Monday, September 28, 2009
[This originally appeared here about three years ago on September 13th, 2006. Jonathon and Miranda probably don't seem nearly as odd today as they did back then.]
Having fallen far behind in regular reading of Money Magazine now that they've given up their role as cheerleader for the national housing boom, opting instead to restrict their real estate advice mostly to topics such as home improvements and home insurance, this intriguing story lay there for a couple months before being stumbled upon the other day.
In what seems like a bit of an over correction since singing the praises of condo flipping and second home buying last year, more stories such as this one about thrift and getting out of debt seem to be popping up in the nation's most popular personal finance magazine.
Both the word and the concept of thrift are foreign to most Americans today, however, they may be set to re-enter both the nation's vocabulary and psyche in a big way, dependent upon how the excesses of the nation's booming housing market are worked out in the years ahead.
In a world of overconsumption enabled by piles of debt that mount higher with each passing month, Jonathan and Miranda Edel are bucking the trend.
Despite good income and prospects for much more, they have forsaken the consumer pleasures favored by hundreds of millions of other citizens in this land, choosing instead to save over 50 percent of their income.
A lifestyle that most would consider austere, lacking the joy derived from the purchase and use of consumer items that people don't need, purchased with money that they don't have, all of this prompting the question, "What planet are these people from?"
Last Christmas, as kids all over the country tore into piles of brightly wrapped presents, the Edels of Rochester, Minn. sat down to a rather more restrained gift exchange. For six-year-old Zachary, there was a basket containing shampoo and a pretend shaving kit. Seven-year-old Elyse got one stuffed animal. And 12-year old Madison received a single CD. All the children got new socks and underwear, packed in recycled gift bags and hand-me-down wrapping paper from their grandmother's closet. "Everything for each child cost under $20," says their mother Miranda.It is possible that this was one of the least read articles ever published by Money Magazine. In the table of contents for the August print issue, the photo of the family is displayed in black-and-white along with other colorful photos and print on the same page - there seemed no reason for this other than to segregate the Edels and indicate a sort of lifelessness in the family photo. Strange.
It's not that the Edels couldn't afford more. Miranda, 34, is a graphic design professor in the University of Minnesota system, and her husband Jonathan, 29, is a doctor--a surgical resident at the prestigious Mayo Clinic. Together they make over $90,000, an income that could easily triple once Jonathan completes his residency. And despite having four kids (there's also a two-year-old, Gavin) and a fifth due in October, they save more than half their gross pay. In other words, they have no financial reason not to spoil their kids at Christmas--or buy new cars or trade up to a big house or indulge any of the other familiar American consumer impulses. They simply choose not to.
In a letter to the editor in the September issue, Tom Davenport noted:
It's admirable that Jonathan and Miranda Edel are fighting the peer pressure to spend more than they make. While I disagree with some of their choices (30-year mortgage, no investing, wood stove - and yet still cable and DSL), I suspect they won't have to work into their seventies.While Tom's comment about 30-year mortgages begs the question of what he would suggest instead, it's hard not to disagree with his "no investing" objection, the Edels seemingly too trusting of paper money in an era of stealth inflation and paltry interest rates on savings.
Of course, Tom's comment regarding retirement was his most important observation, an issue that too few pay too little mind to until it's too late. As millions and millions of Americans remain fixated on consumer electronics, granite countertops, sport utility vehicles, and the like, little do they know that they will be ill-equipped to live a life of leisure in their golden years.
Unless of course it really is true that people don't have to save anymore because they can borrow against the rising values of their homes indefinitely.
You see, the Edels have rejected consumerism. While it's easy to argue that they've gone too far, they have completely shunned Madison Avenue's pleas to buy things that they don't need with money that, in this case, they do indeed have.
From the outside, the Edels' simple life looks a lot like the suburban life all around them. With a kids' clubhouse in the backyard and a Volvo in the driveway, the trim four-bedroom cottage fits perfectly into its middle-class neighborhood. But walk inside and you quickly realize that this is not the average American home.The unground wheat berries in the basement clearly crosses some sort of line somewhere, but their savings rate is impressive - Chinese like, you could say. And of course, Jonathan's investment strategy seems to have some serious flaws.
Instead of a wide-screen TV, the most conspicuous presence in the Edels' living room is a wood stove, one of two that heat most of their home. (Estimated fuel savings: $1,200 a year.) Forget about a pool table or exercise machines in the basement; instead, there are 400 pounds of unground wheat berries stored in six-gallon pails, which will provide the family with whole wheat bread for at least six months. (Cost: $72.) Conveniences like cell phones are out of the question, of course. Even in the kitchen, where Miranda spends much of her day, a worn KitchenAid mixer is the only appliance in sight.
The Compact has inspired the Edels to pare back even more. These days Miranda walks to the grocery store instead of driving ("It saves on gas, and can only buy what I can carry"). She refills shampoo and lotion bottles at a local store that sells bulk foods, and has planted a vegetable garden. Jonathan, who commutes to work on a 115-miles-per-gallon moped, recently bought a 1979 Mercedes diesel sedan, which he plans to convert to run on vegetable oil salvaged from local restaurants. "We may smell like a deep fryer," jokes Miranda, but they'll be fueling the car for free.
Curiously, the Edels have given comparatively little thought to what to do with the prodigious amounts they save. Some $200 goes into an extra monthly principal payment on their mortgage, a 30-year loan fixed at 5.6%, but the rest mainly piles up in their checking and savings accounts. The two now have a combined balance of $75,000. Jonathan had invested $15,000 in a mutual fund, but after it lost half its value in the crash, he swore off the stock market. "I like to keep money where I can see it," he now says. "In the bank or in my home."
But, you can't help but marvel at a family like this and heap praise on Money Magazine for publishing this story during an era of excess consumption.
It may well be that both the Edel's and Money Magazine are on the leading edge of a new trend that will soon be sweeping the country. Jonathan seems to have had some childhood experiences that have forever shaped his view of money, however, that is far from the case for most others in this land for two decades now since borrow and spend became a way of life.
If others follow along with the Edels in the years ahead, it will not likely be voluntarily.