I came across a book called The Tightwad Gazette which is a compiling of articles and discussions from a newsletter about frugal living. I want to summarize one article which holds a profound truth that applies to more than finances.
You and the Financial Edge
“You know someone who arrives 20 minutes late for everything. It could be work, to church, or for a date. He is always late because the 20 minutes falls within his margin of acceptability.
When they turn the clocks back from daylight savings to standard time, you’d figure he would now be 40 minutes early. However, he makes the mental adjustment and arrives the same 20 minutes late.
You also know people who arrive exactly on time, and people characterized by their chronic earliness. Likewise these people set their mental clocks so that they arrive within a time frame that is acceptable to them. In the case of the extenuating circumstance the early bird may arrive on time, the on-time person may be 20 minutes late, and the straggler will arrive 40 minutes late.
Your inner clock functions in the same manner as your sense of where you are in relation to ‘the financial edge.’ You have an inner sense of how close you can come to meeting your financial obligations and still feel comfortable.
During my single working years I maintained a checking account balance of $1,000 to $1,500. When my balance exceeded $1,500 I would spend. When the balance dropped below $1,000 I would cease extravagant activity. I could have saved more, but I felt comfortable with the $1,000 to $1,500 range from the edge.
Those who feel comfortable closer to the edge frequently find themselves saying, ‘I have only $10 to get me to the next paycheck.’
What of the individual who lives beyond his means? He builds a mental gangplank out beyond the edge where he teeters precariously.
The ‘$10-to-paycheck-guy’ and the ‘gangplank-guy’ will point to the extenuating circumstances that lead to his position near or beyond the edge. When an unexpected expense come along propelling them to financial depths, they do not accept responsibility. However, the person who maintains a cushion, given the same circumstance, will occasionally approach the edge but quickly work his way back to his comfort zone.
This principle of the financial edge helps my idea that we are all capable of raising our standard of living if we can adjust our mind sets. I heard a friend venting about never being able to get ahead and how debt is strangling him, even at a young age. He said that bankruptcy doesn’t sound like a bad thing since even with zero he would be better off than being in debt. I have to agree. However, if the debt was pardoned but he held the same spending habits, how long would it take for him to achieve his old financial status?
I used to have a hard time getting to work on time. I was always about 5 to 10 minutes late to work. One afternoon, about closing time, my boss told me that he had something important for me the next morning and that I should be there 30 minutes early. I made an extra effort to be there at 7:30, but with one thing and another I didn’t make it until 7:50 or so. I apologized for not making it in time for whatever he needed me for so early. When I asked what I had missed he gave me a clever smile and said not to worry, he had known that I would be late getting there, but he knew that way he could get me to be there on time. I was devastated to realize that my tardiness was what he counted on. That’s all it took for me to understand that a change of mental boundaries was necessary.
In the same way that the late guy still arrives late with the gift hour due to the return to standard time, many of those living on the edge or out on the gangplank, fail to benefit by increased income. They might have more stuff or more fun, but they instinctively maintain the same distance to the edge regardless.
For most of us our relationship to the financial edge comes down to a matter of choice. The choice may be the decisions we make today, or we may be living with the choices we have made in the past. While the past choices cannot be changed, remarkably the ones we make today become tomorrow’s past choices.
We can make choices that allow us to take a giant step back from the financial edge and set up a cushion. A sustained effort to scale back will result in savings for more than just a cushion. We can save for long-term goals and increased financial independence.
— Amy Dacyczyn, The Tightwad Gazette