This is the third chapter (part 1 and part 2) in our discussion with Danny Kofke, author of How to Survive (and Perhaps Thrive) on a Teacher’s salary. I wanted to look at the idea of being disciplined and making hard money decisions. Does this lead to increased happiness? I asked Danny about the discipline of writing down expenses (discussed in the first post). Specifically, should this be done only with major purchases? What about “walking around” money? Danny replies:
I feel that it is these small expenses that have gotten so many into trouble. It is those $5 – $10 purchases that add up – buying coffee out, eating lunch out everyday, going to the movies every weekend, etc. These do not cost a lot at one time but add up over time. For instance, if someone buys coffee out every work day at $3 a cup, that adds up to almost $800 a year! That to me is definitely not a small amount.
Danny says that knowing where even your small purchases are going is crucial for getting a handle on your spending. He theorizes that “cash is king” and it is important to know where your money is going. He also suggests using cash instead of credit cards because:
There are studies that show you will, on average, spend 12-18% more when using a credit card instead of cash. For most people, it’s much easier to swipe a card through a machine than to pull out the green stuff. Using cash causes my wife and me to think twice before making many of our purchases. This leads us to buy only those things that we truly want, since we’ve paused to consider before opening our wallets.
The decision to use cash can also have extra perks. Danny tells a story that he
… recently had a friend that wanted to buy a new TV that was listed for around $1,000. I told her to walk into the store with $700 in cash and say that she really wanted the television but could only spend the money she had. Well, after some talk, she walked out with this TV for the money she had in her purse. Not all stores will do this, but, with the economy where it is, it doesn’t hurt to ask.
The benefits of knowing what you have and spending no more than that amount can lead to more happiness and even discounts!
Next time – The fringe-benefits of living frugally!
You can find out more about Danny Kofke and his book at his blog: http://www.dannykofke.blogspot.com/
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