It's Chic To Be Cheap: A Penny Pincher's Primer

Scrimp, scrimp, scrimp. That homely activity is Mary Hunt's raison d'etre. A self-confessed credit junkie from Southern California ("It started with a Texaco card"), in 1982 Hunt found herself with $100,000 in debts, an unemployed husband, and two babies. Hunt changed her life. When she landed a good job, she kept track of every dime she spent and worked the family's way back to financial health. Now, she and her husband co-manage an industrial real estate company, they're close to paying off what they still owe, and Hunt has become so competent at pinching pennies that she teaches others the fine art through Cheapskate Monthly, the newsletter she produces in her home.

Finally, Americans are recovering from a 20-year addiction to spending that has left many on the brink of financial peril. Three big shockers--the stock market crash of 1987, the nationwide real estate bust, and a recession that has permanently wiped out hundreds of thousands of jobs--have jolted consumers into realizing that they can't eat their Rolexes, let alone their houses. The lesson of the day, says Marc Eisenson, who publishes The Banker's Secret Bulletin, is that "in an effort to collect the most marbles, you could end up with none." Personal-finance commentator and author Jonathan Pond agrees. "I'm calling the '90s the decade of fear," he says.

Of course, if enough people are scared witless, then being scared witless is "in." So, the generation that took conspicuous consumption to new heights is now making parsimony hip. Ostentation is more likely to draw a sneer than a stare of envy.

MORE BOOZE. In New York's cutting-edge beach resorts, it's suddenly passe to wear jewelry with your jeans. Wedding consultants report a trend toward smaller, quieter affairs--taking place on Sunday afternoons rather than on costlier Saturday nights. According to American Demographics magazine, the only item on which people age 35 to 44 spend significantly more now than three years ago is booze--presumably to kill the economic pain.

If vendors capitalized on the money-is-no-object ethos of the '80s, they're now realizing they can't ignore the radical chic in which less is more. Warehouse clubs and super-discount chains are drawing more customers, even though retailers as a group face tough times. Consumers, especially middle-class families, have proved they'll put up with a little inconvenience to buy 20 chicken breasts for the price of three. So, businesses that give them an opportunity to save could find themselves with an edge.

Still, for most of the baby-boom generation, belt-tightening seems almost unnatural. Parents and grandparents who lived through wars or depressions never took prosperity for granted, but the boomers believed there'd always be more, more, more. To help them do what they've never done with any seriousness before--save money--a host of cost-cutting experts has gone into the self-help business (table). If you don't think you can put away a couple hundred dollars a month, they proclaim, you're dead wrong. Furthermore, they offer terrifying predictions of what will happen if you continue your profligate ways. "Go down to the Golden Arches, put on a little cap, look in the mirror, and imagine yourself at 75," says Pond, whose pet cause is retirement planning.

Whether you're saving for old age or trying to pay off a dozen credit-card balances, the first step is to get a grip on your cash flow. That raises the burning question, to budget or not to budget? "To me it's a dirty word, like diet," says Hunt. "It doesn't work." Eisenson thinks budgets are essentially irrelevant to saving money. "Any idiot can figure out that he can save $300 a year by skipping his deli-bought danish and coffee in the morning," he scoffs.

But Larry Roth, who produces Living Cheap News, thinks budgets can help solve that ancient mystery, "Where does money go?" Indeed, for people who can't figure out what happened to the $100 they withdrew from the cash machine this morning, whipping out a pencil and going over the day will make it unpleasantly clear how much money is being wasted.

Reading your checkbook can be equally enlightening. Must you pay $1,000 a year for a health club membership, or could you work off your flab in the park? Have you treated your spouse so badly that nothing less than a $200 birthday present will do? How many pairs of back-to-school sneakers can your 10-year-old wear at once? When the ghostly voice of yuppiedom whispers, "But everybody else . . . ," tell it to shut up. Also remember what the rich have known all along: Save enough on taxis, and you have airfare to Biarritz.

PAINLESS PROGRAM. A reasonable savings goal, say the superscrimpers, is 10% to 20% of your gross income. Your highest priority for that extra cash should be to pay down debt. In today's environment, "if you're leveraged even with a mortgage, you're buying money for more than you can sell it for," says Roth, whose book and newsletter focus on real estate and urban lifestyles.

Eisenson, who specializes in debt management, points out that if you're carrying a $2,000 credit-card balance and making only the minimum payment every month, you'll be paying off that $2,000 for the next 33 years, and your final cost could include more than $7,000 in interest. (Hence the name of Eisenson's corporate venture, The Banker's Secret.) He sells a $28 software program that helps you calculate how fast you can erase credit-card debt with regular or irregular additional payments, depending on what you owe and how much extra you can afford.

Similarly, prepaying a mortgage not only builds equity in your home faster but frees cash for other goals. Lawrence Hagemann, a manager for a Chicago company that makes subway-car doors, used another Eisenson program to prepay his mortgage so he'd be debt-free when his daughter matriculated as a college freshman. Hagemann says the process was practically painless.

Once you're no longer neck-deep in debt, you can invest your savings. Here, too, it pays to pinch pennies: The less you shell out in commissions, loads, and other expenses, the more money you have to grow. For example, if you already know a stock you want to buy, why go to a full-service broker when you can use a discounter? In his savvy (but sometimes grammatically murky) book, Scrooge Investing, Mark Skousen lists 111 ways to slice costs off everything from stock purchases to insurance premiums.

The biggest mistake people make is in thinking that small savings can't make much of a difference. Jackie Iglehart, publisher of The Penny Pincher, became a proud miser when her husband lost his job at Siemens Medical Systems 18 months ago. Most of her money-saving techniques have to do with home economics--and they add up. Iglehart calculates that her $129 electric breadmaker will save her $500 a year. She keeps five chickens, who each lay about an egg a day. "People hear I save $1,000 a month, and they're amazed," Iglehart says. "But it's easy."

DEEP PLEASURE. Sooner or later, tightwads will tell you, saving money becomes deeply pleasurable. They insist that thrift enhances rather than diminishes your quality of life. Vacationing off-season, you'll beat the tourist crowds; cooking from scratch, you'll eat healthier; buying used furniture and wearing old clothes, you'll achieve that coveted style called attitude.

No two people save money the same way, but everybody has a method. So it's fruitful to get others' ideas. Perusing the tightwad press, you'll not only learn how to spend less, you'll also laugh your head off. Some suggestions are revolting (re-use coffee grounds to make another pot; take more showers instead of buying deodorant). Others are absurd (buy a goat to mow your lawn; marry rich). Still, their earnestness can be inspiring. Remember, you're in the vanguard of a movement. It's cool to redeem empty soda cans.

      Living Cheap: The Survival Guide for the Nineties
      by Larry Roth (Ropubco, $14.95)
      1,001 Ways to Cut Your Expenses by Jonathan D. Pond (Dell, $8)
      Personal Budget Planner by Eric P. Gelb (Career
      Advancement Center, $19.95)
      Scrooge Investing by Mark Skousen (Dearborn Financial Publishing, $19.95)
      Cheapskate Monthly ($12.95 a year; 310 630-8845)
      Living Cheap News (10 issues, $12 a year; 408 257-1680)
      The Penny Pincher (bimonthly; $12 a year; 516 724-1868)
      The Banker's Secret Bulletin (quarterly; $19.95 a year; 914 758-140)
      The Tightwad Gazette (monthly; $12 a year;
      207 524-7962)
      DATA: BW
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