Whether you’re aware of it or not, you do have a money temperament. Everyone does. It’s the way you naturally think about, behave, or react to money. To loosely assess your money temperament and to have a little fun with this, consider the following premise then choose the response closest to what you would do.
Your rich uncle learns that you are in desperate need of transportation. In a surprise move, he comes to your rescue with a gift of $15,000 and the instruction to buy a car. What do you do?
a.) Make a $15,000 down payment on your dream car.
b.) Pay cash for a $15,000 previously-owned car.
c.) Exercise extreme patience, flexibility, consumer savvy, and negotiating skills to find a dandy used, late-model, low-mileage, well-maintained car for $7,500 then stash $7,500 into a savings account.
Putting aside your humble columnist’s obvious bias, let’s analyze the options.
Twice the Price
If you responded A, you are prone to live your life for twice the price. You don’t mind paying interest and taking on monthly payments because that’s the way to get what you want. You’re just doing the best you can to maximize your income so you can drive a reliable car.
You depend on consumer credit to bridge the gap between your income and your expenses. It’s easy and convenient. Because you pay double-digit interest rates on your revolving debt, you end up paying twice, or more, for the goods and services you charge. You don’t think about paying double. You live for today, assuming that tomorrow will take care of itself.
If your response was B, you are okay with the full price. When you have money, you don’t hesitate to spend it. You’re a cash buyer, not a wheeler-dealer, and you prefer to just pay the asking price. No hassles, no problems. You have a cash mentality.
You pay as you go. If you like it you buy it. If you don’t, you wait.
You don’t pay attention to prices that much. As a result, your income matches your lifestyle. You don’t live beyond your means and never carry credit card debt. Still, it takes every penny to pay the bills. You live from one paycheck to the next. It seems like you can never get ahead.
Half the Price
If your choice was C, your temperament is geared to live your life for half the price.
You enjoy the challenge of living below your means, you try to never pay the full price. You get a thrill whenever you beat the system. You earn more than you spend and save the difference.
You know your prices, you’re patient, and know how to pay less than the going price for just about everything. In fact, you pride yourself on living your life for half the price.
You live an understated lifestyle and find great satisfaction in being prepared for the unexpected. You live below your means and that means contentment, joy, and financially stress-free life.
Back to Reality
Of course, no one pays twice-the-price for everything nor can anyone be assured of never paying more than half. My point is that with every spending opportunity comes a choice. You can choose to go into debt, you can determine to not spend more than you have or you can work hard to pay half the price.
We are not bound by our temperaments. The ways that we naturally think about, respond, and behave to money and myriad other things in life are simply our first, natural response. We have control over those thoughts and behaviors. Sometimes our responses are like bratty kids who need some adult supervision and discipline.
Toil and Trouble
A couple of hundred years ago, Adam Smith, economist and philosopher, wrote in Wealth of Nations,
“The real price of everything, what everything really costs to the man
who wants to acquire it, is the toil and trouble of acquiring it.”
I’m not trying to fool you into thinking it’s a simple thing to live below your means. I’ll admit that for some of us myself included, the natural response is that its easier to just buy what you want and then switch to credit when you run out of money. That’s as easy as walking downhill. Or rolling off a log.
There is a component of toil and trouble in half-price living, and at times it is more toilsome than the other choices. In some ways, living below your means is like having a part-time job with this job description: plan, research, wait, negotiate, strategize, compare, and consider.
What better part-time job could you hope for than one where you set your hours, agenda, and pace and you’re the boss? The more toil and trouble you choose to contribute, the closer you’ll come to living your life for half the price. And don’t forget that the “wages” are tax-free because every dollar you manage not to spend is a dollar on which you have already paid taxes.
Toil-and-Trouble on Wheels
Remember the $15,000-for-a-car question? Let’s revisit the three options, taking into consideration the toil-and-trouble factor.
Car Purchase Option A
Buying the new car in option A took all of about one hour. It was simple and convenient and, given the fierce competition among new car dealers, probably quite pain-free. The salesperson was more than willing to handle every detail and made the transaction so simple. You didn’t even have to think about the full price. Just knowing you could handle the monthly payment gave you a sense of satisfaction. No toil, no trouble.
Car Purchase Option B
Paying cash in option B required diligence to locate the car. Because this was not a new vehicle, add in the time and expense of a trip to the mechanic for a checkup and inspection.
Paying a lot less in the long run for a good used car was offset by the toil and trouble this buyer was willing to contribute to the deal.
Car Purchase Option C
Finding a cream puff of a car for just $7,500 in option C was harder work. It took weeks of patience, test-driving, calling, and networking. But all of the toil and trouble paid off when this amazing low-mileage, single-owner, pampered car turned up. And then consider the additional “paycheck” this buyer received in exchange for his toil and trouble: $7,500 in the bank.
While “half-price” refers to the cost of things, half-price living is an attitude, a new way of thinking, a learned behavior. No matter your money temperament. Those who choose this—mindset no matter their natural money temperament—see a bigger picture. They exercise personal discipline and respect for the money they are entrusted to manage.
I want you to get excited about what can happen in your life when you begin to live below your means. And if you’ve already begun the journey, I want to inspire you to do even better.