Mindless Austerity

Whatever you may think about President Obama’s call against mindless austerity in government spending, it doesn’t seem like such a bad idea when it comes to personal finance. Mindless austerity refers to cutting spending without thinking too hard about the implications. Austerity as it relates to finance means a strict economy, extreme simplicity, severity, or asceticism. Sounds like pretending to be poor on steroids. I associate the word austerity with the Puritan Pilgrims. They came here for the original American dream—freedom and opportunity with a goal of spiritual helpfulness rather than get-mine materialism.

But I digress. Mindless austerity for personal finance may not be entirely mindless, but once you’ve thought through certain expenses and developed a healthy aversion to spending, you need not continue budgeting every penny or even thinking about most money-saving measures. When you start packing lunch you don’t need to fight the urge to go out midday. When you are in the habit of fixing things, buying used clothes, grocery shopping with a list at discount stores, setting back your thermostat, and generally pretending to be poor, you’re not wrestling with yourself every day about whether to stop for Starbucks on the way to buy your zillionth pair of shoes.

Developing a healthy aversion to spending, or mindless austerity, could take you further toward financial flexibility than budgeting ever will. Making a budget helps you see where your money goes and think about where you want it to go. It can point out obvious areas to cut back. But what you really want is to get in the habit of not spending beyond basic areas of need. (I recognize our modern definition of need is not very austere at all.) The secret to this habit, as we already talked about, is contentment. When you don’t feel deprived, you can spend lots of time and mental energy normally devoted to acquiring Stuff on more fulfilling endeavors.

How can you cut from your budget mindlessly? There may be some degree of thought involved but it’s primarily a matter of changing your mindset. Becoming content and spending-averse brings you under a whole new paradigm that will automatically change your spending. At this point the nitty-gritty details of every day spending are simplified by the “strict economy” of austerity.

Instead of thinking about all the Stuff you could buy or not buy, consider this: not only does lifestyle inflation cost you hours and effort at work, it also undermines your ability to build wealth that works for you. I didn’t realize this until recently, but if you make a decent amount of money (and it can be five figures) and you are decent with your money, you will be a millionaire. If you avoid consumer debt, pay your mortgage off early, live on about half your income, and max out your 401(k), etc., you will reach a point where your investments make more income than you do.  And you can do this decades before a traditional retirement age. So every non-essential purchase you make detracts from investing funds, which grow exponentially. I know that sounds like mathematical magic but the exponential growth of compounding interest is what builds wealth fastest. It’s not hard and it’s not just for rich people. It’s for smart people. It isn’t for people who love spending, though, because they never seem to have anything left. (I’m not promoting a quest to become wealthy, but handling our funds with wisdom while maintaining a modest lifestyle and generosity.)

In the same way that depending on fast food for sustenance is a sign you’re doing something wrong, if buying Stuff has become a pastime, you need to find some better hobbies! Shopping for recreation on a regular basis is simply not a good recipe for financial flexibility. I can say, as one who is able to window shop without buying, that I don’t buy window shopping anymore, mainly because it’s a waste of time. (I’d make an exception for some social settings.) And window shopping, even if you don’t spend a dime, opens a window of temptation. Advertising and marketing exists to make you feel dissatisfied with what you have. Look at this beautiful shirt. You have probably 30 or 40 shirts in your possession already but you don’t have this one. You deserve it, it’ll make you more attractive, and it’s “on sale” (i.e. marked down from some ridiculous value that it’s never been worth). Most people designing these ads are just doing their jobs. But not buying and better yet, not shopping, is like flashing a triumphant, metaphorical middle finger to the overarching system of Materialism.

People often feel overwhelmed at the thought of trying to cut back financially. Changing your mindset will allow you to set personal austerity measures on autopilot and stay the course toward financial flexibility. Then you can begin giving and saving/investing like never before. Call it mindless, mindful, or renewing your mind. A healthy aversion to spending goes far in pretending to be poor. Next we’ll delve into some practical ways to develop this type of thinking.

What do you think of mindless austerity for personal finance? What are some areas where you could apply mindless austerity with no ill effects?