Financial Advice And Free Book Offer From Zen Master Leo Babauta

by Will Chen on 1 January 2009 3 comments
Photo: Zen Habits

Leo Babauta is the author of of the highly popular Zen Habits blog and the new book The Power of Less: The Fine Art of Limiting Yourself to the Essential.  The book was just released yesterday and it is already the bestseller in Amazon's Motivational Books category.

We're happy for Leo's success and we urge you to check out his new book.  But of course, we're all very frugal here so we're even happier about the oodles of freebies Leo is sharing with the readers.

First of all, Leo is offering everyone a free download of his ebook THRIVING ON LESS: Simplifying in a Tough Economy.

Second, Leo is giving away a lot of extra freebies to anyone who buys The Power of Less by the end of today (1/1/09).

I recently talked to Leo about how his philosphy can help Wise Bread readers survive this economy.  

1.  Please tell us a little bit about the principles you'll be introducing in your new book, The Power of Less.  How are they different from other money/time management books?

Let's start with the key principles in The Power of Less:

1. The art of setting limits.
2. Choosing the essential.
3. Simplifying -- eliminating the non-essential.
4. Focus on one thing at a time.
5. Create new habits.
6. Start small.

This differs from other books on money and time management because they deal with specific systems for managing your money or time efficiently. The Power of Less shows that you don't need a complicated system to manage your money or time if you set limits and simplify. It also shows you how to create new habits so that the need for systems is greatly reduced -- it becomes automatic if you make it a habit.

2.  How can I use these principles to organize my finances? There are so many things to keep track of.  How do I "declutter" my financial life?

What I've found is that more important than "organizing" is "simplifying", whether that's with your finances or possessions or anything at all actually. If you have a lot of things, it's hard work to organize them. If you just have a few things, it's much easier to organize.

So start by simplifying your finances -- focus on just the essential, get rid of the non-essential. The fewer things you're spending on, the fewer bills you have, the fewer accounts you have ... the less you have to organize and keep track of.

Next, be sure to automate as many of your bills and savings transfers as possible, through your bank's online bill pay feature. Just about every bank has them these days -- you can automatically pay bills on payday and make savings transfers. Then you don't need to keep track of things or organize them. Also use your bank's online system to download statements and reconcile your checking and other accounts.

Once you do these things, finances should take no more than 15-30 minutes once a week.

3.  How can I use these principles to get out of debt?

These principles got me out of debt. First, I started small – getting out of debt can be overwhelming, but it always starts with the first step. I focused on one debt at a time and eliminated each one completely before moving to the next. I created new financial habits using the habit-change principles in the book.

4.  If I'm addicted to my credit card, how can I use these principles to stop my dependence on credit?

An addiction to credit cards is usually really a habit of impulsive spending -- the credit card just makes this habit much easier. What you need to do is monitor your habit and identify your triggers – the things that cause you to spend on impulse. Then you need to either avoid these habits (don't go to the mall or online shopping sites, for example) or replace the negative habit with a positive habit – for example, exercising when you're stressed out instead of shopping.

A couple of tips:

1) cut up your credit card (or hide it or give it to someone you trust to hold) and delete the number from your online accounts so you don't use it;

ARTICLE CONTINUES BELOW

2) create a 30-day list where you write down things that you want to buy (with the date each item was added to the list) and make it a rule that you can't buy it until 30 days after you put it on the list; and

3) make it a habit to save up until you have the money before buying something.

To create a new habit, try The Power of Less New Year's Challenge. You use this powerful method to create a new habit in 30 days, just 10 minutes a day!

5.  How can I use these principles to find happiness in simpler things in life (i.e. things that don't cost money)?

Use one of the most important principles in the book: choosing the essential. What things in your life are most important -- things that give you the most happiness and value, things you love doing and are passionate about, people you love and want to spend time with? These are the essentials in your life. The trick is to use one of the other important principles of the book, simplifying, by eliminating as many of the non-essentials in your life as possible, to make room for the essentials.

If you can take these two simple steps, you will have created a simpler life filled with things you love doing and the people you love most. This is the key to happiness -- not buying things.

6.  What kind of daily habits should I develop to improve my finances?  How do develop and stick to these habits?

It really depends on where you are -- some people already have certain
habits ingrained -- and your financial situation. But here are some of
the most important habits to form:

  • Control impulse spending, as described above.
  • Take 15-30 minutes a week to pay bills and debt, update your
    financial tracking software.
  • Make savings and debt payments automatic.
  • Save up until you have the money to make a purchase.
  • Learn to find free or cheap ways to have fun, instead of spending, as I talked about above.

7.  Can you give us an example of your experiences with bad financial habit or situations?  How did you over come it?

I had a debt problem, just a few years ago. Not only would I buy non-essential things on credit or get a loan to buy them, but I also made emergency purchases on credit because I basically had no savings. So while I was trying to pay my debts, things would get worse every time there was an "emergency" -- the car would break down, something in my house would break (like the plumbing), there was a medical expense I had to pay, and so on.

Two simple things fixed the situation: I stopped spending on non-essential thing if I didn't actually have the cash on hand (I saved up for things instead of buying and trying to pay later), and I created an emergency savings fund of at least $1,000 (now it's much more) so that I could continue my debt repayment plan even when emergencies came up. It took about two years after that for me to pay off all my debts, but it wasn't hard once I made it automatic and created these vital new habits.

Additional photo credits: Frédéric Dupont, Frank
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Guest's picture

very informative, I throughly enjoyed this article

Guest's picture
Didi Bagallon

"I'm too afraid to have debt"... I find myself holding back all the time and during the holidays when I finally slowed down my eyes from whizzing past department store windows, I discovered that I've been missing a lot. Even with that, a small treat for myself comes with a lot of guilt that maybe, I didn't spend wisely.... I guess my experience could be a downside to too much vigilance against vanity and excesses.

Guest's picture

My struggle with frugality is spending money on a whim. It's so easy to talk yourself into a non-essential purchase if your in the 'right mood'. But forcing yourself to wait for 30 days, allows you to 'cool off' and regain perspective. I'm always amazed at how much I really don't need, once I come to the end of that month long wait.

Excellent interview and great insight. Thanks for sharing. Eric.