The Do-Over
Imagine everything you owned was lost in an insured catastrophe. Your debts were paid, and you had a lump of cash big enough that you were left — financially — in about the same position you’re in now, but you had no possessions except the clothes on your back, a small box of your most precious mementos, and a USB drive with all your photos.
Go through the mental exercise of figuring out how you’d deploy that cash to best satisfy your needs and wants. Start with the little stuff, such as:
Furniture: For a lot of people, this is the most fun category, because a lot of people bought cheap furniture so they wouldn’t have to sit on the floor, and then found themselves stuck with it — because who can afford to replace perfectly good furniture just because it’s cheap?
Wardrobe: How much is stuff you wear every week? How much is special-purpose (swimwear, interview clothes)? How much is too big, too small, or just not quite right?
Kitchenware: How much of your kitchen and dining utensils only get used for two meals a year?
“Stuff”: How many are for sports or hobbies you’ve abandoned? How many are duplicates because your spouse also had one, or because you couldn’t find the one you had when you needed it?
Then think about the big-ticket items:
Transportation: If all your vehicles were gone, what would you replace them with? Could you get by with only one vehicle? Would you consider mass transportation?
Residence: If you’ve just lost all your stuff, you probably don’t need as much room. If that means you could fit into a smaller house, an apartment instead of a house, or a smaller apartment, that could save you a huge amount of money. More importantly, it could go on saving you money for years to come — lower taxes, less maintenance expenses, lower insurance premiums, smaller monthly payments, etc.
Most people enjoy going through this mental exercise, as it allows you to wipe away all the errors you’ve made in accumulating stuff you don’t need. But it’s still a fantasy, and the reality of losing everything you own would be much more significant.
However, the exercise of imagining what you’d do is worthwhile because it’s a way to understand what you really want. If you understand what you really want, you can make progress toward it, even if you can’t take the big leap of replacing all your stuff with cash. If you know you’d like to move to a smaller place, you can prepare by getting rid of clothes you no longer wear and hobby gear you no longer use. Over time, you can downsize your footprint enough that you’d fit in that smaller house. In the meantime, you get to enjoy a more relaxed, less cluttered house.
Once you start imagining that life, you can start taking steps to prepare for it. Soon after that, you can start taking steps to move toward it.
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