Two Pillars of Wise Money Management
When I was I child, my family made frequent weekend visits to my great grandparent’s house. GG Mom and GG Pop lived down a dirt road, at the top of a mountain in rural Pennsylvania.
When GG Pop retired at age 60, he and GG Mom built a house and moved to their version of paradise, where they spent 30 plus years of retirement together.
They grew their own vegetables, chopped their own firewood, and saved every plastic bag and empty butter tub they ever used. These habits were an irreversible effect of growing up during The Great Depression.
Between their kitchen and living room, GG Mom had a framed picture hanging on the wall.It was made from old fabric, Q-tips, rubber bands, and paper clips. The sign read, “Use up, wear out. Make do, or do without.”
Some people have catch phrases they like to repeat but fail to live by. GG Mom and GG Pop lived this motto every day. They were an example of frugality for their children, grandchildren, and great grandchildren, all of whom they were fortunate enough to meet.
Sometimes when I’m sitting at my desk, sipping a Starbucks coffee I bought for $2.89, I wonder what they would think.
They would be proud that I make enough money to drink a Starbucks coffee whenever I want. But they would be even more proud if I was drinking the free coffee at work while saving and investing the $2.89.
I try to use my memory of GG Mom and Pop to guide my financial decisions. The principles they used were simple, effective, and seemingly common sense.
Unfortunately,common sense is a rare commodity when it comes to money management.
Here are some of the principles GG Mom and GG Pop used, the same principles I try to use, and the same principles you can use to save, invest, and grow wealthy.
Familiarity with your finances
GG Pop was the family bookkeeper. Just like John D Rockefeller, he used his ledger books to record every penny they spent – a habit he kept into his 90s.
Early in his retirement, GG Pop refused to buy newspapers because he wasn’t sure they had enough money to make it through. This extremely cautious approach, along with precise budgeting, allowed them to live a wonderful retirement.
GG Pop’s budgeting skills were not naturally passed down to me.
I understand the importance of a budget. What I find difficult is being able to make my own budget and stick to it.
After several failed attempts, I adopted a simple system last year. Rather than making a budget, I decided to start by tracking my spending (get a free copy of my spending tracker here).
I opened an Excel spreadsheet, and every time I spent money,I recorded it with the date, amount, category, and a simple note (i.e. “pizza for dinner”).
My easy expense tracker
At the end of the month, I could see my total spending, as well as a breakdown of spending by category.
This practice was much less overwhelming and much easier to manage than trying to start with a budget.
After a few months of doing this, I had valuable data to use. I knew exactly how much money was coming in, exactly how much was going out, and exactly where it was going.
I didn't start the process totally clueless.
I knew what my paychecks looked like, and I knew most of my major expenses. But until you record every dollar you spend, you don’t realize where money is falling through the cracks.
When I started tracking my spending, I didn’t put any restrictions on myself. My only goal was to record everything. This was my data gathering phase.
My long-term plan was to use that data, six months to a year down the road, to put together a formal budget and give myself concrete restrictions.
But in recording my expenses, I noticed an unforeseen benefit – I started spending less money.
The simple act of adding a line in Excel every time I made a purchase held me accountable whenever I pulled out my credit card.
Do I really need this? Am I being wasteful? Will I regret this purchase when I type it into my spreadsheet tonight?
These questions popped into my head with every transaction.They didn’t prompt a feeling of guilt but a feeling of consciousness.
The first step to responsible money management is consciousness of your money. You must know what’s coming in and what’s leaving.
Just as GG Pop’s ledger book helped with financial fitness, my Excel sheet is a tool I can’t live without.
Live below your means
I drank plenty of soda on my weekend visits to GG Mom and GG Pop’s, but I only remember drinking the store brand.
This was one of my favorites
GG Pop still drove for about 10 years of my life, but I only remember him ever having two cars. Both of which were American made – a Chevy Blazer and a Crown Victoria. They got the job done, but they weren’t fancy.
GG Mom and Pop’s furniture was comfortable, but modest. And I don’t ever remember them buying a new TV.
GG Mom and GG Pop took pleasure in simple things - watching the deer in their field, working in their garden, lunch on the back porch, and home cooked dinners with family.
These pleasures were as close to free as you can find, and more rewarding than any new gadget.
Conversely, my pleasures used to be on the irresponsible side of reasonable.
I had an expensive truck, a brand-new Harley, a monthly wine subscription, and I spent A LOT of money at bars and restaurants.
I thought I was making smart money decisions. I was putting a good chunk of money in my 401k, saving a little bit more, and I had a roommate. My mentality was “work hard, make a lot of money, spend it on cool shit.”
It took a couple years of this stupid mindset, in addition to my roommate moving out and my expenses going up, before I realized I was being a moron.
I was living within my means, but I knew it was time to get my shit together and start living well below my means.
I traded in my truck for a Honda Civic, cutting my payment from $494 per month to $230 per month. This also helped me save about $200 per month on gas.
I sold my Harley and went from having $6k in motorcycle debt to having an extra $7k in the bank.
And I stopped pissing my money away on frequent dinners out and $8 IPAs.
Basically, I looked at what I was doing, and I changed most of it.
If you read those sentences in isolation, you may think I took all the fun out of my life. I thought the same thing at first. But it didn’t take much time passing for me to realize I didn’t miss any of the things I cut out.
I liked my truck, but the Civic gets me to where I’m going just as well.
I loved the Harley, but the Instagram pictures and sporadic rides weren’t worth the cost. I later figured out that I took so few rides, each ride cost me over $100 (monthly payment + insurance + gas/ number of rides).
While I enjoy going out to eat, I enjoy cooking with my girlfriend even more. And we still go out, just not as much. Reducing the number of meals out makes every date night more special.
I read more books, I write more, I exercise more, and I worry much less.
Even if I do miss my old habits occasionally, the feeling I get from watching my savings and investments grow makes the small sacrifice worth it.
A few small adjustments in my lifestyle made an enormous difference in the trajectory of my net worth.
You might find it hard to make these big cuts. It can be a shock to your system at first. But I think you will find, much like I did, that spending your money doesn’t bring you happiness. Your happiness is derived from your relationships and from your low-cost hobbies that are making you better.
The earlier you connect those dots, the sooner you will find happiness (and the sooner your bank account balance will grow).
As a seven-year-old, spending my weekends in the Pennsylvania mountains, I never imagined that GG Mom’s wall hanging or my ShurFine creme soda would shape my financial future.
Twenty years later, I look back on those weekends and clearly see the connection between my mentality on money and the habits of my great grandparents.
Use up, wear out. Make do, or do without.
It wasn’t a just catchy phrase hanging on the wall. It was a lifestyle – practiced and handed down over decades – that provided the foundation for happiness, wealth, and well being for generations to come.
