What a Simplified Wardrobe Can Teach You About Saving

I’m a big fan of the blog and podcast, The Art of Manliness. The content is robust, timely, and always helps me find small ways to become a better man.

I recently came across an Art of Manliness article that has had me thinking. It was about simplifying your wardrobe by focusing in on a few high quality clothing items rather than having dozens of low quality t-shirts or seven or eight pair of jeans.

I’ve tried really hard to embrace this idea. A couple years ago I bought myself a really nice navy blazer and had it tailored. It was kind of pricey for me, but I wanted something that would really last and look great.

Me, my blazer, and some fashionable sprinkler heads.

Me, my blazer, and some fashionable sprinkler heads.

The best thing about this blazer is how much is “getting done” --in a fashion kind of way--with this one jacket. I can wear it to church with slacks and it looks great. It goes with practically every tie I own. Wear it with a pair of nice jeans? Absolutely! It’s versatile and incredibly simple.

Simplifying Our Financial Lives Versus The Prevailing Wisdom

I received an email from a friend recently, asking which type of investments to use in his 401(k). Like many 401(k)s or other retirement plans, he has the option to actively choose his own investments, or stick to a target date fund.

I’ve written on these topics before so I won’t go into the details of one approach versus the other, but in most conversations like this one, my advice often leans toward keeping our investing as simple as possible, as long as our own appetite for risk and the quality of investments aren’t sacrificed. I guess you could call it “Simplified Savings” though keeping our investing simply hasn’t always been the prevailing wisdom.

(Editor’s Note: I talk at length about this idea for 401(k) savers in my free eBook, The 401(k) Workshop. You can sign up for it here.)

The Real Gift of Simplified Savings

Through the 80's and 90's a stockbroker was often hired by investors to help pick individual winning stocks. The superior brokers picked the winning stocks and made gobs of money. The losers, well, they were losers. Many investors’ portfolios ended up with a variety of different stocks and other investments--all hand-picked by their brokers.

But there was a problem. Over time, investors started to notice that many stockbrokers weren’t doing any better than the market overall. In fact, they were doing worse. The portfolios of many investors which were “actively” managed by a broker ended up with dozens and dozens of different investments which were underperforming the market when viewed overall.

If these investors had simply stuck with a well-diversified, low-cost mutual fund they would have been better off. It was a cluttered, poorly functioning “wardrobe” compared to one of relative simplicity.

Simplicity is the ultimate sophistication.

Keeping our saving and investing simple does something really great. Besides the prevailing research that “active” investors tend to underperform the market over the long-term, simplified saving gets a lot done with a minimal effort. Automated contributions to your 401(k)’s mutual funds, automated rebalancing of your target date fund, automated reallocation of your investments as you age--these simpler approaches to growing wealth get a lot done and leave you with more time.

Other Ways to Simplify Your Savings

Ways of making our financial lives simpler--and freeing up our precious time--abound, beyond simply automating our retirement contributions. Here are some examples:

  • Automated budgeting tools like Mint or You Need a Budget...versus individually inputting each expense, each month into a spreadsheet

  • A regular routine of reviewing your budget every other weekend for 10 minutes...versus a once a year, all-day budgeting planning meeting
  • Automatic mortgage or credit card payments...versus writing and mailing a paper check each month

Some of these simplifying techniques are so routine that we don’t think about them anymore. Some of them you’re probably doing right now. 

Any opportunity to exchange the complex and excessive for the simple--without reducing the overall quality--is worth thinking about as you manage your own finances. You’ll be grateful for the time saved while still accomplishing something meaningful for your family.