I had several wonderful conversations with recent retirees about their personal finances at Minnesota Public Radio’s 50th anniversary open house last Saturday. One lesson stood out from the conversations: the returns to sensible spending over the long haul.

The impact of spending habits on personal finances is underappreciated. Personal finance largely deals with how to be a smart saver—with good reason.

Still, the impact of spending habits over a lifetime runs deep. The conversations with the retirees revolved around the advantages of thrift with big-ticket items, especially the home and the car. A home is the most expensive and complicated investment most of us ever make. It’s not just the mortgage, taxes and insurance costs. A home costs money to maintain. When you move in, you will need new furniture.

The same goes with cars. The cost of ownership includes not only the purchase price, but auto insurance, maintenance, repairs and fuel. If you borrowed to buy the car there is also the cost of the loan.

Here’s the thing: The retirees told me that a major reason they were in good financial shape is that they had lived in their home for some 30 years. They didn’t buy bigger homes and take on larger mortgages as their careers advanced. The mortgage was paid off before they said goodbye to their colleagues for the last time. Their cars were practical and driven for a long haul.

In other words, they lived within their means, an approach that kept expenses down, allowed them to retire debt free and made it easier to save over the years.

My emphasis on spending habits is targeted at the big lifestyle options, such as a home, transportation and education (for kids and yourself). I’m not a fan of the personal finance advice that says “don’t buy that latte” and invest the money instead. That money doesn’t add up into much compared with, say, the benefits of sticking with one home rather than moving up several times.

Enjoy the latte, if that’s what you want. Have a regular date night. Just don’t use credit debt to pay for the enjoyment. As the 15th century French poet Charles D’Orleans wisely wrote: “It’s very well to be thrifty, but don’t amass a hoard of regrets.”

When I left the open house and reviewed the experiences of the retirees, I thought now is a good time for people to review their spending habits. The unemployment rate is at 4.4 percent and the economy is healthy. Take advantage of better days to bring spending under control for the long-haul. You will be glad you did.


Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.