A Page from the Tightwad Gazette

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

Responses to Third World Living

I wrote about a situation of living and invited a few people to consider how they would handle it. http://wp.me/p3ocfS-5K
These are some of the responses from people close to me:
Female, age 49:
Maintain furniture, save up for paint, toilet seat, grow garden, bring flowers into the house, find ways to make extra money, sell television, Save portions of food and money over time, scavenge for useful items to use around the house: shelving, flower pots, blocks, boards. collect books. Use whatever I could get my hands on to make things more comfortable. Use time otherwise spent watching TV to do something useful and productive.
Male, age 24:
I would move. I would take my family and do everything I could to either move to the country, or out of the country. My goal would be to homestead if I couldn’t get into America. But I wouldn’t stay in the city, or the country if I could help it. Heck, if they can homestead somewhere where it’s mostly winter, then I can homestead in Mexico.
 Female, age 27:
I would go to a paca and buy sheets or cloth to cover the furniture and maybe the walls. I would save up for a toilet seat, (however I have lived several weeks without one and it’s not so bad ;P). I’m not too worried about how to flush the toilet either. I would pipe water from the rotoplast on the roof to the bathroom and save up money for a heating shower head, obviously I have electricity because of the television, hot showers are nice, unless you are in somewhere hot. I might even sell the television, even though it would be hard (sniff). In a 3rd world country things are cheaper, so even though I would be earning only a dollar a day, I could still make ends meet, (if I ration my money properly, heh, heh!)
Female, age 18:
That sounds absolutely miserable, but at least you are entertained. Good grief, sounds actually pretty good for a third world country considering you actually have a house even if it is unfinished. Sounds dark and dreary and very tedious and unjust. I earn 7 dollars an hour and I don’t think I have enough to pay my own rent, given I have never tried or calculated how much a rent would cost or how much I would earn each month and how much of it would go to paying the rent. In short it doesn’t sound so good and I definitely would want to improve on my situation or get out of there. The camper is bad enough when it comes using a restroom you have to dump out, or rinse by hand. I could go on for ever about this but I have to go to bed so for now it would not be that great. Seriously, sell the TV and by a new toilet, though easier said then done, but seriously.
 Male, age 52:
Sell the television and work harder and smarter.  Call upon the Lord to inspire you to increase your ability to provide,  go to the mall and steal a toilet seat, and thank the Lord that you had a roof over your head, unfinished as it was.
Female, age 20:
First of all I would look for other ways for income, any way possible within reason. Then I would sell the TV and use the profit towards bills and food. Then I would continue with life, saving the extra income I got and would buy a library card so I would be entertained (by going to the library, not from the card alone). Continuing with life, I would continue to save and put the money towards what I needed, until I became a millionaire.
Female, age 19:
Honestly how does one get into such a state? First off, sell the TV  who needs that kind of garbage any way? Then get a better job. Or visa verse. Once you get enough money saved, or just enough money, get food, clothes and either a better house or start working on this one. Get a book on budgeting, plant a garden  be creative for crying out loud! Think of ways to save money, do things yourself. Who needs the government to take care of you? That’s how one  gets there in the first place. (sheesh.)
Male, age 19:
Well, the first thing I would do is pray for help and guidance to get me through. Usually my response to this kind of question would be something along the lines of, “Well, I would start by saving up 1,000 dollars in cash as an emergency fund, then building the nest, and slowly utilizing my resources and investments,” but in this situation there is a sense of hopelessness. I would study on how to work the system in Mexico, and then if all else failed do everything I could to make my way to the United States.
Male, age 21:
I would definitely change. I have seen it so I changed a bit but all priorities and sense of duty and fun would be altered forever. Every time you wake up after that your thoughts would be on making sure that all is well for the family you love so much. I would use what I know about being smart financially and make the best of it while always trying to improve my circumstances. One fear I would have is letting the situation bring out the worst in me, but that is why I would cling to the gospel.
My hypothesis is that since we have been conditioned/trained to live at a certain level of civility or social status we could take any situation in which we are placed and, through our ingenuity, reconstruct our accustomed life-style. I believe that we are not a victim of our circumstances but of our mind-set, or what we believe we need or can have/be/do.
Suppose a millionaire was placed in your shoes. Would he live like you do? Or would he make certain changes that would bring his situation back to what he is accustomed to, just as we would seek to better our situation placed in a third world country? It makes sense.
Why does someone from such a low living standard stay where he is? Why do we struggle so much to raise our standard of living? How can we condition our thoughts to think like a millionaire and hence become one?
This hypothesis is gaining credence in my mind as I learn more about life. I recently read a book called Rich Dad, Poor Dad where the author explains the different mindsets and lifestyles of two different men in his life. The one that happened to be his real father was a teacher and always sought benefits, higher salary through education, job security and so forth. He was also the poor one, always struggling to make ends meet. The other man was the father of a friend, who although not very educated according to contemporary standards became the owner of a small empire.
The book explains how people are driven by certain emotions that put them into a rut that eventually leads to what we call the rat race. These emotions are not necessarily evil but they do have negative effects on us. There is no question that base, carnal desires can turn a sophisticated society into hell. So how do we maintain the level of civility that we have? The same challenges and problems inherent in human beings were suffered by the heathen and the roman alike, the difference was how they dealt with those challenges. The British Empire was never free of sin and depravity, yet it thrived, I believe, because such depravity was discouraged, even though it existed it was not openly tolerated. They had a sense of propriety and civility. Unfortunately such propriety is not so prevalent today. But that’s another issue.
In Isaiah 55:8-9 it reads,”For my thoughts are not your thoughts, neither are your ways my ways, saith the Lord. For as the heavens are higher than the earth, so are my ways higher than your ways, and my thoughts than your thoughts.” This indicates that there is different understanding and intelligence, there are different motivations.
There are different levels of thought that are manifested in our actions and therefore our physical surroundings. A friend very simply stated that when you are unhappy with where you are, then you think about something better and you change it so that you can be happy.
Now ignorance doesn’t necessarily equal poverty or depravity. How is it that doctors can go broke or high-school dropouts can be heads of corporations?
In the book The Laptop Millionaire, Mark Anastazi says he saw his mentor (the Laptop Millionaire)  as though he was standing on top of all his books, looking over a wall at all the opportunities and saying “wow, making money is so easy!” While he stood below seeing nothing but the wall and wondering how he could possibly say that since he couldn’t see anything. In my mind that says the same thing as Isaiah when he says that the Lord is on a higher plane and can see things that we can’t and understands things that we can’t. The Lord also tells us that if we keep his commandments we shall prosper (1 Ne. 2:20; 2 Ne. 1:9; Jarom 1:9; Mosiah 1:7; Alma 37:13; 50:20) and “… seek ye first the kingdom of God, and his righteousness; and all these things shall be added unto you. (Matt 6:33) There are over thirty passages in the scriptures that talk about how abundant life can be achieved through obedience to God’s laws. It is not magic, but the natural result of trusting a higher intelligence. The beauty of it is that God is our father and he loves us. Sometimes I think we hear that phrase so much that we become callous to its meaning. It means that we are his greatest interest. We are not here by accident but for a purpose and that purpose is us.
Do our thoughts change our circumstances? Is there a connection between faith and prosperity? Is apathy dangerous? What holds a person in his life position? If you were placed in a lower standard of living would you stay there? What happens that makes a billionaire out of a homeless man? How can a millionaire go broke and then regain his fortune multiple times during his lifespan while the common man struggles to make retirement?

Third World Living

I like to read books that make me think. I always have a notebook or a scrap of paper handy so that I can capture any ideas that come to me. On one of these moments I thought about how someone from a middle class lifestyle would react if he were to be placed in a third world situation. I wrote out a situation with which I was familiar from my two years serving a mission in Mexico.

Here is the situation and what follows is a collection of responses.

Suppose there was a person who had a family of four, a job that earned minimum wages for a third-world country, a house of cinder-block with no finish and no paint, tile floor. The doors consist of blankets held up by nails, the bathroom is a toilet without a seat, a bucket of water is used to flush, and the shower is another bucket of water next to a bare cement floor with a drain. You do have television and a few amenities such as a stove and a refrigerator. Minimum wage is 60 pesos per day, which is about $1.00 per hour.
Knowing what you know now and having the experience and mind-set of your current self, what would you do if you suddenly woke up and found that this was your life? Would you change it? If so, what would you do?

“Too much month at the end of the money” – Jim Rohn

Have you ever gone to the store and grabbed a bunch of groceries, gone up to the checkout and found that you didn’t have enough money for it all? Or worse, found that you didn’t have any money left? That is a harsh way to go, leaving the grocery store empty-handed. Whose fault was it? Mine (unfortunately).

I got something with a free trial of 30 days. I didn’t realize that my time was up, too late to send it back. So then I had to start making payments on this thing for which I had no need. I had given them my debit card number so that they could conveniently charge my account every other month.

So even though I was keeping meticulous records of everything I was spending on I was always missing a surprising sum. That’s how I thought I had a good $50 left in my account and have it come up empty.

Finally I figured out what was going on and got it taken care of. I learned a valuable lesson, the “have now, pay later” mentality is bad news. What an expensive lesson.

How much will it take?

I went to crunching numbers to see what exactly I am up against.

In order to reach my goal of $100,000 by 2015, even with what I already have saved I will have to make $4,700 every month starting now. Never have I seen that kind of income. That’s about how much I have made in one summer, and about what I’ll have saved after the entire year (after expenses, taxes, etc).

My current monthly expenses are (approx.):

Food: $80

Gas: $150

Car Insurance: $35

Utilities: $40

Housing: $200

Phone: $35

Total: $540

So assuming that my living expenses stay the same I will need to earn about $5,240 every month!

Currently I have barely 1% of my goal.

A Real Education: Experience

Each experience teaches us volumes

Milking a cow, making a friend, getting a Christmas tree, hunting, butchering, finding a place by yourself that you’ve never been to before, building a roof, winter camping, having a girlfriend, breaking up, having a job, going to school, drawing/sketching, making a sandwich…

I have learned so much, and with every new experience I add to the vast and numerous volumes of knowledge and understanding which are mine. If I stopped having anymore experiences and stopped going to school I would still have more to tell than I could convey in a lifetime. I am an asset in that sense. I have a brain that is full of information but also full of potential. Just like the internet, every second our brain is uploading new data. What we need to figure out is how to browse this web and find the information which others will value.

When we are old and our grand children ask us about our childhood we finally tap into this reserve. Most of our experiences are shared by others so they aren’t interesting to our peers, but children are ready and interested to know how we reacted to certain situations. It is valuable to them. Again it is like the internet, not every topic is interesting to everyone, but each one is of interest to someone and probably quite a few people.

Monetizing 

Of course everything I put on here is for the end of reaching my goal, so how does one go about monetizing this vast resource of ours?

First, we need to find a way to find useful information in us and get it out. We can do this by writing or teaching what we know.

Second, we need to find the market, or those few or many to whom it is valuable.

If there is something which you are expert in, usually a hobby or subject of interest, you may be able to write a book or teach a class on it.

Accelerated learning

One of the common threads I have found in books on entrepreneurship is the value of experience. They usually urge you to get out there and fail, take chances, try it out. Perhaps success is not always expected or even desired but the act of trying will always teach you something valuable. I find that the more outrageous the endeavor the more there is to be learned.

How do you accelerate learning? Fail.

Failed Endeavor

I had spent the last few months studying marketing strategies and thought I was very learned on the subject. So I had the idea that I could make myself useful by offering to local businesses my “expertise”. I went to a book store and asked to talk to the guy in charge of marketing. There wasn’t one so the girl took my name, number and noted my business for the owner. I never did get a call. Maybe the owner never got my message but I’m sure that he looked at it and said to himself “who is this punk, trying to tell me how to run my business?” and never thought twice about it.

What did I learn from this? First of all if I was to do it again I would have dressed the part. Jeans, sneakers and a hoodie are not exactly business material. Secondly I brought myself down to earth about what I actually knew; I began to wonder afterward what I would do if I actually did land an interview with a business owner. I had no presentation, no credentials, not even a plan in mind. I just thought that I would make it up as I went. I realized how naive my endeavor was and actually hoped that I never got a call.

While revealing these experiences is not at all flattering it is part of the process and must be recorded. Swallow your pride and tell it. Having tried a few of the ideas that were knocking around in my head I came to understand things better and progress in my education of business.

Experiences are more valuable than they ever are painful. I hope that I never lose the courage to try new things.

Time

Why don’t we apart time to do things that we want to do? time is a limited resource. We have many things that clamor for attention but our salary is always the same allotment each day. What we have to ask ourselves is what do I value? There is so little time that we cannot afford to spend one minute on things of lesser worth. We have so much to do. As with money, the bills should come first because they represent the preservation of our lives and those whom we love.

There is actually a lot of time that seems to slip through our fingers, at the end of the day we wonder where it all went. The fact is that we often spend it on things that have no real value to us, or we spend an excess of time on something. What we have to figure out is how much time each activity is worth, so that we don’t get ripped off for cheap stuff. Figure out what your values are exactly. Write down the things that are most valuable to you.

Good health is important to me, being relatively comfortable (warm home, bed, shower), my family is important to me so that merits a good chunk of time, my career is important to me.

What about my career is important to me?

ability to provide for my family

personal education and fulfillment

ability to contribute to society