At every turn,
the state seeks to undermine our thrift. Without thrift, our liberty
and property are in jeopardy. We must struggle against the tide
of the state's institutions to embrace the age-old virtue of thrift.
First, a review
of the problem. Second, a suggested plan for the economist1
to Samuel Smiles
in his book Thrift,
Samuel Johnson called Thrift the daughter of Prudence, the sister
of Temperance, and the mother of Liberty. Pierre-Joseph
Proudhon famously declared that Liberty is the Mother, not the
daughter, of Order. So, we have a family tree of virtues: Prudence
begets Thrift which begets Liberty which begets Order. Of course,
from economics, we also know that Thrift begets Capital which begets
Prosperity. Smiles's book Self-Help
documents hundreds of cases of people improving their conditions
and the conditions of others through thrift. Alas, as far as I know,
there is no modern equivalent to the sweeping scope of Self-Help.
Also from Smiles's
Thrift: "Some of man’s best qualities depend upon the
right use of money — such as his generosity, benevolence, justice,
honesty, and forethought. Many of his worst qualities also originate
in the bad use of money — such as greed, miserliness, injustice,
extravagance, and improvidence." As we know from the doctrine
of the unity
of the virtues, individual virtue is necessarily connected to
political opinions, and so Smiles has perhaps shown us that a man
handling his own money well paves the path to political virtue as
well. So, this attack on thrift by the state is an attack on virtue
generally, and we can expect that it has spillover effects in the
adoption of ideologies that apologize for vices.
The state seeks
to usurp our liberty and take our property by appeals to disorder
and destitution. One way in which we know the state is evil is that
it attacks us in a pincer
maneuver, undermining our thrift, which results in disorder
and destitution, and then from the other flank, using these results
to further usurp our liberty and take our property. How does it
The state, having captured the free market institution of money,
having destroyed its link to gold and silver, and having centralized
and cartelized the supply of money, inflates the money supply to
monetize its growing debt and reward elites. This has two primary
effects for the individual. First, it has become virtually impossible
to use money as a store of value. Its value erodes away if kept
for years, so it is necessary to invest any money saved, just to
keep pace with inflation. Second, inflation causes investments to
be riskier, by causing business cycles. The best explication of
this is What
Has Government Done to Our Money by Murray Rothbard.
Not only is taxation perhaps the most evil institution left on earth,
now that chattel slavery is virtually extinct, taxation distorts
the individual's finances. We are all familiar with the social engineering
in the US Federal Income Tax, with credits and deductions for all
manner of activities the state officially encourages or discourages.
But much worse is the attack on capital which the tax system represents.
Consider: your wages are taxed, with what's left, you invest in
stocks of companies, the profits on the companies you invest in
are taxed, with what's left of that, the company pays you dividends
or increases retained earnings, and then those dividends or capital
gains are then taxed.
and "welfare." The cruel hoax of this system is well
known. Besides being financially unstable and subject to the whims
of Congress, this system encourages people to be dependent upon
the state for their financial security in old age, thereby disintegrating
traditional intergenerational familial obligations. In the US,
we call by the name welfare government programs such as Food
Stamps, WIC, and TANF. Again, these programs disintegrate familial
obligations and encourage dependence upon the state.
An evil attending monetary expansion is that it often "pays"
to buy on credit, when the rate of fall in the purchasing power
of money outstrips the rate of interest charged on the credit account.
With interest rates artificially depressed by the monetary authorities
and banks forced into a fiat monetary regime, they attempt to "loan
up," seeking out many high-risk borrowers, which are the cash
cow of the credit industry. The otherwise good documentary Maxed
Out fails to account for the major role that the state plays
in these circumstances.
This is not
an exhaustive list of the ways that the state attacks our thrift.
Virtually everything the state does, from the FDA, to the War on
(some other) Drugs, to the War in Iraq, impoverishes us and makes
us less able to exercise our thrift. I only dealt here very briefly
with some of the directly relevant institutions.
Not an attack
on debt. Also, this is not an attack on debt per se. Gary North's
series on debt is well worth the time invested in reading them.
That said, every person should strive to reach a point in early
adulthood where he becomes free of all debt with a substantial portfolio
of assets. This kind of financial independence is a source of
strength that the individual, the family, the church, and other
institutions can use in their defense against the predations of
How to Acquire
the Virtue of Thrift
a virtue, as Aristotle explained, is to acquire the habit of exercising
the virtue. Most of us know what is right. It's the doing that dogs
is wrong when he says "I believe [virtue can be taught]"
and that the chief work to do is "to try to understand what
we should do, what we should be, and how we should live." No
— we mostly know what we should do. The best books for improving
your virtue are ones such as those by Benjamin
Franklin, Samuel Smiles, and Napoleon
Hill. They give us inspiration and practical advice. Here is
what I've learned about cultivating thrift:
as prudence. Contra personal finance writer David
Bach, a written budget is absolutely essential to thrift. It
is the beginning of the whole enterprise. Each month gets its budget.
To be clear, you will not have 12 budgets. You will have a budget
for every month you live from now on. It must be agreed to by your
spouse. You must not spend any money unless authorized by the budget
— if you need to spend money not on the budget, agree to change
the budget first, then spend the money. If you want to read a budgeting
book, I recommend this
one, though you probably don't need to. Once you have a written
budget, you must discipline yourself to live below your means. The
reason that a written budget helps you impose this discipline upon
yourself is that you can actually see where all your money goes,
instead of guessing; and, you can make considered choices about
trading money among budget categories. Also, a written budget helps
elucidate this reality: you tell your money where to go, it doesn't
tell you where it "needs" to go. This is a key psychological
change that is empowering and comforting.
So, if you
don't live by a written budget, get off your duff and go write one!
This will improve your thrift! Do it! A quick way to start is with
utilities. Go grab the last year's worth of utility bills and see
what the average payment is. Sign up for balanced billing for electricity
and gas. It will help.
Keep your old,
actual budgets for reference. Your budget should have an "actual"
column to show where you came in. You should also have a place on
your budget to list your major liquid assets (401-k, IRA, savings)
and debts. All this will show you where you've been, where you're
going, and provide guidance for future budgets. And, like Franklin's
virtue tally, they will serve as a reminder of what needs improvement.
Factor. Both Smiles and Bach spend considerable time in their
books discussing what Bach calls the "latte factor." If
you don't think you can live beneath your means, or squeeze your
budget to pay down those debts faster, you're not looking hard enough!
Do you brown bag it to work every day? Do you ever buy anything
from Starbucks? Do you subscribe to cable or satellite TV or radio?
It's not that these luxuries should not be enjoyed — it's that when
your budget needs squeezing, be merciless. You will miss your beer
after work less than you think.
has a technique she uses in her seminars. She has all the participants
rip a dollar and then report on their psychological reactions. They
report that it is a little painful. Try it yourself. Get a $1 bill
and rip it in half. Not at all like ripping a piece of paper, is
it? This psychological connection to "real money" is an
important reason to use cash as much as possible. Another reason
is that you can't overspend cash. A third reason is that having
cash on hand and exercising your will — resisting a purchase — builds
your ability to do so.
How to use
cash. The time-tested envelope
method is what to use. For each budgeted category, put cash
in an envelope when you get paid. Write the budget category on the
outside of the envelope. Keep track of expenses by writing on the
envelope and keeping receipts in the envelope. This will allow you
to improve your budgeting over time.
tithing. Every personal finance author I've surveyed — David
Paul Evans, Suze Orman, Dave
Ramsey — recommend giving or tithing a portion of your income.
Christian scripture commands it. They all claim, with the weight
of their experience and the experience of others they have helped,
that giving or tithing paradoxically helps one's financial position.
I cannot subscribe to the notion of God showering blessings upon
the thrifty, but I think there is something to this. Periodic donations
develop the virtue of magnanimity, and build community relationships.
This impacts all of your virtues, and raises your self-esteem as
someone who is a benevolent and magnanimous person. It stretches
you to develop your virtues even more, and this often results in
a more productive home and business life. And the fact of giving
creates a psychological sense of abundance, which undoubtedly has
an influence upon your subconscious which can deeply influence your
TV, radio, and billboards are filled with exhortations to buy on
credit, go to the movies, go out to eat, order food in, and get
the latest electronic gadget. To steel yourself against this onslaught,
review your budget, talk to your spouse about how great it will
be to become debt free and financially secure, read or listen to
books on personal finance (check them out from the library!), and/or
listen to radio shows
like Dave Ramsey's. Share your financial goals with your extended
family. It may seem weird to them at first, but they will sense
the virtue in it and communicate that to you. It is family and community
that help you to be strong against temptations.
Develop an affirmation such as I will be debt free by March 2011
by budgeting every month and living frugally. Repeat it to yourself
daily, aloud and loud, with emotion and conviction, at least 5 times
daily for 1 month. Develop within your mind a vision of what debt
free will look like, feel like. What will be some of the things
you'll do? Now, work these visions and the emotions they create
into your daily affirmation. The point of an affirmation is to convince
your subconscious that this will happen. The subconscious responds
well to emotion, visualization, and repetition. Once your subconscious
is "on your side," then it will be your greatest ally.
plan. For specific guidance beyond this foundation of thrift,
I'm a fan of Dave Ramsey's baby
step plan, and I recommend his book The
Total Money Makeover (check it out from the library!). The
plan is simple and straightforward. It's nothing new. Our own Mark
Thornton's advice is quite similar.
what about everyone else? Let us follow Albert
Jay Nock's advice: "The only thing that the psychically
human being can do to improve society is to present society with
one improved unit."
- I happily
use the term "economist" as Samuel Smiles did in his
book Thrift. Here, an economist is one who practices economy;
one who is frugal, thrifty.
Guillory [send him mail]
an engineer in Houston.