eKourier Oct 2010

Nev’s Notes... T he distinction between Poverty, i.e. being poor or having little money, and Frugality, i.e. being economical, may not be clear to some. Having come through an era over the last 10 – 15 years where ever- increasing affluence seemed natural and normal, some people lost, or never learned, the habit of being frugal, and now find that they are experiencing poverty or a degree of lesser affluence at least. Profligate spenders may not notice the link between their spending habits and their occasional lack of money; their periodic poverty. They have not learned to be frugal. People who are poor have little choice but to be frugal, or at least to cut down their spending; they don’t have much to spend, so must spend less. But they may not be truly frugal, just poor. People who are frugal are very often not poor. They have learned to be careful, to save, and to be economical. I have friends who are frugal, and who are also wealthy. Their frugality has contributed to their wealth. Their frugality is a habit. They hate waste. Their spending and life-style often belies their wealth. People who live in poverty may have issues with unemployment, with health, with circumstances, but many are just poor managers of their money and have never learned to be frugal, careful, economical, and to save. Instant Gratification is the craving or compulsion to have it now. People get into financial difficulties when they give in to their craving for instant gratification. Deferred gratification is the practice of doing, or not doing, something today with the expectation of doing or having more tomorrow. Saving shows a preference for going without something today so that you can have more tomorrow. Children have a difficult job with deferred gratification; they have not yet matured; as they grow up they start to get it, and have money-boxes, Frugality Versus Poverty

bank accounts and maybe get a small job, so that they can have something more worthwhile in the future. They learn to save, and to work. Being able to defer gratification is a sign of maturity. Some adults have a problem with deferred gratification and thus reveal their immaturity. Economists call this “time preference”: a shorter time-preference indicates a preference for consuming today rather than having more tomorrow (longer time-preference). Being frugal means being economical and includes buying well, using carefully, spending judiciously, avoiding waste. There are some expensive habits that contribute to poverty: smoking is an expensive habit, as is drinking. Socialising and ‘going out to dinner’ can be expensive if you do it a lot. It is easy to be frugal when you are poor: you have no choice. Being frugal when you are affluent is harder: you have a choice to spend or not to spend. The affluent but frugal person will spend carefully, get good value, be careful not to waste. The frugal person will be able to buy in bulk, buy specials, buy for the future; the poor person may have to buy small and expensive necessities for today. Getting rich slowly is better than getting rich quickly. People who get rich quickly often also get poor quickly, while people who get rich slowly have learned along the way; they have learned to earn, to be frugal, to save, to buy well, to manage their money. They have inevitably learned deferred gratification. However deferred gratification and being economical becomes a more difficult thing for affluent parents to teach their children, as the affluence becomes apparent to the kids; this calls for training and discipline of the children. Poor people don’t have much opportunity to be generous. Frugal people, if they have managed well, do have the opportunity to be generous, to help others. They should also have the opportunity to invest for the future.

Christmas is fast approaching and KSS will be enjoying the Festive Season with celebrations in Sydney, Victoria, South Australia, Queensland and the Central Coast. Check out the following dates to make sure you are able to join in the celebrations in your area. Central Coast: 12th November Queensland: 18th November South Australia: 25th November Victoria: 26th November Sydney/Canberra: 3rd December chance to become un-poor. Frugal people are too careful with their money to waste their money: they know that gambling is for losers and the only consistent winners are the gaming houses and organisations and lottery operators. All this is expressed very nicely in the classic fable “The Richest Man in Babylon”, required reading, I believe, for young people of all ages. In this little book the message is ‘Pay Yourself First’ by which he means, putting money aside every pay day for the future- saving. Instead of saving what’s left over, as many do, save first, put 10% of your pay or income into tomorrow, into next year, your retirement, your investments. Saving and looking after your growing capital will ensure you will not be poor; your frugality will ensure your prosperity. Nev Kennard KSS Christmas

Poor people often waste money gambling, seeing this as their only

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Kennards Kourier October 2010