- What minimalism is, what it isn’t, and why we’re so attracted to it
- Why having more choices isn't always better
- How to simplify your personal financial decisions, so you have more time for what’s important
You purged your closet, traded your chair for a squatting desk, and just the other day your partner walked in on you watching—“Tiny House, Big Living.” You’ve been bit by the minimalism bug, and it’s not a bad thing. Especially when it comes to your finances.
With minimalism comes clichés of quitting your job to start a travel blog and attending silent retreats in Tegalalang, Bali. But minimalism isn’t about fitting your life into a backpack. At its core, minimalism is about freedom. Theory goes, if we remove the excess in our lives, be they material possessions, daily responsibilities, or our obsession with being busy, we should be left with that resource we all crave but secretly fear having too much of—time. Time for relationships, experiences, passion projects, things that make us truly happy.
Why we're so attracted to minimalism
“What’s for dinner tonight?” “Did you send that email?” “Are you sure you can recycle that?” If you just felt a pang of anxiety, you get the draw of minimalism. By some estimates, we face over 35,000 decisions every day; Cornell researchers say we make 221 food-related decisions alone. Not only are these decisions exhausting but also harmful, coming at the cost of stress, anxiety, impulsivity, and even choice paralysis.
You can't even decide what type of jam to buy
In 1995, in a California supermarket, researchers Sheena Iyengar and Mark Lepper showed the world how paralyzing choice can be. First, they set up a tasting booth, offering shoppers a variety of jams to taste and a coupon for $1-off any jam purchase. The tasting booth rotated hourly, offering 24 flavours one hour, and 6 flavours the next.
Human nature would have us believe that more choice is better
And more choice was certainly better when it came to attracting tasters to the 24 flavours booth, which attracted 50% more shoppers than the 6 flavours display. But when it came to decision time, actually purchasing the jam, only 3% of customers in the extensive choice condition—24 flavours—purchased a jar of jam. Compare that to the limited choice condition of 6 flavours, where 30% of tasters redeemed their coupons.
Personal finance can be a Pandora’s Box of decisions. That’s why responsibilities as important as budgeting, investing, rebalancing, and filing your taxes are so easy to put off. Fortunately, there are ways to simplify these decisions. So throw away that beanie baby collection you’ve been sitting on with the false hope it'd be worth something someday, and simplify your financial life with these six tips.
Ways to simplify
1) Switch to eStatements
You may prefer the papery feel of a novel to a Kindle, but I doubt you feel that way about your bank statements. Switching from paper to eStatements seems trivial, but the benefits will surprise you. Besides killing fewer trees to know your credit card balance, reducing physical clutter improves your focus. Researchers from Princeton found that the mere presence of visual stimuli—such as a messy desk—competes with your brain’s ability to focus and process other information. So save time, trees, and mental capacity by switching to online statements. If you simply must have your statement in paper form, you can always print it ad hoc.
2) Automate your deposits
Save for a rainy day with automatic deposits, a quick and convenient way to transfer funds from your chequing account to your investment and savings accounts. Automatic deposits save you the headache of funding your account every week, month, or year, and more importantly, they regiment your saving. Try timing it for the day after you get paid and you’ll never know it’s missing. But you’ll be glad it was when you see the cumulative effect of consistent saving.
3) Consider investing in funds over individual securities
Researching, buying, and monitoring a portfolio of individual stocks or bonds can be time-consuming for an experienced investor, let alone a novice. If you’re the latter, or the word investing makes you yawn, you’re in luck: exchange-traded funds (ETFs) and mutual funds can make investing easier and come with the added benefit of diversification.
Both ETFs and mutual funds invest in a collection of stocks, bonds, and/or other assets. By investing in a variety of assets from unalike companies and industries, these funds can spread the risk and reduce exposure to any one investment. Portfolio managers largely make the investment decisions in the case of mutual funds, whereas the majority of ETFs simply track a stock or bond index (e.g., S&P 500 Index, US Aggregate Bond Index). However, this convenience does come with a management fee, so be sure to take that into account. Also pay particular attention to mutual fund management fees (called MERs), which tend to be both high and hidden in Canada. If you are fee sensitive, consider ETFs, which are a low-fee alternative to mutual funds.
4) Consider investing with a robo-advisor
If you like the sound of mutual funds and ETFs but want something even simpler, robo-advisors could be the solution. Contrary to the name, robo-advisors aren’t robots taking care of your investments. They are financial companies that offer financial advice and portfolio management but with less reliance on face-to-face contact, since most things, from finding the right portfolio to rebalancing it, can be done almost entirely online. By leveraging technology, robo-advisors cut down their infrastructure costs, they also typically build portfolios from low-cost ETFs, meaning they can pass all of these savings on to investors.
Investing with a robo-advisor can be as easy as opening your account, answering a few questions about your financial goals and appetite for risk, then reviewing and accepting your recommended portfolio.
5) Batch pay your bills
Your cell phone bill arrives on the 10th of the month, credit card statement the 15th, hydro the 23rd, and credit line the 27th—vendors aren’t sympathetic to the scheduling of your bills. But there is a way to simplify the bill paying process, and that is to pay all of your bills at the same time every month rather than when they come up. In the above example, you could pay them all on the 27th if the due dates allow. Better yet, automate them all.
6) Consolidate your debts
Even when you aren’t thinking about debt, a sense of indebtedness can pervade your everyday life, leading to sleepless nights, lower productivity, and sometimes illness. One of the many burdens of debt is keeping track of all the places you owe money. Not only do you have to keep track of what payments to make, when, and to whom, but also which debts get priority. One way to rein in your debts is to consolidate them into one easy payment, hopefully at a lower interest rate. And you don’t have to do this alone.
Credit Counselling Canada is a non-profit association that “serves anyone who needs help managing money and credit as well as reducing or eliminating debts.” Being a non-profit they don’t typically charge for their service.
One of their key services is debt repayment, with the aim of helping Canadians:
- Reduce their monthly payments
- Reduce their interest and other fees
- Eliminate calls from creditors
- Repay all debts in a reasonable time frame
- Re-establish their credit
- Relieve stress
So much time for activities
Having to make too many decisions is a modern malady, and minimalism is a possible cure. Hopefully, with these six steps, you’ll be able to simplify the decisions you have to make regarding your finances and have more time for your passions. Hey, one of them might even become personal finance.
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