It’s no secret that we live in a world obsessed with “more.” But, as Benjamin Franklin said, “Many a man thinks he is buying pleasure when he is really selling himself to it.”
However, minimalism offers a refreshing approach to personal finance. Despite the misconception, this isn’t about deprivation or hardship. Rather, it’s about aligning your finances with your values and finding freedom in simplicity.
By using this approach, you will be able to:
- Save more money. You can invest in your future with more left over by cutting unnecessary expenses.
- Reduce stress. The less clutter in your finances, the less mental strain you’ll experience. As a result, you’ll feel more in control of your finances.
- Increase time and freedom. When you don’t have to earn money for unnecessary things, you have more time and energy to pursue your passions.
To put it simply: True wealth is the ability to live a fulfilling life, not accumulating possessions. It’s about valuing experiences, relationships, and personal growth over stuff.
So, how do you get started? The following tips will help you apply a minimalist approach to personal finance.
Redefining Wealth and Success
To begin with, we must challenge what is traditionally considered wealth and success. Society often equates these terms with having more—more money, more possessions, a bigger house, a flashier car. Minimalist finance, however, flips this script.
The idea is that true wealth is having enough to live comfortably and pursue your passions. More than material accumulation, it’s about finding joy in experiences, relationships, and personal growth. Additionally, it’s about intentionality and alignment.
By shifting your perspective, you can escape the treadmill of consumerism. When you stop chasing the latest gadgets and trendy clothes, you realize happiness does not come from stuff. You can then spend your money with intention on the things that truly matter.
The first step to spending money with intention is to create a budget that aligns with your values and priorities. Tracking your income and expenses can help you identify areas where you may overspend or where you can cut back to make life more fulfilling.
Another step? Practice mindful spending. This means simply means before making any non-essential purchase, consider whether it aligns with your values and if it will enhance the quality of your life.
As a final suggestion, invest in experiences rather than material possessions. Research shows that experiences lead to long-lasting happiness.
Decluttering Your Finances
As with decluttering one’s physical space, minimalism in finance is about decluttering one’s spending. To get you started, here are some strategies:
- Track your spending. Spend a month tracking your income and expenses to better understand where your money goes. Many budgeting apps are available on the market, or you can make a simple spreadsheet. Whatever you decide, the key is to be honest about your spending habits.
- Identify unnecessary expenses. Determine where you can cut back on your spending by analyzing your spending. Could you, for example, get rid of Amazon Prime? Besides the annual $139 fee, this could prevent impulsive shopping. To eliminate unnecessary expenses, you must be ruthless.
- Unsubscribe. This refers to marketing emails and social media accounts that bombard you with offers.
- Avoid impulse purchases. Think before you buy: “Do I really need this, or am I just wanting it?” Can I borrow it from a friend, or can I find a cheaper alternative?
- Embrace free or low-cost entertainment. Instead of expensive nights out, check out free museum days, library events, or outdoor activities.
- Cook at home more often. Eating out regularly can put a strain on your budget. Take advantage of budget-friendly recipes and enjoy the pleasure of cooking at home.
- Cancel unused subscriptions. Review your subscriptions if you rarely use a service, such as a gym membership or a streaming service.
It’s important to remember that minimalism is not about deprivation. It’s about prioritizing spending on truly valuable things.
Streamlining Your Accounts
Spending isn’t the only cause of financial clutter. Other causes include numerous bank accounts, credit cards, and investment portfolios. As such, whenever possible, consolidate your finances.
- Consider having just one checking and one savings account. This will reduce your chances of being charged an overdraft fee and allow you to keep a better eye on your balance.
- Do you have multiple credit cards with varying rewards programs? Keep one or two cards that offer the best rewards based on your spending habits and evaluate their benefits. In this way, overspending is reduced, and bill management is simplified.
- Review your investment accounts. You may want to consolidate several old 401(k)s into one IRA if you have several from past employers. By doing this, you will be able to manage your investments easier and reduce the paperwork you need.
Ultimately, streamlining your accounts will allow you to gain better control over your finances and reduce the mental clutter that comes with managing multiple accounts.
Automating Your Finances
If you want to simplify your finances, technology can be your ally. Make your finances run like a well-oiled machine by utilizing the power of automation:
- Set up automatic bill payments. You’ll never miss a deadline again, avoiding late fees.
- Schedule regular transfers to your savings account. Practicing consistent saving habits will help you achieve your financial goals more quickly.
- Automate investments. Set aside a set amount each month for retirement savings or investing. As a result of this “dollar-cost averaging” strategy, market fluctuations are less pronounced.
Overall, due dates and transfers can be easily remembered with automation, eliminating the need for constant vigilance.
Mindful Spending and Saving
Mindful spending and intentional saving are at the core of minimalist finance. In other words, your decisions about your finances should be deliberate, aligned with your values, and based on your goals. To embrace mindful spending, here are some strategies:
- Adopt a 30-day rule. Don’t make non-essential purchases before 30 days have passed. In this cooling-off period, you can determine whether your desire is fleeting or genuine.
- Conduct a “Needs vs. Wants” audit. Make sure your purchase meets your needs, not your wants. Needs are essential for survival, while wants are merely desires. Don’t spend on anything other than what you need and what you really want.
- Follow the “Cost-per-Use” rule. If you are considering a purchase, calculate the cost per use. If you use a gym frequently, for example, the cost per use might be reasonable. All purchases should be based on this logic.
- Embrace delayed gratification. Don’t let instant gratification lure you into making impulsive purchases. Spend less on things you don’t need and save more on things you want. In many cases, achieving a long-term goal is more satisfying than purchasing impulsively.
- Prioritize experiences. Invest in experiences like traveling, learning a new skill, or spending time with family. Unlike material possessions that depreciate over time, these experiences create lasting memories and happiness.
According to researchers, people are more satisfied with experiential purchases than material ones — regardless of the measure of happiness used.
“If you want to be happier, it might be wise to shift some of your consumption away from material goods and a bit more toward experiences,” said lead author Amit Kumar. “That would likely lead to greater well-being.”
Minimalist Finance for Different Life Stages
Any stage of life can benefit from the minimalist approach, with some adjustments:
- Young adults. Build a solid financial foundation. For instance, get in the habit of saving and living within your means.
- Mid-Llfers. During this time, earnings are often at their peak. Saving for retirement and future goals is essential, but you should enjoy life’s experiences.
- Retirees: In retirement, maintain the lifestyle you desire while ensuring you have enough savings to cover your needs and wants.
Living a Richer Life with Less
There is no one-size-fits-all approach to minimalist personal finance. It’s about aligning your finances with what matters to you. But, if you simplify your financial life and spend with intention, you can free up money and mental space to pursue what truly makes you happy.
FAQs
What is minimalist personal finance?
A minimalist approach to personal finance focuses on what matters most and simplifies your finances. Having a life that’s rich in experiences, not just possessions, is more than just being frugal or budgeting.
How can minimalism save me money?
By practicing minimalism, you can eliminate unnecessary expenses. Examples include unused subscriptions, impulse purchases, and staying current with trends. When you focus on what you need and value, you’ll have more money to save.
What are the key principles of minimalist personal finance?
- Live below your means. Don’t get into unnecessary debt by spending more than you earn.
- Prioritize spending. Put your attention on experiences and things that add value to your life.
- Declutter your expenses. Eliminate unnecessary subscriptions or memberships by tracking your spending.
- Automate your finances. Automatically pay bills and transfer savings.
- Redefine wealth. Being wealthy isn’t about accumulating things but rather about living a fulfilling life.
How do I get started with minimalist personal finance?
- Track your spending. Find out where your money goes so you can cut back.
- Create a simple budget. Spend some of your income on necessities, some on savings, and some on wants.
- Review your bills. To reduce your monthly expenses, consider renegotiating cable, finding cheaper phone plans, etc.
- Challenge your purchases. If something does not align with your values or bring you true value, do not purchase it.
Is minimalist personal finance the same as being cheap?
The essence of minimalism is intentionality, not deprivation. The key is avoiding wasteful spending and spending on what matters to you.
Is minimalism right for everyone?
Minimalism is a philosophy that you can adapt to your own preferences and needs. Rather than deprive yourself, you should make intentional choices with your money and focus on what matters most.
Image Credit: goumbik; Pexels
