This week, I participated in four blog carnivals and received two editor’s picks. Thanks so much to all the blog authors and carnival organizers!

My Carnival Submissions

Carnival of Money Stories #62 - Hosted by Finance Gets Personal and featuring my post Spread the message: don’t join the club, which was honored with an editor’s choice. Yippee!

Carnival of Personal Finance #155 - Hosted by Moolanomy and featuring my post Why living cheap is more important than investing, which was chosen as one of the best posts in the “Frugality and Saving” category. Thanks!

Festival of Frugality #128 - Hosted by No Debt Plan and featuring my post What it means to be “cheap.”

Money Hacks Carnival #15 - Hosted by Broke Grad Student and featuring my post Don’t buy things made out of potatoes - just buy potatoes, which was honored with an editor’s choice. Awesome!

My Favorite Posts

…that are from these carnivals but are not by yours truly.

Review of Amazon’s Mechanical Turk - My $mall C€nts says that you probably won’t make a lot of money with Mechanical Turk, a service companies and individuals use to farm out menial tasks. Too bad! Via the Carnival of Money Stories.

26 ways to make extra money - Nice post from the Wisdom Journal about 26 ways to increase your take-home pay. This is, of course, the other side of the savings equation. Via the Carnival of Personal Finance.

Why you don’t want a budget - This thought-provoking post over at Saving Advice argues that maybe having a budget really isn’t the best way to save money. Via the Festival of Frugality.

10 reasons to be cool and make your own cards - If you’re too lazy to sit down and make a greeting card, check out this post from Budgets are Sexy for a little motivation. Via the Money Hacks Carnival.

Other Links

Avoid checked bag fees on American Airlines: just wear it all - That’s what I’m talking about! From Booking Buddy Blog.

Ideas are cheap - It’s implementation that really counts. What a smart realization. From Quest For Four Pillars.

Read full magazines for free, with or without an iPhone - A smart hack that’ll get you some free magazines. From LifeHacker.

The methods you use to deal with ordinary life will fail you as an investor - After reading this post, I’m pretty convinced that this is true. From The Simple Dollar.

What will you do if gas prices go… down? - Will you get lazy and unlearn all those good habits you picked up when gas prices went nuts? From Financial Ramblings.

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It’s said that a penny saved is a penny earned. Well, not if you go right out and spend that penny on something else!

Let me explain.

I recently helped a friend save over $100 on a flight using the strategy discussed in my post How to fly really cheap on Southwest. “Great!” my friend said. “Now I can afford to stay in a nicer hotel!”

I cringed.

I like to help others live cheap but a lot of times people just don’t understand that living cheap is more than a one-time thing. It’s more than an airfare discount or cheaper groceries or improved gas mileage or what have you. It’s about sustained commitment. It’s about achieving goals. If you wanna live cheap, you must get out of the mindset that saving money on one thing will allow you to blow more money on something else.

Everybody likes to save money, but this incident reminded me that everybody has different reasons for wanting to save money.

Do you believe that money exists to be spent? Do you believe that you might as well live in luxury if you’ve got cash to burn? I used to believe this, but that’s before I learned about compound interest. That’s before I actually sat down and figured out how much an IRA contribution today would be worth in 35 years after all that tax-free compounding. That’s before I realized how money can buy you more than just material things - it can buy you freedom. (It’s funny how I thought I didn’t have enough money to contribute to an IRA until I realized how important it really is!)

If you save money one on thing, will you go and spend it on something else you don’t really need? If so, you didn’t really save money. You didn’t reduce your overall living expenses - you just shifted some numbers over from one category of spending to another.

I’ve written before about the importance of goals, about how saving money isn’t just about ending up with more money, and if it is then you probably won’t end up with much money at all. This is just what I was talking about.

I wouldn’t waste my time writing a blog about living cheap if the only purpose of living cheap was to have more cash to blow on unnecessary luxuries. In my mind, that’s definitely not the purpose of living cheap!

I write about living cheap because it’s a means of accomplishing goals. Some people can’t feed their kids; they’ve gotta live cheap. Some people wanna quit their day jobs and become musicians; they’ve gotta live cheap. And if you’re only a (pardon the language) half-assed cheapskate, you’ll find such goals slipping out of reach.

The moral of the story: treat the money you save by living cheap the same as any other money. Consider it a down payment on your life goals. For goodness’ sake, don’t spoil the whole game by spending it on more stuff!

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These days, it’s painfully obvious to anyone who owns a car that driving has gotten pretty dang expensive. But have you ever stopped to calculate exactly how much you’re paying per mile?

If you want to figure out how to cut back on your expenses, first you’ve got to have an accurate, thorough understanding of those expenses. With this in mind, let’s take a closer look at the real cost of driving.

Improving on AAA’s Formula

The AAA estimates that if you drive your car 10,000 miles each year, your cost per mile is about 71 cents. Of course, this amount varies greatly depending on current gas prices and on the type of car you drive. For more information, see the AAA publication Your Driving Costs (the link here will take you to a PDF version of the 2008 edition).

Does 71 cents sound a little high to you? In fact, I’d say that for most people, it is a little high.

Here are the expenses that AAA includes in its calculations: gas, maintenance, tires, depreciation, insurance, taxes, license and registration, and finance charges. Basically, the reason the cost per mile is so high is because AAA treats all vehicle-related expenses as per-mile costs. For your situation, however, it may make sense to treat some of these expenses as annual “fees” you have to pay to own your car, and not as costs you pay for each mile you drive.

For example, let’s say your situation is as follows: you absolutely need a car for some trips, but in many cases you also have the option of taking public transportation. Since you have to have a car no matter what, you can’t avoid insurance expenses, license and registration fees, etc. If this is your situation, it doesn’t make sense to calculate these expenses as per-mile costs.

Instead, your only real per-mile costs are gas, maintenance, tires, and depreciation. With this in mind, you can use AAA’s pamphlet to recalculate your real cost of driving. You definitely need to factor in current gas prices and deprecation for the car you own - more on this in a sec - but in any case, your cost of driving as calculated by this method will be way less than AAA’s estimate.

If your situation resembles the one I described above (i.e. you’ve simply gotta have a car, but you can sometimes use other methods to get where you need to go), this alternate method of calculating your cost per mile will be much more helpful in determining whether it’ll be cheaper to use your car or some other method of transportation.

Now, if you don’t have to have a car, AAA’s formula makes sense. If expenses such as insurance, license and registration fees, etc. are just options for you, then these really are a part of your per-mile cost of driving. Think of it this way: if every mile you drive in your car is a choice, then every car-related expense is also a choice. This means that you should factor in these expenses when you weigh the cost of driving vs. other methods of transportation.

Calculating Depreciation

So how do you calculate the depreciation on your car? AAA’s figures are way too high if you’re driving a car that’s more than a year or two old. Here’s the method I’d recommend to get a better idea of how much your car is going to depreciate.

Check the Blue Book value for your car at its current mileage. You can do this at KBB.com. Then check the Blue Book value for your car at its current mileage plus the number of miles you drive it each year. Divide the difference in value by the same annual mileage figure. You’ll now have a rough idea of how much your car is going to depreciate for each mile you drive it this year (recalculate it next year and the number will go down because the value of your car will have gone down too).

You’ll find that a Mercedes Benz depreciates a lot more per mile than a Toyota Corolla. Do you need any more reasons to buy an inexpensive, reliable Japanese car??

Running the Numbers

Okay, so if the above wasn’t quite crystal clear, I’ll try to make it that way by running some numbers.

Let’s say you drive a 2000 Honda Accord, that you’ve got 80,000 miles on it now, that you plan to rack up 10,000 more miles each year, and that you get about 24 miles to the gallon. With gas at $3.75, you’ll pay 15.63 cents per mile for gas. Add to that AAA’s estimates of 4.67 cents per mile for maintenance and and .85 cents per tires. Now we’re up to 21.15 cents per mile driven.

Using the method above, I calculated the depreciation to be about 5.25 cents per mile. Add this to the previous figure for a grand total of 26.4 cents. This amount is the total per-mile cost of driving this car - assuming that you have to have a car anyway. This is the figure you should use when deciding whether to drive or take the bus or ride your bike or whatever.

By the way, I believe that if you consistently seek out bargains on maintenance and tires, you can significantly undercut AAA’s estimates in those areas.

One More Thing…

Some would argue that there are environmental “costs” this formula fails to take into account. Fair enough. There are.

Also, when you drive your car a lot, you increase the likelihood that you’re going to have an accident. Accidents cost money. How much does this increase your cost of driving per mile? You got me!

I feel like it’s a little irresponsible to suggest that driving is cheaper than it’s commonly represented to be, but in my opinion, it is. Oftentimes the people who are bandying about ultra-high per-mile figures are connected with public transportation or have some other vested interest in making you think that driving is super expensive. Well, owning a car is certainly not inexpensive, but as I said before, it’s critically important to have an accurate picture of your expenses if you want to live cheap. To do that, you’ve gotta run some numbers and think for yourself… and these principles apply to much more than just the cost of driving!

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So I recently called in to cancel my American Express Gold Card.

“Well, Sir, if you don’t mind me asking,” began the representative in a tone of voice I can only describe as accusatory, “what is it you don’t like about your American Express Gold Card?”

“Well, it’s not that I’ve have any problems with the card itself or anything - it’s just that I’m not willing to pay the $135 annual fee,” I answered. (The first year was fee-free but an annual fee was to be assessed after that - hence my decision to cancel the card.)

“Are you aware that very few people can actually get a card like this? Are you aware of the unique benefits this card offers, such as VIP access to entertainment events, fraud protection, no hard credit limit? Are you aware that as a Gold Card holder, you’re one of our most valued members, that you’re part of a privileged group of special people who…”

The representative continued on like this for a minute or so.

“So with that in mind, we’d like to retain you as a member. Is that alright?”

“That’s fine if you can waive the annual fee,” I responded.

No go. I canceled the card.

* * *

Personal finance is a battle. It really is. Well, okay, there’s usually no violence involved, so maybe the word “battle” is a little strong. Since you objected, I’ll use the word “competition.”

One of tools that your competitors will use against you is the concept of exclusivity. American Express understands this. Gucci understands this. Prada understands this. Ferrari understands this. And anybody who wants to achieve financial success has gotta understand it.

When you try to sell something - anything, say, your blog - you realize that your methods of promotion make a lot more impact than the quality of the work you do. If you’ve got a bad product, you’re gonna be in trouble, but in the end, salesmanship is tops.

One of the best ways to sell something is to convince somebody that you’ve got the secret. That’s right, the secret. The one that will open all the closed doors. The one that will make you a part of that special group of people who are always smiling behind their sunglasses - the kind who lay by the poolside in the sunshine in their gated estates while the caretaker trims the shrubbery.

In the last couple years, a book called “The Secret” has sold millions of copies worldwide. The book promises that you can achieve success - the focus being on financial success - by envisioning yourself succeeding and by taking advantage of the “law of attraction.” I haven’t read the book, so I can’t comment on it directly, but I can say with complete certainty that there is no secret.

Or if there is a secret, the secret is that there is no secret.

Don’t listen to anyone who offers you access to some exclusive club. Such individuals almost never have your interests at heart. They’re trying to convince you of something fundamentally false: that some people are in and some people are out and that to be in, you’ve gotta buy their product.

Where I live, in Los Angeles, this concept is almost a religion. Many many doors here will not open to you unless you know somebody or you are somebody. This idea pervades everything from the movie world to restaurant reservations. And you know what, I don’t think anyone ever makes it to the top without recognizing that this whole concept is fundamentally false. To make it to the top, you’ve got to put on airs. You’ve got to convince everybody that you’re already on top, and they are not. Your capacity to make other people believe this determines your level of success.

I believe that there is an element of truth to all this. In reality, you do have the ability to determine whether or not you succeed. Recognizing that you are the one who makes the rules is a prerequisite for success. You create the game, and you play the game. Hopefully, though, once you’re on top, you won’t perpetuate the same deceptions you had to overcome to get there.

In the context of personal finance, this means that you shouldn’t ever be taken in by someone who wants to sell you some expensive thing that will make you part of an exclusive club. You are the one who decides whether or not you are in - not the credit card company, not the car dealership, not a particular clothing brand. And once you’ve achieved some measure of financial stability, hopefully, you’ll spread that message to others who haven’t yet quite “gotten it.”

If everyone took control of their own finances, refusing to allow others to determine what they will and will not purchase, I believe that debt levels would drop and overall happiness would increase. I believe this is a message worth spreading.

What I’m ultimately saying, I think, is that material goods will not make you happy. It’s not a new message, but it bears repeating.

No material good that anyone can sell you will let you “in.” There is no “in!” There is no place else to go. There is only the here and now. And we’ve gotta do our best to succeed under present conditions. If you’re looking for some particular good that’ll open some particular door that’ll lead to some kind of paradise - well, good luck!

As for me, I’m happy living cheap, slowly building wealth - slowly getting rich by living like a poor person. I’d like to have more money. This is the reason I do many things I do. But I don’t ever want to allow the desire for money alone to control my behavior.

Regardless of the amount of money you have, happiness comes from realizing that you are already “in.”

Spread the message.

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Potatoes are a cheapskate’s best friend. They are oh so cheap, oh so versatile, oh so filling. You can make potatoes into french fries, potato chips, hash browns, baked potatoes, mashed potatoes, potato salad, potato soup. Potatoes can be had for $1 per 5-10 pounds when they’re on sale. That’s just $.10-$.20 per pound. What other food can you buy that cheaply?

Raw potatoes are a great value - but processed potato products are a huge rip. Did you know that you can make potato chips, french fries, and hash browns at home very easily? You can! And with that in mind, why pay prices like those listed below? (These are the actual current prices at my local grocery store.)

Potato chips: $3.49 for 10 oz. ($5.58/pound!)

French fries: $2.99 for 32 oz. ($1.50/pound!)

Hash browns: $2.49 for 12 oz. ($3.32/pound!)

It is so ridiculously easy to make any of these products out of raw potatoes.

To make potato chips, heat up a pan of oil, slice the potatoes as thinly as you can and fry until golden brown.

To make french fries, do the same, but cut the potatoes so that they look like what french fries are supposed to look like (that is, whichever variety is your favorite).

To make hash browns, heat about three tablespoons of oil for each pound of potatoes, grate the potatoes, squeeze out the extra moisture, and fry until golden brown.

Next time, before you pick up some processed potato product at the grocery store, consider the amount you can save per pound by making that product yourself at home. Convenience products will kill your finances, and this is just one example! Take a few minutes, do things the inconvenient way, and save some cash!

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This week, I participated in five blog carnivals and was honored with one editor’s choice. A big thanks go out to all the carnival organizers and blogmasters who worked hard to put these things together.

My Carnival Submissions

Carnival of Debt Reduction #141 - Hosted by Consumerism Commentary and featuring my post If necessity is the mother of invention…, which was honored with an editor’s choice. Thanks!

Carnival of Money Stories #61 - Hosted by Piggy Bank Blues and featuring my post A reminder about cash back credit cards.

Carnival of Personal Finance #154 - Hosted by Canadian Dream: Free at 45 and featuring my post Free wireless internet on the road.

Festival of Frugality #127 - Hosted by Funny About Money and featuring my post Why living in an urban area doesn’t have to be expensive.

Money Hacks Carnival #14 - Hosted by Prime Time Money and featuring my post Five ways to avoid being gouged by Ticketmaster. This carnival has a really unique theme (”weird golf facts”).

My Favorite Posts

…that are from these carnivals but are not by yours truly.

Do bigger payments really make for a faster payoff? - Thursday over at Wealth Junkies argues that paying off debt as quickly as possible isn’t always the best idea. Via the Carnival of Debt Reduction.

Mastering the Game of Money - The Baglady posts about how personal finance is like a big game and to win it you’ve gotta be smart, cooperate with others, and make sure you’re always having fun. Via the Carnival of Money Stories.

Tracking pennies: making the abstract concrete - I’ve Paid For This Twice Already… blogs about tracking your spending. I recommend this, too (see my recent guest post at Alpha Consumer). Via the Carnival of Personal Finance.

What I think of Dave Ramsey - Master Your Card argues that debt snowballing is a shoddy idea and that Dave Ramsey is bad at math. Personally, I think Dave Ramsey’s teachings are useful insofar as they promote financial responsibility, but Dave’s methods are frequently not the best methods (for instance, see my post The real truth about credit cards: why Dave Ramsey is wrong). Via the Festival of Frugality.

There are only two ways to save more money - Can I Get Rich on a Salary? reminds us of the obvious - but you know, the obvious is pretty powerful, and sometimes, it’s good to have a reminder. Via the Money Hacks Carnival.

Other Links

Gasoline isn’t only rising cost for drivers - Oh, man. This article from CNN Money points out that ridiculous gas prices are not the only cost increase drivers are facing these days. If you need any more reasons to start biking, walking, or taking public transportation, here they are.

How to save hundreds by playing the drugstore game - I’ve been reading about the “drugstore game” on several other blogs and have been contemplating trying it myself. This is a clear and concise explanation of the rules of that game. From Get Rich Slowly.

Tax rebates are a losing proposition - “The tax rebate gimmick is extremely inefficient,” argues Free Money Finance. After reading this, I’m inclined to agree.

Useful information from your social security statement - Jonathan from My Money Blog finds some uses for an apparently worthless social security statement.

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It seems to me that many people see the word “cheap” in a negative light. I think this is because being “cheap” is associated with being stingy or greedy. A lot of folks, I think, believe cheapness is synonymous with illogical, obsessive penny-pinching - that is, focusing on the small stuff to the exclusion of what’s really important, filling your pockets with copper while the green stuff slips through your fingers. You can probably guess that I view the word “cheap” a little differently, seeing as I’ve chosen to use it in the title of my blog. So here’s what I mean when I use this word.

In being “cheap,” I always try to take the long view. There are a lot of things you can do that are cheap in the short term but which end up costing you money or depriving you of other opportunities later. I recently posted an article entitled Stuff I won’t buy cheap in which I mentioned that I won’t take the cheaper option when it seems dangerous or when it wastes a huge amount of time. The cost of neglecting your health and safety is too high for potentially dangerous behavior to qualify as “cheap.” Life really is not only about grabbing up every last penny. Also, there are many things you could do to save money which I wouldn’t recommend because doing those things is a poor use of time.

I’ll offer one example. I read on someone’s blog recently (sorry, I can’t remember which blog it was - if you happen to know, shoot me an email!) a story about how that person’s mother would always ask for extra ketchup at the drive-thru and when enough packets had accumulated she would rip them all open and spend about an hour filling up her ketchup bottle with a funnel. That’s kind of cool and funny and honestly I don’t have the right to criticize anybody else’s lifestyle - I mean, maybe filling up the ketchup bottle was an activity that brought the family together, and if so, that’s great. However, I wouldn’t choose to spend my time in that way. If you can get 24 oz. of ketchup for a dollar, is it really worth it to spend an hour to get “free” ketchup? Look at it this way: if somebody offered you $1 per hour to do some menial task, would you take it? If not, why would you spend an hour trying to save $1?

Cheapness isn’t only about ending up with a few extra bucks. Like they say, you can’t take it with you. So cheapness has to have a… how should I put this… a higher purpose! The motto of this blog is “live cheap to live free.” The whole point is that living cheap will allow to retire early and do what you always wanted to do instead of slaving away at a job you don’t enjoy. Now, if you like your job, that’s awesome. Keep on doing it. But if you want to be financially independent, you’ve gotta save. Saving money is even more important than investing - I posted just yesterday about this. Being cheap can be one way to achieve your dreams. Let’s say you want to start a charity or you need to have some side income to supplement a low-paying but extraordinarily fulfilling job or all you really want to do in life is provide for your kids but you’re struggling financially. Living cheap can help you achieve any of these goals.

Finally, being cheap is not about being greedy. In fact, it’s about recognizing the worthlessness of money! Many people spend a lot of money trying to convince other people how much money they have. The trouble is that once they are through spending all that money, they don’t have it anymore! The only way to actually accumulate money is to chill out about the whole wealth accumulation thing and live like you’re poor - that is, live below your means. If you’re hyped up about showing off how much cash you’ve got or about getting rich quick, you’re probably gonna get poor quick.

The really important point I’m trying to make is that there are things that are more valuable than money - time, health, and family being a few of them. And being “cheap” means using your money in such a way that you squeeze the greatest possible value out of life. If you’re greedy or stingy, you’re going to be too blinded by material things to accomplish that.

So I hope that clarifies what it is to live “cheap,” at least as I see it. Living cheap is awesome and cheapness, if you have it, is a quality you should be proud of!

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I’d like to finally lay to rest the misconception that investing is more important than living cheap.

In the personal finance world, there are those who promote the idea of living below your means and there are those who reject it, pooh-poohing frugality as a form of self-deprivation. Robert Kiyosaki, author of the Rich Dad, Poor Dad books, is a prominent member of the latter camp. He argues that when you follow the advice of others who urge you to live below your means, “you wind up average because it is average advice.” Kiyosaki thinks you should focus instead on increasing your net worth through investments and business activities.

But the concept that you should live below your means is much more than average advice - it’s great advice! Here’s the reason why: you have more direct and assured control over your own spending than over any possible investment or business opportunity.

Investing smart is important - but beating a “couch potato” portfolio composed mostly of low-cost index funds is really, really hard. Warren Buffett, by some accounts the richest man in the world, says, “I believe that 98 or 99 percent - maybe more than 99 percent - of people who invest should extensively diversify and not trade. That leads them to an index fund with very low costs.”

Assuming this advice is correct, is it really worth it to pour your blood, sweat and tears into investing? Are investment activities truly deserving of your time and attention? My personal belief is that unless you fancy yourself a professional investor - and an exceptional professional investor at that - you should not devote a great deal of time or attention to investing. You should toss your money into an index fund and be done with it. Even most professional mutual fund managers cannot consistently beat the market.

As far as starting your own business, that’s great if you’re a businessperson, but keep in mind that more than half of all businesses fail to ever turn a profit (see this link). I’m not saying you can’t do it, but you’ve got to be good. You’ve got to put some serious time and effort into your business. If doing business is what you love, great. But if doing business is not what you love, or you just stink at it, there’s something anyone can do to assure long-term financial stability.

That thing is - you guessed it - living cheap. It’s much easier to increase your “returns” by living further below your means and pouring more money into smart investments than by trying to eke an extra 1 or 2 percentage points out of those investments. As mentioned earlier, most professionals can’t even manage to match the market’s performance, so just imagine what extraordinary capabilities are needed to outperform it. Instead of pursuing active investing, you should devote your effort to reducing your spending.

It’s not at all difficult for most people to cut back by 1 or 2 percent on spending. There’s always something you’re spending money on that isn’t strictly necessary. I fancy myself a hardcore cheapskate, yet even I could cut back my annual spending by a few percentage points if I had to.

Are you buying in bulk? Do you cook your meals at home? Do you use your freezer to stock up on sale items? Do you use the internet to look for cheap gas? Have you looked into biking instead of driving? Do you use credit cards to take advantage of cash back and float?

There are a million and one things anyone can do to cut back on spending. You don’t have to be a genius to live cheap. You have to be consistent, you have to be patient, and you have to think outside the box. It probably isn’t a coincidence that all these are qualities exhibited by truly genius investors. You can put these qualities into practice in your own life without devoting a lifetime to mastering the intricacies of stock-picking. I don’t know about you, but to me, that’s encouraging and empowering!

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A while back, I posted about how credit cards can be used responsibly and how personal finance commentators who say this is impossible are just incorrect (see The real truth about credit cards: why Dave Ramsey is wrong). I still believe that taking advantage of credit card cash back programs is a smart and responsible thing to do, but I was reminded recently of how easy it is to get suckered into increasing your spending to take advantage of increased cash back.

A couple days ago, I received the April-May statement for my Citibank cash back credit card, and I was quite disappointed to see that my cash back was lower than it has ever been before. I earned just $9.17; usually, I’ll earn at least $12-$13. Then I stopped to think about why this was.

I earned less cash back because I spent far less on gas during that month than I usually do - and I earn 5% cash back on my gas purchases. I spent less on gas because I’ve started riding my bike more often. Biking makes it a lot less stressful and a lot less expensive to get from point A to point B, and I’m getting more exercise than I did before. All these are significant benefits, and it would be foolish to give up these things for an extra $5 in cash back each month.

The moral of the story is that if you do use a cash back credit card, you’ve gotta be conscious of the true cost of that cash back. You should only use the card for purchases you would have made anyway - otherwise, you’re being taken in, and it’s really easy because the amount is right there staring at you on a piece of paper while the things you sacrificed to get that cash back may be harder to quantify.

I have not swayed in my belief that credit cards can be used responsibly, and that getting cash back on your purchases is smart. But getting cash back should never be your goal in making any purchase. It’s simply a side benefit - a small but significant side benefit that adds up over time, but which has to be kept in its place!

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The other day I got to thinking about that old adage “necessity is the mother of invention.” I’m certain that it’s true - and I believe that fully understanding this adage can help all of us learn to be more responsible with our money.

One recent example of a technique which has been invented to respond to a particular need: hypermiling. Hypermiling is actually a bunch of different techniques which are intended to maximize gas mileage. Hypermilers turn their engines off at stoplights. They roll out of parking spots in neutral. They whip demonically around corners so as to avoid braking. This is all, of course, in response to the recent rise in gas prices. These higher prices make extreme action necessary, which explains why people have begun devoting all kinds of energy to this type of inventive thinking.

The idea that “necessity is the mother of invention” is actually pretty obvious. I mean, all it’s really saying is that people snap to attention and develop creative solutions when problems present themselves. Most of us refuse to waste energy fixing what isn’t broken. Energy gets spent where it’s needed. That’s clear enough.

Let’s talk about another implication of the adage - one that’s a little less obvious but which leads to a very valuable realization. That is, people don’t solve problems until they absolutely have to. Most of us don’t whip out our inventive powers until we have no other choice. We prefer to sit on our laurels until the situation gets out of control.

I see this truism at work in the lives of people who are deeply in debt. Lenders disguise the necessity of actually paying off debts (in fact, I think you could say that credit card companies are only able to stay in business because they successfully mask what they’re all about - usury, not charity). Many people forget that they’re actually going to have to find a way to make good on their debts. People who are on a debt joyride eventually have to pick up the pieces. They’re eventually forced to rearrange their lives entirely to pay off the debts they’ve incurred. All too often, this only happens when the problem expands and it becomes painfully obvious that the only way out is to think creatively and reform old habits. But the creativity doesn’t come out until it’s forced out.

The way to avoid getting yourself into this kind of mess: always look ahead into the future. Understand the necessities that lie ahead. Understand that a $1,000 credit card purchase could end up costing you a lot more than $1,000 if you don’t pay it off at the end of the month. Understand that going into debt so that you can own your own residence instead of continuing to rent can ultimately save you money. By looking ahead in this way, you’ll find you’re able to make clearer decisions. You’ll find that you’re able to exercise your inventive powers without much effort at all.

Basically, to achieve financial success, you’ve got to invent new ways of doing things. You’ve got to deal with the human laziness that can destroy any of us if given free reign. You’ve got to conserve energy by not fixing what isn’t broken - but by fixing what will break before it breaks.

Being inventive, and recognizing necessity when it presents itself, will get you far. You can learn a lot from some of these old, crusty sayings!

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