Toastmaster's Speech on Living Below Your Means

I joined Toastmasters several months ago to work on my public speaking chops. Once you register for membership, you are provided a manual with a progression of 10 speeches that help you work on various aspects of your public speaking. I think this, essentially free, organization is invaluable.

I have already completed my first speech, the "ice breaker" and I am now on the brink of presenting my second speech geared towards organizing your speech. For this second speech I chose to talk about my own life experience of learning to live below my means. I have pasted a copy of my speech below:

"Who here hasn’t heard the famous quote attributed to Ben Franklin - “A penny saved is a penny earned?” And all of us, at least ostensibly, know it’s important to save money. However, few of us innately understand the true importance of saving - I know I was clueless for a long time.

Looking back on life I was lucky to be born into a fairly affluent family I wasn’t spoiled per se, I just never wanted for anything. While I was a fortunate to have grown up so comfortably that comfort was a small curse in the sense that I never developed an appreciation hard-earned money and the importance of saving it.

I remember getting to college and my parents providing me a monthly stipend. Pretty sweet right? Well despite this “Free” money, I constantly over drafted my checking account. There are few things more embarrassing than waiting in one of those interminably long lines of people at the bank only to finally get to a teller and have them tell you your checking account is $295….overdrawn. Oh my god. ummmm…what?! I vividly remember being immediately overcome with heart palpitations and sweats followed by me quickly transforming into whisper mode so as to avoid the other people in line getting a good laugh about my predicament. I could imagine them thinking “Wow I thought my finances were bad…look at this clown!”

At that time in my life…I was a compulsive purchaser. Anything I felt I wanted to needed I bought. If I were hungry I would go out to eat wherever I felt like it. I couldn’t walk by a music store without stopping in to buy a few cds at $20 a pop (yes that dates me a bit). That I really didn’t have enough money to afford this lifestyle just never seemed to register. I am just so grateful it never occurred to me to get a credit card in order further fund my lifestyle at that time. But clearly, I was headed in that direction. I was on the path to being that guy with a really nice car and really nice clothes and a really big pile of debt.

I wish I could tell you the intervening force that halted my meteoric plummet into debt was a financially savvy friend or family member; but it wasn’t…it was an issue of Money magazine I randomly picked up one day. In it, there was an article on the importance of saving your money and living below your means. And explained to me how a Penny saved is actually worth more than a penny earned. The article presented me with several intriguing concepts a couple of which I would like to briefly discuss with you.

First, we’re all aware that pretty much all our earned income is taxed. So, if you are in the 25% tax bracket every dollar you earn is essentially only worth .75, this value drops even further due to state and local taxes. But what I came to realize was that each dollar saved or each dollar in my checking account has already had taxes taken out. Fairly obvious right…but when I thought about this in the sense of the things I was constantly buying it hit me. In order to replace the $20 I paid for each cd I bought I would actually have to earn around $25 or $26 due to taxes. I really started to realize the importance of saving the money I earned.

Second, I learned of the time value of money. The article asked me if I would rather have $1,000 today, or $1,000 in a year? Well I of course thought, I want it now! And while this is the right answer, I felt that way for the wrong reason. At that time, I would want the money now so I could buy things now. But the real reason it’s beneficial to have the money now is because the money is worth more now. Why? Well aside from inflation, which is a whole other troubling issue, you want the money now because of its earning potential. You can earn interest on the money right now. Such that my $1000 in a high interest savings account will be worth more than $1000 a year from now. And if I spent that money now, I will lose out on the accrued interest of that immediate money. So it dawned on me that the less money I spent now…the more money I would have down the road.

From all of this, I came to understand that a penny saved really was worth more than a penny earned and so began my new life of parsimony. I quickly began to view saving money as a personal competition and a test of my will. How little could I live on and still be completely comfortable? Well of course that approach can get a little out of hand and each of us needs to find our happy medium of frugal living. I know I have found mine.

The car I drive exemplifies a perfect example of my financial paradigm shift. I drive a crappy car. It’s a black Saturn ion with a crumpled in rear fender, poor acceleration and a rattle that let’s everyone in my neighborhood know when I’m coming and going. I think a lot of people would be embarrassed to be the owner of my car. I know the old me would have been. The old me would not have stood to be seen in such a jalopy and would have run out and purchased a much more expensive car on credit and gone into debt for it.

But now days, I take pride in the fact that I have had my car for over 5 years and plan on having it for at least another 5 years. Because my car, as crummy as it is, is paid for and costs me nothing more than gas and routine checkups to keep it running. And I know the money I save now by not having a nicer car will be worth so much more in the future and will allow me and my family to live just that better of a life later on. I always try to remember that a penny saved is really worth more than a penny earned. And while I disagree oh so slightly with Ben Franklin’s famous advice, I think he would understand my perspective and be proud."