Note: This is a guest post from Bob Lotich, author of Simple Money, Rich Life.
In keeping with the theme of Things That Matter, today I want to highlight a few financial tips to help you spend less time and mental energy on money so you can have more time to focus on what actually matters in life.
I tend to be someone who believes that personal finance is personal and that there aren’t any one-size-fits-all solutions. But there are principles that even if they can’t be applied directly, can often be adapted to our situations.
So with that, let’s get to the list.
1. An uncluttered financial life is one with little to no debt.
Yes, I guess this is obvious, but it is worth stating. Debt doesn’t just cost you money; it also makes life more complicated. Not only do you have to spend more time paying bills, but each debt adds more stress and is taking money out of your pocket that could be used for things you actually want to use it for.
I am thankful to be 100% debt free, and from having spent years with a dozen or more outstanding debts, I can say with confidence that an uncluttered financial life is one with little (or zero) debt.
Eliminating debt obviously isn’t a push-button fix, but is always a financial goal worth pursuing.
2. Fewer credit cards are better
If you choose to use a credit card for points and simplicity, you don’t need 3, or 5, or 10 credit cards. Just find the best one for your situation and then get on with your life.
I actually opened up 34 credit cards to see which one was best for our family (I know, I am weird like that). Now I only have one credit card in our wallet (with a debit card as a backup).
(And yes, if you have a bunch of cards and close them all, it may have a negative effect on your credit score.)
So if you are concerned about it affecting your credit score, then consider keeping the card with the highest credit limit and/or the card that has the longest history, and close the others. Doing this will reduce any potential negative impact on your credit score.
3. Owning a home costs more clutter than renting
We all know the arguments for owning a home, so I won’t get into that here, but I do think it is worth bringing up a counterpoint: renting tends to yield a less cluttered life than owning.
Owning your own home comes with a long list of expenses and responsibilities that you wouldn’t have if you rented. For example, you wouldn’t need to be concerned about repairs, maintenance, or HOA special assessments. Your landlord would be responsible for those.
Generally speaking, renting reduces you to just a monthly rent payment, and a small number of utilities. Anything beyond that will not be your concern. That will simplify both your finances and your life.
Additionally, I found that renting (especially apartments or condos) tends to prevent clutter. Simply because there isn’t nearly as much room as most homeowners have. When we lived in an apartment, I found that it forced me to constantly evaluate purchase decisions because of our limited space.
4. Ignoring the noise that is the financial industry is BETTER for your investments
Far too many investors think the key to financial success is just reading the Wall St. Journal every day, watching stock prices non-stop, analyzing charts, etc. But the truth is, you can invest wisely, passively, and without any of the stress most investors deal with.
In fact, years ago Fidelity did a study that revealed that of all their clients, the ones with the best investment performance were the accounts that were forgotten about or accounts where the investor had died. The takeaway is that as investors, we tend to be our own worst enemy, and good simple investing tends to be set-it-and-forget-it.
Taking this to heart, I have been passively investing for the last 10+ years and only check my investments 1 time per year. I spend about an hour or so per year thinking about my investments, so I don’t have to deal with any of the mental clutter and noise that the financial industry seems hell-bent on stressing us out with.
If you want to learn all the details of how I do it check out my 10x Investing Course.
5. In work/business, do less, but do it better
When it comes to generating income, it makes sense to focus on the things that are working best and to cut out the rest. This applies most directly to the self-employed and to commissioned salespeople, but it does have relevance to salaried employees as well.
Many freelancers and businesses will find that the 80/20 principle holds true in their revenue numbers.
What if you actually cut out a lot of promotional activities that are bearing minimal fruit and instead put all your energy towards the 1 or 2 things that are generating the most revenue? Or for salaried employees, this could be concentrating your efforts on activities that are likely to produce a larger bonus, or put you in a better position to be promoted.
This single change in strategy can both increase your income, and simplify the income earning process of your life.
Bob Lotich is a award-winning blogger, podcaster, and the author of the newly released book Simple Money, Rich Life: Achieve True Financial Freedom and Design a Life of Eternal Impact and has spent all week chasing Joshua on the Amazon Bestseller lists to no avail.
I’ve always said, ‘buying the house is the easy part…the costs associated with upkeep are what most don’t consider’. We’ve owned for 30yrs total (two different homes) but just today, dropped $3K+ for trees to be removed (probably $8-9K over last 5yrs). Painting will be $6K later this summer. The HOA, yard, landscape, taxes, etc. The annual burn can be significant.
Paint yourself—-why hire?
Good point and likely would if it wasn’t the exterior.
Linds Boughton says
Really bad idea to think that renting equates to clutter! Owning a home means equity. It is an insurance oftentimes.
You purchase a home to lock in your cost of housing, plus it is an investment, provided you have saved for a proper down payment and don’t overextend yourselves. (Fan of the 15 year loan where the payment is no more than 1/4 your take home pay, personally.)
Bob Lotich says
Hey Sheelah & Alexandra – appreciate your thoughts. Just so we are clear I am not suggesting that owning a home is a bad idea. I have been a homeowner now for 13 years and love it and a lot of the benefits. But the point is that renting, in many cases, makes for a simpler financial life and like I mentioned also provided a limit to how much stuff I could accumulate, whereas my house provides a never-ending list of ways to spend money on it.
Mad idea that renting is better than owning your home. No fun renting when you’re retired, and your income has been slashed. That’s one way of ensuring you stop buying “things” – you can’t afford anything beyond bare necessities, if that. Thankfully, I bought my house before reading this.
Absolutely agree. That was my first thought reading this.