5. Get over the mistaken belief that you are fitted for only a single occupation! Every normal person can succeed at a number of occupations, and every normal person would probably fail in many occupations. Take myself, for example: if I had studied and prepared myself for the following occupations, I believe I would have had a good chance of achieving some small measure of success-and also of enjoying my work. I refer to such occupations as farming, fruit growing, scientific agriculture, medicine, selling, advertising, editing a country newspaper, teaching, and forestry. On the other hand, I am sure I would have been unhappy, and a failure, at bookkeeping, accounting, engineering, operating a hotel or a factory, architecture, all mechanical trades, and hundreds of other activities.
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Chapter 30: “Seventy Per Cent Of All Our Worries …”
If I knew how to solve everybody’s financial worries, I wouldn’t be writing this book, I would be sitting in the White House-right beside the President. But here is one thing I can do: I can quote some authorities on this subject and make some highly practical suggestions and point out where you can obtain books and pamphlets that will give you additional guidance.
Seventy per cent of all our worries, according to a survey made by the Ladies’ Home Journal, are about money. George Gallup, of the Gallup Poll, says that his research indicates that most people believe that they would have no more financial worries if they could increase their income by only ten per cent. That is true in many cases, but in a surprisingly large number of cases it is not true. For example, while writing this chapter, I interviewed an expert on budgets: Mrs. Elsie Stapleton-a woman who spent years as financial adviser to the customers and employees of Wanamaker’s Department Store in New York and of Gimbel’s. She has spent additional years as an individual consultant, trying to help people who were frantic with worry about money. She has helped people in all kinds of income brackets, all the way from a porter who earned less than a thousand dollars a year to an executive earning one hundred thousand dollars a year. And this is what she told me: “More money is not the answer to most people’s financial worries. In fact, I have often seen it happen that an increase in income accomplished nothing but an increase in spending-and an increase in headaches. What causes most people to worry,” she said, “is not that they haven’t enough money, but that they don’t know how to spend the money they have!” … [You snorted at that last sentence, didn’t you? Well, before you snort again, please remember that Mrs. Stapleton did not say that was true of all people. She said: “most people”. She didn’t mean you. She meant your sisters and your cousins, whom you reckon by the dozens.]
A lot of readers are going to say: “I wish this guy Carnegie had my bills to meet, my obligations to keep up-on my weekly salary. If he did, I’ll bet he would change his tune.” Well, I have had my financial troubles: I have worked ten hours a day at hard physical labour in the cornfields and hay barns of Missouri-worked until my one supreme wish was to be free from the aching pains of utter physical exhaustion. I was paid for that grueling work not a dollar an hour, nor fifty cents, nor even ten cents. I was paid five cents an hour for a ten-hour day.
I know what it means to live for twenty years in houses without a bathroom or running water. I know what it means to sleep in bedrooms where the temperature is fifteen degrees below zero. I know what it means to walk miles to save a nickel car-fare and have holes in the bottom of my shoes and patches on the seat of my pants. I know what it means to order the cheapest dish on a restaurant menu, and to sleep with my trousers under the mattress because I couldn’t afford to have them pressed by a tailor.
Yet, even during those times, I usually managed to save a few dimes and quarters out of my income because I was afraid not to. As a result of this experience, I realised that if you and I long to avoid debt and financial worries, then we have to do what a business firm does: we have to have a plan for spending our money and spend according to that plan. But most of us don’t do that. For example, my good friend, Leon Shimkin, general manager of the firm that publishes this book, pointed out to me a curious blindness that many people have in regard to their money. He told me about a book-keeper he knows, a man who is a wizard at figures when working for his firm-yet when it comes to handling his personal finances! … Well, if this man gets paid on Friday noon, let us say, he will walk down the street, see an overcoat in a store window that strikes his fancy, and buy it-never giving a thought to the fact that rent, electric lights, and all kinds of “fixed” charges have to come out of that pay envelope sooner or later. No-he has the cash in his pocket, and that’s all that counts. Yet this man knows that if the company he works for conducted its business in such a slap-happy manner, it would end up in bankruptcy.
Here’s something to consider-where your money is concerned, you’re in business for yourself! And it is literally “your business” what you do with your money.
But what are the principles of managing our money? How do we begin to make a budget and a plan? Here are eleven rules.
Rule No. 1: Get the facts down on paper.
When Arnold Bennett started out in London fifty years ago to be a novelist, he was poor and hard-pressed. So he kept a record of what he did with every sixpence. Did he wonder where his money was going? No. He knew. He liked the idea so much that he continued to keep such a record even after he became rich, world-famous, and had a private yacht.
John D. Rockefeller, Sr., also kept a ledger. He knew to the penny just where he stood before he said his prayers at night and climbed into bed.
You and I, too, will have to get notebooks and start keeping records. For the rest of our lives? No, not necessarily. Experts on budgets recommend that we keep an accurate account of every nickel we spend for at least the first month-and, if possible, for three months. This is to give us an accurate record of where our money goes, so we can draw up a budget.
Oh, you know where your money goes? Well, maybe so; but if you do, you are one in a thousand! Mrs. Stapleton tells me it is a common occurrence for men and women to spend hours giving her facts and figures, so she can get them down on paper-then, when they see the result on paper, they exclaim: “Is that the way my money goes?” They can hardly believe it. Are you like that? Could be.
Rule No. 2: Get a tailor-made budget that really fits your needs.
Mrs. Stapleton tells me that two families may live side by side in identical houses, in the very same suburb, have the same number of children in the family, and receive the same income-yet their budgeting needs will be radically different. Why? Because people are different. She says a budget has to be a personal, custom-made job.
The idea of a budget is not to wring all the joy out of life. The idea is to give us a sense of material security-which in many cases means emotional security and freedom from worry. “People who live on budgets,” Mrs. Stapleton told me, “are happier people.”
But how do you go about it? First, as I said, you must list all expenses. Then get advice. In many cities of twenty thousand and up, you will find family-welfare societies that will gladly give you free advice on financial problems and help you draw up a budget to fit your income.
Rule No. 3: Learn how to spend wisely.
By this I mean: learn how to get the best value for your money. All large corporations have professional buyers and purchasing agents who do nothing but get the very best buys for their firms. As steward and manager of your personal estate, why shouldn’t you do likewise?
Rule No. 4: Don’t increase your headaches with your income.
Mrs. Stapleton told me that the budgets she dreads most to be called into consultation on are family incomes of five thousand dollars a year. I asked her why. “Because,” she said, “five thousand a year seems to be a goal to most American families. They may go along sensibly and sanely for years-then, when their income rises to five thousand a year, they think they have ‘arrived’. They start branching out. Buy a house in the suburbs, ‘that doesn’t cost any more than renting an apartment’. Buy a car, a lot of new furniture, and a lot of new clothes-and the first thing you know, they are running into the red. They are actually less happy than they were before-because they have bitten off too much with their increase in income.”
That is only natural. We all want to get more out of life. But in the long run, which is going to bring us more happiness-forcing ourselves to live within a tight budget, or having dunning letters in the mail and creditors pounding on the front door?
Rule No. 5: Try to build credit, in the event you must borrow.
If you are faced with an emergency and find you must borrow, life-insurance policies, Defence Bonds and Savings Certificates are literally money in your pocket. However, be sure your insurance policies have a savings aspect, if you want to borrow on them, for this means a cash value. Certain types of insurance, called “term insurance”, are merely for your protection over a given period of time and do not build up reserves. These policies are obviously of no use to you for borrowing purposes. Therefore, the rule is: Ask questions! Before you sign for a policy, find out if it has a cash value in case you have to raise money.
Now, suppose you haven’t insurance you can borrow on, and you haven’t any bonds, but you do own a house, or a car, or some other kind of collateral. Where do you go to borrow? By all means, to a bank! Banks all over this land are subject to strict regulation; they have a reputation to maintain in the community; the rate of interest they can charge is fixed firmly by law; and they will deal with you fairly. Frequently, if you are in a financial jam, the bank will go so far as to discuss your problems with you, make a plan, and help you work your way out of your worry and indebtedness. I repeat, I repeat, if you have collateral, go to a bank!
However, suppose you are one of the thousands who don’t have collateral, don’t own any property, and have nothing to offer as guarantee except your wages or salary? Then, as you value your life, heed this word of warning! Do not-do not-apply to the first “loan company” whose alluring advertisements you see in the paper. These people, to read some of their ads, are as generous as Santa Claus. Don’t you believe it! However, there are some companies that are ethical, honest, and strictly on the level. They are doing a service to those people who are faced with illness or emergency and have to raise money. They charge a higher rate of interest than the banks, but they have to do this, for they take greater risks and have greater expenses in collecting. But, before doing business with any loan company, go to your bank, talk to one of its officers, and ask him to recommend a loan company that he knows to be fair. Otherwise-otherwise-well, I don’t want to give you nightmares, but here is what can happen:
At one time a newspaper in Minneapolis conducted an investigation into loan companies that were supposedly operating within the regulations laid down by the Russell Sage Foundation. I know a man who worked on that investigation-his name is Douglas Lurton, and he is now editor of Your Life magazine. Doug Lurton tells me that the abuses he saw among the poorer class of debtors would make your hair stand on end. Loans that had begun as a mere fifty dollars had soared and multiplied to three and four hundred dollars before they were paid. Wages were garnished; and, frequently, the man whose wages were attached was fired by his company. In numerous instances, when the man was unable to pay, the loan sharks simply sent an appraiser into his home to “evaluate” his furniture-and cleaned out the home! People were found who had been paying on small loans for four and five years and still owed money! Unusual cases? To quote Doug Lurton: “In our campaign, we so flooded the court with cases of this sort that the judges cried uncle, and the newspaper itself had to set up an arbitration bureau to take care of the hundreds of cases.”
How is such a thing possible? Well, the answer, of course, is in all sorts of hidden charges and extra “legal fees”. Here is a rule to remember in dealing with loan companies: if you are absolutely certain, beyond the shadow of a doubt, that you can pay the money off quickly, then your interest will be low, or reasonably low, and you will get off fairly. But if you have to renew, and keep on renewing, then your interest can mount into figures that would make Einstein dizzy. Doug Lurton tells me that in some cases these additional fees had swollen the original indebtedness to two thousand per cent, or about five hundred times as much as a bank would charge!
Rule No. 6: Protect yourself against illness, fire, and emergency expenses.
Insurance is available, for relatively small sums, on all kinds of accidents, misfortunes, and conceivable emergencies. I am not suggesting that you cover yourself for everything from slipping in the bathtub to catching German measles-but I do suggest that you protect yourself against the major misfortunes that you know could cost you money and therefore do cost you worry. It’s cheap at the price.
For example, I know a woman who had to spend ten days in a hospital last year and, when she came out, was presented a bill-for exactly eight dollars! The answer? She had hospital insurance.
Rule No. 7: Do not have your life-insurance proceeds paid to your widow in cash.
If you are carrying life insurance to provide for your family after you’re gone, do not, I beg of you, have your insurance paid in one lump sum.
What happens to “a new widow with new money”? I’ll let Mrs. Marion S. Eberly answer that question. She is head of the Women’s Division of the Institute of Life Insurance, 60 East 42nd Street, New York City. She speaks before women’s clubs all over America on the wisdom of using life-insurance proceeds to purchase a life income for the widow instead of giving her the proceeds in cash. She tells me one widow who received twenty thousand dollars in cash and lent it to her son to start in the auto-accessory business. The business failed, and she is destitute now. She tells of another widow who was persuaded by a slick real-estate salesman to put most of her life-insurance money in vacant lots that were “sure to double in value within a year”. Three years later, she sold the lots for one-tenth of what she paid for them. She tells of another widow who had to apply to the Child Welfare Association for the support of her children-within twelve months after she had been left fifteenth thousand dollars in life insurance. A hundred thousand similar tragedies could be told.
“The average lifetime of twenty-five thousand dollars left in the hands of a woman is less than seven years.” That statement was made by Sylvia S. Porter, financial editor of the New York Post, in the Ladies’ Home Journal.
Years ago, The Saturday Evening Post said in an editorial: “The ease with which the average widow without business training, and with no banker to advise her, can be wheedled into putting her husband’s life-insurance money into wildcat stocks by the first slick salesman who approaches her- is proverbial. Any lawyer or banker can cite a dozen cases in which the entire savings of a thrifty man’s lifetime, amassed by years of sacrifice and self-denial, were swept away simply because a widow or an orphan trusted one of the slick crooks who rob women for a livelihood.”