Minimalist living has been proven to be one of the best ways to achieve financial success. If you’ve already embarked upon a minimalist lifestyle, perhaps you’re ready to finally achieve financial minimalism.
Did you even know there was such thing as financial minimalism? And that you can become a financial minimalist?
Neither did I before I began my minimalism journey…
We’re always looking for ways to save money and cut expenses, but it’s hard when you have bills coming in every month.
The good news is that it is possible.
Most people don’t realise how much they’re spending on unnecessary things until they actually see the numbers side by side. That was me too, and then I managed to put some of these steps into action to save $10,000 in a year.
If you want financial freedom then you need a plan that works for your life. Taking a minimalist approach is one way to take control of your finances and get out of debt quickly. And who doesn’t want less debt?
You might also like:
- Convenience Culture: The True Cost of Convenience
- How to find joy in frugal minimalism (with 10 frugal living tips)
- 36 Simple Frugal Life Hacks: How to Save $200 Each Month
- 12 Unexpected Benefits of Minimalism
- What is Extreme Minimalism: Benefits & Examples in 2023
- 17 Reasons I Love Minimalism: Less Stuff Equals More Living
- What is financial minimalism?
- Why practice financial minimalism?
- How to practice financial minimalism
- 1. Track Your Spending Habits
- 2. Cut Out Unnecessary Expenses
- 3. Make Money Without Spending It
- 4. Pay Yourself First
- 5. Be Mindful About Your Purchases
- 6. Reduce Your Debt
- 7. Don’t be Afraid to Invest
- 8. Negotiate and compare prices
- 9. Work Towards a Balanced Lifestyle
- 10. Build an emergency fund
- 11. Automate your finances
- 12. Embrace Your Free Time
- 13. Set Your Own Standards for Living
What is financial minimalism?
Financial minimalism is a lifestyle and mindset that focuses on simplifying one’s finances and reducing the emphasis on material possessions and consumerism. It involves intentionally and consciously managing your money, expenses, and investments to achieve a greater financial freedom, reduce financial stress, and prioritise experiences and personal values over material wealth.
Financial minimalism means living with less to focus on what’s truly important in life. You may choose this path because you want to spend more time with the people you love, or make a difference to those around you.
There are many ways that financial minimalism can help your life (and your bank account). Today we’re going to look at some ways you can achieve financial minimalism and save money in the process.
Why practice financial minimalism?
It’s important to practice financial minimalism so that you have peace of mind for your future. We all know that financial stress can have a detriment affect on our health.
By getting your spending under control and reducing your debt – whether it be credit cards or loans – you may be on the right track to reducing your expenses and reaching a place where you’re living within your means.
Practicing financial minimalism is about more than just getting your spending under control. It’s also about reducing the number of things you feel you need to live “the good life” so that you can focus more on what makes your life meaningful and less on material goods. Your health, relationships, passions, and contributions are all more important than anything money can buy.
But there’s more than one path to getting to financial minimalism! Here are some strategies that could work for you:
How to practice financial minimalism
1. Track Your Spending Habits
When I first started practicing financial minimalism, the best thing I did was start tracking my everyday life spending. It took me about six months of deliberately recording everything I spent until it became second nature.
The reason why tracking my spending was so powerful is because it really opened up my eyes to where all of my money was going and all the unnecessary purchases I was making. And although sometimes it felt like too much information, ultimately knowing exactly where my money was going gave me the awareness and power to make better spending decisions.
The most interesting thing I discovered from tracking my spending for a year is that about 80% of my expenses were habitual. Sure, at the time it seemed like a good idea to buy the same pair of shoes in 4 different colours, but in hindsight that wasn’t the case.
By focusing on my biggest money leaks, I was able to cut out a lot of unnecessary expenses and save more money each month.
Make a spreadsheet of all your expenses – from car loans to health insurance to daily coffees – to see where your money is going. This will give you insights on unnecessary expenses and help you create a budget that makes sense for you.
2. Cut Out Unnecessary Expenses
Another practice I adopted when learning how to be a financial minimalist was cutting out all of the unnecessary expenses in my life. This is something we can do at any time, not just when we’re actively practicing financial minimalism.
It’s really easy to lose track of what actually brings value into our lives. We start getting caught up in the idea that we need all these material goods to be happy, when really it’s only ever temporary happiness.
There are so many habits and expenses that bring no value into our lives whatsoever. I cut out a lot of my subscriptions and started bringing packed lunches to the office instead of eating out.
I even got rid of cable TV! And it turns out I don’t miss it at all because I realised how little I was using it. It also reminded me that there is plenty of free content on YouTube or elsewhere online if you know where to look, and after a while you’ll find yourself not missing what you never thought you’d live without.
Other examples of unnecessary expenses may be your gym membership, or reducing your phone plan to a more minimal version. Don’t forget to include the subscriptions and memberships you pay for but have no good use too!
3. Make Money Without Spending It
Do you know what one of my biggest money leaks has always been? Shopping. I used to love shopping for new clothes, even though I didn’t really need anything and would rarely wear the clothes I bought.
Over the years I’ve learned how to make money online through various different streams – blogging and Etsy to name a few. By earning money online, I discovered that working from home is something I’m completely comfortable with, and something that can bring incredible financial benefits in the long run as well as opportunities for self-expression.
This is another way to work towards financial minimalism, and one that’s much more sustainable than spending all your money every month on retail therapy.
4. Pay Yourself First
One thing I learned from tracking my spending is that sometimes we pay ourselves last. We might spend a whole week’s worth of wages on going out to dinner, buying a few new clothes, and other unnecessary expenses before we remember to transfer anything into our savings accounts.
This is exactly what you don’t want to do if you’re trying to learn how to become financially minimalist. Treat yourself gently by paying yourself first. Make it part of your routine, especially if you have a tendency to forget about the funds that could be growing in your savings account.
Financial minimalism isn’t just about giving up all your money or refusing to buy anything – it’s also about deciding what brings value into your life every day. Even if you start small, learning how to be a financial minimalist can change your life for the better.
5. Be Mindful About Your Purchases
Another big part of financial minimalism is being mindful about your purchases . This took me a long time to accept, because it led to the conclusion that I spent way too much money on some pretty dumb things.
But once I accepted this fact for myself, it made the process of finding substitutes for these unnecessary expenses so much easier. For example, instead of spending money on lunch every day at work, I would bring my own food from home or pack some snacks so I wouldn’t be tempted by expensive take-away close to my office.
6. Reduce Your Debt
If reducing your debt is one of your goals, then having no debt or living within your means are practices that go hand in hand with financial minimalism. Without spending more money than you make, it’s much easier to pay off your debts because money isn’t constantly being wasted on unnecessary expenses every month.
I have shared before that before I started my minimalism journey, I was in a lot of debt, both credit card debt and I had loans. It wasn’t until facing the facts that I could see clearly what steps needed to be taken in order to reduce it. And now that all of my debts have been paid off, I finally have some breathing with my finances.
If you have high interest credit card debt, it’s important to focus on eliminating it as soon as possible. One of the best ways to do this is to make more than the minimum monthly payment and pay off the balance in full each month. This will help you avoid interest and fees, which are usually very high for credit card debts. You can also try to switch to a lower interest credit card to help with paying off the debt quicker.
If you have more than one loan, consider consolidating them into one loan with a lower interest rate. With consolidation loans, it can be easier to track and pay off your debt as you’ll only have one payment each month.
Create a simple budget that you can stick to. This will help you stay within your means and track how much money is coming in and going out each month. Having a minimalist budget will also let you know exactly where your money is going so that you can make sure it’s being used in the most efficient way possible.
7. Don’t be Afraid to Invest
Don’t think investing is something you can only do once you have a lot of money. Just like with anything, the more you invest when you’re young, the less you’ll need to hit your retirement goals
Investing in yourself by learning new skills or working on improving the ones that are already there is one of the best investments anyone can ever make. And it’s never too early or too late to start!
You just never know what opportunities could come your way if you’re willing to put some time and effort into developing yourself through some self-education.
Besides investing in yourself, another way to get started with minimalistic investing might be making contributions to a retirement account every month, or investing in low-cost funds that will be able to help you reach your goals sooner. It all adds up eventually!
There are three rules before you start investing money, however:
- You must be debt free
- You must have at least 6 months living expenses saved (just in case)
- You must not need the money you invest for the next 5-10 years (i.e. it’s not an immediate future savings scheme)
8. Negotiate and compare prices
Whenever you need to buy something, try to find ways to negotiate or compare prices. This could mean searching online for a better deal before purchasing, or negotiating with the seller for a lower price.
Ask vendors when their next sale is coming up or if they have special offers depending on payment methods.
There are endless possibilities when it comes to getting the best deals on items – so be sure to do your research first.
9. Work Towards a Balanced Lifestyle
Spending your money on overpriced drinks and going out with friends can be one of the easiest ways to blow through your paycheck fast. But it’s not a great investment. It might feel like fun spending at first, but once the glow wears off and you’re still broke, how do you feel?
In order to achieve financial minimalism, try working towards a better work-life balance. That doesn’t mean you should never have fun, but rather prioritise your goals and budget for joy as well. You could decide to put half of your paycheck into savings or investments and use the other half for necessities and reasonable luxuries.
Find things to do other than partying which won’t cost you a fortune and can help you find joy at the end of a long day.
10. Build an emergency fund
How often have you had to dip into savings for unexpected expenses or worse yet, take on more debt because of an unexpected trip to the dentist or your car breaks down?
Building an emergency fund is a great way to prepare yourself financially for any surprises life throws at you. Aim for 3-6 months of your living expense in liquid assets so that if something does happen, you’ll be able to cover it without having to worry about covering your other expenses.
Your emergency fund should be kept separate to your general savings fund. That way, you won’t be tempted to dip into it for non-emergencies.
11. Automate your finances
You’d be surprised how much time, energy and money you can save by automating your personal finances. Set up automatic payments for regular bills, such as your rent or mortgage, phone bill and internet costs. This way, you don’t have to worry about having enough funds available when the payment is due. And, even more so, you don’t have to worry about late fees for not paying your bills on time.
You can also set up automatic transfers into savings or investment account. This could be either a regular amount each week or month, or you can set up an automated system that will transfer any extra money into your savings fund that is left over from day-to-day spending.
12. Embrace Your Free Time
With so many people working overtime every week, I think we’ve all come to realise that time is precious . If we spend our time earning money for things that don’t add value into our lives, what’s the point?
Don’t let making a living prevent you from making a life– john wooden
Looking back over my life, I can see why financial minimalism has such a great appeal to me now. I know how much more happier and peaceful my life is without worrying about all the excess spending.
Time, money and energy are all finite things.
It’s up to each of us to decide what we want out of this life and start making choices that will lead us towards where we really want to be. Financial minimalism is only one path on the journey, but it’s an important one if you can learn how to embrace your free time instead of spending it trying desperately to make more money.
13. Set Your Own Standards for Living
If you’re in debt, living paycheck to paycheck or just getting started on your minimalistic journey, it can be helpful to understand that everyone’s journey is different. It might seem like people managed to get all their personal financial in order overnight when you see all the paid ads online, but what they don’t show the true stories.
Everyone has their own story and lessons learned along the way. The key is learning from them so you can build upon them yourself. Sometimes having a role model isn’t the answer. Everyone has to find their own path because no two paths are exactly alike. The sooner you realise this, the faster you’ll start reaching your goals.
PIN FOR LATER!
Practicing financial minimalism has made a profound impact on many. It’s about understanding what matters most to you, being mindful of where your money is going and having a plan in place for the future.
If you can find the right balance between spending and saving, it could lead to lasting financial freedom and ultimately a better quality of life.
Take a look at the strategies we’ve discussed and think about what’s realistic for your current situation. Transforming into a financial minimalist isn’t an easy process but I hope these strategies have been helpful to start you on your journey.