The wise have wealth and luxury, but fools spend whatever they get.
Proverbs 21:20 NLTAn easy way to get rich is to stop spending. It is often not the high cost of living that hurts people, but the cost of high living! The typical American is addicted to an extravagant lifestyle that keeps him poor and stressed. The pleasure, wine, and oil of Solomon's day are the entertainment, toys, and eating out of today. Individuals, businesses, and the nation are financially sick and dying due to excessive spending.
Most of us spend more than we need to spend. But some people crave pleasure and luxury, and they spend themselves into poverty. These people are always in financial trouble, but they never stop wasteful spending. Though many of these people have adequate or better income, they spend it all and then some! Bankruptcies of all kinds are on the rise!
Ben Franklin, a founding father of America, summarized Solomon by saying, "A penny saved is a penny earned." Reducing your spending is the same as raising your income. If Ben were writing today, with the average marginal tax rate at 28%, he might say, "A penny saved is 1.4 pennies earned," reflecting income taxes. If that lost you, reducing expenses by $1000 is the same as increasing income $1400 for the average taxpayer.
Some people live within their means, but most do not. In economic theory, the desire to increase spending as income rises is the propensity to consume. In America, it is often greater than 100%. Spending increases faster than income, and they cover the difference with credit card, installment, and mortgage debt. They never pay off a house, for when they get close, they buy a bigger house, whether they need it or not. The love of pleasure and luxury crushes them, for they have created "needs" they cannot justify or afford.
Is it possible to live modestly? Consider Sam Walton, the richest and most successful American when he was alive, continued to drive a pickup truck accompanied by birddogs! Warren Buffet, the greatest investor and second richest man in the world, still lives in the same little house he bought over 40 years ago and is content with burgers and Cokes for lunch.
A huge expense these days is eating out. Our grandparents likely never considered it. Eating out hurts the budget more than most any other expense. In one generation, our nation expects to eat out almost daily. Cooking at home is almost a thing of the past. Packing your lunch? No Way!
The poor man who likes to spend money will always be poor, for he has no savings to take advantage of investment and business opportunities Proverbs14:4. It is only by having a savings that we can profit from those few situations in life that offer unusual opportunities and profits. So again we see the rich get richer and the poor get poorer.
I'm convinced that what we all need is more temperance, or self-denial and self-discipline. We need to make rules to curb spending, no matter how much we "want" or think we "need" something. All we truly need is food, clothing, and shelter. Anything else is luxury and pleasure.
You may need to be drastic! You might need to cancel the cable or satellite. One thing is for sure, if you did that, you would avoid aggressive advertising! Throw away your credit card. You will hinder impulse buying and avoid the highest interest rates in the market. Vacations are not rights. They are privileges of those who have their financial houses in order. Reject the pride that says you cannot buy used cars, homes, furniture, appliances, or even clothing.
A good experiment would be to see how cheaply you can live for one month. Cancel the newspaper...it's probably way too liberal anyway. No eating out...the food is loaded with fat. No video rentals...the movie you would choose is likely filled with foul language and rude behavior. Turn off lights, and set the thermostat back a few degrees...you'll conserve energy thus making a liberal happy and save money thus making a conservative happy. Wow.....everyone wins. Now THAT makes Common Cents!
If you have a topic or a question you would like for me to take a stab at answering, email me at scottfowler@legacyfive.com.
DISCLAIMER: I am not a licensed financial planner and have received no formal training or education in finance or tax laws. Always consult your CPA and or financial planner before making any investment, retirement and estate planning. That makes "common cents!"
Singing News and Salem Communications are not responsible for the content of this article, nor financial losses/gains made by utilizing any strategies aforementioned.
