nor do they drive many luxury cars. My brother in Ontario was surprised that one of the Canadian billionaires, Mr. Weston, who could easily afford a Rolls Royce, drove a Ford minivan. I remember reading about the owner of Wal-Mart, who, when asked why he drives a used pick-up, replied, “Because I like it.” Financial coach Dave Ramsey says that when you are getting out of debt, “you must live (super-thrifty) like no one else, so that when you are out of debt, you can live (abundantly) like no one else.” It’s all about delayed gratification. Together as a couple or family, choose the area(s) you will reduce spending in, and celebrate your successes with high-fives or a special, affordable treat. For example, cut out junk food, or buy used items instead of new.

In short: Make sure your outflow is less than your income, otherwise your upkeep will be your downfall. Self-control and deliberate under-consumption are the keys. It’s up to you how much you under-consume.

How do you start? The first goal is to establish a monthly financial margin. The larger the margin between income and outflow, the faster you will be able to save. Use the dual approach to saving—off the top and from the bottom. Set a predetermined savings amount BEFORE you start to spend. It may be as little as 5% of your total income. Next: Stick to it. In the second Canadian bestseller, The Wealthy Barber, author David Chilton popularized the expression, “Pay yourself first.” He borrowed the practice of setting aside the first 10% for super long-term savings from another classic financial textbook, The Richest Man in Babylon, by George S. Calson. Let me recommend a better approach taken from the number one best seller of all time, The Holy Bible, which tells us to “Honour God first.” Then, pay yourself second. This is proactive saving from the top. Afterwards, find other ways to save—hopefully with minimal pain so that you can use the savings later for the greatest gain.

Many years ago my mother worked in the towers of downtown Toronto. She had started out in the Sears steno pool and then, over a period of almost two decades as she and my dad raised us four children, she climbed the administrative ladder to become a bilingual, executive, legal secretary. One year she and my grandmother went for a fancy winter vacation in Florida. The other secretaries were shocked. They asked, “How can you afford to go on a high-class vacation on a secretary’s wage?” My mom asked them how much they spent on lunch that day. The replies averaged out to about three dollars. My mom replied, “I brought my lunch from home and saved three dollars today, sixty dollars this month and seven hundred dollars this year. My Florida vacation money came from my saved lunch money.”

I share this story to make a point. Thrift is a learned skill. It starts small, but now I need to make an important distinction: Thrift is not the same as stinginess. Many people confuse the two. Thrift is defined as frugality, wise economic management, and the careful use of resources. Stinginess is a selfish reluctance to share resources. Both strategies avoid waste, but thrift is selfless whereas stinginess is self-centred. Thrift is a virtue. Stinginess is a vice. Lean more with the Super Savings Study Guide at wisdomwithwealth.org.

Tom Lipp