Financial minimalism is the practice of simplifying your finances to remove fear, stress, guilt, and anxiety from your life when thinking about your money.
It focuses on the idea of spending your money in areas that truly bring you happiness and fulfillment and cutting spending in areas that aren’t contributing to your overall goal.
While it’s nearly impossible to remove every ounce of stress from your life, financial minimalism is a step in the right direction.
Now, you may be asking yourself how this is possible or how it can work for your unique situation.
While it does take commitment and practice, financial minimalism can be achieved by anyone who wants to reap the benefits.
Before we dive into how you can start applying financial minimalism to your life, let’s cover what financial minimalism is not:
Financial minimalism is NOT cutting back every expense to a point where you don’t enjoy life anymore
Financial minimalism does NOT mean you can’t have a lot of money
Financial minimalism is NOT the only right way to approach money
Financial minimalism does NOT limit your ability to make more money
After removing those myths around financial minimalism, here are a few ways you can start practicing financial minimalism in your daily life:
Define your financial values and priorities
Without knowing where your money should be going, it’s difficult to establish regular money habits.
The first step is to think about what you truly value and what your long term goals and priorities are.
Examples of long term goals:
Save 20% for a down payment
Retire at age 45
Live ‘bad’ debt free
Your financial values should reflect what makes you happy. For some, this may be traveling or visiting a new brewery every weekend.
Whatever brings you joy is where you should be using most of your spending money. The tougher part of this equation is to cut spending in areas that aren’t bringing you value and joy.
If you love traveling but don’t care to have the latest and greatest iPhone, wouldn’t it make sense to save for your next trip instead of upgrading when the newest iPhone comes out?
Take some time to think about what you truly enjoy. Then look at your spending to see if it aligns with those values. If it doesn’t, adjustments need to be made to prioritize what’s important and limit spending in other areas.
Automate your savings
Automating your savings is one of the best and easiest ways to get started with financial minimalism.
As soon as you get paid, a portion of your paycheck should be going to savings/investments no matter what.
It’s okay if it’s not a massive amount. Everyone has to start somewhere but the important part is starting.
If you automate your savings and cover your necessities such as rent, bills, debt payments - the money you have left over can generally be spent guilt-free. Using this method, you may not even have to create a budget because you’re saving your money first rather than saving what’s left over after a month of spending.
After you’ve established your financial values, it’s easier to spend your money on things that bring you happiness.
If you find yourself debating on making a purchase that doesn’t align with those values, wait a couple days before committing to that purchase.
Oftentimes, you’ll forget about whatever you were thinking about buying and your wallet will thank you for it.
If you’re like most people, you trade your time for money. You trade 8 hours a day, 5 days a week to get a paycheck.
Now, let’s say you make $20/hour after taxes.
If you go shopping and spend $200 on things that aren’t contributing to your goals, that purchase cost you 10 hours of time you can’t get back and pushes you farther away from your goals.
The Bottom Line
Financial minimalism is a great way to simplify your money and allows you to spend more on things that bring you happiness.
You may have to cut back on things that you thought were bringing value and joy to your life, but ultimately you’ll gain peace of mind and clarity with your finances by focusing your money in areas that bring you closer to your goals.