Review: The Ultimate Cheapskate’s Road Map to True Riches

Each Friday, The Simple Dollar reviews a personal finance book.

cheapI love books on frugality, but they’re actually pretty rare – the personal finance section at your bookstore is pretty heavy on debt management and investing and extremely light on frugal living. Because of that, I’ve been eagerly anticipating this book by Jeff Yeager, a regular contributor to NBC’s Today show. On the show, he talks about ways to save money, ranging from the simple to the borderline extreme, and does it in a humorous fashion – interesting enough that my mother has thrice mentioned things that Yeager has talked about on television and suggesting that I write about it on “that web site of yours.”

Given Yeager’s segments on Today, I was expecting a funny, lightly-written book on frugality and personal finance that would be a quick read on a lazy Christmas vacation afternoon – and that’s exactly what I got. I read the whole thing in one sitting and finished with a smile on my face and a few ideas in my head. Is that enough for a strong recommendation, or is this just a book to flip through, smile at, and toss aside? Let’s dig in and find out.

Looking Into The Ultimate Cheapskate’s Road Map to True Riches

1. Introduction: The Money Step
The opening chapter was a humorous summary of the basic idea behind Your Money or Your Life. In Yeager’s words, most of us are trapped in a crazy, never-ending dance with our wallet, one in which we work hard to earn money, which we then spend on stuff that we convince ourselves that we need. The real trick is to figure out what we actually need and what is unnecessary. For most people, a good chunk of spending falls into that “unnecessary” area, and that’s really what frugality is about – determining what’s really in that “unnecessary” area and what’s not.

2. Fiscal Fasting: The First Step Down the Road to True Riches
Yeager recommends starting off your financial turnaround by not spending any money for a week. I applaud this idea a lot, and I’ve talked about doing a money-free weekend in the past on here (along with fifteen things to do, fifteen more things to do, and fifteen fulfilling things to do on such a weekend). The idea is to separate yourself from your spending routines. By stepping back from the diversity of ways that you spend money in a given week, you can begin to see which ones you truly miss and which ones you barely remember – and the ones you barely remember are the ones you can give up right away to put money in your pocket.

3. Six Golden Rules for Ruling Your Gold
For the most part, these six golden rules boil down to one thing: don’t buy something unless you need to buy it. The six golden rules are largely corollaries to this general statement: borrow things if you can (via neighbors or the library), don’t buy items to replace the ones you’re already using and are still working, and so on. Perhaps the best tip in the whole chapter is to focus on pinching dollars rather than pinching pennies: instead of burning a bunch of time trying to “optimize” the interest on your savings account, instead spend that time making sure you’re putting money automatically into a savings account to begin with.

4. Warning: Money May Be Hazardous to Your Health
Yeager focuses mostly on food in this chapter, and he makes the astute point that for the most part the dollar cost of healthy food is less than the dollar cost of unhealthy food. Thus, quite often cheapskates eat the healthiest diet – after all, fresh carrots and homemade whole grain bread is very cheap compared to a prepared meal from your grocer’s freezer aisle, and that’s not including the health and exercise costs as a result of eating unhealthy foods. One can even compare the McDonalds Dollar Menu to home prepared foods and find this to be true. However, Yeager does overlook one aspect of this: time costs. One big advantage of the prepackaged meals is the time investment – you can come home, throw it in a baking dish, toss it in the oven, and it’s soon done – very little effort required for a tasty meal so that you can channel that effort elsewhere (towards spending time with kids, for example). That’s the reason, for the most part, that I seek out time efficient ways to prepare and reuse food at home. I like mastering the art of leftovers and convenience foods.

5. Buy a Home, Not a Castle
Here, the topic is housing, and Yeager is firmly in the “buy within your means and pay it off ASAP” club. He also doesn’t believe in banking on your home’s value for retirement, which is definitely the correct lesson to take from the last year or so in the housing market. Instead, he advocates buying cheap, getting a “real” mortgage for it, then paying it off quickly through accelerated payments.

Yeager makes a good argument for doing this, one that made me go run the numbers. Let’s say, hypothetically, you had the choice between a $200,000 and a $400,000 house right now, and you can get a 30 year mortgage for either one at 6%. For the $200K house, your monthly payment is $1,199.10 and for the $400K house, your monthly payment is $2,398.20. You have enough to just make that larger payment, so if you buy the cheaper house, you can make double payments.

With the cheaper house, you will have the house paid off in nine years and will have dropped $59,428.74 in interest. If you keep putting that $2,398.20 into the bank each month, in eight more years, you’ll have $200,000 in equity in the house and $200,000 in cash in the savings account – in only nineteen years and with only $59,428.74 paid in interest. With the more expensive house, you’ll own the house in thirty years, but will have paid $463,352.70 in interest. That’s a pretty good argument for buying as cheap as you can and paying it off rapidly.

6. Slow Down, You’ll Get There Faster
If you figure all of the costs to buy and maintain an automobile against the income of the average American, you only get five miles of driving in your automobile for every hour you work. That’s a disturbing thought and one that I barely believed at first, but after running some numbers (using my wife’s Mercury Sable, which is more efficient than my truck) using the average Iowan’s salary, he’s actually right. In comparison, a bicycle is much more efficient, even including the speed difference. Let’s say you can average 15 miles per hour on your bike, but can average 45 miles per hour in your car. Over a 90 mile trip, you’re spending four extra hours on the bike compared to the car, but the cost per mile for the car is far, far higher than for the bike.

What does that mean? It means that for small distances, it makes a lot of sense to use a bicycle or to walk. This reduces the mileage on your car, making it last longer. Thus, if you’re going to the post office that’s a half a mile away round trip, take your bike – you’ll spend roughly the same amount of total time and you won’t put that extra mile on your car – or burn that extra portion of a gallon of gas – or inch that much closer to an oil change. Instead, you’ll get some exercise out of the deal.

7. An Amish Guy’s Guide to the Digital Age
This chapter deals directly with gadget lust, and it boils down to a handful of principles. First and foremost, wait thirty days before buying any gadget or electronic item. Second, ask yourself if it really fulfills a need in your life. Third, research the item carefully and know what you’re buying before dropping the cash. Fourth, ask yourself what the best thing that will happen if you do buy it and the worst thing that will happen if you don’t (this is usually pretty compelling for me). Fifth, ask yourself if the next generation of this product might be a better buy and worth waiting for.

I find that using similar principles almost always keeps me from buying things I don’t really need. One of my biggest challenges now is the knowledge that I can afford frivolous purchases quite easily – I can pay for most items I can think of in cash without blinking. So, instead, I just continually ask myself, “How does this really benefit my life?” and variations on that question. Hmm… maybe this would be a good article on its own soon.

8. Now That’s Entertainment
Right off the bat, Yeager pulls out one of the most valuable points from a book I discussed a while back, Daniel Gilbert’s Stumbling on Happiness. In it, Gilbert makes the assertion that most stuff tends to lose value over time, while most experiences retain their value through memories and such. Thus, if you have $2,000 in the bank and want to spend it to entertain yourself, you’re far better off spending it on a great vacation than on a flat panel television that you don’t really need.

Yeager then goes on to point out that many, many great experiences are cheap. I tend to agree, actually. While the best vacation I ever spent was with my wife on a honeymoon to England, I can’t honestly say that the massive extra expense compared to some of our other vacations (say, our camping trip on Mount Rainier above the snow line in summer) was worth it. In terms of bang for the buck, actually, my favorite vacation of all was probably a camping trip in the summer of 2006 – we made a road trip out of it and camped on the north shore of Lake Superior with our son when he was eight months old or so. We spent almost an entire week there and spent barely $100, but I remember it fondly (and the video of my eight month old staring wide-eyed out over the lake is one of my favorite captured moments of his life so far).

9. Getting Your Nest Egg Laid
What about planning for retirement? Yeager basically says that you should simply put away as much as possible, because most recipes for how much to put away really don’t do a good job of capturing the specifics of a financial situation. Since it never hurts to have more than you need in retirement, just put away as much as you can and then you know you don’t have to sweat it when you’re older.

This is basically the same conclusion that I’ve come to after trying to figure my “number” over and over again. Yeager’s specific investment advice (go for solid investments like bonds for much of your retirement) makes sense, but with the numbers that I’m socking away (I actually get warnings at work that I’m approaching annual contribution limits and stuff) and the long term of the investment, a little bit of short term loss is fine with me in order to be able to ride the elevator of a bull market or two over the next few decades.

10. Conclusion: Go Forth and Be Cheap
In the end, Yeager hits it right on the head. Frugality is about valuing time more than stuff. For some people, this seems surprising – how, then, can I talk about making homemade bread as a frugal experience? To me, cooking is a spiritually fulfilling activity, well worth my time invested in it even if it didn’t save us money (and, trust me, sometimes it doesn’t). In the end, it really is all about time – and making sure that you have the time to do the things that are valuable to you.

Buy or Don’t Buy?

The Ultimate Cheapskate’s Road Map to True Riches is a light and very fun read on frugality. The humorous tone, self-deprecation, and solid advice mix together into a very enjoyable read, one that I enjoyed quite a bit – even more than I expected.

That being said, The Ultimate Cheapskate’s Road Map to True Riches is a book targeting beginners. It focuses on frugal ideas and tips that can easily be applied to an average American life, and most of the ideas are likely already being used by people who are in control of their money already.

If you don’t mind this, or you’re looking for a good, fun book to read on the basics of frugality, The Ultimate Cheapskate’s Road Map to True Riches is definitely worth reading. I certainly enjoyed it – not only was it a lot of fun, it was a quick read and I dug out a useful idea or two for myself.

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  1. Johanna says:

    I’d be curious to see the details of the numbers you ran on the car versus the salary. Could that be a post, one of these days?

  2. Thanks for the review, Trent.

    I recently started reading “America’s Cheapest Family(tm) Gets You Right On The Money” and, frankly, thought it to be a little extreme right out of the gate. The book suggests “levels” of participation in frugality but it tends to be a bit “too” frugal, if there is such a thing.

    “The Ultimate Cheapskate’s Road…” sounds a lot more palatable and, therefore, doable.

  3. Yeager is an entertaining guy and everything I have seen him associated with has always been informative. Looks like this book is just one more item in his great archive of information.

  4. I wonder who the target audience for this book is. If it’s so light an easy and for beginners, I’m assuming it’s for people that don’t practice frugality to begin with, and does the cover (I work in publishing) and title (“Cheapskate”) really appeal to anyone who otherwise wouldn’t think about money issues?

  5. The waiting period before buying any new gadget or electronic is so true! Most of these gadgets frequently have initial technical problems and you’ll end up paying a huge premium if you buy it when it’s first released. Prices with electronics drop fast so it’s a good idea to be patient
    -Raymond

  6. DNA says:

    Thanks, good review. I do think that aiming for a target percentage of money to save each year is a really good idea. This approach has stopped me from a couple of major car purchases (in cash) because I hadn’t saved the 40% I aim for every year. Especially when I stopped to factor in extra expenses for insurance, maintenance cost per hour, etc.

  7. LC says:

    Nice that your work warns you about contribution limits – I am coming close and have to check it every now and then to make sure I don’t go over

  8. Jason says:

    Thanks for the review. I love a good “cheapskate” book because it validates my “cheap” lifestyle! In fact, some of my favorite reads include the Tightwad Gazette and the book by the Economides family, The Cheapest Family in America. I’m looking forward to checking out Yeager’s work as well.

  9. Rob in Madrid says:

    I may order the book, this is something my wife and I have been working on, learning frugality. Learning how to live life to the max on the smallest amount possible. Funny thing over time you find feeling tight and feeling furgal aren’t one and the same.

  10. yoyoguy2 says:

    Trent, i simply cannot believe the quote “you only get five miles of driving in your automobile for every hour you work.”

    taking this at face value, that means an 8 hour work day pays for 40 miles of driving, or a 20 mile commute each way. so you’re telling me that if you have a 20 mile commute (not terribly remarkable these days) you can afford NOTHING else? i don’t think so. i calculated that my last car, which i bought used and drove into the ground, cost me around 25 cents per mile over the time i owned it… do these people drive their car into a tree once a week?

  11. To Rob in Madrid, I’m the type of person that—whenever I feel like I need to or want to learn something, I reach for a book. It’s just the way I’m wired.

    So I understand. But I would recommend, especially in the spirit of frugality, that you don’t buy the book and instead read as much of The Simple Dollar as you can, along with all the other great sites that are out there. You save the money and you learn all the tips.

    I need to keep telling myself that I don’t *always* have to buy a book to read something that will teach me.

  12. Mrs. Micah says:

    Sounds like a really fun book! The Home/Castle numbers excited the geek in me. :)

    I’ll see if it’s at my library or Borders and gently thumb through it.

  13. To Rob in Madrid, I’m the type of person that—whenever I feel like I need to or want to learn something, I reach for a book. It’s just the way I’m wired.

    So I understand. But I would recommend, especially in the spirit of frugality, that you don’t buy the book and instead read as much of The Simple Dollar as you can, along with all the other great sites that are out there. You save the money and you learn all the tips

    I need to keep telling myself that I don’t *always* have to buy a book to read something that will teach me.

  14. That sounds like a great read! I’ve added it to my book list. Thanks for sharing!

    Best Wishes,
    D4L

  15. Hi Trent & Everyone -

    Wow, what a rush to log on to your site (as I do regularly) and see – to my surprise – my smiling Cheap Mug! Glad you liked the book. It’s my first book, and I’m mighty proud of it. As a big PF/self-help reader, it’s a book that I’ve always wanted to write.

    Someone raised the issue of my intended “audience”. That’s what really inspired me to write this book: I wanted to reach, in part, a new audience, one that would never pick up a traditional (dare I say “dry”?) PF book. I tried to write it with equal parts humor, pracitical information, and social message, all with the hope that it might reach new folks with our shared message of valuing the simple life.

    Based on initial reviews, it seems to be working — some folks have critiqued it (quite favorablly) from a purely humor/entertainment perspective, others from a strict PF perspective, and organizations like the Sierra Club are embracing it for it’s social messages. Well, we’ll see. (FYI, I’ve had a number of hard core PF junkies tell me that it’s the first PF book they might actually be able to get their kids, spend-thrift friends, etc. to sit down and read because of the entertainment value!)

    On the topic of “5 miles an hour,” the source I talk about in the book is the ’70′s social philosopher Ivan Illich and his essay “Energy and Equity” — some of the numbers might be outdated, but in the context of the book I was discussing the trade off between the time involved to earn the money to transport yourself to the place where you need to go to earn that money (and round and round we go!).

    Thanks again for taking a look at my book, and please feel free to contact me with any questions, suggestions, or conerns (UltCheapskate@aol.com). BTW, if you have a book club or finance club that would like to discuss my book, I’ll gladly participate over the phone or in person. Also, I’m going to be doing a series of book-tours-by-bicycle – “The Tour de Cheapskate” – starting in January and I’m looking for fellow cheapskates to put me up for the night, so that I can donate my expense savings to local libraries along the route — let me know if you have a spare couch. (You can see my inagural Tour de Cheap intineraries on my website, http://www.UltimateCheapskate.com)

    Thanks & Stay Cheap!
    Jeff Yeager
    http://www.UltimateCheapskate.com

  16. ahenwithoutarooster says:

    I love the ‘tone’ of the book… and I love that you say Time is really the most Important thing.

    I love how I spend my TIME each day…because I living frugally and that means I’m frugal with my time too.

    I have learned to say “NO”… when something is not worth my time.

    I love my work…and home and lifestyle.. simple and serene..

    Money means nothing if you don’t have time to enjoy the peaceful times..

    Betty Ann

  17. My favorite book is ‘The Complete Tightwad Gazette’

  18. Stenya says:

    Maybe there are “very few books” on frugality because true tightwads are unlikely to buy books that tell them how to save money? Or maybe it’s all been said before – if you’ve read The Tightwad Gazette or The Simple Living Guide (borrowed from the library or bought at a yard sale/used book store, of course!), you’ve got 90% of the information you need to align yourself with the cheapskate principles that will serve you for the next 40 years. Blogs and online articles can fill in any gaps, for free.

    It’s kind of like the “planned obsolescence” you were talking about the other day… this is also a “want” masquerading as a “need.” You don’t need to buy a new book to tell you how not to spend money. (Sorry, Jeff!)

  19. Bill says:

    So he was talking about buying new vehicles?

    Because I buy very cheap used cars,since I’m never more than 10 miles away from work/home – no problem even if it dies.

    His housing example is excellent – remember previous generations raised families of 6 in a 3 bedroom/1-2 bath, 900-1,200 sq.ft. home.

  20. Nancy says:

    To Rob in Madrid,

    For the sake of frugality see if your public library has books on cheap living. A library card is a very good friend to a frugal person.

  21. AJ says:

    I’ve been reading this book at Barnes & Noble and it’s really a good read. I wanted to buy it but I’m becoming a cheapskate myself so I just choose to read it there.

  22. John says:

    Your example with the house is absolutely ludicrous. You need to do a proper accounting of the economics of the situation, which you clearly did not. You need to figure: (a) the tax-deduction for the interest in both cases; (b) the taxes paid on the money you put in the bank; (c) the interest rate of the money in the bank; (d) the appreciation rate of real estate vs. a savings account (or even invested in equities, if that is what you choose); (e) the difference in the appreciation of the two properties; (f) your tax rate. You need to do this on a monthly basis,then see where you are at the end of 19 years or 30 years. Its not at all hard, but forces you to quantify your assumptions (in your case to even think about them, have you?) on rates.

    Secondly, there is some a huge strawman assumption here that most people have a CHOICE about picking a $200 K house vs a $400 K house. The cost of housing has gone up far, far faster than personal income. Where I live in the DC metro area, that kind of luxury does not exist. In fact to live in a reasonable, safe neighborhood precludes the choice. We are 4 people living in an 800 sq. ft SFH. That is frugal, its a dump, they dont get cheaper than this anywhere near here. The only thing available that is half that price is a 1 bedroom townhouse. So get real. Do the numbers, ALL the numbers, and put in a realistic difference in cost, not a 100% difference, but say a 10 or 20% difference.

    So Im sorry, poster Bill, the housing example is not excellent. Its a farce.

  23. Steve says:

    Some people do make that “100% extra” choice. I know someone who sold his 3 bedroom townhouse for $360k to move into a 5 or so bedroom house for $620k. It seems hard to justify having a bigger house than you need on the numbers alone. That’s just as true even for spending 10% or 20% extra as it is for 100%. And it’s just as true if the minimum house price in your area is $400k instead of $200k. You could do the calculation on a base house price of $1 and it would come out the same, since we’re mostly dealing with multiplication in this calculation and multiplication is transitive.

    Of course “minimum house price” is definitely up for debate. As you hint, a 4 person family isn’t going to comfortably fit in a 1 bedroom condo. On the other hand more people on earth than not do fit in a house the same square footage as a 1 bedroom condo, so maybe it’s not so minimum after all.

    I do agree there seems to be a lot of hand-waving in both the house and car calculations. I too would like to see more details.

  24. Steve says:

    Oh, as to the car vs. bicycle comparison, obviously biking a 90 mile trip is a bit extreme. But maybe the point is that you consider not making that trip at all, and instead go somewhere closer. Also one should remember that every mile does have a cost (even if that cost is less than spending 12 minutes of your life at work.) For instance it costs at least a couple bucks every time I drive over to my friends’ house to hang out. A couple bucks for a couple hours of good company is worth it – but it’s always worth remembering that every choice you make has both a cost and a benefit, and consider if the one is worth the other. That applies to the housing as well.

  25. Rosa Rugosa says:

    This was the book that first got me going, and I’ll always have a warm spot in my heart for it!

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