It may not be the first thing that jumps to mind when talking about minimalism, but a minimalist approach to life can (if you choose) extend all the way from how you shop and manage your time to how you manage your personal finance.
Personal finance doesn’t have to be a big scary thing you don’t want to look in the eye. Managing your money can absolutely be simple and uncomplicated.
In the same way we work on developing healthy habits by keeping an uncluttered home or making mindful clothing purchases, learning how to budget, save and work with money is simply an achievable skill to master.
Let’s look at 7 ways to approach personal finance management with a minimalist mindset.
Spend With Purpose
A familiar concept in the minimalist world, doing things with purpose and intention is key.
Start off by examining your reasons for spending. By all means spend money on something you need or love, but don’t waste money on things that have ‘impulse buy’ written all over them. Are you buying to keep up with friends or because you feel like it’s the in thing to have?
Aim to make purposeful decisions to prevent purchases that aren’t mindfully made.
To put a purchase in perspective, I like to ask myself what I could buy that would have positive long term effects (memories from a fun camping trip, an online course, dancing classes!) for the same price as the tempting item.
Find a helpful filter or meaningful comparing tool you can use to weigh up the true value of impulse purchases you’re wanting to make.
Track Your Spending
To grab hold of your personal finances, it’s important to know where your money is going.
Dig through your bank statements to find trends. Sort your expenditure into categories like
- Luxuries: Things you don’t need and your life would be the same without. Includes meals at restaurants, jewelry accessories, scatter cushions!
- Essentials: Rent, loan repayments, utilities. These essentials can be re-examined if necessary to discover possible saving opportunities.
- Variables: Spending that can be tweaked. Groceries are a necessity, but it could be possible to spend less with more careful choices. Maybe save money by packing a homemade lunch instead of buying something on the go. (A great example of the money-saving benefits of meal planning! Read more here.)
These categories will make it easier to create a budget. Having a budget is an amazing way to build your awareness around your spending habits. It also makes it easy to set financial goals and intentionally make plans for funding your dreams in life.
Deal with Debt
If you have debt, and most of us do, getting rid of it needs to be a priority. Coming a close second is not accumulating any more debt (if at all possible).
This will require some resolve, but the payoff will be a new level of financial freedom that is worth aiming for.
Work out a plan to pay off debt. Dave Ramsey has great practical methods for paying off debt and also creating a plan to live debt free. He teaches about the value of living within your means by sticking to a budget, building an emergency fund and other helpful personal finance tips.
Build an Emergency Fund
An emergency fund is money you have saved for rainy days. Dave Ramsey (he really is good!) recommends starting off by saving $1,000. Even if it takes time, it’s an achievable goal to aim for. Examine your budget to discover any areas you could cut some expenses. Doing some odd jobs or starting a side hustle will get you there even quicker.
Ultimately, a popular rule of thumb is to have 3-6 months worth of expenses tucked away in an emergency fund.
Keep Your Investments Simple
If you’re interested in investing (and it’s a wise way to use and build your finances), over and above investing in retirement, investigate simple investing solutions that don’t carry a lot of risk.
Find a financial advisor to consult with and get trustworthy advice about simple ways to invest that don’t take up a lot of your time (unless you love it!).
Set Personal Finance Goals
What are your financial goals? Do you have a plan guiding your budget? Money is a tool that, when wielded wisely and purposefully, can open up doors of possibilities and adventure!
Work out a short, medium and long term financial plan. A short term plan could be to pay off debt in a specific time frame. Saving for a trip overseas is an exciting medium term goal. And saving for retirement is a solid long term goal to structure your finances around.
Re-evaluate your goals regularly and be encouraged by the progress you’re making.
The principles of simple living and minimalism are so compatible with mindful personal finance.
Taking your finances in hand and learning them inside and out, creating goals and developing intentional spending and saving habits will enable you to use money as a tool to further your life plans.
Keep it simple and be intentional and you’re sure to reap the benefits for years to come.