|
| Monday, December 22, 2008 |
| Satisfaction From a Dollar Well-Unspent |
Another reader submitted article (Thank you Beth!) from the Washington Post: Satisfaction From a Dollar Well-Unspent tells the tale of Virginia couple Austin and Katy Wheelock's two week "no-spend" experiment. For two weeks in November, the couple paid their bills and mortgage. But that was it. No eating out. No double espressos at the corner cafe. No pedicures. No iTunes downloads. No groceries, even. Austin went to Best Buy twice, just to wistfully look around.
But as the Wheelocks came to the end of their forced frugality, they felt giddy instead of deprived. Katy found herself humming "Money for Nothing" by Dire Straits. They checked their money-tracking software and figured they had "saved" more than $2,000 during those two weeks just by not spending it.
"It's embarrassing how much money we saved," Katy Wheelock said. "We had literally been eating our money." Of course, this kind of full-stop abstinence from spending is just the kind of behavior economist hope does not happen.
I have a mixed reaction about these types of experiments. On the one hand, maybe some people need to go through these kinds of radical spending detox exercises to shake them out of the thoughtless spending so many do. What I fear is that people who deprive themselves so radically will really just delay the spending. So you save $2,000 in those two weeks, then after the experiment is over, you treat yourself and splurge - basically blowing that $2,000 after all. Famine, feast, famine, feast - that is not healthy.
My opinion is people should not rely on stunts like this. Rather they need to do the long boring work of tracking and monitoring their spending and savings. You cut back a little here or splurge a little there, but overall you are not experiencing wild swings in spending or saving. Building an emergency fund, paying off debt, saving for goals, funding retirement plans - these are marathon events, not sprints.
What do you think readers? Should more people be encouraged to do as the Wheeler family did? |
| posted by Boston Gal @ 12:19 PM *
* Subscribe to Boston Gal's Open Wallet |
Links to this post:
|
| 14 Comments: |
-
I think both approaches are useful, but in general, I agree with BG's opinion. We have had times when we have said, "no buying anything that isn't 100% necessary until the next paycheck," as a way of putting the brakes on and making sure we aren't overspending a pay/billing cycle, and this is useful sometimes. However, it isn't really a way of saving a lot of money in the long run, for a couple of reasons.
First, for us, it doesn't create a famine/splurge cycle, but it does create a cycle of going without/restocking. Even if we eat just the food in the pantry and avoid the grocery store, eventually we have to restock the pantry, and so the expenses rise up in the following weeks. We have four children, who keep growing out of (and wearing the knees out of) their clothing. While we can put off buying new boots or pants for two weeks, they have to have the clothes eventually.
The second reason this family's approach doesn't do a lot for us is that we are not extravagant in the first place. We rarely eat out, for example. We cook from scratch. We strive to limit our grocery store trips to once/week, making do until the next trip. We don't buy clothing very often, and what we do buy is quite modest. We rarely buy home decor. We don't go shopping for entertainment.
So, articles like this one actually make me mad, because they make it sound like it's actually pretty easy to save several thousand dollars if you just discipline yourself to stop eating out and stop buying all that cool stuff at Best Buy. (I do realize the article talked about other things, like gas in the car and extra grocery runs, but still . . .)
Huff, huff, huff.
-
I think this type of exercise can make some people realize that they really can survive without whatever it is they're giving up. It's a trial run of sorts. And it may give some folks the inspiration they need to start the arduous task of tracking their spending for a month or two.
Of course I do agree with you that if all they do is delay gratification, there's no point. Maybe they could decide up front that they're going to put however much money they save into their savings account. Or, if they really feel they need to reward themselves, save half while spending the other half on something special.
-
I've done that often, mostly because it teaches me to "make do" with what I have. There were cans and cans of soup in my pantry but I'd still "need" to go to the store to get something for dinner. Ultimately I end up buying the same things again once I'm done, like the lattes on the weekend, or dumplings for lunch. But I've still saved the money I didn't spend the week before.
But Jesus...$2,000!!!!!!!
-
We did this about 7 years ago, when we were spending WAY too much going out.
For one month, we didn't eat out. No coffees, no quick lunches--nothing. It took discipline for us, at the time (now it's no big deal LOL).
We were really surprised NOT by the money savings, but by the TIME savings. Going out *takes time*. Making a quick sandwich and eating some vegetables is cheaper and *faster* than going out.
So I think these sorts of exercises are useful if you feel like you're out of control and want to instill discipline. In our case, we've never gone back to that level of eating out, so it created permanent change.
-
Boston Gal - Thanks for writing about the article in the Post. Just to add to your commentary...we did not turn around after two weeks and spend what we saved.
Rather we did the two week no-spend exercise as a way of focusing on the extra spending.
As a result of this effort, we reduced our spending on nice to haves and focused on shifting the savings (or avoided expenditures) into the investments we should have been doing all along.
I think there is a lot to be said about the abstinence approach not necessarily being the best way to go about saving money, but it did work for us. I completely agree that a meticulous tracking on your income/expenses is absolutely required to meet the longer term goals of retirement, etc. Again, the abstinence approach forced us back into that approach.
BTW, you blog is great! It takes a lot to give everyone such huge insight into your personal finances.
Best regards,
Austin Wheelock
http://planetperspectives.blogspot.com
-
I figure that it works different ways for different people. The lightbulb I'm-spending-too-much moment isn't going to be the same from household to household. There are probably some others who would learn from this and change their habits immediately, although I think that's probably a minority of people. The rest of us should probably just take your advice.
-
austin:
re: "Just to add to your commentary...we did not turn around after two weeks and spend what we saved."
but i guess you folks are back to square one again, eh?
whatever it is, it sure helps to have your blog featured to draw in the ad income. i hope you guys are planning to - or already have - enough ads on your blog!
- s.b.
-
Anonymous, fair point - Katy did post that - and I believe it was really in reference to having gone back to getting pizza two nights in a row due to crazy lives and Christmas spending (which I would argue is an out-of-cycle set of expenses).
Having said that, I think (we will see once we review the moth's data in mint.com) that we will still have spent less in December than we did in October, even with Xmas. Regardless, we will post on the blog and, if we have spent more and "slid back" then we will own up to it and try harder or a different approach.
Austin
-
I don't think this was said enough... $2,000 in TWO WEEKS?!?!?!?!?!?!?
Why? How? Where?.....!!!
-
The article mentions that they spent some of that "extra" time found during those two weeks lowering the cable bill, insurance bill, etc.
I guess when you are not shopping you finally have the time to focus on your predictable bills. This exercise of just sitting down with your bills, asking if this is as low as they can go, picking up the phone, calling the companies and negotiating - that can save you hundreds right there. Just upping the deductibles on your car and homeowners insurance could result in hundreds of dollars in savings.
It also depends on how they calculated the savings. If they lowered their cable bill by doing the Comcast retention call trick and lopped off $20 per month, did they consider that $10 saved for the two week period, $20 or $240 since that is what they WILL save in a twelve month period?
It would be hard for me to imagine that a family of four spends $2,000 in two weeks just on eating out, groceries, gas, entertainment, and general shopping. Which is what they would be admitting to if they say that is really what they saved during their experiment just by ceasing all of those activities.
I mean, break it down - that is $1,000 per week. So $52,000 per year? Considering that is all after-tax money being spent, that means it takes them about $75,000 (if in the 30% tax bracket -fed and state- and don't save for 401k or contribute to health insurance, etc) in income to generate that yearly $52,000.
I can only assume we are getting very close to the income one spouse is earning.
I would hope that $2,000 number is inflated and not a real reflection of their true savings.
If it is, it shows this couple had a TON of fat in their budget that could have easily been cut. If they really did learn something and won't slide back to old habits, if they do another period of famine (as the article indicates they plan to) even if it is for three weeks instead of two - they should find the savings much, much less the second go-around. If that is not the case and once again come up with a huge number - well, they are not really learning anything after all.
-
BG - The article was off re: $2000 in two weeks. We estimated we saved about $1320 in the two weeks we were "not spending" and about $2000 for the entire month of November.
It was between $500-600 for week 1 and about about $720 for Week.
See http://planetperspectives.blogspot.com/2008/11/day-14-two-weeks-of-saving-money-saving.html and http://planetperspectives.blogspot.com/2008/11/day-7-two-week-experiment-is-half-way.html for the details.
We fully anticipate a lower "savings" in January if we do this again.
Austin
-
-
b.g.:
"It also depends on how they calculated the savings. If they lowered their cable bill by doing the Comcast retention call trick and lopped off $20 per month, did they consider that $10 saved for the two week period, $20 or $240 since that is what they WILL save in a twelve month period?"
in case you are unaware, "they" are right here commenting ("DC Consultant") on your post. why not ask them straight? :-)
- s.b.
-
Being practical about your finances is a lot like maintaining your weight. Nothing sexy-- just consistent dedicated hard work.
Gimmicks will only get you so far. But we flock to them even though they lead to teh feat/famine cycles, that can be so hard on our wallets and also our waists.
|
| |
| << Home |
| |
|
|
|
|
I think both approaches are useful, but in general, I agree with BG's opinion. We have had times when we have said, "no buying anything that isn't 100% necessary until the next paycheck," as a way of putting the brakes on and making sure we aren't overspending a pay/billing cycle, and this is useful sometimes. However, it isn't really a way of saving a lot of money in the long run, for a couple of reasons.
First, for us, it doesn't create a famine/splurge cycle, but it does create a cycle of going without/restocking. Even if we eat just the food in the pantry and avoid the grocery store, eventually we have to restock the pantry, and so the expenses rise up in the following weeks. We have four children, who keep growing out of (and wearing the knees out of) their clothing. While we can put off buying new boots or pants for two weeks, they have to have the clothes eventually.
The second reason this family's approach doesn't do a lot for us is that we are not extravagant in the first place. We rarely eat out, for example. We cook from scratch. We strive to limit our grocery store trips to once/week, making do until the next trip. We don't buy clothing very often, and what we do buy is quite modest. We rarely buy home decor. We don't go shopping for entertainment.
So, articles like this one actually make me mad, because they make it sound like it's actually pretty easy to save several thousand dollars if you just discipline yourself to stop eating out and stop buying all that cool stuff at Best Buy. (I do realize the article talked about other things, like gas in the car and extra grocery runs, but still . . .)
Huff, huff, huff.