Small Choices Have a Big Impact on Your Finances

Sam FarringtonMinimalist Money, Money

Small Choices Have a Big Impact on Your Finances

Why do some people become wealthy and others stay broke? Why do many believe that our families need more space, more money, and more things, yet we are sacrificing exactly what we’re yearning for: more time? In many cases, it comes down to choices.

To see the impact choices can have on your life, let’s look at three fictional friends: Andy, Brian and Matt. They grew up together in families with the same socioeconomic status. Now 35 years old and married, they all have average health, incomes and debt — but their financial outcomes and the achievement of more time won’t be the same.


Andy is happy with the status quo and doesn’t think anything needs to change in his life. He simply does what he’s always done.

He contributes 3% to his 401(k), enough to get his employer match. He knows he should save more, but figures he’ll do it when he makes more money. He doesn’t like his job, but he stays because it “pays the bills.”

He has student loan debt, a car payment, a mortgage and a credit card balance of about $5,000. He’s able to make these payments each month, so he’s not worried about the debt. He figures that if the bank is willing to loan him money, he’s in good shape financially.

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Life is good in Brian’s world. Money is tight, but it’s all for the good of the family.

He just purchased a brand new TV, which his whole family loves. They watch it each morning and evening as they relax in their comfy new recliners in their brand new house. (Brian believed they needed more space for their growing family.) They also have a new car, new appliances and take nice vacations each year.

His family has the usual debt load: student loans; a car payment; a new, bigger mortgage payment; and a credit card. He puts vacation expenses on his credit card, but always thinks he’ll pay them off in a month or two. He believes that it’s fiscally smart to charge purchases in order to earn as many “free miles” as possible — and that carrying credit card debt improves his credit score.

Brian recently changed jobs because it pays more. His 401(k) wasn’t doing very well, so he chose not to contribute anything at his new job, even though his employer matches 3%. Instead, he cashed out his 401(k) to buy his new TV and furniture.


Like Andy and Brian, Matt and his family have student loans, a car payment, a mortgage and a credit card balance with purchases from years past. But it bothers Matt.

He feels like most of their income walks out the door in the form of debt payments, and he dreams of how his family will have more freedom without debt. He dreams of having a career that he loves even if his income decreases to pursue his passions.

To that end, he makes small changes to strengthen their financial foundation and move toward quitting the unfulfilling rat race.

Matt reads about minimalism and getting out of debt. He realizes he was chasing dreams that weren’t his own.

Matt is now aware he can have more time AND strengthen his finances by actually pursuing less. He develops a plan to pay off all non-mortgage debt within two years and be 100% debt-free, including the mortgage, within eight years.

He and his wife also trim their expenses drastically because they realize they already have what they need (plus a house full of stuff they don’t use). For example, they stop buying new clothes each season, they realize they don’t need new kitchen gadgets, and many of the knick knacks, picture frames, and furniture can be sold or given away because they go unused and simply take up space.

They start simplifying their lives by purging and selling a large percentage of their possessions because they decided to get rid of items that if given the choice today, they would not repurchase it again.

He also puts in one or two hours each weeknight, after the kids are in bed, starting his own business, with the long-term goal of quitting the rat race and finally move toward a career he loves.

With the additional income, Matt opens a Roth IRA and automatically contributes just over $200 every other week so he can max out it each year. This is on top of the 3% of his income that he saves in his 401(k), which his employer matches. Retirement might not be right around the corner, but they know starting early and often will drastically improve their retirement success.

He chooses to fill his mind with positive and inspiring information and new ideas. He starts reading more and listening to instructional books and podcasts during his commute.

Matt’s five simple choices — purging unused possessions, paying off debt, creating more income, contributing to a Roth IRA, and nurturing a positive outlookmay not be seem all that impressive, but they will dramatically affect the well-being of his family in the long run.

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6 Months Later

Six months pass and the three friends haven’t made much progress.

Andy continues to plug along with nothing changing.

Brian still loves his new TV and is planning the next family vacation in Hawaii — they deserve a treat! He hasn’t paid off the last vacation because his family wanted new granite countertops for their kitchen. And he still hasn’t signed up for his 401(k).

Matt is keeping up with his lifestyle changes. He is happier overall because his life is less cluttered and is focusing his time and energy on things that matter.

Most people wouldn’t notice much of a change in Matt, but he sure feels something changing within.

If you tallied up the three friends’ net worths and investment accounts, they’d look about the same as before. No one is significantly closer to financial freedom. But, you are starting to see Matt is somehow finding more time to spend with his family and working on projects he’s passionate about.

Three years later

After three years, the results of Andy’s, Brian’s and Matt’s choices really start to show.

Andy is still average. He’s in no hurry to pay off his debt, but has accumulated about $10,000 in his 401(k). His net worth is around $0, where it’s been for years.

Brian looks like he’s doing really well, but feels broke. His credit card is almost maxed out and he still hasn’t started contributing to his 401(k).

The market has gone up during the past few years, and he really wants to invest, but doesn’t feel like he can bring home any less money each month and still make ends meet. And although they’re close to paying off one of their cars, Brian and his wife believe they need a new one. Their neighbors, the Joneses, just got a new, top-of-the-line SUV, which makes Brian’s car look like scrap metal.

heir debt now totals more than the value of what they own, which means they have a negative net worth. Brian is moving backward financially: He owes more money than he did three years ago and because he’s not investing in his 401(k), he hasn’t been taking advantage of compound growth.

Matt, on the other hand, is off to a fabulous start. Like Andy, he’s accumulated about $10,000 in his 401(k). He also has close to $18,000 in his Roth IRA due to stock market growth. Best of all, Matt’s family just paid off the last of their non-mortgage debt.

They’re on target to pay off their mortgage in five years, and their net worth is now around $100,000. And those are just the financial benefits for Matt’s family.

With their new and improved minimalist mindset, they are spending more time together as a family instead of cleaning and “organizing” their home every weekend.

Their house feels more spacious than a few years back because they got rid of all the unnecessary items in their lives. But the most exciting part for their family is Matt is now doing what he loves for a career, and they have the ability to be extremely generous to causes their passionate about.

Falling Behind

We all know people who fit in these three categories.

There’s Average Andy, who never can get ahead but isn’t taking any action to change his situation.

Broke Brian is a little harder to spot because he appears to be doing so well, but he’s never satisfied with what he already has. His financial issues become apparent only when he gets his car repossessed or has to file for bankruptcy.

Minimalist Matt might be the most difficult to detect because he’s not flashy and doesn’t need to impress anyone. His main goal is making room for the most important things in life, which aren’t things at all. He hopes to continue moving in a positive direction by acting on a few simple choices.

If Andy and Brian don’t start to make better choices — even small changes — they won’t be able to achieve financial freedom or spend their precious time at what they value most. And if we were to check back in another three years, they would be even further behind.

One Decision At a Time

What these fictional characters remind us is that wealth, happiness, and clarity is built one decision at a time — and the only person who can make those decisions is you.

You might have a mentor who pushes you and acts as your accountability partner, but it’s up to you to lead your own journey. If you’re not quite sure where to start on your financial journey, I invite you to take part in the Minimalist Money Blueprint.

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About the Author

Sam Farrington

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Sam is a minimalist and CERTIFIED FINANCIAL PLANNER™ passionate about valuing experiences, like hiking in the mountains, over things. He's a financial expert who’s been quoted in such publications as Forbes, USA Today, Money, Yahoo! Finance, Nerdwallet, and Nasdaq.