BOOK REVIEW: The Cheapskate Next Door

The Cheapskate Next Door: the surprising secrets of Americans living happily below their means (2010) by Jeff Yeager  

The Review

I thought this book was the most fun I ever had reading about money.  The writing is entertaining and the approach to finances challenging from a philosophical standpoint but super easy from a mathematical one.  I totally recommend it for people at any stage of life for mid-course correction, but especially at the beginning stages before the I'm-an-adult-now-you-can-tell-from-my-expensive-car stage starts.

By the way, regardless of the typical connotations of the word "cheapskate"-- someone like Scrooge who removes all the joy from life to save a half-penny-- Mr. Cheapskate Yeager actually encourages focusing on what is really important and beautiful about life rather than on its cost.
For example, do not stop having dinner parties.  Instead, serve a less expensive brunch menu or big pot of soup or have a potluck.  The focus is the friends, after all.

"A Cheapskate values time more than money.  
It helps to put the true cost of things in perspective.  But, if you go about it wrong, frugality and saving money can be a time-suck in its own right.  It’s really more about stretching their time than it is about stretching their dollar."

The Reason Mr. Cheapskate is Relevant at Zessn

Considering the largest asset most middle class Americans have is their home, it's the biggest part of the financial pie.  I'd like to report on some of the the approaches that cheapskates interviewed in the book have taken as they apply to housing.

A "non-traditional approach":

Take a non-traditional approach to the big ticket items AND control your spending on a wide range of small-ticket items.

"Kate moved an unwanted house at her own expense to land she already owned.  This cost $6500 to move plus $20K for a new foundation, basement & remodeling."  

"Albert Polhemus House" getting moved
Image courtesy of dfulmer via Flickr
The same lady moved an old barn to her property, board by board, and only paid $250 for it.

In another example, a 48 foot sailing ship (<500sf) docked in the Baltimore harbor cost its owner only $18K.
SO much cooler than a trailer park…it reminds me of that guy from the Highlander TV show in the 90’s who lived in a cool barge parked on the Seine in Paris.
I always loved that.
(warning: the ones in the link are not DIY, they've already been restored, so they're not gonna be $18K)

Eclectic Housing:

"Artists' Handmade Houses"
a great book about eclectic houses
largely DIY by creative people who
intended to stay in them a long time
"Many cheapskates have a passion for eclectic housing.  Part of it is a money thing; nontraditional housing often costs less, sometimes a lot less.  But I suspect that for most of us it’s more about expressing and being comfortable with who we are.

"We want to live in a place that is truly our home, not a house that we buy to keep up social appearances, or just because it’s a good investment, or a home that we’re afraid to modify to fit our particular (peculiar?) tastes for fear of negatively impacting its all-important “resale value.”  We want the luxury of owning a home that’s about us, not about what other people have or want or think. Ironically, that kind of housing often costs less than traditional housing."  

Negotiating for a House:

“A mortgage is a house with a guilty conscience.”

"Show them the money.  Paying with cash can often get you a better price."  Dave Ramsey recommends paying with cash, too.
I'm not so sure.  You have to pay rent while you're saving up for a down payment or to pay cash for a place to live.  In many cases, rent can be higher than the mortgage payment.  This makes no sense in my book.

Mr. Yeager also insists that banking services are very competitive and they will often waive fees if you ask.

The Right Size:

Differentiate between needs and wants.

Buy a “right-sized” home:  cheapskates average 1650sf vs national average of 2300sf.  The cost of U.S. housing per sf has increased only by inflation, but Americans spend almost DOUBLE on housing today than what we did in the ‘50s, simply because most Americans now want twice as much house.

Unless your commute looks like this!
Image courtesy of brian glanz via Flickr

The Right Place

Eliminate the commute.  Typical Americans drive 16mi to work (and back) at a cost of $4K/year.

The Right Price:

Buy a home that costs less than what you can qualify for based on your income.  Base it on how much you can afford to spend.  Cheapskates typically keep their housing costs (mortgage payment, taxes, insurance, maintenance) to 25-30% of their take-home pay.  Two-income cheapskate families only use one income for this calculation in case one spouse loses a job.
This advice is in alignment with what I've seen from Dave Ramsey.

Pay Off the Mortgage

"Paid In Full"
Image courtesy of kjarrett via Flickr

Pay it off as quickly as possible: 80% of cheapskates plan to or already have paid off their mortgages early.  Make additional payments with yard sale proceeds, or a few extra dollars every month.  Allocate the increase from pay raises directly to mortgage payments.
Consider setting up a “mortgage acceleration plan” with your lender (making ½ payments twice a month). This will knock years off your mortgage.
If you refi, do the math carefully and shorten the remaining term.

Focus on the prize (being mortgage-free).
Don’t be envious of neighbors who move on to bigger, more expensive homes/mortgages.  They may never get out from under a mortgage.

Home & Landscaping Improvements

"Home Improvement Store"
Image courtesy of Raymond Bryson via Flickr
Home improvement is all about timing: hire help during the “slow” season: landscapers in the winter, exterior repairs in fall/winter, interior jobs in spring/summer, moving company btw Oct & April.
Stay in your house as long as you can. Enjoy it.  Make it your own.  Put down roots.  Get to know your neighbors.

Practice guerrilla gardening:  swap plants with friends & neighbors at plant-swap meets.  
Befriend local landscapers who often discard plants they uproot from landscaping jobs.

Divide & propagate more plants from the plants they already own.  Score free or cheap mulch from the local highway department or landfill.  Recycle items into one-of-a-kind garden art.

I thought the Cheapskate Next Door had some great insights into how to keep your home affordable.  If you liked this, go get Mr. Yeager's book.


P.S. my ab fav clip on Financial Responsibility from Saturday Night Live

SNL skit (partial) with Steve Martin
Season 31: Episode 12 (February 4, 2005)

"Seriously, if you don't have the money, don't buy it!"

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It's somewhat ambiguous, but the definition of affordability has to be related to income, right? Income as well as other debt & ob...