Fire and Knowledge

It is useless to reduce your own consumption unless you also reduce your income. Everything you earn gets saved or spent, and anything that you save just gets spent later, by you or someone else. Changing your spending pattern will put a dent in the amount consumed only if it allows you to reduce your income.

–Joseph Heath and Andrew Potter, Nation of Rebels: Why Counterculture Became Consumer Culture (UK Edition, 2004), p. 153

To have a great capital is not so necessary as to know how to manage a small one, and never to be without a little. It is not large funds that are wanted, but a constant supply, like a small stream that never dies.

–William Cooper, A Guide in the Wilderness (1810) as quoted in Scott and Helen Nearing, The Good Life, p. 285

The other day, someone pointed out to me that my blog is read by more people than 95% of all the magazines published in the US. She wanted to know why I don’t try to monetize it. “Run ads,” she said. “Or find a sponsor, or maybe even charge for it!” That’s a lot of nickels, after all.

I tried to sum it up like this: Not only can’t I imagine charging for my blog, I’m practically in debt to the people who read it. I ought to pay them, not the other way around.

Every time you read something I write here, you’re giving me a gift… attention. It’s getting more precious all the time, you have more choices every day, and it’s harder and harder to find the time. I know. I’m grateful. I’m doing my best to make your attention worth it.

–Seth Godin, “Thanks”

Do you want to live on $12,000 a year? Here are some tips on how to pull it off.

A man is rich in proportion to the number of things he can afford to let alone.

–Henry David Thoreau

It is a good thing to know what it is to be poor, and a better thing if you can do it in company.

–John Ames in Marilynne Robinson, Gilead (2004), 199

According to recent polls, 40% of workers are not saving for retirement and 25% percent of workers say they have no savings at all (source).

That means 1 out of every 4 people in America do not have savings. Solomon has a proverb for this. He tells the sluggard (or "lazy fool" in a paraphrase) to "go to the ant" and watch how "she prepares her bread in summer and gathers her food in harvest" (see Proverbs 6). The wise store up for hard times.

We must plan for the future. Instead of buying gadgets and getting into debt, we should be putting money aside so we do not become a burden on family and society. In fact, if everyone saved responsibly there would be little need for social security. (Perhaps one day I’ll write up my idea for how to eliminate social security and replace it with a stable, decentralized system.)

If you are not saving for emergencies and retirement, it’s simple to remedy. Here are some action steps:

1. Open an IRA with your employer.
   1. Put as much as you can into it with each paycheck. Most employers will match up to a percentage of your income (usually anywhere from 3% to 5%). Did you catch that? You double your money the first day!
   2. Whatever you put into an IRA can be deducted from your income taxes and you don’t pay taxes on gains and dividends. It sounds too good to be true, doesn’t it? So why aren’t you doing it?
   3. If you are self-employed or work for an employer that does not offer IRAs, you can open your own and get the tax benefits.
2. Open a high-yield savings account. I use ING Direct.
   1. This is your reserve account and should build up each month. The money is there for when something goes wrong — like your water heater explodes or Rover needs heart surgery.
   2. Setup an automatic monthly transfer from your checking account to your savings account. If you’re working full time, this should be at least $100.
   3. Don’t use your savings account for anything other than (1) emergency purchases or, occasionally, (2) making more money. But if you use it to make more money, always replace what you took out as soon as possible.
   4. The goal is to have — on top of your emergency reserve — six months to a year of living expenses covered in your savings. If you lose your job then there should be enough to live comfortably while you find a new job. (Or to finance that small business you’ve always wanted to start.)

That’s it. Now watch it grow, save on taxes and feel a little more like a wise man than a "lazy fool."

Money is better than poverty, if only for financial reasons.

–Woody Allen, Without Feathers (1975) in The Complete Prose of Woody Allen, 63