Essentialism 101: De-cluttering Life

Thank You...

for being here. Before you get on with the article, I would encourage you to read my previous articles on this topic for better congruency.

1. Keep it Simple, Silly
2. Essentialism 101: Digital Detox

Now, let's get started with the topic of the post.

Introduction

My last post was focused on the digital aspects of our lives. In this post, I wish to deal with life decisions in general, primarily focusing on big purchases. I have to acknowledge the fact that purchasing something can feel immensely satisfying. The dopamine rush that we get while planning the purchase, being handed over the key/item, and the first few days of ownership can be addictive. So, the attempt here is not to deny that impulse or eliminate it but to encourage deliberate thinking into our purchase decisions.

One clear disclaimer here is that all these discussions are largely subjective. The intention is to hopefully debate some tools which can help us make better decisions. Most of the description is based on my own experience, your case might be vastly different so I am in no way, shape, or form trying to pass any judgment.

Assets vs Liabilities

I am not a finance guy, nor an economics guy, I took a finance course in college, and to date, I consider myself very fortunate to have survived it. Having said that, I am an engineer and the greatest joy of my life is trying to break things down using First Principles. For me, any purchase decision boils down to the following broad classification.

1. Assets are purchases that generate a net positive (inflation-adjusted) return on investment
2. Liabilities are purchases that do not generate a net positive (inflation-adjusted) return on investment

The rest of the post will be devoted to analyzing common (major) expense decisions because investments (if identified and done well) do not need any explanation here. I wish to discuss some broad tools which can be considered while making sizeable (very relative term) purchase decisions so that we can handle the impulses of our emotions.

Emotional Considerations

I do agree with the Maslows Hierarchy of Needs.

I think it is useful to try to place our purchase consideration on Maslow's hierarchy of needs for a broad categorization. Anything that falls in the bottom 2 categories should be purchased based on our ability to afford it comfortably.

The definition of safety can be largely subjective.

1. I have always been happy renting my accommodation. I have had the usual pressures to "invest" into a flat/real estate (from well-meaning family members) but somehow, by good fortune, I have never really felt drawn towards it. As a result, I have the freedom to move around. Not be tied to an EMI. Have a decent amount of liquid savings and if I don't like my society/landlord, I can "fire" him easily. However, recently, a good friend of mine told me something that got me thinking. He is getting a flat for his parents and it is a purchase (not rent) so we started discussing. He told me that for his parents, owning a flat is psychologically very important. It elevates their status in society, helps them make more friends, become part of the society RWA, etc. They also get to renovate and decorate the place as they please. I totally understood his point. So, the definition is very fluid and subjective. My only suggestion would be to understand that it is an expense (there are much better/easier investment opportunities). Take an objective decision.
2. Having a car to move yourself and your family is also partly a safety-related decision. You cannot use an uber/ola in case of an emergency. So, it is important to have that sense of safety/security. Furthermore, it is heartening to see that finally, Indian consumers are at least having a discussion on the safety features of cars and not just features/gizmos. So, having a car is totally justified, the only caveat being that we need to be responsible about the budget and do an objective evaluation of our needs before making the purchase decision because a car is a liability (financially), not an asset.

Intended Purpose

A useful construct I like to use when it comes to making purchase decisions is to pause and imagine the intended purpose of a product. What was the designer trying to achieve with this product? Every product developed has an intended purpose, if we can relax and try to think about it and then ask ourselves if we are doing "justice" with the capabilities of the product.

First, we need to accept that there is no "perfect" product. There is no "perfect" house, "perfect" car, or "perfect" phone. Every product is biased towards a few functions and there will be some tradeoffs on other aspects. Let's try to understand a few examples:

1. SUVs: I love SUVs (I am committing sacrilege by using this example). Also, I think India loves SUVs (from the sales trends). I am only using SUVs as an example here to make a point which is that investigating the "primary" use case is relevant. A big bulky SUV is a great "tool" if you go on long highway stretches, traverse bad/broken roads, or go to the mountains a lot. However, it isn't exactly the best "tool" for day-to-day city commutes. A smaller (easier to park/maneuver), comfortable (ride quality of sedans are generally better than that of high ground clearance SUVs), low cost of ownership option might be more suitable. When you are researching, don't just get carried away with all the options, that's a lost battle. Capitalism and market forces have ensured options from ?300k to ?300,000k (and more) and countless options in each price band as well. So, if you try to guess what was the mandate for the designer for the product that you are thinking to purchase and then ask yourself if your (primary) use case matches with the intended function, it might help you evaluate options more rationally. End of the day, it is our sole responsibility to ensure that we are making good financial decisions because we will have to bear the consequences as well.
2. Mobile Phones: The smartphone revolution has been amazing. Hardware technology has evolved so fast that any "flagship" technology (speed, camera, etc) becomes mainstream within 12~18months. Again, if I take my own (hopeless) example, I have modest hardware (processor + ram) needs because I don't use my phones for gaming. I have never had a need for the latest generation specifications. What I realized was that the only reason I need a decent phone is that I do like to take good photos so, I'll pay for a good camera experience. Even if I like a phone, I typically wait 9~12 months by when the price has crashed by 30~40% from the launch price once the euphoria has died down. So, I get a good camera + hardware experience at palatable prices. It is not a status symbol for me. Also, since, I try to follow my own advice (to the extent possible) from the previous post, my phone is typically not too cluttered or running at full capacity all the time. My personal challenge is to make the current phone last 3 years, let's see if I succeed. Again, the point is that it is great to be a consumer in today's times, it is great to have options but take a moment to step back and investigate what your needs are and if the item matches with the intended function for you.
3. Residential Flats: As already admitted, purchasing residential property for self-occupation or for the family is always justified. The only problem I have is when people get too carried away and justify over-extending themselves (and their loans) because they are convinced that a residential flat is a great investment. I think it was great in our parent's generation (when people bought plots and built retirement homes), commercial properties might still be considered decent investment options but I am not convinced if a residential flat is a good investment tool (investments can be a future blog), so, it is best to be prudent and consider it as an expense for the emotional/psychological safety of our loved ones.

Total Cost of Ownership (TCO)

The rush of buying something can be addicting. A brand new phone, a shiny new car, a house (if you can afford it comfortably), all feel like accomplishments. A lot of people also use these objects as "success signals" or as status symbols to establish themselves in society. However, most people just look at the Purchase Price and don't necessarily consider the Total Cost of Ownership for the items bought. Let us take some examples:

1. Flat Purchase: I have already conceded the emotional aspect of a flat purchase, no arguments there. The only caveat is to not stretch out too much because it'll result in getting tied with burdensome loans. It is almost important to understand that the purchase price of the flat is just one aspect. It is important to think about the recurring costs e.g: interest on the loan, society maintenance charges, property taxes, and most importantly opportunity cost of investment. As a renter, I don't have to worry about taxes, painting, major damages/repairs, or EMIs. I am also not worried about the occupancy of the flat because it is a burden to have an unoccupied flat (while the society/maintenance charges are still accumulating). Furthermore, not owning a flat allows me the freedom to pursue career opportunities anywhere without worry. I have the freedom to take a career break without worrying about a huge EMI (the bank owns the flat till the loan is pending, not me).
2. Car Purchase: I haven't bought a car since my (serious) accident in 2019 even though, I LOVE driving. However, I understand why having a car is great. It just feels good to have a handsome, large car to take us and our loved ones around wherever we want, whenever we want. Again, the intention of the post is not to avoid a car purchase, it is about being intentional/deliberate about which car to buy. The cost of a car is not limited to the ex-showroom price. Dealers will load taxes, accessories, insurance, warranty, RSA, etc. Most of this will get bundled into the on-road prices. Even after this, there are costs worth considering e.g: insurance renewal, annual maintenance costs, wear and tear expenses, denting/painting/repair expenses. In my experience, the annual costs can add up to about 3~5% of the purchase price. This is excluding the fuel costs and driver costs. Furthermore, the moment we drive off the showroom ramp, the car has already lost 30% or more of its purchase price in the resale market. The resale price falls pretty fast with the aging of the vehicle, especially now when new cars are getting launched every month. So, I like to add the difference in the purchase price and the (potential) resale price to the TCO. As an interesting exercise, try looking at any company that is offering leasing options and check the monthly EMI that they will be charging you, now compare this with the price that you are going to pay upfront. Whether you believe it or not, this is close to the price that you are paying by owning a car. Add this cost to your per km fuel cost to have a fair idea about the expenses.

I'll repeat the disclaimer, the suggestion is not to not buy a flat or a car but to do it intentionally and objectively. I believe that we should also try to decide on a comfortable budget based on our earnings, the stability of our earnings, our other essential expenses before committing to a big expense.

Transactional Friction

Going back to the Assets/Liabilities argument, I have heard people justify a big (stretched) purchase by categorizing it as an asset. I have had my share of "burnt fingers" with financial investments with "guaranteed insurance + returns" etc. Most sales/marketing people will do/say anything to get you to buy, it is our job to be rational and vigilant. I have learned with time that it is better to segregate things objectively. e.g: Term insurance is good, pairing it with a returns vehicle typically doesn't work well. It is better to have plain vanilla term insurance and look for better financial instruments separately.

The point that I am trying to get to is that, if you look at a flat/car/jewelry as an asset, please do consider the fact that there is a transactional cost associated with it when you try to offload the "asset". Not only is there a financial cost associated with it, but there is also an emotional/time cost associated with it.

Finding a buyer for our property, negotiating, looking out for fraud, closing loan papers, transfer of ownership requires time and effort.

Selling a car, negotiating a price, looking out for fraud, transferring paperwork, etc requires effort.

When you try to sell jewelry, making charges are lost, try to sell diamond jewelry and you'll quickly find out if it is an asset or not.

So, we are lucky as a generation to have so many options of liquid investments, it really is a blessing. Not only is the purchase process seamless and transparent, but the returns are also easy to check, selling is super easy. Financial investments can be sold off and the money will be available in the account in less than a week, try doing that with other "asset" classes.

De-Clutter Aggressively

The post so far was about bringing some deliberation into the impulse to accumulate excess. Coming back to the theme of Essentialism, let us discuss some things to eliminate.

I think this is quite self-explanatory. Let's take some examples:

Every day, I have the "pleasure" of standing in front of my wardrobe and marveling at the collection of clothes that I have gathered over the years and then picking up something out of the same 5~7 items that I am (now) comfortable with. Fit changes, taste changes, colors fade but I am too much of a chicken to actually get rid of the items which I don't wear, and more importantly, I am not likely to wear (ever) again. It is the same with electronics, utensils, shoes, etc. So, after Covid, I started putting aside stuff in a separate area of the house, told the maid she is free to take whatever she finds useful and she has been a lifesaver. I would also like to share the link of an organization "Goonj" that might be able to help.

Another area where this principle works amazingly well is with relationships and acquaintances. Les Brown puts it brilliantly, "Too many people will never reach their full potential because they have too many toxic, negative, energy-sucking people that they tolerate". I have also realized that we all have a limited about of time/energy when it comes to maintaining healthy relationships but in the "social media" era, we confuse acquaintances/connections/followers with deep friendships. We tolerate too many casual friends even though we know they cannot be trusted, or they are not good for us. The problem is that if we do not declutter, we will never ever make the time/energy available to allow better people to come in.

The idea is not about eliminating things but thinking of the process as a way to create more space. The saved space can now be utilized productively so, the opportunity cost of not decluttering is stupidly high.

At the workspace, having a sense of control over how our time and energies are utilized can have an immense effect on our level of satisfaction. Similarly, I am of the view that decluttering our lives and becoming judicious with our choices of what to accumulate/horde can have a profound impact on our sense of freedom and well-being.

Self Development

I am a firm believer that the ROI on self-development projects/spends is unparalleled. Making money is great but using it productively requires thought and effort. The default option, in my view, should be to constantly look for ways to improve ourselves. Buying books/courses (and completing), learning new skills, developing hobbies, investing in health and better diet, developing meaningful social connections, exploring the beautiful wide world, spending quality time with close friends/family can all bring lasting joy and success. In fact, I try to allocate a fixed percentage of my earnings to this and force myself to spend it. What I have found is spending a lot of money productively is actually hard work (totally worth it).

However, like anything worthwhile in life, good habits/rituals can take years to develop so it is important to start early and invest consistently.

Conclusion

The purpose of this post is not to pass judgment on any of the items mentioned above. I am no saint, I have made ample mistakes in life when it comes to investments and purchases but thankfully, I have survived. Unlike my previous post which was found to be a little extreme by some readers, this post essentially is intended to invite thoughtfulness into every day (but substantial) purchase decisions and remind ourselves how important it is to not get carried away by the dopamine "high" that we all experience whenever we are in pursuit of something. However, as discussed in the previous post, it is important to be mindful of our purchase decisions and practice reduce, reuse, repair, recycle principles in our everyday life, not just for a sustainable environment but also for our general well-being.

I do think that a post on Financial Investments is warranted so, maybe, I'll dedicate some articles on the same. As always, do share your comments and feedback. If you have some suggestions that you can share with the readers, that would be much appreciated so don't hold back.

Read Next >>

I hope I could do justice to the time you have just invested. If you wish to explore more, I have linked the next article below for easy reference:

• Essentialism: Expert Speak

References

• Start Here
• Essentialism 101: Digital Detox
• Goonj
• Akshat Shrivastava
• Ankur Warikoo