Maria writes in:
Do you ever write about the political and social implications of frugality? When you choose not to spend and instead invest your money, you’re either supporting the banking industry or brokerages. Every dollar you have makes some sort of statement, even when you choose to save it.
Maria makes a good point. As long as we live in a society where money is used for goods and services, our dollars are going to have an impact. Every dollar we spend affects the products that are available, because products that do sell will take up more of the marketplace and products that don’t sell shrivel away. Even when you invest, you’re still buying a product, one that theoretically has the ability to return money to you.
It’s worth asking ourselves what that actually means.
It doesn’t take a rocket scientist for someone to read The Simple Dollar and know that Sarah and I are fairly careful with our money. We keep our non-essential expenses (mostly) in check. We try to buy things that will last. We tend to pay more to buy healthy, quality foods. We’re very frugal with consumable household items. The vast majority of our investment money is in Vanguard.
In other words, we tend to reward companies that make well-made products that last for a long time. We tend to reward ethical food producers. We reward companies that make well-priced household products.
Do we go far enough with our dollars, though?
Maria’s point is that every single place that our dollars touch has an impact. When money sits in the bank, it rewards that financial institution. Is that financial institution ethical? Do you care? When money sits in an investment, it rewards the financial institution(s) that are responsible for that investment. It also rewards any companies and organizations you’re invested in. Are those organizations and institutions ethical? Do you care?
Once you start going down that rabbit hole, it quickly becomes an impossible task. You can’t judge the ethics of every single use of every dollar in your life. The amount of time and effort required would be incredible.
Instead, our approach is to find out more about specific companies and, if we approve of what they do, we view their products and services as having more “value” when we buy.
I’ll give you an example. Our family has actually visited Picket Fence Creamery on many occasions. We’ve touched the cows and observed that they live outside during nice weather and in nice barns in cold weather. We’ve seen their processes. We’ve met the people who run the company – a very nice family. We know that they run a wonderful, ethical dairy that produces quality products.
These things have value to us. We are willing to spend a little more to buy products from Picket Fence Creamery than from other dairies.
This does not mean that we’ve studied all of their competitors in detail. We don’t know the details of the operations of many of their competitors. It simply means that we know that Picket Fences does a good job using methods and practices that match what we personally value, so we want to take our business there.
Over the years, we’ve found a few principles that tend to point us toward good businesses.
Businesses that operate locally tend to draw our dollars. Not only does this mean that dollars are more likely to stay in the local community (paying taxes there, for one), it also means that we have greater access to that business directly.
Small businesses tend to draw our dollars. It is much easier to understand those businesses and the ethics behind them. I have a much better chance of getting to see the cows and view the processes and meet the owners of a small dairy like Picket Fences than a large one like AE.
Businesses that lead with their ethical principles have a lot more to lose by violating them. If a company says things like “we will never put hormones into our products,” they are putting their reputation on the line with that rule. Provided we agree with that principle, such companies are more likely to draw our dollars.
Those principles might be important, but when do they trump chasing the best “bang for the buck”? I don’t think there’s an easy answer for that. The amount of money you’re working with each month certainly plays a role, as does your own internal values. For example, if you genuinely don’t care who makes a product that you buy – which might be your stance – then it shouldn’t have an impact on the products you buy.
It all comes down to figuring out which attributes are truly important enough for you to pay extra money for. This is always going to be an “extra” cost, as paying more for a more ethically made product isn’t addressing a need. It’s addressing a personal desire. By choosing a more ethical food producer, for example, you’re likely adding more to your monthly food budget without actually changing the food that comes into your home. That’s not a good choice when you’re struggling to keep your head above water. Instead of buying more ethical dairy products, cut out the dairy products entirely and move to a less expensive diet, for example.
This leads to another question: are there non-financial actions you can take to impress your values on the businesses around you? Absolutely.
You can make your friends aware of the good practices – and the bad practices – of companies, which will influence their decisions. You can participate in larger protests and boycotts. You can even get directly involved in politics by working for candidates that match your values and will go on to affect laws that shape the marketplace.
Every dollar we spend has an impact on the world. You’re choosing to give a dollar to one business and to not give a dollar to other ones. That exchange is more important than just exchanging your money for the item that you want; you’re also exchanging money for the company that you want.