Lessons from a “Cheapskate”

I recently read “The Ultimate Cheapskate’s Road Map to True Riches” by Jeff Yeager, which made some great points in addition to being very funny.

My favorite line was “guys like me would rather shit their pants in public than suffer the embarrassment of saying something like ‘a grande caffe latte, please.’ ” But this wasn’t so much financial advice as a rant about the distastefulness of fancy latte language.

The points I found more financially interesting were the following:

  1. The Fiscal Fast – going for a whole week without spending any money at all. I guess you could stock up on groceries/gas and pay bills in advance, but the author seems to think these moves are for amateurs. The idea is purging your system (of financial transactions to unleash creativity), tapping your reserves (of food etc.), and reflecting (on the impact spending money has on your life).

I think this is interesting because I have often gone for 2-3 days without spending money, and thought it was pretty cool. I also tend to do this at the end of a pay period when I am trying to achieve the financial goal du jour. But I have never thought about carefully planning to keep it up for a week. I bet the sense of accomplishment would multiply! And my old pantry items would deplete. Refreshingly.

2. Under a Dollar a Pound, Year-round – Jeff manages to buy only food that is less than $1/lb!!! Who knows how. But, I have made it a point over the years to buy mostly items that cost $1-2 or less. It occurred to me some time ago that when you buy a single item that costs more than a couple bucks, you are paying for processing, or packaging, or both. So this might equate somewhat to the dollars-per-pound approach. Until it’s time to buy steak anyway.

3. Pay Off your Mortgage ASAP – this is the only convincing argument I have heard for paying down your mortgage in advance. Jeff points out (the now obvious-sounding advice) that a mortgage is just a huge debt that allows you to feel like the roof over your head is really your own. In fact, it made me realize that questionnaires should say “rent/mortgage/own” rather than just “rent/own” – you don’t skip straight to owning really.

Additionally, Jeff notes that every dollar you spend on something else as long as you have a mortgage is just leveraged at the rate of your mortgage interest. Even if you invest money in a 10% interest-bearing account, you are effectively only making 6% on that investment if you are still paying a 4% mortgage. A friend once tried to make the same point by asking, If I had paid off my mortgage, would I ever take a mortgage back out just to fund an investment? And obviously the answer is no, but that version of the logic did not resonate so well with me. But continuing with a mortgage and treating my post-tax dollars as whole dollars is exactly the kind of thing I would do (had I not read this). I had previously thought about adding an addition to my home with a construction loan, but that would be digging myself further into a mortgage pit. Now I am thinking about paying down my mortgage as soon as I settle some other goals.

“Cheapskate” had many other comedic and financial gems but those were a few that really got me thinking. Good book!

2 thoughts on “Lessons from a “Cheapskate”

  1. The $1/lb rule is hardcore. You’re giving up cheese and butter entirely at that point. I think you can still get milk (a gallon is $0.50/lb if my top of the head calculations are correct) but you can’t have yogurt. You should be able to get oil, but it won’t be made from olives. You’re also giving up any form of alcohol. And say goodbye to beef, fish, and shellfish. That would be a he’ll of a concept for a book, just seeing how many weeks you could make it, sort of like the direct opposite of the South Beach diet which is basically designed to make you broke.

    The mortgage vs. investment question is to me, primarily a matter of opportunity costs. You have to pay your mortgage every month. After that you want to fund your retirement accounts every year, because they provide so much tax advantage and because yearly contributions are capped. After that, it’s debatable whether the extra money would be better devoted to cut her investment or paying down the mortgage. Paying down the mortgage is the safer bet, as there’s less risk involved (though there’s still some risk. You could be forced to move. Your home could be ruined by disaster. The U.S. housing market could suddenly and inexplicably collapse). There’s also the mortgage interest tax deduction, though that doesn’t seem like a great reason to pay more interest. The risk involved means we’re dealing with probabilities, but I think I agree with you, the market risk is sufficient that any extra funds are probably best spent paying off the mortgage.

    • Rob! What great points you make 🙂

      I will have to catch up with you offline to find out how you have been!

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