How ‘Essentialism’ Can Help You Make Better Money Decisions
While a minimalist life can be great for some, this is not that.
Essentialism is about saying no to most things so you can make the highest contribution to the things that matter. It’s about pausing to ask yourself ‘Am I investing my time, energy and money in the right activities.’ Because most of the time, we’re majoring in minor activities, says Greg McKeown, author of the book Essentialism: The Disciplined Pursuit of Less.
These days, he says, we have too many choices, too many outside influences on our choices and a lot of stressed people walking around trying to cram too much stuff in.
But when you pause to weed out the distractions and focus on what matters most to you, it can help you reach your financial and life goals faster and be happier to boot.
McKeown’s book is one of the best books I’ve ever read on improving your life by being more strategic with your time, energy and money—your three most valuable resources. It’s something I’ve been practicing for a long time, and have written about, and it significantly changed my life. But my term for it was getting ‘purposeful,’ or at other times, ‘simplifying.’ What’s different, and what I love, about McKeown’s approach is that simplifying or getting purposeful implies something you have to do. Essentialism on the other hand, implies doing less—a cutting away of the unnecessary to have and do more of what matters. It’s a letting go and at the same time a super-focused pursuit.
What is essentialism and how it applies to money
McKeown defines it as the pursuit of less, but better. Ignoring what is non-essential and focusing on the things that matter the most for the results that you want to achieve.
It doesn’t mean denying yourself of what you’d love to have in your life. Quite the opposite. It means knowing unquestionably what raises the quality of your life and actively bringing those things in, while deliberately shedding what doesn’t add value.
When it comes to your financial, business and life goals, funneling your time and resources toward only what moves the meter and cutting out the rest helps you achieve them more efficiently and effectively.
How it applies to money
You want financial freedom today, tomorrow and every day. You want to do what you love and contribute to the world in some way without worrying about money. When I work with people on their money habits we find that their money goes to everything but that.
In fact, so much of our money goes to the wrong places.
Juliet Schor, author of The Overworked American: The Unexpected Decline of Leisure and others have argued that we pursue the wrong things—namely more income and consumption. This pursuit puts us in a never-ending work-spend cycle and keeps us from reaching the kind of life we’re trying to achieve.
The power of making a conscious choice
Most of what we do or have is unimportant and yields very little reward, says McKeown. To change that, you need to revise your life to pursue what deeply inspires you. You can do that by overriding your impulsive decisions and the ones you’re making for superficial reasons or for other people.
The power in simplicity
Simplicity is another way of saying ‘paring away the non-essentials.’ It’s something we innately crave but have so much trouble creating. The thought of having it makes us feel good, less cluttered, less bogged down. The thought of trying to make it happen seems impossible.
And one reason may be that we’re just not wired for it. For one, our brain works on the reward system. When we acquire, our brain sees it as a reward and wants to acquire again and again and again.
How often have you looked around your house and realized you have so much stuff you don’t even want. Or you mindlessly bought a bunch of things you didn’t need or you said yes to something you didn’t want to do or did more work than necessary. And you look at it all and feel overwhelmed.
But your brain just keeps wanting the high of those rewards. So it takes effort to steer away from it and focus on paring down. But once you do, once you’re allowing only what’s meaningful into your life and letting go of everything else, you tune into something greater. A connection to yourself and what’s meaningful to you that you were missing before.
Here are some suggestions for ‘essentializing’ your life.
Make the space for it: We’re pulled in so many different directions every day and feel like we don’t have time to stop and get clarity on our finances and what we really want. In many cases, we spend our life winging it. Making that space to get clarity and a plan for optimally spending your time, energy and money is the only way to create a healthy, happy, financially free and thriving life. Even though I’ve gotten pretty good at this essentialism stuff, I squander too, but often catch myself early enough. Which is why really making the space to practice is key. The more you keep it front and center in your day, the more your money will go to the right places and the better your life feels.
Play the game of ‘Which problem do I want?’ Would you rather say no to the luxury car and feel envious of the cool model in your friend’s driveway or sleep more soundly than your friend at night because you have more cash flow? Would you rather be the most prestigious doctor in town by being available to everyone 24/7 or be less known but get to surf with your kids three days a week? We often get caught up in what society values rather than what we value and go after the superficial without realizing what we’re sacrificing.
Take inventory: Separate what McKeown calls “the vital few from the trivial many.” What in your life is non-essential? What is non-negotiable, meaning you must have it in your life for your long-term joy? Start scaling back or ditching the non-essentials as you can. It may take time, but you’ll feel liberated with each thing you let go of.
Get mindful. If you’re not self-aware and paying attention, it’s too easy to be sidetracked, unfocused, an in unconscious robot-mind with your decisions. Try setting your phone alarm to sound a few times a day to trigger your awareness of the types of decisions you’re making.
Spend mindfully. I make every expenditure and money decision meet at least one of four criteria (you can use these or have your own criteria):
- Is it necessary?
- Does it lead to financial freedom?
- Does it lead to personal or professional growth?
- Is it for something you love/long term joy/memorable experiences with loved ones
Automate saving and investing: Now that you might have more cash flow because you’ve weeded out unimportant stuff (and even if you don’t), make it add up without extra work. The best way to simplify saving is by setting up automatic transfers from your paycheck to your savings/investing accounts or from your checking account as soon as income comes in. If your money has the chance to sit in your checking account, it will probably get spent on something that isn’t financial freedom or your major goals.
Start tracking: I’ve written about tracking many times because tracking changes the game. It’s the best tool for improving pretty much anything because it keeps you focused on the goal. Every night, write down any decisions you made that weren’t in line with your best possible self. The more you do this, the more aware you’ll become.
As McKeown notes, many smart, capable and driven people are kept from reaching their goals because they believe everything is important. When you focus on the right things instead of everything, you’ll start to see your financial goals and dreams coming to fruition.
Could you become more of an essentialist? If not, what’s stopping you? We’d love to hear your thoughts or experience in the comments below.
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