“I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.” -Steve Martin
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Without minimalism, I don’t think I would have retired twenty years earlier than the average male in the United States. In the US, the average male retires at 65, and the average female retires at 63 – Empower.
It is an odd connection and I will say that the two aren’t necessarily correlated.
According to the Minimalists,
“Minimalism is a tool that can assist you in finding freedom. Freedom from fear. Freedom from worry. Freedom from overwhelm. Freedom from guilt. Freedom from depression. Freedom from the trappings of the consumer culture we’ve built our lives around. Real freedom.”
That is a pretty broad and maybe confusing definition, but the second to last sentence is key, “Freedom from the trappings of the consumer culture we’ve built our lives around.” The purpose of business is to create goods and services in exchange for something in return, typically time or money.
According to the American Marketing Association,
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
Value for customers… That can be a bit sneaky. Does a product or service actually offer you value or have they made it seem like it will offer you value?
Pause for a second and look around your bedroom/office/kitchen/living room/closet/etc. How many of those items truly provide you value? How many gadgets, knickknacks, bits and bobs, trinkets, accessories, etc. actually make you happy, give you satisfaction, or improve some aspect in your life? How many of those items do you think you’ll be using in one year from today?
Every single item has a cost associated with it, all the way down to the single strand of thread used to make a garment of clothing.
To acquire that item, we typically trade time in the form of a job for money. But then that money, in the US, is taxed by the federal government (10% to 37%), social security (6.2%), medicare (1.45%), and state tax (Colorado is 4.4%) plus our city tax…
Using an example, let’s say you are a single person and you make $35/hour. That would be $72,800 per year before tax and you really really want to buy some item (gadget, clothing, meal, activity, etc.) that costs $60. Let’s get nerdy and see how much that $60 would cost in time.
Starting off, the IRS is a bit nice. They allow you to have some money for free without taxes. This is called the standard deduction and comes into play when you file your taxes.
The standard deduction is a specific dollar amount that reduces the amount of income on which you’re taxed.
You can think of this as a gift from the IRS. They are overlooking some of your income. IRS – Hey, don’t worry about paying taxes on that money. The standard deduction for a single person or a married person filing separately is $15,000. Filing jointly is $30,000. That would bring your total taxable income down to $57,800 ($72,800 – $15,000).
In 2025, the Federal tax brackets for someone who is single or filing separately would be:
- $0 to $11,925 taxed at 10% = $1,192.50 in taxes
- $11,926 to $48,475 taxed at 12% = (($48,475 – $11,925) * 12% = $4,386.00 in taxes
- $48,476 to $103,350 taxed at 22% = (($58,200 – $48,476) * 22% = $2,139.28 in taxes
That means, per year you would pay $7,717.78 in taxes or an average of 10.6% ($7,17.78/$72,800) per dollar earned in federal taxes.
10.6% (Federal Tax) + 6.2% (Social Security) + 1.45% (Medicare) + 4.4% (Colorado State Income tax) + local city tax (?%) = 22.65% in taxes per each dollar earned.
Oh but wait, that isn’t all of it. Your employer happens to offer a 401k and for each dollar you put in, they give you $0.50 up to six percent. (($72,800/26 paychecks per year) * 6% = $168 contributed per check) So, if you put 6% into your 401k, your employer would contribute $84.
Oh, but we forgot health insurance (medical, vision, and dental). Let’s say that totals $200 per paycheck. This is just a random number I picked out of thin air. ($200 a paycheck * 26 paychecks) / $72,800 = 7.14%.
Adding all that up, 22.15% in taxes, 6% in 401k, and 7.14% in health insurance would mean 35.29% of your paycheck is gone before it hits your bank account. That means you are actually making $22.65 per hour ($35 per hour * (1 – 0.3529).
With all that math out of the way, you would need to work at least 3 hours of your life for that $60 thing, forgetting the sales tax you would also pay in-store. In Colorado, it is 2.9%. (Taxes would be $1.74 for that item)
The question is, does that $60 thing you are about to buy worth working for three whole hours?
When Anna and I saw how much time we had to trade for all the things surrounding us, it made us start second-guessing if that thing would really provide us that much happiness. Instead, if we took that $60 and put it into an index fund with a 10% return year over year (YoY), in ten years that $60 would grow to $156. What would happen if we put in more money? If you read the post Getting Out of Debt, you know how good we are at finding and piling up money. But that is a topic for another blog about investing.
I want to circle back because the first half of this blog focused on the financial picture of minimalism. It is one thing to just look at things differently, it is another thing to get rid of things and live a more simple life. In the first weekend we committed to minimalism, we donated seven 55-gallon trash bags worth of clothing. These were items that weren’t bringing us happiness anymore. Yes, it was a sunk cost. A sunk cost is something you already spent the money on, but don’t want to let it go, even though it isn’t providing value. For example, holding on to a brand new outfit that you have never worn or keeping some piece of electronic that you haven’t used or rarely use. Yes, you paid good money and time for it, but if you aren’t using it… it is just taking up space in your house/apartment and collecting dust. Depending on the item you might have to provide maintenance for it or have some kind of upkeep. Not only did you lose time to earn the money to buy it, but now you have to spend time to maintain it. You might also have to buy new shelves or bins to store it. It quickly spirals out of control.
Side note, this is one of the only pictures we have because we were too embarrassed to take more.
After our initial pass on the house, we actually got rid of thousands of items, we then implemented the 180 rule which is our adaptation of the minimalist’s 90/90 rule. If we didn’t use it in the last 180 days and don’t think we’ll use it in the next 180 days, then it has to go. There are so many things we keep that we tell ourselves, I’ll use that one day. Or we get it, use it, and then lose interest in it. That allowed us to let go of more items. While the process of letting go is painful, it retrained our brains to revalue our time. We only have so many hours in the day. Do we want to invest it in things that don’t align with our long-term goals?
We didn’t.
We started a board, months later, in the kitchen to start tracking all the items we let go. After the initial pass, we estimated we let go somewhere north of 15k items. Out of all of them, I don’t miss a single thing. I can’t even remember what the majority of items were. I can tell you, they cost us tens of thousands of dollars and years of wasted time.
I want to circle back on this topic at some point in the future and talk more about things we kept in our lives and the impact they made. In the next part, we’ll talk more about the finances we need to be able to retire earlier.
In the next post, we’ll talk about the exact dollar amount we need in our financial accounts to retire early.
