Occam’s Razor is a rule of thumb or principle, that can be stated as follows:
That all things being equal, the simplest explanation or strategy is usually the best or correct one.
Another related quote sometimes attributed to Albert Einstein : Make everything as simple as possible, but not simpler. And then there is the KISS Principle, or “Keep it Simple, Stupid”.
For some reason, I think many of us are to quick to dismiss simplicity when it comes to personal finances and money management. Maybe we think that managing money and becoming wealthy is more complicated than it really needs to be. It can’t really be that simple, can it?
For example, I think there are a lot of personal finance truisms, that many of us are to quick to dismiss as being cliched, such as “spend less than you earn”. When we read or hear it, it is very easy to say or think that our own personal financial situation is more complicated than just spending less than we earn, isn’t it? But if everyone spent less than they earned, there would be a lot fewer people with money problems.
Simplifying your personal finances can go a long way to helping you live with less stress and worry. It can also help in eliminating distractions that keep us from reaching our financial goals.
One high interest savings account (or even a regular one) is enough to start building wealth, isn’t it? Do we really need 3 or 4 accounts, moving money around to get that extra 0.1% in interest for a month or two? When we are focus on things that make our finances more complex, what are we not spending time on? We could be making more money or spending less instead of juggling multiple accounts, credit cards, etc. I am not really picking on having multiple savings accounts or credit cards in particular, but just using that as one example.If you don’t have a problem with, and many people don’t, then it is likely not a distraction to you.
However, the fastest way to get wealthy is to make the gap between what you spend and what you earn as large as possible, for as long as possible. If that difference was 1 million dollars a year, for example, a lot of the things that you might worry about now regarding your finances might soon disappear. There might be new things to worry about, of course, but over time they would likely get less and less worrisome-at least when it come to money.
Are your finances simple and easy to deal with, or are they too complex? Do you to focus on the wrong things when it comes to building a secure financial future?
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Yeah, some people may dismiss the simplicity of it, but in my own personal experience, I have found your advice to be sound. If you just live by that one rule, spend less than you earn, you will come out ahead. Simple, but the long-term effects it can have on your financial freedom are profound!
@Luke- Thanks for the comment- you are correct, the long term effects can be huge over time, even if the amount saved is not very large each month.
Yes, brilliantly put! Personal Finance is pretty damn easy when it comes down to it, we just make it so complicated sometimes! Maybe so we can use it as an excuse to give up or not care
K.I.S.S baby, all the way!
Thanks, J! I agree!
At one point I had so much going on (4 checking & 3 savings) I didn’t know was happening. I have gotten better, but I think I could simplify a little more.
Hi! Occams razor is my guiding principal. It yields more time for fun, wealth, and incredible productivity!!!
Barb