Recently I read the book: “Love People Use Things” by Joshua Fields Millburn and Ryan Nicodemus who are widely known as The Minimalists. They also have a documentary on Netflix called: “The Minimalists: Less is Now.” In both their book and documentary, Joshua and Ryan share their story about how they went from being extremely unhappy with a good paying job, surrounded by endless material items, and being in a considerable amount of debt to living a purposeful, intentional and financially free life. Joshua and Ryan transformed their lives by reducing the amount of possessions they have and by being mindful of what they bring into their home and focus more on what is truly important to them.

If you haven’t heard of minimalism before, it is a concept where individuals choose to limit their excess belongings and try to only own items they truly need. This approach has been found to allow individuals to live a much happier and fulfilling life. There are extreme minimalists who live without furniture, keep no family pictures, have only a few changes of clothes, and own a total of fifteen items or less however, you do not need to live this extreme life to be a minimalist.

Ryan and Joshua emphasize how the average American assigns too much meaning to their material possessions, which results in individuals disregarding their financial well-being and personal health. We live in a consumer society where we are constantly convincing ourselves that we need the next big thing to make us happy.

We see constant advertisements that suggest our current possessions aren’t good enough. The iPhone you bought last year? Get rid of it! Its camera doesn’t have quite enough pixels. That green shirt you bought a couple months ago? Don’t wear it, purple is the colour of the season. You painted your walls grey and bought matching home decor? Well get out your paint brush and run to Home Sense because beige is the colour of the year. In reality, there isn’t anything wrong with the things we already have.

Ryan and Joshua shared how much Americans spend annually on non-essential goods:

“We spend $1.2 trillion every year on nonessential goods. Just to be clear, that means we spend over a trillion dollars a year on things we don’t need.”

When individuals prioritize purchasing non-essential items over taking care of their finances, they are often left in a poor financial standing, which can cause stress and unhappiness. Ryan and Joshua stated:

“Over 50 percent of us don’t have enough money on hand to cover even a month of lost income; 62 percent of us don’t have $1,000 in savings, and nearly half of us couldn’t scrape together $400 during an emergency.”

This statistic is alarming because in the event that an emergency did occur, these individuals wouldn’t have funds to be able to cover the expense. What is even more startling is, “… 60 percent of households will experience a ‘financial shock’ event within the next twelve months."

Before you go out and buy that new outfit or iPhone, think to yourself ‘do I actually need this?’ What would happen if you decided to contribute $200 to your TFSA instead of buying that new pair of shoes you wanted? Well that $200 invested with a 5% rate of return would turn into $325 in 10 years. That is $325 more than you would have had if you bought those trendy shoes that would be lost at the back of your closet. What would happen if you reduced your spending and saved $200 monthly for the next 10 years? It would compound to $31,847 with a rate of return of 5%.

Overspending can affect households of all different incomes. As Joshua and Ryan said:

“This isn’t merely an income problem – it’s a spending problem that affects low-income folks as well as six-figure earners: nearly 25 percent of households earning between $100,000 and $150,000 a year say they’d have a difficult time coming up with an extra $2000 within a month.”

There are some individuals who own a luxury car, have a closet full of designer clothing, and own a massive home that are in extreme debt. It is often the individuals who don’t appear to have money that have the most in savings. Look at Warren Buffett for example, he has lived in the same house since 1958 that he bought for $31,500 ($250,000 in today’s dollars) and is extremely content living there even though he could afford much more.

The concept of minimalism encourages us to reduce the amount of possessions we have, to buy less, and to ultimately save more. In doing so, a huge weight can be lifted knowing that we can focus on spending time with the people around us and be in the moment rather than worrying if we can pay next month’s bills or if we will have enough savings for retirement. Let’s face it, we don’t value a person because of the $700 pair of shoes they are wearing. We value people for their camaraderie.

If we save regularly and invest our savings wisely, we will be prepared for emergency expenses and we can enjoy every day knowing that we are financially free. Money doesn’t buy happiness but having money in the bank does bring peace of mind.

It is important to be aware of how you are investing your hard-earned savings. My investment philosophy of owning great quality, dividend paying stocks allows you to live life your way. I choose companies to invest in that provide services and products that we use every day and are paying a dividend that they increase on a consistent basis. No matter if the price of the dividend paying stock is up or down, the growing dividends provide you with an income, which you can live off of. 

 

“How will you replace your current income in retirement?” ™ – Jim Seyers