Back in our twenties, Thom and I wanted to be millionaires. TV shows like Lifestyles of the Rich & Famous and Who Wants To Be A Millionaire? fueled the desire to amass our fortune. Then somewhere along the way someone really SMART asked Thom, “Why a millionaire?” and forced him to consider what he meant by that idea. For the first, time Thom began listing experiences and feelings that he hoped to achieve if and when he/we became millionaires. To which his friend said something like, “So it’s really the feelings and experiences you want—not the money itself?” From that moment forward, we began realizing that the labels of being rich, poor or somewhere in-between had little to do with the actual quality or experience of our lives. In fact, the things we thought most important could be realized with far less income than we ever imagined. That’s why through the years we’ve come to believe that “right-sizing” is a much better way to describe the unique and priceless lifestyle that brings you happiness, purpose and peace of mind regardless of your age. Once you have that clear picture of what brings you a happy and quality lifestyle, you can begin to figure out the second step of where money fits into your life.
As I mentioned in Step One where I covered some of the psychological aspects of rightsizing, the first step is always figuring out what it is that will bring you closer to living a happy, purposeful and low stress life. Once you’ve got that figured out, the next step is determining the trade offs and costs that such a lifestyle requires. Chances are, if you work with financial or retirement planners they will tell you an amount of money you’ll need to come up with to continue living the lifestyle you are currently living. Their work is a cookie-cutter approach that implies that people are humanoids who all want the same things, never change, and are addicted to “more.” But the best questions are much deeper than just maintaining the status quo. Rightsizing suggests that the best lifestyle is one that is juicy, deeply satisfying, minimal stress, filled with purpose, creativity, emotionally rewarding, and as unique and special as each individual. Once each of us has a better idea of who we are and what really makes us happy, then we can start seeking ways to experience that on a regular basis.
Here’s a good place to start:
#1 Sit down and list exactly (line by line) what you are spending to maintain your current home—specifically mortgage, insurance, utilities, taxes, yard, maintenance, etc. If you are renting, list every expense like rental rate and utilities. I know, it’s not a fun job but it is very important to be honest and aware of what it is you are spending your money on—everything from silly stuff to big and important things.
For example, before Thom and I made our big move from a large suburban home to a home almost half the size, we discovered that we were spending almost $40,000 extra every year to live in that house with those amenities. Because we had also taken the time to write out beforehand what was very important to us to live a quality life—we realized that a big house wasn’t on the list and didn’t mean that much to us. Instead we discovered that we could better use that $30,000 in ways that would double and triple our happiness quotient. Also keep in mind that if you can rent a place that suits you at a fraction of the price to own, then that might be a great alternative.
#2 Look at your vehicles and add up all the costs associated with them. I mean all costs—car payment, gas, taxes, insurance, maintenance, and upkeep. Now look at your list of things you feel is important to a quality life and see where those cars fit into it. Do you really need that many or those models? I know several people who are slaves to large, fancy, name-brand cars just because they think it adds to their prestige or image. Face it—the only people who care how many you have or what kind of car you drive are people who are also worried about what everyone thinks. The quality of your life and experiences ultimately has very little to do with what anyone thinks of you and everything to do with how much you have to give up to drive (and own).
#3 What kind of debt are you carrying around? You’ve already done some of this with your home and car but what are your other debts. Credit cards? Lines of credit? Purchases on time? List each one with both the balance and the average payment you make each month. Then list them in order of the “stress level” each of them brings. If you struggle every month to pay your credit cards, those would go to the top of your list. Again, knowing which causes the most stress is illuminating.
#4 Now make a list of every single on-going expense you have every month. Start with all your home costs that you’ve already calculated, plus your car expenses and then keep going. List how much you routinely spend on everything: food, entertainment, phone, cable, utilities, insurance, education, coffee, children, etc. List everything. Take a day or two to do this because if you dwell on it you will come up with more and more things you conveniently forget about but still spend.
Then once you have that list look through it and rate every single cost on a 1 to 10 basis about how much it adds to your life in terms of quality. For example—take cable TV. I happen to watch more TV than I need to but I also enjoy some of the programming that I watch. However, if I were to “rate” it honestly, the cost of my cable TV on a 1 to 10 scale would likely be around a 6. I could do without it; especially if there was something I was denying myself that I would enjoy more. But knowing its importance to me tells me a lot about my life.
All of the above questions attempt to clarify what you are currently spending money on and how important –or not important—those things are to your idea of a quality life. Now that you have pinpointed where your money is going—now is the time to ask yourself the following:
A) When I look back on all the questions I answered in Step One—how much of my money am I spending doing those things? If you say you love fixing motorcycles and riding them as much as possible, but never seem to have time to do it, that’s a good place to start. If you love to cook but are always too tired after slaving at a job you dislike, you need to look at that too. Are you spending your time, energy and money doing things like shopping when you would just as soon be going to a free community concert or lecture?
B) How do you feel about your current job? Do you stay in your job only because you are “waiting” to retire? Can you see from some of the other experiences that your current job might actually be costing you more of both money and life energy than it’s worth?
C) Do you continually reward yourself for working at a job you don’t like? You know what I mean right? You buy yourself a Venti Frappucino on the way home from work because you had a long hard day. Not only are you spending $5 bucks but you’re eating a large portion of sugar and caffeine. Or what about shopping, you buy that extra pair of shoes because they are cute and when you do it makes you feel good about the fact that your boss yelled at you that day? Do you often spend money you don’t have just to make yourself feel better? Eventually the cost of that expense will cause even more stress that needs to be addressed.
D) List what you could eliminate today that would make you feel freer and less stressed out—then put them in order. If you are going to a job that feels like a noose around your neck that might be number one. Or are you struggling every month to make credit card bills—or a mortgage payment? List the things that would make your life feel great if they were gone.
Once you’ve come up with that list—compare it to the list of things you came up with in Step #1 of rightsizing your life. Say you’ve become aware that your current debt level is sucking the very life out of you. Obviously a first step would be to put most of your efforts into paying that particular debt off. Sure it might require extra time and energy—but remember, if you have a good idea of things you can do that are free that make you even more happy—you can start adding those to your life whenever possible.
I recommend that you go for the big stuff first. Like I mentioned before, Thom and I realized that our house was a huge chunk of money that we would rather spend doing other things. We also had three cars at the time. Letting go of one of those vehicles allowed us to free up money, time and energy.
E) What would it take for you to be debt free? I know that lots of people can’t imagine being debt free so this might seem like a bit of a stretch. But if you take the time there might be some way you could see yourself free of debt and living a much happier life. Sure you might have to save and be thriftier for a number of years to pay off your mortgage—or you might simply be able to sell what you have and scale down to what you really need to accomplish the same goal. For Thom and I one of the most rewarding aspects of right-sizing has been achieved by going completely debt-free. Honestly, it was not any easy thing to do but even if it takes a number of years like it did with us—it can be done if you really want to. Do you?
There are actually dozens of more questions I could ask that would help simplify your finances and right-size your lifestyle but these are a great place to start. If you get bogged down or have a difficult time staying optimistic through the process, I recommend that you go back to Step One and remember all of the things that are truly important to you. Whenever we spend time focusing on the activities and qualities that make our lives meaningful and worth living, we are uplifted and rejuvenated. That is the power of right-sizing—and it is always in our reach.
When I first imagined writing this post about right-sizing I thought I could do it in two steps. I’m now realizing that there is a bit more to say that I think will add to the experience—so next week I will cover, “Final Thoughts on Right Sizing Your Way To Retirement.”
Final Thoughts on Right-Sizing Your Life Right Now–is now available!
Christine Somers says
I think your series on Right-sizing to retirement is right on the money, so to speak. Getting clarity on what you want your retirement to look like is the key to understanding what it is going to take to finance that life. Planning for what you want “to have” instead of what you want “to do” in retirement is not only draining but limiting. Everyone should give themselves the opportunity to dream and expand their horizons beyond the car they own as they craft their retirement years. Thanks for the reminder that we have so many options and giving us the how-to for the retirement.
Kathy Gottberg says
Hi Christine. From a person who writes regularly about intentionality, I’m not surprised that you picked up on what is such an important part of planning for our future. And as you say, trying to figure out how much cash you’ll have or what car you’ll own is much less important than figuring out what kind of life you’ll be living! Yes, we do have plenty of options. HOpefully we can continue to remind each other as time goes by to keep reaching for the stars! Thanks always for your comments. ~Kathy
Cathy Taughinbaugh says
You have some great suggestions for anyone as they are getting read to retire. So often we get used to either the large house or certain other things in life and realize that we could possibly do more traveling or do other things that we enjoy if we make some adjustments. Retirement is somewhat of a wake up call to many and finding our “right-size” will make that time in our life more enjoyable. Thanks for the great post!
Kathy Gottberg says
Hi Cathy! Glad you liked the post….but I’m hoping that people realize that you don’t have to wait until you are retired to “right-size.” At this point Thom and I never plan to retire because we are already making so many steps that increase the quality of our lives by living beneath our means–AND because we happened to have set up our occupations as things we love doing (and can continue no matter what our age.) And yes! you and I are alike about preferring travel over a big house! ~Kathy
Dave Bernard says
Great advice Kathy. Money is in no way the secret to happiness as we so often see following the lives of the rich and famous among us. I have always liked the motto “live beneath your means”. You don’t have to go over the top with things to be happy. Spend less than you make or have saved and money can be your friend not your enemy. As you describe, just taking a close look at where we spend our money can open our eyes to the waste. I maintained a spreadsheet of expenditures for years basically to see where it all went come the end of the month. There are definitely places to cut back that don’t negatively impact our quality of life. Enjoy! 🙂
Kathy Gottberg says
Hi Dave….I know you write a lot about similar topics on your blog (and books) too so I appreciate your input. Isn’t it the truth that when we learn to live beneath our means we often find so much to be happy for that doesn’t cost much. I think it’s developing that habit and then reminding yourself of that possibility. Of course it also helps to surround yourself with other people who are doing the same, reading about it on a regular basis, and talking about it with friends. The media and our culture continues to promote the idea that money (whether working or retired) is the way to the greatest happiness and as we know, that’s just ain’t true! Thanks for stopping by! ~Kathy
Kathy, these questions are good ones and the information on the investment planners are invaluable. Some people see a major drop in expenses when they retire from savings on wardrobe, commuting costs and the meals eaten out which means they would need a lot less to retire than they need now to work. But if your retirement is filled with expensive travels and shopping you may need much more.
Kathy Gottberg says
Hi Lois….Isn’t it just amazing how most financial planners focus on the money angle? Even Susie Ormond, who has some good things to say about savings and living within your means makes it all about socking away a big chunk of money in order to live a happy life. And while having savings for a rainy day is good–having a “Life” is much more important!!! When we learn to live simple–and free–like your great example…we don’t need scads of money. Do I like to travel–sure! Do I have to travel–no always. And I did plenty of traveling when I had little or no money too. I think it all depends on what we think we have to have, what we can’t do without, and what’s really important. I lump all that together under the “right-sizing” umbrella. I’m just hoping that my thoughts on this are helping others find their own “right-size” too.~Kathy