Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Thursday, May 13, 2010

Is Simplicity the Answer?

Our world seems to get more complex every day. The recent financial crisis was caused, in part, by exotic, complex financial transactions that few understood. We have repeatedly written about avoiding complex investments that so often seem to crash and burn (See our recent blog article titled: “Goldman Sachs: The Lesson to be Learned”).

Thousands have lost their homes in the recent financial crisis and thousands more foreclosures are expected in 2010 and 2011. Many bought homes they couldn’t afford and ran up credit card debt they could pay off. It seems like nearly everyone wants a bigger house, new cars and all the latest in toys and technology.

At the same time, few have saved sufficiently for retirement; college and health care expenses continue their meteoric rise and governments around the world are going bust. In the U.S., budget deficits threaten our future and higher taxes and inflation seem a certainty.

We seem increasingly vulnerable to Mother Nature, when an unexpected volcano can shut down Europe’s airports for nearly a week, and is currently causing more problems. Recent earthquakes have caused disasters around the globe. All this, as an oil slick threatens the coast of the U.S. We can imagine a world crisis caused by any number of factors. How can we prepare for an unknown future?

While our ingenuity has allowed us to grow and prosper, we know our natural resources are limited. We must find new energy sources and new materials to meet our needs and protect our environment. It seems that we need to change our ways.

An article we read recently in Real Simple magazine titled “Happily Ever After in 351 Square Feet” (May 2010), suggested a possible solution. The article told the story of Ren and Natale Marasco, a couple who returned home after Ren’s 31st birthday celebration to discover their 1400 square foot ranch home burning to the ground. They salvaged little and were not fully insured. Natale lost his garage workshop from which he ran his business, in the fire.

They considered many options but loved their property and jobs, so decided to stay where they were. They decided to combine two 1940’s era cottages they had previously acquired for free from local developers. They dug a foundation, moved the cottages in place and planned for maximum use of the space, a total of 351 square feet! They had two rooms, a kitchen dining area combined, a bedroom with a queen-size bed and small sofa, and an area for a tub, toilet and sink. Careful planning was needed to maximize their space.

Their life by necessity had to be simpler. They buy only what they need to eat in the next few days and waste less. They have little room for storage, so give away magazines soon after they are read. They store more info on their laptops (bank statements, photos and recipes).

The article sums up their “new normal”: “Surviving the tragedy of the fire aged our relationship, but in a good way. It goes on to say: “And being in such close proximity as we are in the house has deepened our connection. As a result, the pair, who don’t plan on having children, are in no hurry to move on to bigger digs.”

We’ve read of builders planning to build smaller houses. The scarcity of natural resources and tighter budgets may force us to return to lifestyles reminiscent of our ancestors. We may find that a simpler life provides more meaning and enjoyment as it seems to have for Ren and Natale Marasco. Perhaps simpler is better?

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