Living beneath your means, or simple(r) living

Date: Mon Jan 04 2021 ; Tags: Personal Finance »»»» LBYM

Something interesting I found along the route of paying off my debt is the inner dialog around things. How did I build that debt in the first place? It wasn't just a matter of not paying my bills, but also the things in my life. I had, and still have, a large quantity of possessions.

The thing about possessions is, well, they possess you. They require space to store, they break and need replacement, and there's always new things coming on the market that you gotta have. In other words, not only do you have stuff, but your stuff has needs and requirements. And you end up having to spend money (your life force) to pay for it all, to have a large enough house to store it all, to replace it, and to upgrade everything when the next new thing comes along. And then there's keeping up with the Jones's, because if your buddy down the street gets a 36" widescreen TV, well you gotta go for the 45" model, don't ya?

Or do you, really?

Let's go back to the available cash equation:

available cash = income - necessary expenses

The amount of cash that's truly yours is what's left over after absolutely required expenses such as taxes, food, shelter, and clothing. The rest is optional, and what "the rest" really is depends on your idea of what's "necessary expenses". The point is this obvious principle

The more expenses you deem 'necessary' the less freedom you have

The available cash in your life directly determines the freedom of choice. What if I had gotten laid off with $35,000 in credit card debt and no available cash and with no prospect of a job any time soon? Talk about lack of freedom, or consider the alternate scenario with $35,000 in interest bearing investment bringing in $2275 per year. Which gives you more freedom?

There are two ways of increasing available cash, increasing your income, or decreasing necessary expenses. Since the first is generally difficult, let's talk about the latter as it's something that's relatively easy to resolve.

The first step is to know your expenses in the first place. I've used some money management software, Quicken, to track all my expenditures, credit card balances, bank balances, to schedule payments, and more. One thing it does for you is, for every expenses, to declare individual individual categories for the expense. You define those categories for yourself, letting them be meaningful to you. Over time this lets you build up a really detailed picture of where your money is going.

The next step is to first take care of all the nickel and diming expenses. Are all the cable TV premium channels you get worth it? Is cable TV worth it at all (hint: I do not own a TV, so am not even on the cable TV treadmill in the first place). What about your magazine subscriptions (can you read the magazines at the local library)? Is the cell phone plan you use worth the expense? Do you need to pay $3 for latte every day? What about lunch at work, is that a $20 hole in your wallet every day? If your credit card company offers credit insurance, what use is that really? Is your bill paying and saving pattern causing extra fees all the time (such as bank balance not being high enough)? In other words, there's a whole slew of small expenses that come a little at a time but together add up to a large pile of money. This step is to look at each one squarely and say "is this truly needed".

In addition to the nickel and diming expenses, are the large ones. Do you need a $50,000 car, or will a $15,000 one haul you around just as well? The same question applies to the choice of a large house versus a small house.

Before you start getting antsy thinking I'm going to tell you to deny yourself and have no fun, that's far from the truth.

What if you can have a simpler life, full of the things you truly want to do and have, the relationships you desire, and without working yourself to death earning the money to pay for it all? You don't have to deny yourself, you just have to be smarter about how you fulfill yourself. God gave us brains so we could reason, and that didn't mean to let the television commercials do all our reasoning for us.

One of my inspirations to this was the realization of how I had bought a bunch of stuff out of momentary impulses with no real need behind the purchase. Another inspiration was adding up how much the bank fees were, and various other fees, just through having a low balance or not paying on time. Remember, every penny you spend has to be earned somehow, and it means that you spent some of your life earning the penny that pays for the bank fee, the inflated cell phone bill, or the $50,000 car.

Let me suggest this principle

Bigger is not necessarily better, but it usually costs more

Which car gets you around town? The $50,000 one or the $15,000 one? The answer is both will get you around town. Hence, you can achieve the same goal of traveling around town while spending $35,000 less to do so. Or, even better, if you live in a city with decent mass transit the car is completely optional (to be rented on days when you need it), and you can ride the train or bus around town.

If your cell phone plan has 2000 minutes of time, but you generally only use 500 minutes, why are you paying extra for those minutes? Why not shift to a cheaper plan? You achieve the same goal, having a cell phone, but with less cost.

If your bank balance is constantly under the limit required in order to avoid fees, the bank will charge you a variety of maintenance fees. Well, this is what Wells Fargo does, charging in the neighborhood of $20 per month every time the balance dips below the required level (which recently moved up from $2500 to $5000 minimum balance). That's $20 per month which can be put to other purposes, or just given to the bank, so which is your choice? Consider in this question, because the bank is requiring a minimum balance to avoid fees, if you maintain the required balance in that account is the money then truly yours? If you were to tap into that money to drop it below the minimum balance, the fees come back, yes? In a sense, therefore, the money is trapped. Maybe you want to find a bank with a different (or no) fee structure?

What is a latte but coffee with a lot of milk? Do you have to pay Starbucks $3 for the priveledge? Or can you keep a can of condensed milk in your refridgerator, as my Grandfather used to do. For that matter, the iced milk coffee you find at Vietnamese restaurents, or the Thai Iced Tea, are just other examples of condensed milk used to sweeten these drinks. You can easily make these drinks at home.

The examples could go on, so the point is this. You can easily find ways to decrease the cost of having the same things you currently have in your life. It does not have to be a starvation diet, you do not have to deny yourself, you just have to be smarter about what you're buying, what you're spending your money on, and what you truly want in your life.

Back when I first was exploring the things in my life, and their cost, several times I had the experience of being drawn to go to the local electronics store and buy something. One time I was in the store, had picked something up (a mini-disc player maybe) and was halfway to the register before I stopped and asked "what am I doing" and "do I really need this", only to hear a crying voice of a young child saying "but I want it". Ah hah, I realized, I was in the grip of a demanding inner child who didn't get to own all the toys (or whatnot) he wanted, and now with adult eyes was grabbing for everything he could get.

Sound familiar?

There are other ways to satisfy the inner child than buying more stuff. Maybe learning to play more, like with the stuff you bought last week, would do the trick?

This raises an interesting principle

There is a big difference between true needs, momentary wants, desires, the glitz that advertisers put in our mind, and our ability to pay for it all

If you live in the mountains and frequently haul large things, then your true need is probably for a two-ton pickup truck with crew cab, so by all means buy that truck even at its high cost. But if the majority of your driving is around town with a 20 mile daily commute, won't a much smaller vehicle get you around much more efficiently (saving money on gasoline) and cost a lot less?

Advertisers have decades of experience in using psychological techniques to tweak their way into your subconscious and twist the desires until you have to have whatever it is they're selling. Some of the deepest psychological research is done by those advertising companies so they can discover better ways to cause you to buy more stuff. So when you're out there looking for a new car and the inner voice says you want a Lincoln Navigator with plush leather seats and a stereo system to die for, is this the advertising you watch on TV speaking, or is it your true needs?

This is why I don't own a TV, by the way. That, and I have better things to do with my life than have false friendships with characters being put through fictional troubles that are meant to entertain.