Simpler, Smaller, Happier – Page 2

Radical Changes

Yesterday, we looked at Dave Ramsey’s 7 baby steps; these are steps almost everyone can follow. If you have an income, a reasonable level of commitment and some patience, you can make some real progress at becoming financially secure.

So what if you really want to go crazy with this thing? If you have a very early retirement as your goal, you might want to read what Jacob Lund Fisker has to say. Mr. Fisker has a 21 day makeover plan to get you on the path to save 75% of your income and retire extremely early. This guy is really smart. His is also way out under the long tail of our graph.

If you are willing to start questioning why we live they way we do; try:

The forest versus the trees Early Retirement Extreme: — written by Jacob Lund Fisker

In this blog Fisker explains how the actions of his deliberate and planned frugality interact.

Dump Stuff is a suggestion that Fiske makes early in his 21 day plan. He contends that a too big, too expensive house or apartment is one thing holding people back from achieving their goals. People buy or rent too much home so they have a place to put their stuff.

Small & Close are the words to have in mind when looking for a place to live.

Save Time & Money – Live close to work, recreation and shopping. You will save time and money on your commute and may be able to get down to one, or no cars.

Be Happy & Healthy – Walk or bike that commute to decrease your stress and improve your health. Spend some of that saved commute time cooking healthy real food.

Each of these actions has a benefit by themselves, but done together a real money saving synergy is created.

If we look at the opposite of the life he describes, we have a huge house in the suburbs, where no one can walk to anything.

Both parents must work to pay the mortgage, insurance, taxes and upkeep of our big house.

Commute times and costs are so high that three nights a week dinner is from a drive through.

The kids spend more time in the car shuttling from school to activity than they do playing outside.

At night the family zones out in front of their 52 inch 212 channel TV. No one has time to nurture relationships and everyone’s health suffers from lack of exercise, stress and poor diet.

How about that, we started off trying to save your money and instead we might just save your life.

Need a ride?

This is a graph.

Let’s call it our “How People Get to Work Graph”.

Most people live under the big fat part of the graph. They are driving financed or leased cars to work. They are obligated and indebted. They are normal.

Normal Sucks. (Please remember this highly technical financial phrase; it can make you rich).

If we move just a little to the right, we find people driving their paid off cars to work. These people are not entirely normal, they are not indebted (at least not for their car) and they have given themselves a chance to win. Dave approves of these people’s transportation.

Out to the right a little further, we might find two or more people car-pooling, sharing their transportation expense. Most of you are still with me here, that’s a scenario that you can wrap your head around.

But let’s go way out under the long tail. Here we can find people who have sold their car. They don’t have a car. They don’t have car insurance or maintenance or parking or gas expenses. They don’t have finance costs or depreciation draining their net worth. They are car-free. These people are way Beyond Dave.

Could you do this? Before you answer please notice I have my fingers in my ears. Go ahead a rattle off your 52 rationalizations why this is crazy and the people who do it are nuts and why it would never work for you. Done?

The average American spends nearly 20% of the income on transportation. Twenty percent, how much is that for you?

Edmunds True Cost to Own can give you an idea what it really costs to own different models.

These people without cars plan to live without cars. They live relativity close to work. This means not only do the save on transportation costs, but they may also save on commute time as well.

What would more time at home mean to you?

Would it mean you could get a load of wash done in the morning so everyone is less rushed and stressed in the evening? Would it mean you could cook dinner more often instead of picking up unhealthy and expensive drive through food? Could you get an extra hour with the kids?

Add this value to your twenty percent.

So, how do you get to work if you don’t have a car?

Buses, trains, subways and car pools work in some places.

Electric Bikes, bikes and walking work in others.

A combination of any of the above works in even more places.

I commuted by bike 10 miles each way for a number of years. I usually rode at least 3 days a week. It was good for my health and good for the budget. It wasn’t as good as being car free but it was much better than normal.

How far can get you from normal?

An Attitude for Change

Changing your money behavior so that you can win long term may not be as difficult as you think.

It requires accepting a few basic premises:

I can give up something I want now in order to achieve a more important goal later.

Many of us have allowed the marketers of the world to weaken our self-discipline muscle. Some poor souls among us have never been forced to exercise it, not even as children. We have to find this muscle and strengthen it. The same “I want it and I want it NOW” thinking that has caused us not to win with our finances in the past, will undermine our transformation if we allow it. “Later” is a word we need to embrace.

Lots of little victories can add up to a big win.

Most people are far less successful financially than they could be, simply because they are unintentional with their money. We can achieve our goals by making lots of small changes in our lifestyle. Quit hoping for the one big win and start collecting small victories.

Most people (not you!) are financial losers.

Once you’re on a plan you may find “everyone” around you goes out to eat anytime they want. They also drive cool cars and take great vacations. You’ll have to remind yourself that despite their appearance, most of these people are broke. They are deep in credit card debt; they don’t have an adequate emergency fund; they aren’t saving for their children’s education or for their own retirement. In other words they are not who you want to be.

If you can accept these premises, there is no reason for your financial transformation to be painful.

Shiny Things

The constant desire for new stuff can be our undoing while trying to build wealth. Unlike the crow, you were not born with an attraction to shiny objects.

Marketing is powerful.

The car you thought you liked last week becomes the car you can’t wait to replace when you are inundated with ads for the newer cooler model. Every new tech toy captures your imagination, becoming the one thing that would make you happy. Not one of the 33 pair of shoes you already own will do for Saturday night, once you catch a glimpse of the latest Jimmy Choo’s.

Marketing is powerful and if there is any hope of you controlling your own life you must be prepared to fight back with some formidable strategies of you own.

Long Term Strategy: ALWAYS

Always have a plan and a goal for your money. Make both the plan and the goal specific and measurable. Having an overall plan helps you resist temporary temptations.

Once you have lived for a while with your long term goals in place, you will find in becomes much easier to be very intentional with your spending. But until then, give these three mini-strategies a try.

Mini-Strategy One: Blow $

Set up a blow budget; allow yourself a fixed amount of money every month that you don’t need to account for. But do not spend over this limit.

Mini-Strategy Two: Wish List

Keep a list of things you want. Don’t buy anything that’s not on the wish list unless it can be paid in full from your blow money. Having a wish list forces you to consider an items worth to you relevant to other wish list items. Prioritize your list and create a goal in your Mint.com account or put a jar on the kitchen counter or set aside a little extra in your savings account for the desired purchase. Make a chart tracking your progress and hang it on the wall. Wait until you’ve saved enough to buy your wish list item. You’ll be surprised how fast you can save for something you want, once you’re focused.

Mini-Strategy Three: Cooling off

Set a hard and fast unbreakable cooling off period before you buy, even if you have the cash. Wait 24 hours for decisions less than $50, a week for less than $200, a month for $500. After the cooling off period, if you still want it and you can pay cash for it and it’s the number 1 item on your wish list, go for it!