One of the first design classes I took was a 3-d design class – learning about structural properties and other details I won’t bore you with. But our first project was the egg drop. Many of you may have heard of it or taken part in a similar project. But the goal of our project was simple: to create a structure that would support an egg from a 8 ft. drop. There were a few restrictions though. We were only allowed to use one 11 x 14 sheet of paper, provided by the prof (similar in weight to a sheet of Bristol board), and we were only allowed to use white glue on one side of the structure. The egg had to be 50% visible. And the goal was to use the least amount of paper possible. But most importantly – the egg could not break – or else you would receive a failing grade.
I had made two little versions which I tested from my attic – a 10 ft. drop. The first one broke. So I made some minor modifications, tried it again and the next one was a success. When I brought my sample to class, everyone had these complicated structures – some with wings, some with built in propellors — a lot of them making whole use of the paper provided. And there I was, with my tiny sample that fit into the palm of my hand.
When everyone saw mine, they laughed and asked if I had tested it. Even the prof was doubtful, and joked ‘where did you test that? On the edge of your bed?’. But I was still pretty confident it would work, until student after student climbed up that ladder, dropped their egg and splat! Almost every single one failed. I was one of the last handful of students to go and so far only one had made it and another disqualified because the egg was only very partially visible.
Just because it looks like a duck …
When it was my turn, I got up on that ladder, dropped the egg and looked away, staring at all the students reactions, afraid it would break. Then all of a sudden, the class erupted into a cheer. I quickly looked back and found that indeed the egg had succeeded and simply rolled out of its structure. But surprisingly it didn’t break. Everyone wanted to see it again and see it dropped from 10 ft. But the prof warned me that I would be risking my grade, if it broke the second time. That wasn’t really fair, but I wanted to prove the first time wasn’t just a fluke. So, I asked him if it worked the second time, if he would be willing to give bonus marks, if I succeeded. He agreed. And so I climbed up that ladder, dropped the egg and again, everyone applauded – it rolled out exactly like the the first time. Even the prof was impressed and asked if he could keep it as a sample to show other classes.
I just stuck with what I knew. I stuck with basic structural principles and didn’t worry too much about how it was going to look – but how it was going to function. Often, the best ideas are the simplest ones. No fancy propellers, wings, or flourishes here.
Same goes for your personal finances. Yes, they can be complicated, but they don’t have to be. Taking steps to simplifying your finances, will not only help you out, well… financially, but help you so you don’t have to spend so much time thinking about them. Think about it!
Simple rules to live by
Here are a just a handful of ways to simplify your finances:
Spend less than you earn. Yes this is the golden rule of personal finance and written about in just about every single personal finance book. It’s a simple concept, but it’s one that’s tried and true. Spend less than you earn and and only buy what you need. You will never get ahead, if you’re spending more than you bring in. Unless you marry rich. And even then, that won’t last long.
Budget your expenses. Look, I’m a big fan of manual budgeting – yes, pen and paper, or through software such as PearBudget. But don’t let that stop you from creating one. If you want to create one that’s mostly automatic, then do that. The purpose of a budget, for me at least, is to see plain and clear, what am I spending most of my money on. And it’s not always what you think? If you haven’t set one yet, do it now. It doesn’t need to be complicated, just build one you can follow.
Automate your savings. When you wait until you cash your pay check, to set aside money for savings, chances are pretty good it won’t happen. It gets spent as soon as it happens. It’s important to give your money a purpose, and automate your savings to align with your goals — and as soon as your paycheque comes in.
Consolidate your accounts. Just overhearing some colleagues discussing their own personal finances (and debt), drives me bonkers just how complicated some of them are. They use credit cards and lines of credit to pay off other credit cards, all manually, and juggle between multiple banks and through multiple accounts. Who could keep track of all that? It’s no wonder some of them are having trouble keeping up with bill payments (and trouble sleeping). Your finances are not a game. There’s really no need for multiple accounts and credit cards. It gets much harder to track follow. So, simplify your accounts and set up pre-authorized payments for your most important bills, so you never miss a payment.
Don’t be afraid of investing. Look there are a lot complexities in the market, but you needn’t concern yourself with them. The majority of investors are reactive to the market. Panic sets in when there’s a huge drop, and we rush in to buy when we have an influx of cash. We react on emotion, trying to time and beat the market. But the truth is, very few of us do. The average investor is probably better off investing in an low-fee index fund. If you’re glossing over at the mention of an ‘index fund’, don’t panic, it’s quite simple. An index fund is like a mutual fund that tries to match (as closely as possible) the performance of a specific financial market (or it can track certain components like the Energy market and so on). So for example, if the TSX returns 10% one year and you have an index fund that tries to match the TSX, you would earn 10% minus your management fees (typically around a low 0.5%)… well, more or less. See, simple! After all, the worst part of investing, is not investing at all. So start investing today and invest regularly.
Organizing and simplifying your finances can save you lots of time, money, headache and heartache, helping to reduce financial stress and helping you to avoid costly mistakes. So, keep it simple and don’t let the egg drop on your financial life.
What are some of the ways that you simplify your finances?
“The ability to simplify means to eliminate the unnecessary so that the necessary may speak.” ~ Hans Hofmann