How Three Pepper Shakers Can Hurt Your Financial Plan
As much as I would have liked to spend the long weekend skiing or doing something leisurely, somehow I got roped into cleaning the house, which quickly morphed into an organizing frenzy.
I started to empty out every shelf and drawer and couldn’t believe what I found:
Three cinnamon spice bottles. Three pepper shakers. Two bottles of sesame oil. Endless varieties of flour: All-Purpose, Bread, Cake, Almond and Coconut. Expired allergy pills. Expired vitamin pills. A saffron spice bottle that was never opened for that paella recipe that I never made. At least three cookbooks that I maybe used twice. At least five pots/pans purchased at various Bed Bath and Beyond sales that we’ve barely touched.
The list goes on. And that was just the kitchen!
Those few hours got me thinking about the importance of organization, not just with household items but also with personal finances. From duplicate purchases to stuff never used, the waste was incredible.
All in all, it probably equaled only few hundred dollars. At first, that might not seem like a huge deal, until you start really adding it up…
That was just one room. For argument’s sake, let’s just assume the waste equaled $300 in purchases. We have ten rooms in all so, using $300 as an average, multiplied, that’s $3000. If instead we took that money and invested it at an annual growth rate of 6% for 25 years, it would grow to approximately $12,875!
Now, $12,875 alone is not going to fund one’s retirement, but that’s no small change either. Being organized and mindful about your spending can have a significant impact.
While my duplicate purchases and tendency to overspend clearly applies to cooking/kitchen items, yours may be in another hobby or area. Maybe you can’t pass up on the latest tech gadget, or you splurge on books that you could easily find at your local library. Perhaps you have every shade of lip gloss or fill your closets with clothes that still have their price tags because they’re never actually worn.
If so, it may be time for an early spring cleaning to reassess where there’s excess and how you can redirect that money to other goals, such a savings goal, moving forward.
De-cluttering and being organized also applies to your investments. Over the holidays, a friend of mine who held individual shares of Chevron asked me if she should sell them. She was hesitant because they were doing so well and was emotionally tied to them as a result. But when I took a look at her portfolio, I noticed that she also held a few U.S. large-cap mutual funds – and within each of them, guess what stock was being held? Chevron!
She had overlapping investments and did not realize it; because they were mutual funds and had different names, she assumed she was more diversified than she actually was.
Sometimes we make finances overly complex when often it’s the simple things that can make a big impact – like being organized.
Set aside some time for your own financial housekeeping. It can be a dedicated day each month, or an hour or so each week, as long as you devote some amount of time to getting a better handle on both your spending — so you can identify waste and excess – and your investments — so you can determine where there may be unintentional overlap that undermines your desire for diversification.
Your closets – and your financial plan – will thank you!