Skip to content

The Economic Case For Minimalism

April 3, 2016

American society is foundationally built on materialism.  We are often told that the key to a blissful existence lies in the quality, quantity, and size of our possessions.  Our country is gifted with an abundance of land, so we’ve always had our big lawns to go with our big houses.  SUVs, trucks, and muscle cars have become the identity of the American automobile and cultural landscape.  “Bigger is better” is one of our most cherished phrases.  But is bigger really better?  If the notion holds true, that the larger and more abundant our possessions, the happier we are, then America should be the happiest country on earth.

According to the 2015 World Happiness Report, The United States is ranked 17th out of 156 countries in happiness, losing out primarily to European nation-states. One key difference between Europe and the United States is that European culture tends to value minimalism as opposed to materialism.  These results are not surprising, considering study after study have proven that material purchases tend to be more susceptible to diminishing returns.  That is, materialism only makes us happier initially, but then it quickly regresses over linear time.  In contrast, research have discovered that the jubilant effects of personal experiences tends to actually ascend over time.  We are essentially endowed with a perpetual surge of serotonin whenever we reminisce.

Minimalism as a philosophy have been around for many years, but it wasn’t until the recent 2008 recession and concerns over global warming that Americans have opened up to the idea of downsizing their lives.  Specifically, minimalism have become quite popular with the Millennial generation, with many even going as far as building shipping container homes.  Millennial are also more willing that any other generation to spend their money on travel and experiences as opposed to things.  However, unlike their predecessors, the Gen-X and Baby Boomers, Millennial are also the most financially strapped, often hammered by massive student debt, globalization, and an unfavorable job market.  Despite these obstacles, though, it is still possible for a young American today to enjoy an insatiable life of adventure as long as they understand the economic value of minimalism.

People tend to underestimate how much money something can cost them over an extended period of time.  For example, you do not need to be wealthy to wander the world.  You just need to understand how to travel cheaply, and buy everything in size small, including the two biggest purchases of your life:  A house and a car.

When deciding on a car, people far too often just refer to the sticker price to assess cost. They would compare a 2016 Honda Civic LX, which is currently listed at approximately $18,640, with say, a 2016 Ford F-150 XL at $26,430.  The consumer would see this as a $8,200 difference and perhaps therefore deciding to follow the American cultural practice of buying large, since $8,200 doesn’t seem like that much more.  Unfortunately, the reality is, buying the larger vehicle in this case will actually cost you significantly more because you need to put into consideration interest rate, oil, gas, insurance, repair, tires, parts, etc.  Below I conducted a breakdown of true costs between these two vehicles based on the assumption of 15 years and 150,000 miles of driving:

Civic LX From $18,640
F-150 XL From $26,430

Civic – $0 down, $299/mo, 4.9% APR, 72 month financing (Final Price:  $21,528)
F-150 – $0 down, $424/mo, 4.9% APR, 72 month financing (Final Price:  $30,559)

INSURANCE (w/ $500 deductable through Liberty Mutual)
Civic – $157 a month ($28,260 for 15 years of driving)
F-150 – $149 a month ($26,820 for 15 years of driving)

TIRES (65,000 miles, Goodyear Assurance® Fuel Max®)
Civic LX – $575 ($1725 for 3 tire replacements over the life of the car)
F-150 – $835 ($2505 for 3 tire replacements over the life of the car)

OIL (7,500 miles replacement)
Civic – 4 quarts (80qts for life of car), $22.88 for Mobil 1 Synthetic Oil at Walmart.  With tax:  $1830
F-150 – 6 quarts (120 for life of car), $22.88 for Mobil 1 Synthetic Oil at Walmart.  With tax:  $2745

FUEL ECONOMY (Average for last 10 years in the Metro Detroit Area at peaks and dips equated to approximately $3.10 a gallon – Please see chart below)
Civic – Up to 31 city / 41 highway (36 average).  Total cost of gas for 150,000 miles:  $12,917
F-150 – Up to 18 city / 25 highway (21.5 average)  Total cost of gas for 150,000 miles:  $21,628


This metric is impossible to calculate, but it not unreasonable to assume that over the course of 15 years, the F-150 could accumulate at least $2,000 or more in costs simply due to the higher overhead on larger parts (i.e. windshield wipers, air filters, etc), and therefore, this will be the rough amount applied to the total.

Civic – $66,260
F-150 – $86,257
Difference:  $20,000 (Rounded)

As you can see, owning a large vehicle like a truck or SUV will cost you approximately $20,000 more than owning a compact.  Twenty grand is certainly enough to travel the world when done conservatively.  Moreover, assuming you actively drive between the age of 16 – 76, you will go through 4 major car purchases in your lifetime, further widening the gap between these two material products.

A house is no different.  People often forget that the bigger the house, the higher your property tax and insurance.  It will also cost more to heat and cool your home, replace the roof, replace the central air unit, replace the carpet, etc.  For a young couple, you really don’t need more than a thousand square feet.  Anything more and you’re basically just wasting money.  A home is a place to sleep and watch television, why do you need so much floor space?  Do you enjoy cleaning all the time?  A house, whether 1,000 or 2,000 feet will probably give you the same memories in the end, but imagine all the experiences you could have with the $100,000+ you saved by minimizing. –Ping Zhou

*Recommended article about Japanese minimalism


No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: