Jeff Yeager made a name for himself as The Ultimate Cheapskate. Now, after traveling the country and talking to tons of fellow members of the “cheaphood,” he’s back with a new book that’s all about how cheapskates proudly do what they do and save more and spend less than typical consumers, how they couldn’t give a hoot about keeping up with the Joneses—and how, odds are, they’re happier than their free-spending neighbors. Among the revelations in the book: If you know what you’re doing, personal finance mainstays like budgets and emergency funds are unnecessary, and one way to save, recommended by a female cheapskate, is to go without underwear (at least when the weather’s warm).
“Cheaphood,” by the way, is a Yeager phrase. He’s known to create terms that describe various consumer conditions—”premeditated shoppers” and “borrowability” (as opposed to affordability) are a couple of other Yeager-isms.
The reason to scrimp, according to Yeager and others, isn’t about being cheap for its own sake, or to practice some form of self-denial. Being cheap, quite simply, will make you happy. Or rather, being selectively cheap will make you happy. Yeager, as you can see in a previous Q&A, will spend good money on certain things. Being a wise, big-picture-type cheapskate is about buying only what you want—and about not buying anything solely because someone else says you simply must have it.
In the Q&A below, Yeager discusses these ideas and more from his new book, The Cheapskate Next Door: The Surprising Secrets of Americans Living Happily Below their Means:
A lot of the personal finance folks out there swear by the need for things like budgets and emergency funds, but you don’t bother. Why? Do you think that certain kinds of consumers need these sorts of things, and others can simply wing it?
For my new book, I surveyed more than 300 self-described “cheapskates,” and those were among the interesting, counterintuitive findings — that only about 20 percent of those polled have a formal, written household budget or a designated “emergency fund.” These are people who have made smart money management second nature in their lives. As one told me, “We live our budget; we don’t waste time writing about it.” They often equated a “budget” with a “diet;” they’ve conditioned themselves to spend money wisely as a lifestyle – like eating healthy all the time instead of spending every waking hour counting calories or chasing the latest fad diet. When it comes to emergency funds, the cheapskates next door generally have more than adequate financial reserves they can draw on, but they don’t usually consider them an “emergency fund” per se. As one cheapskate told me, “An emergency fund is something that’s more necessary when you don’t have your financial house in order otherwise and when you’re burdened with debt. If that’s the case, then every little thing is an emergency.” Don’t get me wrong, I think for a lot of people a written budget and a designated emergency fund is a good first step in whipping their finances into shape, but the cheapskates next door are black-belts of personal finance and show you how truly effortless smart money management can become once you’ve integrated it into your lifestyle — that’s what the book is really about, and I think most people will find that comforting, that you don’t need to spend your whole life on a crash-diet, if you will.
The subtitle of the book describes cheapskates as people “living happily below their means.” Do you think that’s the defining characteristic of a cheapskate nowadays? If so, how do you think we got to this point? I mean: Everyone is supposed to live below (or at least not above) their means, right?
Sure, living within your means is only common sense, but, in fact, it’s quite rare these days in our culture. A recent Gallup Poll showed that nearly half of all Americans say they “live paycheck to paycheck,” and a majority of American adults technically have a negative net worth, with more liabilities than assets. For the cheapskates next door, debt still stings. They recognize the difference between “affordability – “can I truly afford it?” and what I call “borrowability” – “can I borrow enough money to buy it?” Most Americans confuse the two, and that’s a root cause of the current economic debacle. But my book is really about much more than how to spend less than you earn, regardless of the size of your income. My book is as much about how to find happiness – perhaps with what you already have – as it is about money. Smart spending is part of that, but it’s mostly about deciding, as the Spice Girls said, “what you really really want,” and skipping the rest.
I love how you put it that Americans have gotten used to “wantonizing.” How do you think we got so accustomed to thinking that many of life’s wants are actually needs? Is it all just clever marketing? Are consumers that stupid?
“Wantonizing” your needs is, for example, convincing yourself that, because “shelter” is a basic human need, you must have it in the form of a 8,000 square foot mini-mansion with his and her master bedrooms suites and granite countertops throughout. The cheapskates next door have a very clear perspective on wants vs. needs, and that’s not to say that they always deny themselves things they simply want. But, while the average American eventually has (at least some) regrets about nearly 80 percent of the discretionary items they buy, the cheapskates I surveyed regretted less than 10 percent of their discretionary purchases. Cheapskates are what I call “premeditated shoppers,” and so skip the 80 percent of the stuff others buy and later regret. As for the cause of this shift toward wantonizing our needs, advertising has obviously played a huge roll; otherwise, would companies continue to invest in the 3,000+ advertisements each of us is exposed to every day? And it’s been a pop-culture shift as well; we no longer aspire to just “keep up with the Joneses,” we instead want to live the lives of the rich and famous we see on TV. All of that is neither good nor bad, but it’s definitely been a huge and fairly sudden shift in our lifestyles and our financial lives. Even back in the 1980s, 75 percent of household items we purchased were to replace an item that was broken or worn out and beyond repair; today, only about 20 percent of such purchases are to replace a worn out item … the other 80 percent is just because there’s something new on the market – and we gotta’ have us one of them! Or the what-ever-it-is we currently owns still works just fine, but it’s in last year’s color, or is one generation behind, etc, so we need to run out and replace it. The cheapskates next door simply don’t accept that new, uber-consumer mindset.
Throughout the book, there are plenty of references to the idea that cheapskates are happier than the conspicuous consumers. But you also point out that cheapskates often suffer from something you call Spending Anxiety Disorder (which indeed can be SAD, and which certainly affects me). How can these ideas coexist? How can you be happy if you’re constantly worried about every expense, and you stay up at night thinking that you really shouldn’t have ordered that $8 glass of wine at dinner when you know that you could have bought an entire bottle for that amount? (Not that this ever happens to me or anything.)
That is sort of a paradox, but, again, I think it comes back to putting money in its proper place, a relatively small role in your life. Nearly 90 percent of the cheapskates I interviewed said they worry/think/stress out less about money than most non-cheapskates they know. So these people I profile in the book aren’t “pensive penny-pinchers.” No offense, Brad, but maybe you’re still a brown-belt in your cheapskate development in this sense. Clearly one reason they stress out less about money is that they live largely debt free. Less than five percent had any consumer debt other than a home mortgage, and, even then, 85 percent of those cheapskates with mortgages said that they plan to – or already have – paid off their mortgages early. In addition to knowing the joy of living debt free, as I discuss in the book, the cheapskates next door have almost a sixth-sense when it comes to knowing a true value or good price when they see one – they can instantly tell you, for example, what’s a truly good price for a can of tuna in their market – so they spend very little time shopping, think about money, etc. I’d also say that, if the cheapskates are afflicted by Spending Anxiety Disorder – displeasure from spending money, particularly wastefully – most other people suffer from “Manic Spending Disorder.” In other words, they get a high from shopping, from spending money, which is usually followed by the disappointment of buyer’s remorse and anxiety over how they’re going to pay for it all. So, choose your own monetary-malady I suppose, but I’ll take S.A.D. any day.
Some of the folks you call upon as resources swear that the products that advertise more are actually inferior to those that are more low-key. They make a really interesting point. What do you think? Is there some truth to that?
Yes, the cheapskates are what I call “brand-blind” and “advertising averse.” They shop based on quality/durability as well as cost. A brand name means nothing to them unless they’re convinced that it represents a superior quality and justifies what is usually a higher cost. In fact, they’re often suspicious of heavily advertised products. They recognize that the cost of all that advertising is ultimately built into the price paid by consumers. They also reason – and I think they’re on to something – that, if a product is so good, so necessary, such a good value, why does a company need to spend so much time and money telling people to buy it?