The Zen of Saving and Spending
A few years back, my wife and I were “resting and recovering” on New Year’s morning. We pulled up Netflix and stumbled into the release of a brand new series called “Tidying Up With Marie Kondo.” We clicked in, and were instantly hooked. The show’s format involves Kondo taking on “tough case” families who are out of control when it comes to the cleanliness and order in their homes. Each episode, Marie comes in and saves the day using her expert organizing techniques, plus a little dose of Zen.
My wife and I binge watched the entire series over the next 48 hours. It was a brilliantly timed release by Netflix, tapping into the “out with the old, in with then new” theme of the new year. And Marie Kondo really is a master at the skill of organizing. My favorite tip if hers was the concept of “sparking joy.” The method is this: to help you let go of things, you basically pile everything up and start picking through the pile one by one. Pick up each item, consider it, and ask yourself, “does this item spark joy”? If the item does spark joy, great, put it aside in your “keep” pile. If not, place it in the “discard” pile.
It was an eye-opening experience, and I highly recommend you do this process with the stuff in your home. In addition, Kondo gives tips on how to fold clothes, organize drawers, and gives you a process to tackle every space and item in your home. To this day, my dresser drawers are still arranged the Kondo way, and it honestly gives me a sense of calm every morning when I open up my shirt drawer and see the t-shirts organized in neat rows.
And here is where we pivot back to retirement. The Kondo method is so valuable, I believe it makes sense to “clean house” with all of the items in our lives, not just home goods and material things. Do it with your spending. Do it with your time. Here are some tips.
Make Sure Your Spending is in Alignment with Your Values
The goal here is to align our spending with our values. We want to make sure that the money we spend is in alignment with what is most important to us.
Think about all of the things you spent money on in the past week, month, and year. Is there anything that did not “spark joy?” If so, make a note and look for ways to eliminate this spending. Of course, we are mostly referring to our spending on “discretionary items.” So don’t worry too much about the essential spending like mortgage, rent, utilities, etc. (But even there, we have room for improvement. More on that later.)
Try This:
-Scan your monthly credit card bill. Are there any charges that do not bring you joy? Use a red pen, or a highlighter, and mark the items that fit this category. Think about how you might change the situation.
-Review your bank account for automated payments, debit card charges, and smart phone transactions. In addition to the “in or out” sparking joy method, you could also rank your spending items using a 1 to 10 scale based on how much joy the spending brings. (10 = super joy. 1 = total waste of money.)
-Once complete, consider immediately dropping everything scoring in the 1 to 3 range. Then consider the rest of the items that rank higher. Can you reduce some of these costs? You have likely heard of the slogan used by environmentalists: reduce, reuse, recycle. Well, here is a catch phrase that isn’t as rhetorically snappy, but it is useful: Reduce. Substitute. Eliminate.
The simple template below can help you think this through. The whole point of this is to free up space for saving. The ultimate goal is to carve out enough savings so we can put away at least 15% of our income.
One of the nice things about a review like this is it’s not all bad. When I review my credit card spending, I often see items that I am completely happy with. My music streaming service is worth every penny because I use it all the time. My wife and I have a favorite restaurant we go to that we both value very highly and would never eliminate. A spending review like this reinforces the things we do value, and it highlights the areas where we can save money with really NO loss in our quality of life. Sometimes eliminating spending ends up as a GOOD thing, not a sacrifice.
Perhaps you can swap in an activity that is free without losing any satisfaction? Maybe spend time in nature or at a museum. Browse a new place you have been wanting to visit. Make contact with a group you find interesting. Call a long-lost friend and reconnect. Look for fun things that do not cost money. Maybe an easy bike ride around the neighborhood?
Your Time is as Precious as Your Money
There is really no difference between money and time when it comes to this exercise. I highly recommend “cleaning house” with your activities as well. Are you spending your time on things that you value?
Consider This:
-List the main things in your life that you are spending time on. (OK, similar to above, we may need to filter this to “discretionary” activities. But hey, you may want to include chores and required tasks if you like. It may spur you to find creative ways to simplify, streamline, or even eliminate these tasks.)
-Just like the exercise above, are you seeing any activities or experiences that did NOT fit with your values? Where you spent time and received no payoff, or very limited satisfaction? If you review an item and the answer is, “yes, this sparks joy,” then add it to your “keep pile.” If not, discard it. Again, the idea is reduce, substitute, eliminate.
-Review for a second time your credit card statement and bank statement. But this time, think in terms of the time you spent on the activities and items shown. For example, are those subscriptions worth your time? Did the trip you took amount to time well spent? Are you getting the satisfaction you want out of your hobbies, recreational activities, restaurant visits? Applies this concept to everything that consumes your time and energy.
-Take a quick look at any of your calendar apps in a monthly view. Look for items that bring little to no pleasure or meaning. But also, items where time was well spent. Remember those and do them again!
-Again, for all of these activities, you could also use the ranking scale from 1 to 10, and drop everything with a low score.
-And just like with the monetary charges, this does not have to be all bad. Don’t forget to be grateful for the activities and experiences that rank 9 and 10. This exercise can double as a gratitude session and re-enforce the concept of the value of your time.
Here is an exercise for bonus points. Track your time for a week. Just use a simple pen and paper or the notes app on your phone. Evaluate and rank the value you got from the time spent on different activities.
End Game
The sign that we have completely “cleaned house” is when the three key elements are in balance: money, time, values.
Once we can say that we have maximized the joy we get from each spending item, and each activity we spend our time on, then we can consider our life in balance.
Imagine a life where all of the time and money we spend “sparks joy.” I can’t think of a better definition of success.
Aligning Your Values With Your Spending
Review the items you spend money on and make a list, either manually or using a spreadsheet. The five column headers can read like this:
Item $ Spent Purpose Spart Joy? (Yes/No) Value Rank (1 lowest, 10 highest)
Aligning Your Values and Time
Review the items you spend time and energy on and make a list, either manually or using a spreadsheet. The five column headers can read like this:
Item Time Spent Purpose Spart Joy? (Yes/No) Value Rank (1 lowest, 10 highest)
Up Next: What if we were to just skip the long, boring “saving” part of retirement and go straight to Las Vegas, or play the lottery? Or maybe we should sit back and wait for an inheritance? We will discuss the pros and cons of these “wealth accumulation” approaches next.
Progress Check:
Have you freed up some $$ to invest? Here are some tips on the best next steps:
The Most Important Factor in Retirement Success: How Much You Save
Why It Makes Sense to Automate Your Savings
The Three Key Factors in Investing for Retirement (Part 1) — Fund Mix
