Wednesday, June 25, 2008

Figure Out The "One Thing"

Curly: You know what the secret of life is?
Mitch: No what? ...
Curly: One thing. Just one thing...
Mitch: That's great, but what's the one thing?
Curly: That's what you've got to figure out.
~ City Slickers (1991)

Often, I find there is just too much information. There are thousands of books on personal finance. There are millions of personal finance blogs. And we all have colleagues, family and friends with their perspectives. In my experience, I am most successful when I am able to focus on one thing and do it well. Of course, it's important to find the right one thing.

For personal finance, our "one thing" has been living below our means. As noted in Is There Anything Really NEW In Personal Finance?, our #1 personal finance principle is spending less than we earned. Living below our means made it easier to implement some of the other principles such as #2, saving and investing, and #3, using debt sparingly.

Also, living below our means became a virtuous cycle. By consistently living below our means, only a portion of each raise was used for spending. Thus, with each raise, our standard of living increased and more was being saved. As a result, our emergency and retirement savings grew steadily over time.

How did we know we had the right one thing? Honestly, we only knew in hindsight after retiring in our forties. In retrospect, here are some aspects that helped us know we had identified an appropriate "one thing" for us :
  • Consistent with our values. Both my spouse and I grew up in families with lived frugally and we have a modest lifestyle. Although we may spend a little more on a home and healthy foods, we are not extravagant with cars, clothing or other expenses. For example, I will drive my 2003 truck at least 5 more years, and perhaps 10 years, barring any mechanical issues. We eat at home since my spouse enjoys cooking and I do a number of home maintenance items myself.

  • Sustainable over a long period. Without too much sacrifice, we have been able to live below our means for 13 years, as a family, and up to 25 years by ourselves. Simplicity was part of the reason we were able to follow this principle.

  • Delivers the desired result. My spouse was able to quit working in her thirties and I was able to retire in our forties. For me, results are the ultimate validation of a choice.

  • Of course, the "one thing" may vary for different people and YMMV. So everyone needs to figure out their own "one thing" and then evaluate if it is working for them.

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

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