Jeff Yeager's latest book, The Cheapskate Next Door, landed in bookstores on June 8 and is the perfect personal-finance book for the new economy.
In the past, most personal-finance books have tried to teach readers how to build a seven-figure net worth. Yeager traveled around the country talking to some of the cheapest people in America and learned the secrets to living happier, more fulfilled lives with less stuff.
DailyFinance: What's been the most surprising thing that you learned about cheapskates working on this book?
Jeff Yeager: You know, I surveyed more than 300 self-described cheapskates for this new book -- and interviewed many of them personally -- and while there were many surprising things I learned along the way, overall it was that for the vast majority of them, like 90%+, their decision to live the frugal lifestyle wasn't about money at all. It was almost always grounded in a bigger belief. Sometimes it was a religious belief, sometimes environmentalism, sometimes something else. These aren't greedy, Scrooge-like, pensive penny-pinchers I write about. These are people who recognize that there's a lot more to life than money and stuff, and they've found creative ways to make money a less important part of their lives. They know what they want, and they skip the rest.
In your book, you mention that cheapskates hate debt. But I think there's a popular perception that people who "win" with money rely heavily on what many consider to be "good" forms of debt. In your experience, how do cheapskates feel about things like student loans and mortgages?
Well, I'll bet you that there are a whole lot fewer people who believe that stuff about "good debt" than there were a few years ago, don't you think? For the cheapskates next door, debt still stings. They understand that there's a big difference between "affordability" -- Can I really afford it? -- and what I call "borrowability" -- Can I borrow enough money to buy it now? Ninety-five percent of them live debt free, with the possible exception of owing on a home mortgage, and even then the vast majority of those with a mortgage told me that they plan to pay it off early, or already have. Admittedly we're talking an old-school attitude toward the perils of borrowing money, but I think the wisdom of the cheapskate ways is being proven out these days in a very visible -- and in many cases, painful -- way. As for using debt to create wealth, let me be really clear about this: I don't write books about how to get rich, which is what the vast majority of personal finance books are ultimately about. I write books about how to get happy, perhaps with what you already have. Part of that is showing people how to spend smart, regardless of how much money they have, but the bigger part of what I write about is quality of life, and issues regarding human happiness. As I said in my first book, I'm afraid we live in a culture that's more concerned about amassing a quantity of stuff, rather than amassing a quality of life.
You talk in the book about buying used. What are some advantages to buying used that a lot of people don't necessarily think of?
Obviously there are positive environmental aspects. Mother Nature thanks you for using it up and wearing it out, rather than rushing out to buy a new one. But of the cheapskates I surveyed, the environmental impact of their frugal lifestyles was only important to about half of them, even though their frugal behavior is inherently green -- greener, in fact, than those self-proclaimed environmentalist who rush out to buy the latest expensive, eco-friendly products when they don't even need them. Sorry for the tangent, but I've been an ardent environmentalist my whole life, and some of the current consumer-driven trends in environmentalism bother me. Of course, there's also a tremendous economic advantage to, as one cheapskate told me, "letting the other guy pay for depreciation," which is what you're doing, at least to some degree, when you buy used. Most of the cheapskates I interviewed we're also very tuned into the issue of "appreciation," always looking for items that might actually increase in value over time rather than lose value. That's why the Amish, for example, often buy antique furniture. Cheapskates think about appreciation when buying a wide range of consumer products ... cars, furniture, even clothing. Let's face it, most consumers only stop to think about appreciation when they buy a house, and even then, they're often not very smart about it.
One of the things you talk about is how being a cheapskate will actually make you happier. But a lot of people think buying cool stuff will make you happier. Why isn't that the case?
Of course, pretty much all the social science about human happiness suggests that more money and more stuff really doesn't make us happier, at least once we're above the poverty level. Most "stuff" tends to eventually disappoint us. Americans eventually express at least some regrets about almost 80% of the discretionary items they buy. "Buyer's remorse" is an epidemic in our culture. On the other hand, the cheapskates I surveyed regret only about 10% of their discretionary purchases. So, it's not that they're depriving themselves of things -- or, if they are, they're mostly depriving themselves of the 80% of the crap that most people buy, only to regret later. The fact that that type of smart spending allows the cheapskates next door to live debt free -- and therefore a less stressful, less money-centered lifestyle -- is one of the secrets to happiness that they have to share with the rest of us. More than 9 out of 10 of the cheapskates in my survey said that they think about/stress out about money less than most non-cheapskates they know. They also get divorced at only about half the national rate, in part because they rarely have "money problems." I'd also be remiss if I didn't mention that of the cheapskates I polled, they donate nearly twice as much to charity as the average American. Again, that's because for most of them, their decision to live a frugal lifestyle isn't about the money at all.
I recently reviewed Gary Rivlin's important new book, Broke USA, for the Huffington Post. Thus, I was stunned when I noticed that the book had been reviewed by the Wall Street Journal.
I wondered if the reviewer, Katherine Mangu-Ward, and I had read the same book.
f you go by her philosophy, payday lenders and other members of the "poverty industry" are upstanding entrepreneurs, performing a service for society!
She waits until the second to last paragraph to "mention" that payday lenders are providing this wonderful service at "something like a 300% to 400% interest rate."
Ms. Mangu-Ward makes a historic comparison of those in the "poverty industry" with loan sharks of a different era. I'm not sure that Mangu-Ward, a Yale University graduate, has ever met a loan shark. I have.
As I note in my book Son of a Son of a Gambler, loan sharks and gamblers populated my hometowns of Covington and Newport in Northern Kentucky.
Although the sharks were aggressive in their collections policies, any loan shark who charged 400% would have soon been floating in the Ohio River.
I also doubt that many loan sharks were ever touted for their entrepreneurial acumen in the Wall Street Journal.
The sad thing is that the Wall Street Journal would allow such a slanted and biased reviewer to write a review for their newspaper.
She leaps to conclusions that show a lack of research, especially for a graduate of an Ivy League school.
For example, she said that Rivlin brings "a level of financial illiteracy and disdain for entrepreneurs that is somewhat surprising in a man who once covered Silicon Valley for the New York Times."
If Mangu-Ward had done her homework, she would have read Rivlin's books, The Plot to Get Bill Gates and The Godfather of Silicon Valley. The first book shows Rivlin's tremendous empathy with the featured entrepreneur and the second shows some keen insights into how businesses truly operate.
Anyway, Broke USA is not about entrepreneurism. It's about the poverty industry and how loan sharking has become legalized.
Rivlin devotes much of his book to efforts in North Carolina and other states to offer payday loans at a more reasonable interest rate. He notes how the United States armed services put a 36% cap on any payday loans made to military personnel.
None of that important information made it into a "review" that in the author's mind puts payday lenders in the same category as Mother Teresa: Doing good for the poor.
I don't remember Mother Teresa charging 400% interest rates.
Despite what the Wall Street Journal says, Broke USA is an even-handed look at the poverty industry.
A little even-handedness would have gone a long way in the Wall Street Journal's review.
http://online.wsj.com/article/SB10001424052748704629804575325840351124892.html?mod=googlenews_wsj
http://www.huffingtonpost.com/don-mcnay/wall-street-and-legalized_b_596986.html
Don McNay, CLU, ChFC, MSFS, CSSC is an award-winning financial columnist and Huffington Post Contributor.
You can read more about Don at www.donmcnay.com
McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.
McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery
McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.
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