Tuesday, July 15, 2008
My parents have always been frugal. Not cheap, because when they splurged they really splurged, however, they do not live a lifestyle congruent with their positioning in the class system. My father is a vice president of an energy company and my mother works for a association that deals with trial lawyers. They do not live in the lap of luxury, and for the life of me I never understood this. Why wouldn't my mother go out and buy expensive handbags and big diamonds? Why doesn't my dad drive the latest model sportscar? And why are we living in the same house we've lived in since I was two?? As a materialistic (yes, I admit I am) and money-driven individual, my parent's lifestyle was inconceivable to me and I vowed I would not live the way they do: simply.
I've been reading The Millionaire Next Door lately and an intresting concept jumped out at me (actually, it's the fundamental concept of the entire book). The difference between a UAW and a PAW. What do those mean? Well according to the book, UAW stands for Under Accumulator of Wealth where wealth is defined as an individual's net worth. Don't be confused and assume this refers to how much one makes a year, but rather, how much does the indivudal have in investments, CDs, money markets and the bank. A PAW, as you may have assumed, is a Prodigious Accumulator of Wealth, or someone who has a high net worth.
This concept: the idea of being a UAW versus a PAW made me think about saving and living frugal in a whole new way. Turns out that typically, a UAW earns a rather large income but spends the majority of it, while the PAW may make a large amount a year (or not), but lives off only a fraction of this. The entire underlying focus is: living beneath your means.
Now I'm sure you're asking yourself, "Well, what's the point in working your tail off to not enjoy the fruits of your labor?" and I think that is an incredibly valid inquiry. One in which I am struggling to answer myself. I think the key to living this way is to a) not entirely deprive yourself and b) take solace in knowing that should you lose your job tomorrow you are able to sustain your lifestyle for quite some time. If you're living in a mansion, driving a Benz, how likely will you be able to support this lifestyle when you retire or lose your job? The answer is: you won't. Because you have very little in the bank, and a high consumption rate your lifestyle would change dramatically. You are now working in order to live.
As a PAW, you may not be driving the nicest car, you may not have that yacht, or that Chanel suit, but the difference is: you can afford to if you really wanted. I believe that my position has changed after learning PAW and UAW and what it means to be either of them. My parents are a perfect example of a PAW: frugal, living off a fraction of their income and living a fulfilled life with nice things (albeit not extravagant). What a relief to be able to plop down a large amount of money when unexpected twists and turns leads to a financial obligation you weren't anticipating. When your kids need help financially, how comforting to know you can give them assistance without feeling the pinch in yoru purse. I have been extremely blessed with all that my parents have been able to provide for me, and now I believe it is my turn to become a PAW so I can live a life with financial independence. I finally understand their way of living and I plan to emulate it.....even if it means havign to tell my parents they were right ;)
Labels: Personal Finance