Money and Wealth (Part 18) – Spending (Part A)

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Money and Wealth (Part 18) – Spending (Part A)

Spending

1. The key to spending money wisely is also the key to success in nearly every area of life: moderation (Php 4:5).
   1. Moderation n. – 1. The action or an act of moderating. †a. Limitation, restriction; a fixed limit; a restricting provision or clause. Obs. b. Control, rule, governance. 2. a. The quality of being moderate, in various senses; now only with reference to conduct, opinions, demands, desires, or their indulgence; avoidance of extremes; self-control, temperance; occasionally, †avoidance of severity or rigour, lenity, clemency.
   2. We must therefore exercise self-control when it comes to everything we do, including how we spend money.
   3. Moderation in spending (and saving) will over the long run result in prosperity (Joe 2:23-24).
   4. We should be temperate in all things (1Co 9:25).
      1. Temperate adj. – 1. Of persons, their conduct, practices, etc.: Keeping due measure, self-restrained, moderate. b. Moderate and self-controlled as regards the indulgence of appetites or desires; abstemious, sober; continent; in late use spec. moderate or abstemious in the use of alcoholic drinks.
      2. Temperance n. – 1. The practice or habit of restraining oneself in provocation, passion, desire, etc.; rational self-restraint. (One of the four cardinal virtues.) Self-restraint and moderation in action of any kind, in the expression of opinion, etc.; suppression of any tendency to passionate action; in early use, esp. self-control, restraint, or forbearance, when provoked to anger or impatience.
      3. We must practice self-restraint when indulging our appetites and desires, which is directly connected to spending money.
   5. Temperance is:
      1. a fundamental tenant of faith in Christ (Act 24:24-25).
      2. a fruit of the Spirit (Gal 5:22-23).
      3. a requirement for the ministry (Tit 1:7-8).
      4. a requirement for old men (Tit 2:2).
      5. a Christian virtue which must be added to our faith to make our calling and election sure (2Pe 1:5-11).

2. If you have expensive taste and you indulge it regularly, you will be poor (Pro 21:17, 20).
   1. Having wine taste on a beer budget is a recipe for poverty.
   2. Spending too much money on eating out and drinking will make you poor (Pro 23:21).
   3. Millionaires spend less on groceries, eating out, and clothing than the general American population does.
      1. “Based on the research, the average millionaire in this study [The National Study of Millionaires (2017)] spends approximately $412 each month on groceries as a group. Meanwhile, one report from the USDA states that a comparable family in the general population spends more than $582 a month on groceries. So, in general, it can be said that millionaires are more frugal than non-millionaires in their approach to grocery shopping.” (Dave Ramsey, Baby Steps Millionaires, p. 188)
      2. “The median millionaire in this study [The National Study of Millionaires (2017)] stated that they spend less than $200 each month at restaurants. Meanwhile, the Bureau of Labor Statistics reports that the median American household spends approximately $251 eating out each month. Figure 19 demonstrates that roughly two-thirds of millionaires spend less than $300 at restaurants each month, with 36% spending less than $150. Only 17% spend more than $450 a month, dispelling the image of a stereotypical millionaire eating out at extravagant restaurants every night. The research shows that a vast majority of millionaires are much more frugal than their general population counterparts.” (Ibid, p. 189)
      3. “The millionaires included in this research [The National Study of Millionaires (2017)] reported that they spend an average of $117 a month on clothes, while the Bureau of Labor Statistics reports that the average American household spends $154 a month.” (Ibid, p. 190)
   4. A man who spends money indiscriminately and wastefully will quickly blow through his inheritance and have nothing (Luk 15:11-14).
   5. “Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then, we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.” (Thomas J. Stanley, The Millionaire Next Door, p. 1)
   6. “Most people have it all wrong about wealth in America. Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.” (Thomas J. Stanley, The Millionaire Next Door, p. 1)
   7. “It is unfortunate that some people judge others by their choice in foods, beverages, suits, watches, motor vehicles, and such. To them, superior people have excellent tastes in consumer goods. But it is easier to purchase products that denote superiority than to be actually superior in economic achievement. Allocating time and money in the pursuit of looking superior often has a predictable outcome: inferior economic achievement. What are three words that profile the affluent? FRUGAL FRUGAL FRUGAL” (Thomas J. Stanley, The Millionaire Next Door, p. 28)
   8. “Being frugal is the cornerstone of wealth-building. Yet far too often the big spenders are promoted and sensationalized by the popular press.” (Thomas J. Stanley, The Millionaire Next Door, p. 29)
   9. “If you buy things you don’t need, you will soon sell things you need.” (Warren Buffett)

3. There are two things that people spend money on carelessly that keep them broke: big things and little things.
   1. “But small expenses become big expenses over time. Small amounts invested periodically also become large investments over time.” (Thomas J. Stanley, The Millionaire Next Door, p. 54)
   2. Lattes, drinks, eating out, and unnecessary small purchases add up over time.
   3. However, you can be as frugal as you want with little items and it won’t make much difference if you are paying tens or even hundreds of thousands of dollars in interest on a 30-year mortgage, financing new vehicles, and buying expensive “toys.”
   4. This is called being “penny-wise and pound-foolish.”
4. High-paying professionals are usually big spenders and are therefore broke.
   1. You might think that high-paid professionals such as doctors, lawyers, accountants, executives, etc. are wealthy people, but in many cases, you would be wrong.
   2. High income professionals are expected to “look the part” and have a high-consumption lifestyle of living in high-end homes, driving expensive cars, wearing expensive clothes, etc.
   3. They walk in vain show (Psa 39:6).
   4. They believe that they have to do this because their clients will judge them as unsuccessful if they live a modest lifestyle.
   5. Many of them are therefore broke.
   6. Being a “highly educated” professional is more likely a curse than a blessing when it comes to saving money and building wealth.
   7. “Another reason very well-educated people tend to lag behind on the wealth scale has to do with the status ascribed to them by society. Doctors, as well as others with advanced degrees, are expected to play their parts. Mr. Denzi is a small business owner. In spite of being wealthy, he is not expected by society to live in an exclusive neighborhood. He would not be out of place living in a modest home or driving a nondescript sedan. His domestic overhead is significantly lower than Dr. Dokes’s. “Many people tell us that you can judge a book by its cover, meaning that high-grade doctors, lawyers, accountants, and so on are expected to live in expensive homes. They also are expected to dress and drive in a style congruent with their ability to perform their professional duties. How do you judge the professionals you patronize? Too people judge them by display factors. Extra points are given to those who wear expensive clothes, drive luxury automobiles, and live in exclusive neighborhoods. They assume a professional is likely to be mediocre, even incompetent, if he lives in a modest home and drives a three-year-old Ford Crown Victoria. Very, very few people judge the quality of the professionals they use by net worth criteria. Many professionals have told us that they must look successful to convince their customers/clients that they are.” (Thomas J. Stanley, The Millionaire Next Door, pp. 75-76)
   8. As a pastor, I have honestly felt a bit uncomfortable at times with where I live and what I drive because it does not look “becoming of a man of the cloth.”
      1. But then I have to remind myself, “Why should I care what broke people think?”
      2. I felt the same way to a certain extent when I was an engineer and all my friends lived in nice homes or apartments and drove expensive cars while I lived in the cheapest one-bedroom apartment I could find and drove a cheap, old, small car.
      3. But again, I didn’t care what broke people thought.
      4. We should not care what other people think if we are living wisely (1Co 4:3-4; 2Co 3:1).
   9. We should not judge according to appearance, but judge righteous judgment (Joh 7:24; 1Sa 16:7; 2Co 10:7; Isa 11:3-4).
      1. I have heard people ask, “would you choose an investment advisor who was wearing an old worn-out suit and driving an old clunker for a car?”
      2. I personally would be intrigued by such a fellow and would want to enquire more about him to see if he was good at his job.
      3. I don’t care what kind of car a financial advisor drives. As a matter of fact, I would be very wary of one who drives a brand-new expensive car because that tells me he probably doesn’t make good financial decisions.
      4. For me, one of the most important questions for a financial advisor is, “What is your net worth outside of your home equity?”
      5. If he doesn’t have a net worth at least in the multiple hundreds of thousands, depending on his age, he apparently doesn’t know how to manage his own money, so why would I trust him to manage mine?

Look for good deals and ask for discounts

1. 1. You can save a ton of money by buying clothes at a thrift store.
   2. I have bought most of my clothes over the years at thrift stores and have saved hundreds and probably thousands of dollars doing so.
   3. Buying things on sale or from “scratch and dent” retailers can save a lot of money.
   4. If you pay cash (actual, physical cash) for things, you can often get a discount.
      1. This goes for products (new and used), lodging (hotels and B&Bs), furniture, cars, houses, medical care, services (mechanic, plumber, etc.), and many other things.
      2. Always ask for a discount.
   5. Learn to negotiate, especially on larger purchases.
      1. “Just start with the assumption that you can get anything at a discount. Assume that the sticker or sales tag says, ‘Price starting at:’ before the actual listed price. It’s the starting point. It’s not the final price. Get it into your head that everything in every store in every city in the world is negotiable. You just have to ask. You have to make it a way of life.” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, p. 178-179)
      2. Ramsey’s seven basic rules of negotiating
         • Always tell the absolute truth.
           1. Never deceive when negotiating (Pro 20:14).
           2. This applies to buying or selling.
         • Use the power of cash.
         • Understand and use “walk away” power.
         • Shut up! Don’t talk too much. (Pro 17:27-28; Pro 29:11)
         • “That’s not good enough!”
         • Good guy, bad guy.
           1. This is what sales reps do when they “go to talk to the manager” and come back with a number.
           2. They try to position themselves as the “good guy” between you and the “bad guy” manager.
           3. Be aware of this when dealing with sales reps.
         • “If I” take-away technique.
           1. “This one can be fun, because you never know what you get out of it. You use this one near the end of the deal, after you’ve pretty much figured out that the price has gotten as low as it can go. That’s when you say, ‘Okay, if I take the car for that price, you’ve got to throw in new wipers and floor mats.’ Or, ‘If I take the house for that price, you’ll have to cover the closing costs.’ The point is to agree to the price, but then throw something else into the deal.” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, p. 186)