Lessons From the Cheapskate Next Door

He's just like you and me, but he lives below his means.

Jeff Yeager met hundreds of like-minded skinflints for his book The Cheapskate Next Door: The Surprising Secrets of Americans Living Happily Below Their Means (Broadway Books, $13).

What did you learn by meeting other cheapskates across the country? They fly in the face of the stereotype. They're not penny pinchers, and they don't spend every waking hour trying to figure how to save a nickel. Being a cheapskate sometimes isn't about money at all. Many cheapskates have strong religious beliefs, and some embrace environmentalism as the underpinning for a decision to live frugally.

What's the common thread? Cheapskates run the range of lifestyles and economic profiles. Some are multimillionaires and others have such limited income they could qualify for public assistance if they chose to. The commonality, regardless of income level, is living on less than they make -- sometimes substantially less. They're largely living debt-free. Only 5% had any consumer debt other than their mortgage, and among those who had a mortgage, 85% said they were working to pay it off early. The vast majority have been living this way a long time, pre-recession. They're not nouveau cheap.

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Do they ever splurge? Everyone I asked said, Yes, of course. But they do it selectively, and they make certain they want something before they buy it. They splurged on an activity rather than a possession. There's quite a bit of social science that shows possessions disappoint over time, but experiences appreciate in value, in our memories.

What can we learn from cheapskates? Practical advice on how to stretch your money, ranging from small tips to larger lifestyle choices. For instance, cheapskates don't shop yard sales because you often buy things you didn't set out to. They do like thrift stores, which they see as department stores of used merchandise. Cheapskates barter and negotiate for goods and services. They might use an old-fashioned food dehydrator yet they're tuned in to the latest cyber tips for saving money, including checking www.freecycle.org for giveaways and www.accidentalwine.com for wine that's discounted when the label is damaged. Some tips are truly bizarre. More than one cheapskate told me that underwear was an optional extravagance.

Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.