Jeff Yeager — aka “the Ultimate Cheapskate” — is AARP’s savings expert and host of the weekly Web show The Cheap Life, produced by AARP and airing on YouTube. He’s also the author of four popular books about frugal living, including his most recent, How to Retire the Cheapskate Way. Jeff will be a guest on AARP Live on Thursday, June 19, so we sat down with him in advance to chat about retirement planning and living, cheapskate-style.
What does it mean to have a cheapskate retirement? Is your quality of life worse? What does it require you to give up or do without?
It’s not about living any one particular retirement lifestyle or dream, and it’s certainly not about leading a life in retirement that’s filled with sacrifice and deprivation. Rather, it’s about deciding what’s really important in your life — and in your retirement — and finding ways to achieve those things by being a smart spender. The premise of the book is that you can enjoy whatever retirement lifestyle you’d like and do so for less than you might think possible … or at least less than a lot of folks spend. It’s also not necessarily about amassing a huge nest egg, but it’s about making the most of whatever financial resources you have available.
Throughout the book I profile a great many people — who I jokingly call cheapskates but who are really just black belts of smart spending — leading a wide range of lifestyles, and I attempt to extract from those people and their stories the common attitudes and practices they have when it comes to savvy money management and life. Hopefully, anyone of any age, regardless of their retirement dreams and lifestyles, will find advice that they can use to plan for and enjoy their retirement more.
What would you say is the biggest roadblock getting in the way of people’s retirement? How can they overcome that roadblock?
Well, of course, the conventional wisdom would be that most people fail to start saving early enough in life for retirement or that the economy in recent years has caused many people’s retirement savings to implode and, as a result, they’ve needed to change their retirement plans and dreams. And those things are indeed true and important. But the point of my book — and it should be a comforting message — is that while you have little control over the income side of your finances, everyone has at least some control over their spending and consumption … although, admittedly, many Americans seem to be AWOL in that regard!
So, to more directly answer your question, I think a reluctance to set priorities — i.e., figure out what is really important in your life and retirement. Hint: It’s often things that come without a price tag — and grappling with the spending side of your personal finances is a huge barrier in most people’s retirement planning. I encourage you to become your own CFO (“chief frugal officer”) and really figure out and control where your money is going. A big part of that is treating personal debt like the plague, to the point where cheapskates believe that the biggest asset you can have when entering retirement isn’t something you have, like a massive 401(k) — although that’s nice — but, rather, something you don’t have: debt. In short, their approach is “retire your debt before you retire yourself,” and they show you how to do that primarily through smart spending, as opposed to get-rich-quick investing schemes.
What are the areas people can cut the most from to save for their retirement?
While in the book I talk about hundreds of ways that people can reduce their expenses to both save more for retirement and live on less once they are retired, the two most important money moves cheapskates make are limiting/eliminating debt from their lives and setting in motion automatic, relatively painless ways to incur savings on an ongoing basis.
In terms of debt, the average American is now projected to pay more than $600,000 in interest during the course of their lifetime! Cheapskates rack up huge lifetime savings — and so they can set aside far more for retirement — by keeping debt out of their lives as much as possible and, when they do take on debt (usually just for a home mortgage), paying it off as quickly as possible. Cheapskates live by the old-school rule that “If you can’t afford to pay for it now, you simply can’t afford it.” Cheapskates don’t confuse affordability with what I call borrowability; in other words, just because you can borrow the money to buy something doesn’t mean you can afford it. For example, of the cheapskates I’ve surveyed, they tend to buy homes that cost only about 70 percent of the amount their bank tells them they can qualify to borrow to buy a home. How un-American is that?!
Curbing expenses is something that’s most effectively done when you make it automatic and routine, just like if you’re trying to lose weight — a crash diet isn’t likely to have a lasting impact, but, rather, you need to change your dietary and exercise lifestyles on an ongoing basis. So those are the kind of cost-savings tips I try to focus on — everything from investing in the energy efficiency of your home, which can save you thousands of dollars each and every year, to driving a manual transmission automobile (if you need to own a car at all), which should save you about $30,000 over the course of your lifetime. And lots of little ongoing savings measures, too, like switching to a more convenient bank to eliminate foreign ATM fees (who gets any joy out of paying those?); always checking your grocery receipts for errors (about 30 percent of the time there are mistakes there that cost you); and drinking tap water instead of bottled water, which could save you more than $1,400 per year if you’re currently drinking only the bottled stuff.
How do cheapskate retirees look at retirement differently from the typical retiree?
From a financial perspective, for most cheapskates, retirement is not the type of radical adjustment many Americans experience when they retire. Cheapskates have been living within — and often below — their means for much or all of their adult lives, whereas many Americans only begin to live according to their means and a household budget at the point they retire. In that way, cheapskates have been test-driving their retirement lifestyle and budget all along, and I think that’s a very positive and comforting thing to do. And in that regard, no matter where you are in life, it’s never too late to start by borrowing some pages from the cheapskate playbook.
That’s not to say that cheapskates don’t make lifestyle changes at the point they retire, although they tend to remain very active and engaged in retirement, and I give a lot of real-life examples of that in the book. In many instances cheapskates view retirement as a chance to reinvent themselves, not to sit in a recliner and watch TV. From setting sail for years on end on the high seas (yes, it can be done for cheap!) to turning a hobby or other interest into a minibusiness (what I call selfish employment), from volunteering and spending more time with family and friends, cheapskates remain very active in retirement and can enjoy it more because they have their financial houses in order. In short, better retirement living through frugality.
Get more of Jeff’s tips and tell us the wackiest way you save money! Join the conversation – call in with your comments or questions and your own thrifty tips on the next AARP Live, Thursday, June 19, on RFD-TV, or watch right here on the Web at 10 p.m. ET/9 p.m. CT/7 p.m. PT.
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- Join AARP: savings, resources and news for your well-being
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