The Greenroom

Our latest guest post during our month of sharing comes from Trent Hamm, the writer behind The Simple Dollar,
a blog focusing on personal finance and personal development. Be sure
to check out his blog after reading this truly inspiring piece.

Every time you spend a dollar, you sacrifice a bit of your future.

Five years ago, I believed the above sentence was foolishness. I was
24 years old, working at a high paying job, and about to get married to
a wonderful woman. I had just spent almost ten thousand dollars on a
wedding ring and an exorbitant honeymoon in Europe, and I was actively
shopping for a new vehicle because, well, my current ride just
wasn’t quite good enough.

Roll forward three years. I had $17,000 in credit card debt and
literally not enough money to pay my bills. A good chunk of the debt
incurred for that honeymoon still sat on the credit cards. My wife,
son, and I lived together in a tiny apartment, trying to figure out
what we were going to do next.

Everywhere I looked around me in that apartment, I saw stuff I
didn’t need. Video game consoles piled high under the television,
along with a small mountain of games for the consoles. Over a thousand
DVDs. A gigantic television set that dwarfed our living room, looking
almost comically out of place. A huge collection of Magic: the
Gathering cards. So many books that half of our child’s bedroom
consisted of bookshelves. Two nearly-new cars sitting outside.

And yet I felt empty inside. I held my child close, thinking about all of the things I wanted to give to him, but instead I had chosen to spend all of my money on stuff

Every time you spend a dollar, you sacrifice a bit of your future.

Today, not only do I believe deeply in that sentence, it underlines
every choice I make in life. I turned that disastrous ship around,
realized that all of that stuff was standing in the way of my passions
and dreams, and in just two short years, I found enough financial
freedom to do what I’ve always wanted to do: quit my nine to five
job, stay at home, and focus entirely on my family and on my passion
for writing.

The name of this blog, Unclutterer, really underlines the
entire idea. Clutter exists in all aspects of our life, not only in the
way we arrange items in our office and in our home, but in how we
manage our time and manage our money. Clutter is distraction from the
big picture, in every way, shape, and form. Clutter can even blind you
and choke you if it grows out of control.

Financial clutter is a particularly insidious form of clutter,
because it winds through so many aspects of our life. Much of the
clutter in our office and home has a financial cost to it, meaning that
we actually spent some money to create that clutter. The cluttering of
our time is also financial clutter - if we waste our time on things
that drain our money or don’t earn as much as we potentially can,
we’re draining our financial plans of a great deal of vitality.

Here are six great steps that you can do immediately to reduce the
financial clutter in your life - and begin to open the path to a truly
remarkable life.

Calculate the true value of your time.
Figure up how much you earn in a year. Now, subtract from that the cost
of transporting yourself to and from work, the cost of work clothes,
the cost of income taxes, and any other costs that your job foists upon
you (like entertaining coworkers, for example). Now, figure up how many
hours you actually work in a year, and add to that the time spent
transporting yourself to and from work, the “extra” time
spent working when at home, the time spent buying work-related
materials, the time spent schmoozing with coworkers, the time spent on
business trips, the time you “need” to spend unwinding
after work, and any other time investments you make at work. Then
divide the calculated amount you make by the number of hours you work
for the year. That’s how much you really value an hour of your life. Know that number. Remember that number. It’s important.

Physically unclutter your living space. Go through all
of your possessions and ask yourself whether you actually use it or
not. Is it something that has honestly provided value for your life?
Look for books you’ve not read, DVDs you’ve only watched a
time or two, unplayed games, unlistened music, collections of things
that you no longer feel passionate about, and so on. Gather up all of
this stuff and estimate how much you’ve spent on it. Then divide
it by the value of your time that you calculated above, and if you want
to, divide that by 40 (so you can see this in terms of weeks).
That’s how much of your life you spent working so you could have
this stuff. When I first did this, I estimated that I had spent two years of work accumulating stuff I barely use.

The next step is to get rid of all of this stuff and make a clean
break. Eliminate the stuff that you’re not using, haven’t
used, and likely won’t use again. Get some degree of financial
return out of this stuff in any way you can. Don’t worry about
maximizing your return - you rarely will be able to make back the value
of your time by seeking out a slightly higher return for the stuff.
Then take that money and put it into the bank - it’s now your
emergency fund so you don’t have to turn to credit cards when
something bad happens.

Set some big goals - and remind yourself of them all the time.
This is an effective way to de-clutter your mind. Sit down and figure
out what your true big goals are. My goals were to spend more time with
my children and write for a living - that’s what I really wanted
to do more than anything else. Your goals may differ, but spend some
time really searching within yourself to know what they are. Focus in
on just one, two, or perhaps three goals that really speak to the core
of your life.

Once you’ve figured out what you’re really shooting for,
let most of the other stuff in your life melt away. If you’re
focused on becoming a full-time writer, don’t burden yourself
with chasing promotions at work. If you’re focused on being a
great parent, don’t spend your mental energy worrying about
social obligations in the neighborhood. Focus in on your goal and use
all of your energy to reach that goal.

The best way I’ve found of keeping on focus with the goal is
to put visual reminders of the goal all over the place. My desktop
wallpaper is a picture of my children, and I keep pictures of them
everywhere. I also keep notepads everywhere to make it easy for me to
jot down thoughts - and also to remind myself of my writing dreams.

Use the true value of your time - and those visual reminders of your big dreams - every time you consider making a purchase. Let’s say the true value of your time came out to be $5 an hour (it can easily
be this low, even at a “good” job). You’re at the
store and you’re lusting after buying a Nintendo Wii - it’s
$270 after taxes. That’s 54 hours of your life spent working for
someone else so you can buy something else to clutter up your home.
Even better, that’s $270 - or 54 hours - taken away from your big
dream.

This works well for small purchases, too. Is that latte worth an
actual hour of your life spent working? Is one latte a week for a year
worth 52 hours of your life - more than an entire work week? Might that
$270 not go better helping you save to make that dream come true,
perhaps by helping you build up the financial cushion you need to quit
your job and follow that crazy dream?

Go through every. single. monthly. bill.
Many of the bills you receive every month have some sort of extra fee
in it. Look at your cell phone bill, for instance. Are all of those
features something you really need to pay for, every single month?
Figure out what you don’t need - what’s just
cluttering up your bill - then ring up your cell phone company and get
those “features” dropped. Look at your credit card bill. Is
that finance charge ridiculously high? Call up your credit card company
and request a rate reduction. If the first person you talk to says no,
ask to talk to a supervisor.

Even better are bills you can eliminate entirely. We used to
subscribe to Netflix, but we were scarcely watching two movies a month,
so we cancelled the service. Now, if we get the itch to watch a movie,
we just go rent one or download one — it’s far cheaper than
the Netflix grind. We used to be members at a gym, but now we get most
of our exercise at home or by jogging around the block, so there goes
another substantial chunk of financial clutter.

De-clutter your debt. Make a list of every
single debt you have - credit cards, student loans, car loans,
mortgages, and anything else you have. Write down the total amount you
owe and the interest rate you’re paying on that debt. Order them
by interest rate. Then, each month, make the minimum payment on each of
them, then make a substantial extra payment on the highest interest
debt. When that debt disappears, move on to the next one on the list
until they’re all gone.

The best way to do this is to create a “virtual bill”
for you to pay each month. Figure out an amount that you can afford
without too much hassle - say, $200 - and then each month give yourself
a bill for that amount. That bill is payable to whichever debt is on
top of the list.