Penny-Pinching Enjoys New Popularity

IN the next few days, David Heitmiller and his wife, Jacque Blix, will be making New Year's resolutions of a wholly financial kind.

Like congressional deficit hawks, they will scrutinize last year's spending - tracked penny by penny - and plan a budget for this year's expenses.

The Seattle couple is part of the growing frugality movement. Rooted in the Pacific Northwest, the movement is expanding nationwide as Americans try to make better use of their money and time.

Though not new, the trend toward simpler living appears to be gathering steam, fueled by Americans' growing concerns about job security and retirement.

"Your Money or Your Life," a leading simplicity handbook, climbed last month to the top spot on Business Week's list of financial bestsellers. The book, in its second year in paperback, was not even in the top 15 until October.

Interest in the book has risen "as people have been waking up to the need to save money," says Vicki Robin, the book's co-author.

Layoffs such as this week's announcement of 40,000 job cuts by AT&T Corp. remind people that even in relatively stable economic times, jobs are not as secure as they once were. Some observers say technological change will spawn a new era of surplus labor.

Meanwhile, baby boomers, now approaching 50, are looking to retirement - and wondering where the money will come from.

Practicing steps outlined in "Your Money or Your Life," Mr. Heitmiller and Ms. Blix have cut expenses and left a yuppie past behind. Gone are the Audi 5000 and Jeep Cherokee, replaced by a Nissan Sentra. Blix watches newspaper ads for specials and buys food in bulk. Moving from a home to a rented apartment and drying clothes only part way in an electric dryer, the couple has reached a stage that simplicity devotees call "financial independence." That is, they do not need to work but can live off savings invested mostly in Treasury bonds. Annual expenses: $24,000.

Heitmiller, laid off two years ago from his job as a product manager at US West Corp., is now free to volunteer two days a week at a Big Brother program and Habitat for Humanity. He works occasionally for money to meet special expenses such as a trip to Europe.

Ms. Robin says probably a minority of those who read her book are aiming at total financial independence. Most of the roughly half-million people who have bought the book want to regain control of their lives and set priorities, she says.

"It's a confluence of two really profound trends," says the Seattle-based author.

First, Americans are realizing that "the job that used to support my life has now become my life." People are tired of seeing the activities they most value pushed aside by work, Robin says.

Second, in an era of consumerism and debt, people have lost touch with the frugality that has characterized this land from when Benjamin Franklin said "a penny saved is a penny earned" through the Great Depression. Since 1990, consumer debt per household has almost doubled.

For many Americans, the need to address the latter problem looms larger than the first. Having more free time "sounds good. But I can't put my kids through school," says John Mitchell, an economist with US Bank in Portland, Ore. Even with greater penny-pinching, he says, baby boomers may find themselves wanting to work more, not less.

Still, simplicity advocates say their techniques can transform lives even if they don't set people financially foot-loose. The nine-step program outlined in "Your Money or Your Life" boils down to analyzing one's spending of money and time and rethinking them in light of priorities and values.

Robin and co-author Joe Dominguez encourage people to chart expenses, down to the penny. A key concept is calculating one's real hourly wages - factoring in costs such as commuting time, work clothing, day care, and the cost of a second car.

The conclusion many people reach, Robin says, is: "I'm selling my life for $10 an hour."

By following the steps, individuals can "find out where the hole in their pocket is," she says. "People have found that they have $600-a-year latte habits," Robin says. Her book advises people to think through whether, instead of buying a gourmet cup of coffee each day, they'd rather make their own drinks and work dozens of hours less.

A host of other frugality books and newsletters, such as "The Tightwad Gazette" (Leeds, Maine), have popped up in recent years. Where many newsletters focus on specific money-saving tips, Robin and others are spotlighting the importance of overall priorities.

In addition to "Your Money or Your Life," Americans are turning to everything from the venerable "Franklin Planner" calendars to new books to help rebalance their burdened lives. Among these tomes are "First Things First" by Steven Covey (author of the bestseller "Seven Habits of Highly Effective People") and several books aimed at working mothers.

Robin says the movement toward simplicity is spread fairly evenly nationwide. But the Pacific Northwest has become an unofficial capital for the movement.

"The kind of person who's attracted to the Northwest does so not to get ahead in a career," but to enjoy the mountains or because it is a nice place to raise kids, says Janet Luhrs, editor of Simple Living, a newsletter published here.

It is a region of potlucks, not Porsches. Residents are recyclers, do-it-yourselfers, and enjoyers of a slower-paced, more informal lifestyles than dwellers in eastern or Sun Belt cities.

Yet Ms. Luhrs says Dallas residents responded with more than 1,000 letters after a television special on simple living aired there this fall. "It's not some little grass-roots thing anymore," she says.

Luhrs says the big transition in her own life came when her budding law career began overwhelming family time. She began wondering, "Whose daughter is this, the nanny's or mine?"

Now, although she still works on her quarterly journal and a new local radio show, Luhrs blocks out time to spend with her kids, such as a candlelight dinner every Sunday during which she unplugs her telephone.

"You can experience very positive things even if you don't become financially independent in three years," Heitmiller says.

For several years prior to Heitmiller's layoff, the couple had been pruning monthly expenses. After he lost his job, they sold their home and plowed the money from his severance package into their savings next egg. Since then, they have lived primarily off their earnings from bond investments.

Robin and Mr. Dominguez recommend bonds rather than stocks, largely because they are a much safer investment.

Still, that advice makes some financial planners' heads spin. Over time, they argue, bonds will be far outperformed by stocks and are less inflation-resistant.

Dominguez responds that the inflation problem was largely an aberration of the 1970s and '80s that countered America's long-term trend of low inflation. Even during that period, he has lived on his own nest egg since 1969 - all invested in Treasury bonds. That still supports the former Wall Street financial analyst's $6,000-a-year lifestyle. (The home he owns with friends is already paid for, and he spends less than $100 a month on food.)

His advice to Americans: Start "keeping down with the Joneses."