EL CHEAPO MAN AND WIFE

Living below their means gives Matt and Jamie the freedom to enjoy small splurges

WHEN I SPEAK ABOUT why it’s important to save money and spend less than you earn, I try to explain the benefits of that choice. Some people, unfortunately, equate saving with sacrifice—not getting what they want or the lifestyle they want.

So I present to you Matt and Jamie Cowan, a New Mexico couple who live beneath their means and enjoy a wonderful life with lots of freedom and very little stress.

Matt, forty-one, is a lieutenant colonel and the director of the pharmacy at Kirtland Air Force Base in Albuquerque, New Mexico. His wife, Jamie, has a marketing degree and has worked for several companies, mostly in retail, but is currently a stay-at-home mom to the couple’s two young children.

Matt says socking away money gives him and Jamie the freedom to make choices that are right for them. For example, during a break in his service from the air force back in 2004, Matt was working for a pharmacy automation company.

“I was in the process of returning to active duty service in six months but received a surprise when I was one of twenty-five people laid off,” Matt recalled.

Instead of worrying about how to feed his family or pay his bills, Matt took a part-time job with a retail pharmacy and used the time off to take his family on a seven-day trip to London and Paris. His low expenses and money in the bank gave him the freedom to make that choice.

“We believe this freedom allows us to take advantage of opportunities as they arise and will eventually put us in a position to work because we want to and not because we have to,” Matt said.

Another outstanding benefit of living beneath their means is the lack of financial stress in their marriage.

“We simply do not argue about money,” Matt said. “Overall, I cannot put a value on the amount of psychological income this generates. My disclaimer is that my wife did question me a little when I bought a six-month supply of cereal during one trip to the commissary when it was available to buy with a coupon for $1.05 a box.”

Fortunately for Matt, his wife shares his financial values.

“She is motivated and understands the principles, but thankfully to a lesser degree than I do. Her strength is derived from working at retail clothing stores. She is great at price adjustments and finding the deals on clothing.”

Jamie has also done a great job with yard sales and selling the stuff that the kids have outgrown, Matt said. One of her latest moves was to purchase a trampoline, in great shape, for $80.

“I credit premarriage counseling and her father for us being on the same page. Her wonderful dad gave her the book Smart Couples Finish Rich by David Bach and recommended that she read it. This generated some good discussions and got us off to a good start.”

Their kids are learning to be like Mom and Dad. The oldest loves finding money on the ground, Matt said, and after she lost her first tooth, she looked forward to a future visit from the Tooth Fairy. Her comment: “I hope my pillow bleeds money.”

As for his youngest child, Matt said, “the financial fire does not burn as bright yet,” but he is hopeful.

Matt earns a very good living, about $132,000 a year, including base pay of $7,763 a month, an annual retention bonus of $15,000, and monthly base allowances for food ($240) and housing ($1,764).

But he wasn’t always doing so well. He joined the air force in 1995 as a second lieutenant, making about $28,000 while his classmates graduated and took jobs for $55,000 a year.

“My long-term financial view at that time, desire to serve, and the fact that I did not have any student loan debt allowed me to take a job that was not just about the money,” he said.

Matt still has no debt. He and Jamie spend about $3,500 a month, with their top five expense categories being housing (17 percent), vehicle/gas (13 percent), travel (11 percent), food/restaurants (10 percent), and merchandise supplies (44 percent). They run most of their expenses through their Costco American Express credit card, to earn cash back, and pay the bill in full each month.

“We have been receiving about $65 a month back out of $134 allotted for utilities because of low energy use—I guess those CFLs I bought at Costco for 84 cents have helped decrease our electric bill.”

That leaves plenty of room to save. Matt and Jamie save 35 percent to 40 percent of their gross income, contributing the maximum amounts to their Roth IRAs and Thrift Savings Plan (TSP) federal retirement account. They have savings and investments valued at $630,000.

“I started maxing out my IRA in 1995,” Matt said. “A deployment in 2010 allowed for a $49,000 contribution and the conversion of my IRAs to a Roth with minimal taxes because of very, very low net income that year. I am quite proud of those moves.”

Everyone knows how frugal I am. I once bought a Jacksonville Jaguars sweatshirt just because it was only $3! Think about it: I got a logo sweatshirt for less than I could buy a non-logo sweatshirt. And I still wear that sweatshirt proudly to this day!

Matt shows his frugality by telling people he’d rather have two dollars, the cost of a greeting card, instead of the card.

“Before we were married, Jamie and her mother made me a card out of two one-dollar bills with a note inside. It was a great moment.”

Matt drives a 2001 Subaru Forester that he purchased used for cash, and he tells people he has transportation rather than a car. A splurge for him might be a nice restaurant when coupons are not used or the purchase of tickets to a play.

“A future splurge will likely have to be a smartphone,” he said. “The lobbying has begun.”

Matt and Jamie would like to have saved $1.6 million by age sixty, which would allow him to work part-time “for the sake of my mental and social well-being. Plus, I figure the extra money will allow for the splurges.”

For now, he said, “I feel good that my family is provided for while enjoying a comfortable lifestyle and a good quality of life. My wife and I are very thankful.”

Thanks for your service, Matt! You’re outstanding in so many ways.

Here are a few things to take away from Matt’s story.

Reduce the small expenses one step at a time.

• Market research firm Accounting Principles found Americans spend nearly $1,100 annually drinking coffee away from home and another $1,900 eating lunch out. That’s $3,000 a year!
• Say you’re used to going to a fancy coffee place every day. What if you skip it one day a week and brew a cup at home? That’s a few hundred bucks back in your pocket every year. Same thing with lunch. Brown-bag it one day a week and you’ll have close to an extra $500.
• Between the two, that could be $700 or $800 back in your pocket annually. Once you get used to brewing at home and brown-bagging lunch one day a week, maybe you’ll do it twice a week, and then you’re up to over $1,000 saved.

Control your spending in stores.

• I have a no-cart rule when I’m shopping at retail. I just use my arms; whatever I can carry in them limits what I buy. When something catches my eye as I’m walking to the checkout, I have to assess what I’m bear-hugging and decide what I want to put back. I use that as a way to control my wants. Plus, I like to shop in stores with concrete floors. If I’m in a fancy store, I know I’m paying for the rarefied environment with higher prices. So I avoid them.

Adopt a lifestyle of voluntary simplicity.

• There’s a book called Money Secrets of the Amish by Lorilee Craker, and one thing the author heard again and again from her Amish interview subjects was “Use it up, wear it out, make do or do without.”
• How do you put that into practice in your own life? Go back to basics: Never borrow money for lifestyle. Never make purchases through those “no payment, no down payment, and no interest until . . .” plans that are so popular at furniture stores, electronics stores, and elsewhere. You want to buy with real money—not with borrowing.
• I don’t want you to have the “I owe, I owe, so off to work I go” mentality in today’s economy. Jobs can be shaky these days. What happens if you’re suddenly without one?

Teach your kids about money.

• If you have a family, like Matt and Jamie, you’ve got to teach your kids about money or they’ll learn their lesson at the school of hard knocks. Unfortunately, one talk won’t get the job done with your kids. You have to do it every time a teaching moment arises.
• One of my favorite things to do is sit down with a dollar in coins and ask, “How much of this goes for housing? For our car? For our food?” Pretty quickly kids realize the dollar is gone and we haven’t even talked about a present for them yet! You use finite resources that a kid can get their hands on to teach them.
• There’s no one formula, no one way to teach your kids. You have to keep trying to meet them at their level to increase their knowledge and responsibility. For more tips on how to have a financially healthy family, see the Family chapter.