Saturday, August 23, 2008

Frugal, Frugal, Frugal

I stole this title from the title of one of Stanley and Danko's chapters in The Millionaire Next Door, reflecting the findings of their surveys of people who had accumulated over $1,000,000. It's counter intuitive to think of the wealthy as frugal, I know, since we've all seen "The Lifestyles of the Rich and Famous" and assume that all wealthy people continually indulge themselves with yachts and extravagant vacations.

But it makes sense when you think about it: to accumulate wealth, you've got to live beneath your means; to accumulate extraordinary wealth, you've got to live wayyyy beneath your means. What distinguished these people was not so much how much they made, since they were spread out among many ordinary vocations. They were distinguished, in part, by spending much less than they made - living in neighborhoods with those who made far less, buying conservative, reliable cars. They accumulated wealth by refusing to throw it away.

This is the way my parents lived, thus instilling in me a different mentality than most of the culture I sense around me. Mom's favorite place to shop for clothes is, to this day, her favorite thrift store. Her favorite car is the one she's owned for ten years. She has plenty of money saved for retirement, believe me. Yet, she detests spending money needlessly and relishes a great bargain.

In the spirit of mom and the millionaires surveyed by Stanley and Danko, I've kept my eye out for ski equipment over the months. I take some of my kids skiing once each Winter, but I detest paying such exhorbitant fees for equipment rental. If we could purchase our own equipment cheaply and avoid the rental, we'd only have to purchase a lift ticket. Enter the local Good Will store and Play It Again Sports (selling used sporting goods).

If I bought brand new ski equipment, it would be new only until I used it once. For the rest of my life, it would be used. If you can buy quality used equipment, why not skip that first "brand new" day and start off used?

(By the way, my wife's in full agreement about my frugality. We had a Saturday morning date to Goodwill and she was delighted. She picked up a small table we needed for the laundry room. Reference Stanley and Danko's findings on marrying a frugal mate!)

So I got a nice pair of skis, Saloman ski boots in my size, poles and nice carrying bag, all for under $30.00.

Looking at sporting goods sites, it appears that new skis cost anywhere from $125 to $700. Saloman Ski boots from $125 to $450, poles from $20 to $50, carrying bags starting at $50.

So it appears that, even if you took the cheapest prices, I've saved over $300 in ski equipment by shopping used in the off-season. I'm also in the process of helping my 14-year-old twins purchase snow boards. If they save a similar amount, we're talking $900 in savings as a family, which, if invested in a stock market index fund that might return the historic average (10%), would give me over $100,000 in 50 years!

It's just one item. But the impact can be huge. Doesn't it make Stanley and Danko's findings make sense? These first-generation millionaires understood the power of frugle and applied it to their cars, homes, clothes, vacations, etc. So don't be embarrassed to frequent thrift stores, shop off-season and peruse Craig's List. When you do, you're thinking like a millionaire!