Every talking head on television is sharing an opinion on two prevailing topics: 1) How Bad Will Things Get and 2) When Will It All End. The celebrated thinkers of our time are being asked to peer into the future and give their best guesses.
As a Mom, you are the chief economist of your household, and your opinion matters most. Since you’re likely deciding your family’s purchases on a daily basis, it’s a good idea to brace for whatever your personal economy may face. Following are some BirminghamMom recommendations that are thought-provoking even if you do not adopt all the ideas presented.
The Millionnaire Next Door, by Stanley and Danko – Perhaps this doesn’t sound like appropriate reading right now – after all, didn’t the folks next door lose 30% in their investments just like the rest of America? However, this book can change your financial life. Although it came out in 1996 as the economy was on the way up, the lessons are even more timely with the economy going down.
The authors were tenured professors who researched wealthy households extensively and their results may surprise you. For example, most multi-millionnaires they studied in 1996 had never paid more than $300 for a watch, chose to re-sole rather than replace their shoes, and drove used automobiles.
The book begins with a story about wealthy clients participating in a focus group sponsored by a bank. The lead banker wore a custom suit and a $5,000 watch. Most of the millionnaires participating in the focus group had never purchased a custom suit and were uncomfortable with the provided refreshments of French wine and pate’, which was ultimately left for the bankers to devour.
The Big Ideas:
*Wealthy households often work as a team: One member plays good offense (earning) and one plays good defense (careful spending). The authors illustrate this point with a story about a wealthy household just north of us in Cullman, where the husband came home and announced he had purchased a plane as his wife sat clipping coupons at the kitchen table.
*The authors recommend a set of guidelines for aspiring millionnaires. Two of them are 1) Conspicuous consumption is the enemy of wealth creation and 2) Create an artificial environment of scarcity for yourself.
*The best savers are teachers; some of the worst are attorneys and physicians. This is because high income professionals often believe they must “look successful” to be taken seriously. The wealthy spend readily on education and financial advice but eschew items the book calls “status artifacts.” You’ll love the story of the business owner who finds out some business associates have ordered him a custom Rolls Royce. ”With a Rolls, I can’t go to some of the crummy restaurants I enjoy going to…” he protests and asks them to cancel the order!
Bottom line: If you’re working hard for everything you have, you will find the book particularly gratifying.
Your Money or Your Life, Dominguez and Robin – First published in 1992, this book is a classic for putting money in its place in your life, regarding it as a tool rather than an end unto itself. It is particularly critical of working for the sake of consumption and challenges readers to become FI, or Financially Independent, not by accumulating wealth but by reducing dependence on a job.
The Big Ideas:
* Fulfillment Curve – the idea that once you have “enough”, true enjoyment diminishes and clutter sets in.
* Divorce value from price; the price of something does not reflect its unique value to your household (think about the things your kids like to play with most – empty boxes, pots and pans, and your keys – not necessarily expensive toys)
* Crossover Point – The point at which you do not have to work for pay any longer. Yes, most of us would call this “retirement,” but the book presents a compelling case for how everyday wage earners can get there.
The Complete Tightwad Gazette, Dacyczyn – Not for the faint of heart. Some of the suggestions are so austere you will probably reject them out of hand (for example, the author fed her kids a mixture of whole and powdered milk, which she swears they never noticed).
The author raised six children on her husband’s modest income while publishing a newsletter, The Tightwad Gazette, from 1990-96. This book is a compilation of all her newsletters and contains almost 1,000 pages of specific ideas on how to live frugally. No one can beat her for frugality; as she points out, she never met anyone who had been pushed to bankruptcy or public assistance who would utilize the methods her family used routinely.
The Big Ideas:
* The Price Book – the most effective method the author found to control her spending; she kept a book of the best prices for all of her typical household purchases and stocked up when she found her target price
* Cheap fun – It isn’t necessary to spend money to be entertained, especially if you enjoy do-it-yourself projects. (To be fair, the Dacyczyns live in rural Maine, so they didn’t have many alternatives)
The author really lives what she preaches. She declined offers to license or syndicate her material for products like desk calendars because she didn’t believe printing disposable items would align with her values (after all, her family re-uses calendars). This book is a must-read for those concerned with environmental impact.
More than any single money-saving idea, this book illuminates the fact that it is possible to live on less – much less. The average BirminghamMom could read one chapter and feel like a reckless spendthrift in comparison. The Complete Tightwad Gazette argues that as long as you’re buying individually packaged snacks, you’re living the high life. Read it for the shock value and to savor a new appreciation of bottled milk.
All these books are available in the Jefferson County Library system as well as local bookstores. The Complete Tightwad Gazette is harder to find (in fact, it’s supposedly the most stolen book in the Maine library system!) but it can be ordered easily and is often in stock at Hoover Barnes & Noble at Patton Creek.