When I talk to folks about personal finance, I have the feeling than many people want to get ahead but don't know where to start. And, all the info about mutual funds, dollar cost averaging, etc seem meaningless if you don't have the money to get started. This got me to thinking about how I got my start.
Some of my earliest memories were of our family worrying about where money for groceries or the mortgage would come from. I remember vividly when I was about 5 years old when they got out a jar of pennies to pay a bill collector at the door. Out of that came a determination to attain a degree of financial independence that would largely insulate me from these worries. But how do you get from there to independence? The answer for me was to work hard and save as much as possible, paying attention to the details...a philosophy that has stuck with me to this day. My first job was moving trash for 10 cents per hour. And, I still pick up a penny when I see it on the ground. The penny may be a small amount of money, but the time involved in picking up a penny is approximately 1 second, so the work pays about $36/hour, tax free. Not bad for unskilled labor. And, besides being good exercise, the mentality of paying attention to details at this level is the start of financial independence. Interestingly, I've noticed an inverse correlation between the wealth of the neighborhood and the amount of change you are likely to find. In a low rent apartment complex, pennies are everywhere. In a neighborhood of multimillion dollar homes you'll rarely see one. I suspect this is because the rich got that way by paying attention to the details.
From there, you are on your way. Is the dinner out worth a couple thousand pennies? Is the Beemer worth 50 million pennies? Better to camp for the night than spend the 5 thousand pennies for a cheap hotel? At least until you are well on your way to financial independence, consider taking the cheap way and investing the resulting change.
Each penny not spent will be with you for the rest of your life, multiplying through compound interest to give you space between worries about running out of money. I'm not saying you shouldn't spend the money. Just pay attention to the details and make a conscious decision, and if you make the frugal decision, one day you'll realize you are well on your way to financial independence.
I like to think I'm frugal, but others have had less complimentary descriptions. Penny pincher is one I can't dispute, and it got me started on the way to independence from most money worries.
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4 comments:
I agree with the premise of your post, but I think a penny is the wrong metric and a dollar is the right one. Do you know pennies actually cost more than a penny to make and add inefficiency to our economic system by increasing the time it takes to complete transactions. You can read more about it here.
The point is that financial success is a function of paying attention to the details and making conscious decisions rather than letting your financial life drift.
By the way, I'm not concerned that the cost of materials for making a penny is worth more than the coin. It will be circulated thousands of times.
You don't see pennies in the rich neighborhood because rich people don't use them. Poor people tend to use cashes more, hence leading to scattered pennies.
guanchun,
Good point. As mentioned previously, I use a credit card for almost all purchases. At the same time, I still pick up the pennies I see whether I am in the low rent or high rent neighborhood. Consequently, I always have several pennies in my pocket. Sometimes they fall out, and when they do, I pick them up. And, when I pay cash I use the pennies to keep from breaking a nickel. Then I use the nickel to avoid breaking a dollar.
When I was working I made considerably more than the $36/hour you can make picking up pennies. But I still consider this kind of attention to detail the key to getting over the hump.
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