Technical Difficulties from on Top of the Mountain
  Having money by not spending it
Many younger people today have a problem with money. They think the problem is that they don't have enough of it, but I don't think that's where the issue is. Its how they spend it. (Notice I didn't say what they spend it on.)

Now I come from a downright stingy family to begin with. We thinned our milk with powdered milk because it was cheaper, I got hand-me-down clothes from my cousins (being the oldest in the family didn't save me there), and my mom would wear my boots when I grew out of them cause they still had some life left in them and they fit ok if she wore five pair of socks. But the defining moment wasn't family related, it was an article in Time magazine back in the 70s.

In this article, Time explained that income levels had risen to the point that the average wage earner was going to earn one million dollars in his lifetime (which to a thirteen year old seems like an awfully lot of money). It then when on to break down where that money was going to go and it featured this nice big pie chart graphic showing the major categories. The number one expense, and it was a biggie (more than a quarter), was interest expenses. Now this was back before credit cards were big, so it was mostly house mortgage, car financing, and a little for paying off higher education.

What I realized that afternoon, while sitting on the floor reading that article, was that all I had to do to be richer than others was to not give away 30% of my lifelong earnings to banks for the privilege of using their money. To a thirteen year old, interest seems like the worst thing to spend money on--it doesn't buy anything of substance. As I got older, I understood that in some cases time is money, but to a consumer in almost all cases, interest is really about impatience and self inflicted slavery.

Here's my spending rules that keep me out of debt (except a mortgage representing 25% of the value of my house), and that gets me through the low times as well as the high:

Basically, by not buying something immediately I save myself from buying at least 20% of the things that I see that it turns out I really don't need or even want. By saving up for something, I get even more stingy about buying other things, and by researching an item I sometimes find that my first selection wasn't the best choice or might not have done what I thought I wanted to do with it. Finally, by being prepared, well researched, and having cash on hand; I can actually pounce on sales/good deals when the come along (with the ability to truly determine if they really are a good deal).

This approach can seem like putting things off needlessly, and my behaviours do often annoy my wife, but she finally saw a brief glimpse of the wisdom in these ways when we went to buy our most recent vehicle. We were going to replace an aging 1996 pontiac grand am which I had bought used for my wife and she had never really liked. But it was also starting to show signs of wear (with 80k+ miles on it) and our family had grown to the point where we could really use something bigger.

At first she was looking at SUV like things (which I was looking at station wagon like things), and then she was looking at true monster vehicles (like a Chevy Surburban), when I finally realized what we needed was a minivan. So then we canvased all the various automakers and I really got stuck on the Toyota, but JM wanted it tricked out with all the gadgets. Unfortunately this adds more than $20k to the base price of the van, but I knew that if I fought her directly on this she wouldn't be happy with whatever she ended up with; and I'd be looking at buying yet another car in less than five years. Finally she arranged a test drive and dragged me and the kids down to the dealership to try it out.

This being Flagstaff, they only had one van there (a more reasonably priced mid-range model), and after test driving it (which wasn't really necessary), I took JM off to the side and told her that if she was happy with that model, then we could afford to just buy it and not have to dicker further with financing and trying to figure out where the money for a new car was going to come from. She thought about it for a few minutes, and decided she wanted that van. At that point we went back inside and motioned for our sales droid and the sales manager to come over for a minute. I explained that the van that they had out on the lot was not exactly what we had been looking for, but that if they were willing to take $1,800 off the price (which included some dealer added crap and also took into account that some fool at the dealership had driven the thing down to Phoenix and back and put over 600 miles on the odometer), then we were willing to pay cash right then and there and buy the car.

Our sales droid was astonished at our offer. This was the new 2004 Sienna (Toyota) model that was a complete redesign of their van based on the lead designer test driving the previous model across the united states (going through every state), and these things were flying off lots. These things were winning awards left and right, and some dealers were selling their stock $1,000-2,000 over sticker. Our sales droid was even more astonished when the sales manager came back a few minutes later and countered with $1,600 off. I accepted, and JM was in her new van about twenty minutes later. Preparation paid off and the transaction demonstrated once again that cash is king.

Trackback: Joe Ganley Writing code since 1979

Comments: Post a Comment

<< Home
Life in the middle of nowhere, remote programming to try and support it, startups, children, and some tinkering when I get a chance.

January 2004 / February 2004 / March 2004 / April 2004 / May 2004 / June 2004 / July 2004 / August 2004 / September 2004 / October 2004 / November 2004 / December 2004 / January 2005 / February 2005 / March 2005 / April 2005 / May 2005 / June 2005 / July 2005 / August 2005 / September 2005 / October 2005 / November 2005 / December 2005 / January 2006 / February 2006 / March 2006 / April 2006 / May 2006 / June 2006 / July 2006 / August 2006 / September 2006 / October 2006 / November 2006 / December 2006 / January 2007 / February 2007 / March 2007 / April 2007 / June 2007 / July 2007 / August 2007 / September 2007 / October 2007 / November 2007 / December 2007 / January 2008 / May 2008 / June 2008 / August 2008 / February 2009 / August 2009 / February 2010 / February 2011 / March 2011 / October 2011 / March 2012 / July 2013 / August 2013 / September 2013 / October 2013 / November 2013 / December 2013 / December 2014 / February 2015 / March 2015 / July 2016 / September 2016 / December 2016 / April 2017 / June 2017 / July 2018 / November 2018 / January 2019 / February 2019 / April 2019 / December 2019 / March 2020 / April 2020 / May 2020 /

Paul Graham's Essays
You may not want to write in Lisp, but his advise on software, life and business is always worth listening to.
How to save the world
Dave Pollard working on changing the world .. one partially baked idea at a time.
Eric Snowdeal IV - born 15 weeks too soon, now living a normal baby life.
Land and Hold Short
The life of a pilot.

The best of?
Jan '04
The second best villain of all times.

Feb '04
Oops I dropped by satellite.
New Jets create excitement in the air.
The audience is not listening.

Mar '04
Neat chemicals you don't want to mess with.
The Lack of Practise Effect

Apr '04
Scramjets take to the air
Doing dangerous things in the fire.
The Real Way to get a job

May '04
Checking out cool tools (with the kids)
A master geek (Ink Tank flashback)
How to play with your kids

Powered by Blogger