The simplest solutions are usually the best

Every so often you read a piece of advice that you think is too simple to be effective. This happens me quite a lot. I don’t know why but some part of my brain seems to equate the value of a piece of advice with how hard and complex it is to implement.

The more complex the advice the more valuable it is to me.

I know its very strange logic but I think a lot of us have been wired that way. Take diets for example. Its common knowledge that if you want to lose weight you need to consume fewer calories than you use up during any given day. So simply eat less. However if everyone thought it were that simple then there would be no multi-billion dollar diet industry.

I think as humans we need to feel that when we have a problem we need a unique and magical solution to solve it. A simple straightforward solution just won’t cut it.

A lesson learnt

When I first started to get serious about debt I started to research how to solve my debt problem. I was confronted with a myriad of solutions, everything from debt consolidation to debt management plans. I was looking for some magic bullet.

One piece of advice that kept coming up again and again was simply

‘Spend less than you earn’

Simple right?

It was not good enough for me though. I wanted something that said ‘buy XYZ software package and your debts will repay themselves’ or ‘refinance all your debts and have only one small monthly payment’.

Eventually I came round to the simple way of looking at my debt.

‘Spend less than you earn’

This brought me to my next problem. How much was I spending?

How much?

I had no idea how much I was spending. All that I knew was that at the end of every month my bank account was always in overdraft and my credit card balance had increased.

At the time I remember reading another piece of really simple advice in the personal finance book Your Money or Your life. The advice was to write down and record absolutely everything that you buy everyday. Be exact in your figures, record it to the cent.

This was a compelling idea for me. It was so simple that anyone could do it. At the same time the sceptical part of me was thinking that it was a bit too simple.

Anyway for one month I recorded everything that I bought. I had a little pocket book with a small pencil on a string attached to it. Every time that I bought something I would write it down. I didn’t let anyone see what I was doing and I would wait until I was alone before I would record the expenses. I didn’t want to be marked as some kind of crazy note taking type of guy.

What happened?

Being the dutiful geek that I am I created an excel spreadsheet to formally record my expenses. This is where it got interesting.

On my spreadsheet I had what I called a fixed costs column; these fixed costs included my loan repayments, my rent, my car loan etc. Basically my fixed costs were items that I had to pay each month or face trouble. Then in a second column I had what I called variable costs. These were the cost that I was tracking every day in my expenses notebook. These included items such as newspapers, coffees, lunches…you get the idea.

Prior to tracking all my expenses I would have estimated that my variable costs were probably about $200 a week. I was in for a big shock. When I tallied up my variable costs the average I spent per week on them was $420. Unbelievable!

I was spending more than twice what I thought I was spending on discretionary items. This was a serious wake up call. When I examined what I was spending most of my money on a few things became clear. I was spending a small fortune buying gourmet coffees and the daily newspapers.

More interesting though was that I did most of my food shopping at convenience stores that were close to where I lived. Convenience stores by their very nature tend to be much more expensive than large supermarkets on the edge of town. You pay the extra money for the convenience of the convenience stores. Generally they tend to open much later and they are usually very well located in urban areas.

What next?

I adopted the simplest solutions I could think of. I cut down on the coffees and newspapers but more importantly I started to do all my food shopping in the large supermarkets. I continue to record all my expenses in my notebook and in the month that followed my weekly average spend was $270 – a major improvement.

Once I was on the right track I began to gradually cut my discretionary expenses further and further until I got to the point where my bank balance at the end of the month, while not very much, was positive.

Simple is usually best

It took me a long time to realize that the best and most effective solution to my debt problem was the simplest. For too long I was lost in a world of false promises and advertising overload. It was a painful process for me to recognize that I was wrong in my thinking and in my search for some new fangled complex solution.

How about you? Are there things in your life that you are trying too hard to solve? Are you looking at ultra complex solutions for problems that could be solved more effectively and efficiently with a simpler solution?

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