Orthogonal Stuff Downsizing

A big topic these days for folks is downsizing their lives (at home), and how to get to a minimalist lifestyle. I agree that if you have too much stuff and it is sucking the life out of you, then yes, get rid of it, but I am proposing a much more important technique when it comes to downsizing, and I am hoping it revolutionizes how people think about downsizing.

As an example of this new concept, say you walk into a store and you see an awesome new tablet computer that you are sure will help you wow your neighbours, make you irresistible to women and help your internet experience be that much better, remember these simple words, “You don’t need it”. (YDNI)

3 planes that are orthogonal to each other

The reason I call this revolutionary concept Orthogonal Downsizing is that it is the opposite to downsizing (or perpendicular to the downsizing plane of existence), if you never buy all this stuff, you don’t have to worry about downsizing (and you have the money you didn’t spend, but that is an obvious side effect).

If you stay on the Orthogonal Downsizing plane of existence you have the added benefits of:

  • Not having your basement full of stuff that might catch fire and burn all your nice stuff (and maybe you).
  • You won’t have to pay rent on a storage unit, because you have that much stuff, that it doesn’t fit in your “Stuff Holder” (be that your house, apartment, parents’ basement, trunk of your car, etc.,). I am not sure which industry has a faster growth potential, Pay Day Loan places or You Storage Units, but I digress.
  • The danger of being crushed to death by a pile of stuff you no longer use, when it falls on you is diminished a great deal.
  • The word downsizing isn’t needed in your vocabulary (you can replace with a cool word like Orthogonal).

Is YDNI the New YOLO ?

If you want to get YDNI tattooed on the knuckles of your right hand (or your spending hand) this might slow down that urge to buy the deluxe cheese straightener that you feel you simply must have, or the granite mortar and pestle set to make sure your curly basil is prepared in the correct way.

Seriously folks, stop buying crap, and if you rent a storage unit, you are in trouble and need to get rid of stuff.

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Live Now Pay Later

Sounds like a title of something I would write, isn’t it, however I am actually borrowing that title from a film which starred Ian Hendry, yes “Live Now Pay Later” is actually available on YouTube to watch.

Live Now Pay Later

The movie was made in 1962 and was a commentary (satire?) on going from a very Frugal Saving Society which Britain was at the time (rationing hadn’t been over for that long) to a full consumer society, which in some ways is the opposite of where we stand right now in North America (and possibly worldwide).

The title is almost the title for the past 15 years, with the continuing growth of consumer debt, in fact I wouldn’t be surprised if Live Now Pay Later was the catch-phrase for any of the credit cards out there.

If all you do, listen to the Theme music at the start of the movie, it’s chilling how descriptive it is to today’s society, and the movie is over 50 years old! The only reason I even know of this movie is it was on the BBC once when I was visiting my Aunt in the 70’s.

If your personal finance credo is, Live Now Pay Later, you are digging a hole that you may never be able to fill back in.

The Actual Movie

Yes, this is the actual movie as posted by Ian Hendry.

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Do You Make More than You Did 5 Years Ago?

The simple answer is (if you are in your 20’s or 30’s) is, of course. I make more than I did 5 years ago, however, do you really? Has your lifestyle changed to consume that increase in income ?

Lamborghini Gallardo Sports lifetyle choice
You Deserve this don’t you?

Lifestyle creep is a very dangerous problem for young folks, who start making good money, and decide that their lifestyle needs to expand so they can “enjoy their new life”. Speaking as someone who fell into that trap, I can assure you that it is much harder to simply keep living like you did when you were “poor” (or a student) than to give into your Impulses and “spend, Spend, SPEND!!!”. I borrow this idea from the concept of Feature Creep, where your customers (or worse your management) want to add more and more things to a project, “because they are small”, however all these small add-ons become a big expense (in terms of time, money and resources).

The question really should be, “Do you netas much as you did 5 years ago?”, and that question is a lot harder to answer.

While your income may have increased a whopping 25% (gross) over the past 8 years (or so), the problems you run into are the following:

  • If you crossed the magic line and jumped into the 2nd Canadian Federal Tax Bracket, your new income is now no longer being taxed at 15% and now it is being taxed at 22%, so you aren’t actually having a linear growth on your income. If you live in Ontario your provincial tax rate jumps from 5% to 9% too, isn’t that fun?
  • That crappy apartment that you shared with your annoying roommate that cost you only $400 a month is now gone and you have a great apartment of your own that you are now paying $1500 a month.
  • You have worked hard, so instead of camping in Algonquin park with your buddies and having your major cost being 3 cases of beer, you decided that you deserve a cool vacation to one of those all you can drink (and eat I hear) in Cuba, and it only cost $900 with the air fare.
  • That death trap of a car that you drove into the ground at school, that you did most of your own service on is gone, and you are now leasing a nifty new Studebaker SuckTheMoneyOutOfYou, but your girlfriend really likes it (and it only costs $600 a month on the lease, then more for insurance, and gas).

Are You Getting Ahead ?

You really think you are 25% ahead? If you look closely you might actually be 8% behind (that is a guess on my part it might be more, or less).

Lifestyle Creep is a real danger for young folks, almost as dangerous as belly droop for old guys like me.

Image courtesy of  foto76 / FreeDigitalPhotos.net

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A simple quote from The Big Bang Theory, specifically Dr. Sheldon Cooper. Many times the concept of money comes up on this show, especially since the heroine is constantly broke, so there are many interesting financial theories put forward by the writers of the show. If she simply worked at obtaining more money, she’d be in better shape (financially).

obtaining more money

Dr. Cooper breaks down his money needs in detail (as he is want wont to do), and points out that he only needs about 40% of his income to live on (I am assuming he is talking about his net income). He does not need to work at obtaining more money.

Not a lot of people can explain their financial need down to a percentage in this way, most folks I know simply say that at the end of the month they usually don’t have money left over (or worse they have less than no money (i.e. credit card debt, etc.,)).

Michael James and I have a friend (we’ll call him Samuel) who is the epitome of this concept, in that most of his life (from what we can tell), he has lived on about 10% of his monthly income (when he has had income). We actually confronted Sammy with this fact last week (this topic came up in a Bloggers Dinner Club discussion with Preet Banerjee and Mark from My Own Advisor) and he claims that he has actually become a spendthrift and his “spending line” might actually be up to almost 20% of his net income (we both laughed very loudly at that one).

As I pointed out in one of my first posts about Dickensian Economics:

Annual income twenty pounds, annual expenditure nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

David Copperfield, Charles Dickens, 1849

Even in the times of Dickens, was that simple rule known, wow!

What is your net burn rate?

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Keep it in Your Pants!

An interesting turn of phrase isn’t it? The term is clearly used in a derogatory fashion by both Women and Men and might have a sexual connotation  if you think about it for a minute, however, it also has a very strong financial message.

Don't be whipping this out in public!
Don’t be whipping this out in public! Keep that Bad Boy in your Trousers!

What are 3 things you should be keeping in your pants?

  • Your Wallet, if you don’t whip it out, you won’t spend your hard-earned cash.
  • Your Money, if you won’t have a wallet. Don’t leave your money clip hanging out, or you’ll lose it
  • Your Credit Cards, keep those hot little babies in your pocket and you’ll have less debt

And when I say that, I mean keep them there, don’t take them out (not a simple suggestion of where to store these things).

You want to keep your money? Keep it in your pants (better still keep it in your bank, but leaving it in your trousers is a good start). Of course, those with a UK background, might comment on the use of “pants” and not “trousers” (since pants are the things you wear under your trousers (or slacks)), but be that as it may, keep your money in your trousers and you will save it!

If you need something to whip out, whip out a few pennies and put them in a donation box!

Anything else you should keep in your pants?

Yes, I stole this premise from Blazing Saddles!

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