I’ll leave the “bigger is better” jokes up to you guys. But, if you’ve been around the personal finance blogosphere long enough, you’re bound to hear things like that or “less is more” or some other variations of the phrase.
To me that just seemed obvious – sure, if you want to cut your costs, eliminate your cable or drive a used car and **poof** you’ve saved a few bucks. Frugality at its best.
However, I’ve learned that spending less can actually lead to much bigger savings that I wasn’t even thinking about.
Sometimes when you spend less in one area, it has a domino effect in other areas that make the costs even less overall. And in some cases, those savings can be substantial.
A Lesson in Less is More
My biggest lesson in the “less is more” part of life just came recently. Our move into the apartment has become kind of a surprise in many ways.
As we’re getting closer to our move to Panama, we need to start selling and eliminating. One of the most sizable things we needed to eliminate was our house. And because I started to get nervous about the real estate market, we sold this past fall instead of waiting until the last minute.
That meant we needed a place to stay until we head out of the country later next year. So, we decided to move into a nearby apartment complex.
With the change, I obviously knew that we’d be saving on our monthly payment. We went from a principal and interest mortgage payment of about $1,445 to a rent payment of $1,150. About a $300 per month savings. Not a pop-the-champagne kind of moment, but that’s still $2,655 over the nine months we’ll be living here.
Then there were other things that started to shine as well. For instance, our home insurance went from $1,881 per year to $191 per year. Over our time here, that’s another savings of $1,267.50.
But then there were some things I didn’t really even consider… like property taxes. That’s kind of a big one. We went from paying $2,557.82 a half to… yeah, that’s right – a big fat zero. Over our nine month-run, that saves $3,836.73… now we’re having some fun!!
And here’s something weird – did you know your heating and air conditioning bills drop dramatically when you go from heating a 2,419 square foot house plus a basement to a 1,062 square foot apartment? Of course!!!! Stop being silly!
Our heat has barely turned on here because we live on the second floor and, by the power of thermodynamics, hot air rises… thank you downstairs neighbor for footing most of our gas bill! In fact, our last monthly gas bill was $30.50. It’s too early to start comparing, but I’d venture to guess that we’ll save hundreds of dollars in our gas and electric bills throughout our nine months.
On top of all this, we’re no longer paying for stupid things breaking in the house. Plumbing issue – call maintenance. Problem with the furnace – call maintenance. Ceiling fan not working… yeah, you know the drill.
If you’re living in a house, how much money do you end up spending on home repairs every year? Um, yeah – a lot is my guess. And if you’re not handy, you’re paying for someone else’s expertise to fix the problem on top of it. There’s no doubt in my mind that we easily spent over a grand in repairs at the house in our last year living there.
I could go on and on, but let’s stop it there and at least give a shout-out to the non-monetary benefits. Yeah, shoveling snow, mowing the lawn, landscaping, etc. are no longer tasks I have on my agenda. Sure, these could also be looked at downsides if you enjoy doing those things, but they’re also time-suckers if you don’t.
And finally, I should mention that a smaller place generally means less cleaning… I don’t know anyone who doesn’t enjoy that!
Overall, we should easily save well over $8,000 over our nine months of living here. Plus, we free up a bunch of our time!
Are you starting to feel the less is more concept a little more?
Don’t move to an apartment just yet!
I’m hardly suggesting that you immediately sell your home and move into an apartment. This is just an example based on our current circumstances.
In fact, it’s not all upsides. Apartment living has plenty of downsides as well. For instance, I can tell you that our neighbors upstairs love to shower after 10 pm every night and then walk around as if they’re in a parade for another hour after that.
Then there’s that wonderful smell in the hallways of the building that I can’t quite put my finger on… possibly a mix of curry and feet, but I’m not quite sure.
So don’t think I’m pushing you to just jump ship and move. However, I am suggesting that you re-evaluate your housing situation in general. Maybe it’s worth it and maybe it’s not, but it’s definitely something to consider.
Perhaps you have too much house for you and possibly a spouse and kids. Ever think about downsizing? You don’t need to move into a tiny home (unless you want to), but it’s possible that moving down the street to a house with a little less square footage would drop your mortgage payment significantly – along with a bunch of those other cost savings I mentioned.
That also means you’d have less house to clean and maintain… yay!
Speaking of maintenance, maybe you’re as sick of home repairs as I am. What about the possibility of moving into a rental house? Yes, I get it – you won’t own your own home and the equity and blah, blah, blah.
Darrow Kirkpatrick wrote a great article a number of years ago called Renting vs. Buying: The True Cost of Home Ownership. In a nutshell, when you take everything into consideration, the numbers are a lot closer than you might think.
So guess what – if it makes you happier, then maybe it’s a smart move to consider renting. If not, then stick with owning – there are pros and cons to both.
Our future plans are to rent, at least for the time being. We’re not going to buy a house when we first move to Panama. And even if we decide to stay, the chances of us buying are still pretty small.
I’m not trying to push you in one direction or another. I just want to remember that there are other options that can save you money and in a lot of cases, bigger isn’t always better and less is more.
Saving with geoarbitrage
The less is more concept can also apply to geoarbitrage. I’m not talking about going to extremes and moving to Panama geoarbitrage like some of us are doing (though you’re welcome to join us!). I’m talking about just moving to a different location, in general, specifically to take advantage of the cheaper cost of living.
Not only can that give you an opportunity to save some major bucks, but in some professions, you might even be able to telecommute with your current job. When you look at folks like the Groovies, Mrs. Groovy was able to convince her boss to work remotely.
That allowed her to keep her high New York salary while moving to the lower cost of living in North Carolina. So on top of the lower cost of living, she was able to make it count for even more with the higher salary than she might have been able to get in North Carolina.
If you’re going to take advantage of geoarbitrage, you can also find a place that fits the climate and lifestyle you’d like. In our case, sure, we partly picked Panama for the lower costs. But we decided specifically on the city of Boquete in the mountains because of the 75°F weather every day and the simpler lifestyle.
The point is that bigger and more aren’t really the answers to life. Not only can eliminating the “waste” help to fatten your wallet, but it can also make your life simpler… fewer headaches, less to maintain or clean, and less stress. And that generally means more time as well – something we all seem to be after!
My objective isn’t to get you to do what I’m doing. What I do want though is for you to examine your own life and figure out if there’s a way to apply the “less is more” principle to your life.
Hell, we may hate it in Panama, but for the lower cost of living and the simpler lifestyle, we’re willing to give it a shot. If we hate it, we move back to the U.S. (though probably to a different place like Tennessee). In other words, no harm, no foul.
It only needs to go from point A to point B…
Think of the other options where you can take advantage of the power of less is more!
Most of us have all heard the preaching of Mr. Money Mustache talking about how we should push ourselves to live closer to work and bike there instead of driving. MMM is the ultimate in frugality and there’s no denying it, but he’s absolutely right.
However, I also know that many of you are aghast at the extremity of some of his ideas. That doesn’t mean you should throw it all out the window, though.
If you have two cars, why not consider eliminating one if there’s a feasible way to do it? Or get rid of the fancy SUV and downsize to a used sedan?
Again, this isn’t just a way to eliminate a car payment, but to watch the other expenses start to go down as well.
Think about it – changes like this would also help bring your insurance down. And depending on the value of the used car, it’s very possible you could drop it even further by going with liability coverage only. Self-insuring for the car itself generally puts you in a much better position anyway since you get to keep the socked away money should you not need to use it.
Then there’s the fuel aspect. I watch how much gas we go through in my wife’s 2011 Ford Escape with a v6 versus my 2009 Chevy Malibu with a 4-cylinder engine. It’s a noticeable difference for sure!
We’re a little late in the game to start swapping cars since we’ll be moving soon, but we’ll be eliminating one car in the spring and the other before we fly to Panama. If we decide to buy a car in Panama (I’m still going back and forth on this), we’d only get one and it would definitely be a used car.
Get off the grid, man!!
Investments in some things now can put you far ahead in the game – think self-sufficiency.
If you plan to live in your house for a while, it’s worth digging into the calculations for solar energy or geothermal heating and cooling. Yes, they both have high up-front costs, but the return on investment over the long run can put you way ahead of the game.
It may make sense or it may not, but you won’t know until you check into it. Moreover, with the cost of solar continuing to drop, this is starting to make sense for a lot more folks.
How fun would it be to get that investment paid off and have next-to-nothing gas and electric bills for years to come? Imagine furnace repairs or a replacement being something you don’t have to think about because, um, you won’t need one!
Besides that, getting off the grid a little more puts you in a better position in the case of a disaster – whether from mother nature or another cause.
I could go on and on, but the idea is to view things a little differently and start contemplating different ways of perceiving your costs. Not every idea will be right for you, but those that are can have a cascading effect on your savings that you may have never even thought possible.
Less is more in many circumstances, but in the personal finance realm, going with less can mean also reaping the benefits of big financial gains.
Have you run into any instances where less has been more or bigger wasn’t necessarily better?
Thanks for reading!!