The only way to acquire wealth is to spend less than you earn. This is why one of the most common topics in personal finance is how to save money. It’s why there’s an abundance of articles floating around online with titles such as:
“50 Ways to Save More This Year”
“5 Ways to Reduce Your Phone Bill”
“How to Save 25% on Your Next TV Purchase”
“10 Ways to Pay Less for a New Car”
And while these articles are helpful, there’s an even more effective way to save money that very few of these articles mention:
Want less stuff.
Taking a Step Back
The common way of thinking about saving and spending is:
I need items X, Y, and Z. Now how can I be a smart consumer and save as much as possible on X, Y, and Z?
There is a flaw in this mindset. We are looking for ways to save money on items before even considering if we truly need these items in our life.
A better way to approach the saving/spending question is to take a step back and ask ourselves a simple question: Will purchasing X, Y, or Z add a huge amount of value to my life?
By thinking about saving and spending this way, we force ourselves to think about how to maximize well-being as opposed to minimize spending.
Do I Need That?
How can we know ahead of time if a purchase will actually improve our quality of life? Try this exercise: starting from the moment you think of something you want – whether it’s a major purchase like a car or a minor purchase like new headphones – attempt to go thirty days without buying this item.
Over the course of these thirty days, if you find yourself wishing you owned that specific item because it would make your life significantly easier, it might actually be a purchase worth making. On the other hand, if you find that life goes on as usual and you have no immediate need for that item, it’s likely something you don’t need.
Absence has this effect on us. When we’re forced to live without something for an extended period of time – whether it’s a car, new headphones, a cell phone, or cable television – we quickly find out whether or not the absence of that item makes our life considerably worse or not.
You can also use this trick for items you already own. Try going thirty days without watching television. At the end of the thirty days, if you find yourself missing the entertainment value the television provides, then keep it.
But if you find other ways to pass the time – reading, writing, exercising, spending time with family – you may consider getting rid of the television entirely.
This exercise can be as extreme as you want. If you live in a city with extensive public transportation, try living without your car for thirty days. You might find that it’s difficult, uncomfortable, and inconvenient – if this is the case, switch back to using your car.
On the other hand, you might find that it’s less stressful than fighting traffic each day. You also might decide to get rid of your car entirely and discover that it significantly improves your financial situation since you no longer have a car payment, insurance payment, or the need to pay for gas or maintenance.
The Benefits of Less
There are countless benefits of owning less.
One obvious benefit is the fact that owning less stuff means you own more time.
Instead of spending time coupon clipping, deal-hunting, and driving to stores for sales, you bypass these activities entirely by deciding to live with less.
The more stuff you own, the more time you have to spend maintaining, repairing, and cleaning. By choosing to own less, you are choosing to spend less time on upkeep. You’re choosing to place more importance on your time than on consumer goods, which is a decision that yields high returns.
There will always be more consumer items, more manufactured crap that comes out year after year, but time is a finite resource. Once it has been used, you can never get it back. By owning less, you have more time to actually do things, travel places, have experiences – all of which have been shown to bring more happiness in the long-term than any consumer purchase.
The second obvious benefit to owning less is purely financial: by owning less, you spend less.
By spending less, you achieve financial independence sooner. Choosing to own less is always a better financial decision than coupon clipping, deal-hunting, and bargain shopping.
The individual who chooses not to buy a new gadget is always better off financially than the individual who buys the gadget for 50% off.
Instead of looking to save more, look to want less.
I strongly suggest using free financial tools like Personal Capital to track your net worth, spending habits, and cash flow to help keep an eye on your money. The more you track your finances, the better you get at growing your wealth!
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