There’s an old investment joke that says, “you can put all your money under the mattress and go broke safely” – in other words, being a cheapo by trying to put all your money away for a rainy day is not the path to riches. Now of course, this doesn’t mean that one should spend extravagantly. It just means that putting every penny you earn into a 2% interest bearing savings account is not going to get you to the promised land.
I thought about this quote last night because I was watching this business woman who makes a very good living talk about how much money she “saves” by cutting her son and husbands hair herself. According to her, a typical haircut costs about $20 (done every 2 weeks). Since she went to hairdressing school, she knows how to cut hair and would rather do it herself and save the $40 ($20 X two heads)
As I was watching her I thought to myself why a woman making almost $1 million dollars a year would worry about a small time expense like a haircut. However, as I thought more about it, I did some little calculations in my head and realized that those small spending habits really do add up over time (or do they?) — These are some examples I used from my own experience:
Coffee: Everyone morning on my way to work, I buy a cup of coffee.
Cost per day: $2
Cost per week: $10
Cost per month: $40
cost per year: $480
I could make my own coffee at home, but for some reason, I prefer to buy it.
Cost per day: $4
Cost per week: $20
Cost per month: $80
Cost per year: $960
I could walk, but it’s cold right now and I don’t want to freeze. Also, If I decide to walk, I’ll have to get up much earlier and I’m not willing to do that because I value my sleep.
Let me think of an example that everyone can relate to — going out for drinks, food or whatever. Again, you don’t want to be a “cheapo” — if someone buys you a round, you should reciprocate (there’s nothing worse than hanging out with someone who never reciprocates. Besides, everyone knows who the “cheapos” are and who wants to be around them?) and….I’ve come to believe that people who are more social tend to make more money — people like to be around them, they tend to be more interesting, etc, etc…
As I was writing this, I just came to a conclusion about this issue: Screw it! you only live once and these small comforts are very important for your daily sanity. As long as it doesn’t sink you…spend on.
I mean, what are you going to do? live like a hermit? I remember watching a travel show a while back where they talked about these hermits in Ethiopia that live in caves their whole lives. They are monks of the Ethiopian Orthodox Church and they spend their whole lives living in caves in Lalibela, Ethiopia where they pray the whole day and have no contact with other human beings, ever. I don’t think these guys have money spending problems. I’ve attached a picture of one such hermit, clothed in yellow, sitting quietly in his cave ….what? meditating?