Financial writer Morgan Housel once contrasted the financial lives of two very different people: One was Grace Groner, who was born in rural Illinois in 1909, started working as a secretary during the Great Depression, bought used clothing and never owned a car. The other was Richard Fuscone, who attended Dartmouth, got an MBA from the University of Chicago and became a top executive at Merrill Lynch.
The twist to the story is that, to the shock of her friends, Grace Groner died in 2010 with $7 million of wealth. She had lived a frugal homespun life and had bought $180 worth of stocks in the 1930s that she never sold. In contrast, also in 2010, Richard Fuscone was forced to file for bankruptcy while facing foreclosure on his Palm Beach home and his 18,000 square foot New York mansion with a seven-car garage.
Go figure how a secretary beat out a financial executive with a Chicago MBA — and take whatever you wish from the story: the power of saving, the failure of even fancy finance experts to regulate their own behavior, or perhaps a little schadenfreude. But the story surely reveals what a funny thing money is.
I was reminded of Grace Groner because I’ve been reading a book called Your Money or Your Life by Vicki Robin and Joe Dominguez, a bestseller from 1992, since updated in 2008 and 2018. The book certainly extols saving and frugality. But really, the point of the book is that we need to get a grip on our relationship with money. If we do become fully conscious of how much effort it takes to earn money and what we’re really getting out of the money we spend – both literally and psychically — we almost certainly will start saving more and spending less.
In addition, we will be free to spend our time on the things that really matter. That is what the authors call “Financial Independence.” And by that, they don’t mean the conventional idea of having so much money you can do whatever you want. They mean being free to live your life without letting money control you.
The book offers a nine-step program for getting to what they call Financial Independence – regardless of your income or your values. Not everyone who reads the book will follow through, and actually, the book can be pretty hokey. The self-help language doesn’t help (sometimes, it made me wince a little). But still, I couldn’t stop reading it. There is some compelling, thought-provoking stuff in here.
The authors will get you to think about those strange “watery” feelings you get whenever you receive a bill, tip generously, or get an unexpected bonus or check. They will get you to think about how unconscious your spending is as you march through life: You know, as the authors tell it, you work hard all week. Then you make brunch for the family on Saturday, and when you realize you don’t have flour, you run to the nearby store, but also end up with gourmet strawberries and Sumatran coffee. Then you drive the family to the lake. It’s great, but you can’t resist the cute country restaurant, and the bill goes on the credit card.
It’s not that there’s anything wrong with spending money on these things. The authors emphasize that there are no value judgments to be made about your choices. The philosophy is “No shame, no blame.”
It’s just that you should be fully conscious of how money is flowing through your life. When you spend, you should be sure you’re getting your full enjoyment out of your expenditure and that it aligns with your values. Otherwise, spending can become just like mindless eating, when you plop yourself in front of the TV and overeat without realizing it instead of savoring each bite.
There is a lot in this book about how to save more. The authors have you do things like take an inventory of all your possessions and record every cent you spend ugh, you’ll see the excess for sure! They also will urge you to stop using money to show off, impress others and make yourself feel less empty.
But even if you don’t follow the program here, the book will make you think about what is “enough.” For every individual, there is a point where you have enough, and beyond which more will mean declining fulfilment (see the diagram). Our job is to find our point of “enough” and then to exercise frugality. But remember, frugality here is not about deprivation, being a tightwad, or making do. It’s about having a high joy-to-stuff ratio.