Title: "The New Frugality: How to Consume Less, Save More and Live Better"
Author: Chris Farrell
Publisher: Bloomsbury Press, 2010; 240 pages; $24
Personal finance public radio host Chris Farrell opens his new personal finance book, "The New Frugality: How to Consume Less, Save More and Live Better," with the bold claim that personal finance conversations are a "head fake."
Farrell cites Carnegie Mellon scientist Randy Pausch’s "Last Lecture," delivered while he was dying of pancreatic cancer, for the proposition that this kind of "head fake is when it seems we’re learning one thing, yet we’re actually gaining a different — and far more important — type of knowledge."
Pausch, for example, argued that sending children out to play sports is actually sending them out to learn "teamwork, sportsmanship and perseverance" — life lessons much larger than the rules of any sport.
So, what’s the personal finance head fake? Farrell declares his intention to instruct readers on basics like eliminating debt, wisely managing student loans and investing in the stock market. He then declares that this is all a head fake from the larger lessons that lie within this material: "Personal finance is really about deciding how to live your life, figuring out what you really cherish and value, then putting your money behind those goals and beliefs. It’s about trying to live a good life."
Farrell then sketches out what he sees as the basic contours of the New Frugality — the shift in Americans’ money attitudes and practices, during and after the Great Recession. This New Frugality of which Farrell speaks is built around a greater margin of safety than the highly leveraged, debt-loving, spendy habits popular earlier in the decade, and also emphasizes sustainability — economically and ecologically.
And in the lifestyle scheme of the New Frugality, value is key — Farrell provides several examples to distinguish being frugal, seeking quality of life and of consumer purchases, and fully considering all ramifications of your spending, versus simply being cheap — which is more about quantity than quality.
Farrell lays the groundwork for his frugality primer by making the argument that this last recession was really different from earlier recessions in its lasting impact on the financial well-being of such a large number of Americans across so many socioeconomic strata, which might create lingering shifts in financial behavior — shifts much more lasting than previous recessions.
Farrell goes to lengths to sketch out America’s personal financial history, especially around lending, borrowing, credit cards and mortgages, to plead his case. Here, Farrell was preaching to the choir — anyone likely to pick up or buy the book based on its subject matter is probably a fellow choir member, I’d guess.
Next, Farrell teaches the foundational principle of a lifetime of frugal personal financial management: a margin of safety. He cautions readers against extreme positions on the continuum of risk-ignorance or risk-aversion, encouraging them instead to adopt an Aristotelian golden mean of simply building a margin of safety into their personal financial matters.
From putting a significant downpayment on their home mortgages, to using a Roth IRA, to completing a college education and obtaining disability insurance, Farrell teaches some basic practices to create a moderate approach to the inescapable uncertainties of managing your money and your life.
He follows this primary tenet up with a set of rules, guidelines for living the New Frugality — mantras ranging from "Keep it Simple" to "Borrow Rarely and Wisely." Each of these adages is fleshed out with Farrell’s discussion of what following the rule — or breaking it — looks like in one’s daily life.
The next chapter, Make Frugality a Habit, covers the basic financial building blocks of budgeting, savings, paying off debt, downsizing, and insurance and estate planning. In Borrow Wisely, Farrell helps readers distinguish between good and bad debt, decide between leasing and buying a car, and understand how to manage their credit.
Next, in Investing the Simple Way, Farrell presents readers with a very simple, two-bucket strategy for categorizing their savings and investments, and deciding what to do with them, manifesting his own value statement that "simplicity is an underappreciated virtue with money." The author also offers many books and websites to continue the reader’s self-education on simple investment and savings management.
In Live Long and Prosper, Farrell talks through the financial implications of the longer lives so many Americans are living, including the new approach to retirement (don’t) and how to harness health problems into lifestyle epiphanies. He then moves to Home, Sweet Home, teaching readers how to maintain a margin of safety through their mortgage and homebuying decisions. Before concluding The New Frugality, Farrell covers the value of a college education, and how to finance one responsibly.
Much of "The New Frugality" will seem like common sense to the financially conservative finance maven who spends her weekends clipping coupons and on the phone with her financial planner. But to the many who are just now coming to the frugality party, it is a welcoming, basic but smart, comprehensive and actionable guide to creating a holistic personal financial plan and lifestyle that fuels good living and fundamentally sound true prosperity.