Simplify your life

Words of wisdom about capital and values

“Simplify, simplify” — Henry David Thoreau (Walden, 1854)

There has been something of a spate of self-help books over the past couple of years trying to emulate the format of “Life’s Little Instruction Book”. It doesn’t take a lot of intuition to realize why. These books are so easy to write it ought to be criminal. You sit down and write down a number of quirkily relevant bits of folk wisdom, and then slap some cover story around it about how you wanted to tell your son (or daughter, or pet for that matter) all this wisdom so that they could enjoy life, or at least stay out of trouble. Your publisher then prints it on paper that resembles scaled up versions of the fortunes from fortune cookies (no coincidence there) and expects people to spend as much money as they would for the latest Tom Clancy techno-thriller for something that will soon be collecting dust on the coffee table.

Nevertheless, when I was on vacation (1994) I bought a couple of these books, perhaps out of desperate emotional need, but more likely out of sheer boredom. The subject was “Simplify your life”, an area which I thought I could use some work, as I was increasingly becoming worried about the lack of fundamentals and profusion of gadgets. In any event, to make a short story long, the books exasperated me. One was quite good, but was aimed at people who already had a spouse, a job, three kids, two houses and a debt load that screams attention deficit disorder. The other wallowed around trying to offer lots of ideas about how to save time and money on this and that, but for lack of creativity resorted to quoting Proverbs far too often for a book about simplification. Of course, I thought, I can do better than this. People who yet lack the financial resources to have dug themselves deep into a hole aren’t there for a lack of effort. With the profusion of easy credit, slick commercials and lack of direction, generation X has no doubt mired itself in a swamp. So I am here to save them. ;-)

Well, not exactly. If my opening remarks weren’t indication enough you should have concluded by now that I think there is definite commercial potential in the construction of these books. In fact, it appears the easiest kind of writing project to undertake these days is the self-help book. The itemized list format is perfect for all writers, as the concentration is on content, not on format.

Anyhow, here are some bits of wisdom specifically geared to the less affluent but no less complicated lives of young adults. They all reflect somewhat on my philosophy that simplicity should be the ultimate goal of our actions, as the tendency to complexity leads to problems which require increasing amounts of time and money to address. The urge to acquire and horde must be actively faced, as it is instinctual but counterproductive. We are not defined by what we have, but rather by what we carry within us.

Money

The principal advice I have about money is quite simple. Spend it wisely. If you find yourself spending money simply out of habit, then something is clearly amiss. Clearly our society nurtures the urge to spend money freely, but the reasons are poorly explained and even more poorly justified. This section suggests some obvious rules of thumb to consider.

Get out of debt

This one is so obvious I’m not going to break it into twenty sub-pieces of advice to pad the list. I probably should, since repetition is the tried and true method of education, but I believe in economy in the use of force.

There are several kinds of debt, and not all forms are to be avoided. Short term debt such as credit cards is typically very expensive, and the reasons for accumulating it are notably shallow and self-indulgent. Often the goods and services purchased on credit are gone long before the payments for them are. That violates the cardinal rule of borrowing, which is that you should borrow when you expect the borrowing to improve your capital situation. Longer term debt such as mortgages and auto loans satisfy this principle, though sometimes indirectly. For example, a mortgage forces you to divert your income into your house, where it presumably will sustain its value. In its absence, you should be diverting the income into savings, bonds and stocks, et cetera but this is not always easy to enforce. Thus the house becomes a vehicle for savings.

A strong caveat however. You aren’t saving money by sending in your mortgage payment each month, as can be seen by the following example. Suppose you buy a house at $200,000 and are forced to sell it two years later in a declining market at $150,000. Since the asset lost value, any money you put into paying off part of the principal has been wiped out by the loss you took. Of course, it can work the other way as well, but there is no law in economics which says that housing prices must increase over time. In fact, with the population of the US growing only slightly and construction at fairly high levels, there may be some downward pressure long term.

A few more words about credit cards. It is so easy to get them that everyone should realize by now what a potential source of trouble they are. You should hold no more than one credit card of each type (e.g. Amex, Visa/Mastercard, Discover), and holding none at all might be the best policy. The argument that maybe someday you’ll need to access all that credit at once is a little insincere. If you need to borrow money, borrow money. Don’t plan ahead for the contingency and open yourself to the temptation. My personal choice is to hold one Visa/Mastercard bank card, which has no annual fee but a high interest rate. This way I am not very tempted by a “low” finance rate to indulge in a little creative financing (read: deficit spending). But let’s face the music, many people today think of a credit card as an instant loan, and often max out the credit line before the ink is dry on the signature on the back of the card. One card is enough. I used to have two, but I found that it wasn’t worth the trouble trying to think of which card to use for each purchase (timing them to coincide with closing dates on my statements to maximize the free ride period).

Save by design, not by accident.

My parents as of a few years participated in a Christmas club at their local bank. Periodically they contributed money to the account, building a small nest egg for the inevitable December rush to please the appetites of their children. Putting aside the intelligence of putting money in a low-interest bearing account, the principle behind the behavior is eminently sound.

The idea is this. Ignore the purpose of saving the money. It could be Christmas shopping or a vacation. The important part is the design, the methodical saving by a plan which achieves its goal not by forced economy but rather by sufficient planning. It is very easy to convince someone that if they put ten dollars aside every week, at the end of a year they will have $520. Getting them to do this is the impossible part, and that is the entire struggle.

There is one method that makes this easier for me, and that is a computerized checkbook program, in my case Quicken by Intuit. My entire financial history I’ve entered into this database over the years, and periodically I ask the program to detail some of the spending. To help me save, I do two things. About midmonth I check to see how much my expenses have been for the month and if it seems excessive I consciously tighten spending for the remainder of the month, usually just by postponing some purchases till the next month. Additionally, at the end of the quarter I check how much money I spent over the quarter and how much I earned. The difference is my net savings, and I typically have a target for each quarter. If I missed my target I review the major expenses and try to figure if my failure to save was due to overspending or unforseen expenses. The former I try to avoid, the latter is just a part of life and I accept.

Now, Quicken is not for everyone. I typically spend five minutes every few days entering data into the program, and over the years this has really added up. But I feel in control of my finances by being able to answer questions about my spending definitively, and that makes the time spent well worth it for me.

Lifestyle

Utilize existing infrastructure.

This one is a little cryptic, but I like the particular phrasing and one particular example is sufficient to explain it. The Public Library in your local town has an impressive collection of books, I’m told. Next time you think about buying a book to read, why don’t you see if the local library has it instead. Sometimes you’ll want to own your own copy, but this way you’ll have a chance to make an informed decision. Same thing goes for video rentals. Many libraries have interesting collections of videos which you can borrow for free. Sure, your local video store has more titles, but they charge more, too.

The principle is much broader than these two examples. Sometimes it pays to rent an item rather than to buy it. Not always, but sometimes, and you should be willing to be flexible in your approach. Maybe you’ll only use that camcorder to record a particular event, and then relegate it to the closet (inevitably everything ends up in some closet it seems). You be much better off if that is the case if you borrowed or rented the camera.

A related principle is to buy what you need, and no more. Sometimes the desire to get the fanciest coolest latest thing is uncontrollable. But often a simpler item will do the job for less.

Restrict shopping to one day a week.

Unless you classify shopping as a form of entertainment, there is no real reason to go to shopping more than once a week in my opinion. The key is to learn the success of moderation and foresight. With a little planning, you should not find that you just have to run to the grocery store every other day because you’ve just run out of this or that.

Vance Packard wrote a book in the 1957 (The Hidden Persuaders) revealing the extent modern advertising pervades our lives and distorts our needs. Little has changed since then except the scope as far as advertising goes, and the lesson is clear. The number of advertising messages which bombard us daily is growing and our consumer behavior is greatly affected.

The easiest way I have found to avoid the impulse buying and indulgence spending is to simply reduce the number of shopping trips. If you have to go shopping for the entertainment value, just leave your credit cards and check book at home to accomplish the same effect. You will not be less of a person.

A related technique I usually employ is postponing purchasing something I want to be which is not absolutely essential by a week or too. If after a week I still find I want the item, I usually buy the item. The delayed gratification actually makes the item more precious.

Relationships

Cultivate relationships personally, not once a year on schedule

Many years ago, in order to encourage the purchase of greeting cards and boxes of chocolates across America, Mother’s Day was invented. And the retailers were pleased with the results, and they sayeth unto the lord of retailing: “If the masses will alter their behavior in response to a day on the calendar, we should fill the calendar with such days!” And thus was spawned Father’s Day, and Grandparent’s Day, and Secretary’s Day (is that Administrative Assistant’s Day now?) and many another day that I shan’t tell now.

OK, maybe that’s an exagerration, but many traditions we follow are commercially motivated, and are poor substitutes for true expressions of love and caring coming unbidden. Think about it.

While you do, recall the idea is simplicity. I find the trouble of running out at the last minute to find a greeting card for the myriad name days detracts considerably from the simplicity of just cultivating those relationships at my leisure. I still remember birthdays and Christmas, but I’m increasingly passing up other so called holidays. It’s your choice.

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Last modified: October 31st, 1996 (Happy Halloween)