Living within your means and other tips for achieving financial freedom and peace of mind
Jewish Action recently spoke with Rabbi Naftali Horowitz. A managing director at JP Morgan Wealth Management, one of the nation’s largest investment banks, Rabbi Horowitz has learned a lot about the nature of success. He has traveled the world on a volunteer basis, raising public awareness about the importance of financial stability and independence, and guiding thousands of people toward a life of fiscal responsibility. He recently authored a book entitled You Revealed: A Torah Path to a Life of Success.
Jewish Action: We often hear the term “living within your means.” How would you define that?
Rabbi Naftali Horowitz: That’s a great question. There are essentially three kinds of spenders. There’s the individual who lives above his means, which means that he is borrowing from the future to live in the present. He takes on debt—credit card debt or an equity line of credit, or whatever it may be. He earns X and he spends X plus. He may be doing so because he does not earn enough money. In other words, he’s just getting by; he’s not spending frivolously, but he just can’t afford to live on what he has. While he’s living above his means out of necessity, ultimately there’s a price to pay for that.
Then there’s the person who is living at his means. He earns X and spends X—he doesn’t spend X plus at all. Now that’s technically living at one’s means, but it’s really not, because at some point in the future, his earning capacity may go down, if not go away completely. If he doesn’t save during the years of abundance, there may be nothing to eat during the lean periods. So, in effect, living at your means should be defined as having some rainy-day funds set aside. It means that you think about retirement. If you earn X, you spend X minus, and the difference you put away for the future.
Finally, there are those people who consistently live below their means. They don’t inflate their spending, even as they continue to earn more and grow their incomes. These individuals have decided that they don’t need to spend more than or even all that they earn. They have the peace of mind of having more money in the bank, and even some investments. They’re putting away money for weddings, perhaps they are saving money so they can help their children one day, and so on. These people have a smart life philosophy: just because I earn it doesn’t mean I have to spend it.
JA: How much of a role does peer pressure play in people not living within their means?
RNH: Most of us look around and see what other people are doing. We take cues from our neighbors, our relatives and the people in our shul. It’s not necessarily because we need to live up to the Joneses. It may be that we just use the Joneses to calibrate what a normal standard of living is, and we make choices within that range. That’s level one.
Level two is often peer pressure that is self-imposed. We want to fit in. We want to be respected, and we want to be viewed in a certain way. Maybe we feel that if we don’t fit in, we won’t be able to marry off our kids or nobody will want to do business with us. In fact, sometimes spending has little to do with actual need and is only due to one’s attempt to project a certain self-image.
Peer pressure is sometimes the reason why people do not live within their means. Think about it—if we lived on a deserted island, what would cause our spending horizons to expand?
Ultimately, peer pressure is all about self-esteem. A person who has healthy self-esteem isn’t living for others and isn’t trying to impress anybody. He lives with diligence, prudence and responsibility and doesn’t get pulled into the insanity of the world around him. If you feel your life is meaningful and purposeful, you are not compelled to drive a 2021 car that you’ll be paying off for years to come. The more we build our inner selves and the more we connect to the real purpose and meaning of life, the less hold the materialism of the world has on us.
That’s Musar 101.
JA: But there is also the element of people just needing more. If a couple has a large family, for example, they may need more than a three or four-bedroom house just to be comfortable. They’re not trying to live up to “the Schwartzes.”
RNH: Indeed a couple that has a large family needs more, but how much more? Perhaps not always as much as they think. If you ever went into an older house that’s never been renovated, you will find that the closets are tiny, literally our broom closets today. Even in wealthy people’s homes, all the closets were small. Today, the size of the closets in people’s homes, not to mention the number of closets, is just unbelievable.
What’s changed? Well, my mother probably had three dresses. Today, women have much, much more than that. Men have ten or twelve suits. My father had a Shabbos suit and a weekday suit. So comfort is also a function of what we’ve become accustomed to and what’s available to make us more comfortable. Everything has expanded and everything is more accessible.
But the individual seeking greater comfort should learn to understand the concept of tradeoffs. Take, for example, a young person who just started working and wants to lease a brand-new luxury vehicle. It’s going to cost $450 a month. While a brand-new model will seemingly make his life more comfortable and pleasurable, when you sit down with him and show him what else can be done with $450 a month and he begins to understand the tradeoff, he might make a different choice. You can also remind him how painful it’ll be each month to write that $450 check, when some months he’ll just be scraping by. Right now, the shiny new car is quite alluring. But we don’t always think about and internalize what it means to take on a three-year mortgage to pay it off. Sure we all need a car, but the difference between the cost of ownership of a new car lease versus buying used can spell the difference between funding an IRA or not.
Living within your means is a discipline. It’s an understanding that life delivers a series of tradeoffs. Those tradeoffs are true for every aspect of life. For example, we can’t maintain too many relationships because the use of time itself always involves a tradeoff. Then there is money. For most people, money is not infinite; there’s a tradeoff. So I might want to vacation in Italy, but my sense of discipline tells me that getting that trip means I don’t get something else. When you think about it in terms of tradeoffs, you realize that the comfort you’ll be obtaining through the vacation might ultimately cause you greater discomfort in another area, not to mention the credit card bill that you can’t pay.
While each situation is different, it’s important to get all the facts on the table when making a financial decision. We should consider the counterarguments—in other words, why would somebody not do this?
These people have a smart life philosophy: just because I earn it doesn’t mean I have to spend it.
But there is also a hashkafic aspect to this discussion: stated another way, we weren’t put on this world to be ultra-comfortable. Many of us are intolerant of discomfort in all areas, which is a byproduct of contemporary life. You’re hungry, you eat; you’re tired, you go to sleep; you’re hot, you change the setting of your air conditioner. There’s something we can do about almost every discomfort we experience, which isn’t really good for us as people. Because endurance comes from having to endure. We are capable of much more, and we can push ourselves more. “Adam l’amal yulad [mankind was born to toil].” We are not here solely for the sake of enjoying the comforts of life.
Rabbi Simchah Zissel Ziv, the Alter of Kelm, who was one of the early leaders of the Musar Movement, said that he realized one day that he was not in control of his life; his whims, urges and desires were directing him. He decided that in order to take back control of his life, he would do four or five things each day that were directly counter to his desires. If he wanted to eat a certain food, for example, he specifically ate the item he didn’t want. Engaging in this kind of self-discipline is very powerful. It helps a person realize the mastery he could have over what he wants and thinks he needs beyond what he ever imagined.
This concept can be applied to many areas in our lives. While it may be more comfortable to have a renovated home, if we forgo it and do some basic repairs instead of a complete renovation, we can acquire discipline and stamina. Perhaps we could take the money we saved and put it into an IRA instead, so that when we retire one day, we can age with less stress and worry.
JA: Indeed, our grandparents and great-grandparents struggled physically much more than we struggle nowadays. They didn’t have dishwashers, and they didn’t have microwaves. You mentioned that we weren’t put on this world to be ultra-comfortable. Is a physically challenging life more conducive to spirituality?
RNH: Our grandparents’ generation spent most of the day physically exerting themselves. When you physically exert yourself, you do not promote your material self; you actually diminish it. (That’s the reason we fast on Yom Kippur.)
While I am not advocating that we go back to drawing water from a well, it behooves us to recognize that we may be pampering our physical selves by lack of exertion, by comfort, by having remote controls for everything. The ba’alei musar teach that it is as if the body and the soul are on a seesaw. When you over-indulge the physical self, that in turn weakens the spiritual self; when you raise one, the other will go down.
Our ancestors got up in the morning, they davened, they learned, and they worked very hard physically—and, overall, they had tremendous emunah peshutah, simple faith. They also had mesirus nefesh for Yiddishkeit, which is more difficult for us to have today. The self-sacrifice that we are called upon to exhibit is more along the lines of, “Maybe I’ll walk out of this restaurant because it doesn’t have the greatest hashgachah [kosher certification].” When was the last time any of us were truly moser nefesh to keep Shabbos?
JA: Let’s shift focus. As we all know, the cost of frum life is so high, it almost feels like a losing battle. We often can’t cut the basics, such as housing costs or tuition, so how would you advise families? What would you say are the first areas where frum families who are looking to cut expenses should start?
RNH: Eating out is ridiculously expensive. Similarly, buying prepared foods, nosh and pastries can really add up. If someone chooses to “buy Shabbos,” it’s going to cost three times what Shabbos generally costs. I also see young couples spending excessively on expensive clothes for their children—clothes that will be worn for but one season. Additionally, people who are scraping and clawing to pay their mortgages need to think seriously if they really need to spend a week in Orlando. Is it really a vacation if your stomach turns when the credit card bill arrives?
JA: Obviously, frum families generally need to make significantly more money than the average American family just to stay afloat. But some claim that a culture of luxury and overspending has crept into parts of the Orthodox world. If that is indeed the case, are we ourselves on some level responsible for the financial crisis that the frum community is experiencing?
RNH: Certainly, it costs more to live a Jewish life. We have yamim tovim, simchas, tuition, et cetera. Eliminating the tuition expense would save some families $40,000 to $50,000 a year or more. On top of all that, parents need to pay for summer camp—which is not a luxury [as kids should not be without structure].
Unfortunately, among some, the culture of consumption has gotten completely out of control. Without question, the money to cure our financial difficulties resides within the Jewish community. In a utopian Jewish world, the money that’s being directed toward excess materialism would be directed to make things affordable for others. Yeshivos would be better funded and wouldn’t have to struggle to meet payroll. Endowments and foundations would be set up so that those who cannot afford the full cost of yeshivah tuition would be able receive a scholarship without having to be embarrassed.
Areivus, the responsibility of one to another, is a very deep-rooted aspect of being a Torah Jew. So while I don’t think the affordability crisis in our community is man-made, I think the solution can be man-made.
JA: Can you illustrate how the solution can be man-made?
RNH: Take Satmar, for example, or Belz. The school system in these communities is the responsibility of the Chassidus. Whether or not one has children in the school at the time, if you identify with the movement and the community, you support the school. That’s how these schools can keep tuition to an affordable level for everybody. But unfortunately, this model doesn’t exist outside of the Chassidic world, at least for now.
JA: How should we teach children, who are especially susceptible to peer pressure, not to aspire toward the materialism that is so prevalent in the world around us?
RNH: That is a complicated question. If a child attends a school in a community that is relatively well off, and every family’s car in the child’s carpool is a 2020 car while his parents car is a 2009, it could pose a problem.
There is a further challenge: When we were growing up, our parents told us what to do. Today, some kids push around their parents. My children have learned never to say, “Everyone in my class has [a certain device or toy].” Do you know why? Because I say, “Really? Moshe Schwartz has it? Okay, let me get his father on the phone.” Before I even grab the phone, my son says, “No, no, he doesn’t really have it!” “What about Shloimy?” I’ll ask. I sometimes call the rebbe and ask, “Does everyone in the class really have new Reebok sneakers?” and the answer is always “Of course not.”
Endurance comes from having to endure. We are capable of much more . . . “Adam l’amal yulad [man kind was born to toil].” We are not here solely for the sake of enjoying the comforts of life.
It’s an unhealthy situation for parents to bend over backwards to conform to the society around them, let alone the society around their child. Children have to be inculcated with the idea that we don’t necessarily do what society does. It starts with us, as parents, setting the right example for our children. The constant spending on the latest new gadget or fad is indicative of a deeper problem: Are we being mechanech (educating) our children? Are we teaching our children the ideas mentioned earlier—the true purpose of why we are here, what matters and what doesn’t?
I speak in numerous Jewish communities around the country. I was in Cincinnati a few weeks ago and it was a wonderful experience. Oftentimes, I see that the “out-of-town” communities struggle much less with the whole topic of materialism. In fact, the standard of living outside of major frum areas tends to be much lower, and there is less of an emphasis on keeping up with the Schwartzes.
JA: In your recently published book, You Revealed: A Torah Path to a Life of Success, you write about cultivating a penimiyus, an inner life, as the beginning of a solution toward overcoming the drive for materialism and other external forms of success. How does one begin to develop this penimiyus?
RNH: In my wealth management practice, we constantly discuss the need to adhere to a mission statement. I tell my staff: “Remember why we are in business and what we’re here to do for our clients. If it doesn’t fit our mission statement, or worse, if it detracts from it, we have no right to do it.” This applies to our lives as well. We should live with a cheshbon. We need to understand the meaning and purpose of life, and then we can begin to develop the discipline to live by it. We should always ask ourselves: why am I doing this? Does it speak to my primary purpose? If the answer is no, then we shouldn’t be doing it.
These questions apply to relationships, they apply to how we spend our time, and they apply to how we spend our money. If you ultimately come to the realization that impressing people is not part of your mission statement—and that shouldn’t be a hard conclusion to reach—then the obvious next step is to train yourself not to try to impress people. Moreover, if you learn Chovos Halevavos or Mesilas Yesharim, or other musar sefarim, and you realize the limitations of living a life trying to impress people, you’ll become allergic to it.
JA: That was going to be my follow-up question. Do we need to study musar more?
RNH: Absolutely. People do not learn enough musar. I speak in front of all kinds of audiences—sometimes between 300 and 400 [Jewishly] learned people. If I ask them, “How many of you regularly learn a musar sefer?,” only a handful of people raise their hands. If you’re out in the world today and you don’t have a companion such as Mesilas Yesharim or Chovos Halevavos with you, you’re vulnerable. The study of musar is what builds the inner self.
JA: Frum Jews tend to live in tight-knit communities where rich and poor can be next-door neighbors. Is that a plus or a minus?
RNH: It offers great positives yet poses challenges as well. It’s what makes the Jewish community different than all other communities. Wealth allows yeshivos, shuls and many forms of chesed organizations to be built and flourish and we all benefit from that. Nevertheless, living in a community with a wide range of income levels is challenging for many. In other communities, people segregate around income levels.
When I was growing up, we would travel to Newport, Rhode Island, in the summertime to see the mansions. But those were mansions, and I lived in a house. Those mansions had nothing to do with me. The problem is when your next-door neighbor lives in a mansion and his kid goes to the same school as your kid, and his wife and yours do carpool together. That’s when it becomes challenging.
It is important to note that the wealthy individual bears a responsibility to others. For those people who can afford to live in great luxury, the question is—should they? They have an achrayus to the larger community, and they may unwittingly be bringing up the standard of living for those people who cannot afford it. This is the beautiful aspect that I have witnessed in many out-of-town communities. Because such communities tend to be smaller in general, each person appreciates that his or her actions impact the community as whole. Therefore, the wealthier members tend to be more cognizant of their responsibility to the larger community.
JA: It seems that it’s mostly tuition and simchas that really drain people and cause a lot of financial stress. Since the pandemic has resulted in a significant downsizing the cost of simchas, do you think that might have an effect on simchas going forward?
RNH: Unfortunately, I don’t see simchas becoming any less extravagant due to the pandemic. At least not the simchas I’ve seen. On a personal level, when it comes to simchas, I am very fortunate—I was almost caught up in that trap myself. I speak about it publicly.
When my oldest daughter was getting engaged to Rabbi Ephraim Wachsman’s son, Rabbi Wachsman, who is a very prominent rav, told me that he is a big proponent of takanos (rabbinic guidelines to keep wedding expenses in check). “If our children are going to get married,” he said, “I have to tell you that these are my rules for making a wedding: a one-man band; silk or no flowers; no sheva berachos in a hotel; and no need for both a l’chaim and a vort.” My wife and I were a bit taken aback at first, and admittedly, we had a difficult time agreeing. Ultimately, we agreed. And guess what? It was the most amazing wedding! When materialism is downplayed, spirituality is heightened. It was an unbelievably beautiful wedding with all its simplicity.
For those people who can afford to live in great luxury, the question is—should they? They have an achrayus to the community, and they may unwittingly be bringing up the standard of living for those people who cannot afford it.
When my second child got married, we went about the wedding plans in the same way. By the time we got to my third child, the tables were turned. I faced my soon-to-be mechutanim and said, “This is the way we make weddings.”
As someone who works in the world of finance, I’m wired to think in terms of investing and return on capital. In my mind, an extravagant wedding is the biggest waste of money. The next morning, the guests don’t remember what they ate. Two days later, they barely remember the wedding. People go into debt for what amounts to four to five hours. Instead of setting the couple up with some money toward their future, tens of thousands of dollars are spent to pay for one night. It’s ludicrous.
JA: You mention in your book that you work with fabulously wealthy clients and colleagues. Do you see wealth being harmful spiritually or otherwise?
RNH: Let’s just start with the basic understanding that the more money a person has, the greater the potential for his ego to become inflated. The spiritual test of wealth is first and foremost a test of arrogance—you have more than others, therefore you see yourself as better. Not all rich people have this disease, but it is a prevalent byproduct of wealth. With each step up in level of wealth, the ego increases commensurately. Which naturally is not good for marriage. It’s not good for relationships altogether. And it’s not even good for oneself. What ultimately brings people down is their ego.
I write this in my book, and it’s true—I have heard this phrase from so many clients: “We were so much happier when we had less.” When one of my clients got divorced, he said to me, “Had I not made all that money, we would be happily married right now.”
Money is also an enabler. It strips away certain societal restraints and allows you to do things you would’ve been embarrassed to do when you weren’t wealthy and were just trying to fit in. So firstly, it enables you to buy whatever you want and engage in every insanity you choose. And secondly, you don’t have to worry about the consequences; everybody’s going to want to be your friend anyway. I’m literally just scratching the surface.
Last night, I spoke to a large group in the New York Jewish community, and I told them: “If you saw the other side of extreme wealth the way I do, you might stop davening so hard by Barech Aleinu [blessing in Shemoneh Esrei for prosperity].”
I must stress that wealth, when utilized as Hashem intended, can promote an extremely fulfilling and meaningful life. I have many clients who spend their days helping others through their money, time, efforts and the advice they dispense. They reside on the boards of great institutions and their success in business translates to success in life. Of course, people who are not wealthy can accomplish many of those same things.
JA: What do the musar sefarim say about materialism?
RNH: They say that it presents a great test. Materialism is insidious. It eats away at our neshamah. At the same time, however, we need to recognize that materialism is one of the challenges of life. Hakadosh Baruch Hu created the world in this manner. The Chiddushei Harim writes that the reason Hashem created gravity is to remind us that the world will continuously pull us down—unless we are pushing upward.
The Chovos Halevavos says that materialism is a necessity; it’s something we have to engage in. That is exactly the test of this world. Hashem says, I want you to swim in the material world, but I don’t want you to drown in it; as long as you keep your head above water, you’ll
The only way to keep our heads above water is to raise our spiritual level and to continuously nourish our souls. Some people, however, get lost along the way and begin to feel an inner emptiness. The emptier you are inside, the more you feel a need to seek externalities to fill yourself up. But signing up for cheap, faux replacements isn’t going to work, and so you’re just going to keep doing it. It’s like a drug. You can become a consumption addict.
JA: Rabbi Horowitz, do you have a final message for our readers?
RNH: My final message is very simple. If people tasted how delicious it is to live within their means, if they ever experienced the peace of mind of knowing they could cover all their expenses because they have disconnected from the insanity and the societal pressure around them, they would forgo every single momentary pleasure for this long-term tranquility and yishuv hada’as.
I say this to people because it’s true and because I experience it and I’ve helped so many people, at all wealth levels, experience it. We just have to appreciate how wonderful it is to live in a fiscally responsible way. It’s far more pleasurable than anything you can buy with your credit card.
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