Minimalism can benefit every aspect of your life- including your budget. Financial minimalism and purposeful spending will speed up your journey to financial freedom.
What is financial minimalism?
Financial minimalism can be defined as simplifying your finances to reach your goals and take control of your spending. By doing so, you will better be able to organize your budget, curb unnecessary purchases, and save more money.
When you check your credit card bill at the end of the month, are you shocked by what’s on it? Do you often forget about late-night DoorDash orders, or that super-cute dress you bought on impulse? While individually, these purchases may seem insignificant, they quickly add up and can hold you back from reaching your financial goals. With financial minimalism, it’s important that you take responsibility for these unnecessary purchases before you begrudgingly pay your credit card bill. Ideally, with financial minimalism, you can organize your budget so that you know exactly how much money you can spend in each category of your life (i.e. rent, bills/debt, food, clothing, etc.). Embracing minimalism as a lifestyle will assist you to curb impulse buying and only buy what truly adds value to your life.
However, that’s not to say you can’t have any fun. While minimalist money management does encourage you to spend less on unneeded items, this will allow you to save enough money for the things that will truly bring value to your life. For example, forgoing the weekly McDonald’s purchases that you often regret could allow you to spend a memorable evening with a close friend and/or partner at a nice restaurant in your city. Keep in mind though, that’s just an example- embracing minimalism is a truly personal journey, and only you can decide what adds value to your life.
How can it help you reach your financial goals?
Financial minimalism is all about streamlining your budget to improve your savings and take charge of your own money. Remember- it’s your pay check. Just because you may have formed some less-than-ideal spending habits over the years, or you’re completely new to the world of budgeting and feel lost, does not mean you can’t embrace a minimalist budget. Even if you have more money than you know what to do with, financial minimalism may help you create a sense of purpose with your money. Becoming a financial minimalist is a journey, and it may take some time, but it can help you, wherever you are in your personal finance journey.
As mentioned, financial minimalism, alongside a general minimalist mindset, will stop you from spending money unnecessarily. Not only will this directly improve your savings accounts, but it will also help you gain a sense of control over your money. You will no longer feel like money just flies out of your hands the second you get your direct deposit from work.
By taking control of your spending, you can also keep better track of it. Since you won’t be expecting any surprises on your credit card bill, you’ll be able to spot it immediately if something is wrong. For example, companies double-charge clients by accident all the time- not a huge deal if you realize and dispute it quickly, but if you blindly believe your credit card statement because you can’t keep track of your purchases, you may be paying more than you should without even knowing!
However, if you’re already sticking to a budget and yet still feel overwhelmed, try slimming it down as much as possible. While you won’t be able to eliminate certain categories, such as your rent, you can combine and/or eliminate others. For example, if you currently have a separate budget for clothing / nights out / restaurants, try combining all your “fun” categories into one weekly sum. That way, it will be much easier to remember how much cash you have for extra purchases, and you won’t accidentally go overboard.
Once you have your money separated into fewer categories, you can save yourself time and effort by easily setting up automated transfers to pay any bills you have. That way, your must-haves are taken care of, and your savings are a sure thing, so long as you stick to your new minimalist budget!
Overall, minimalist money management will help you eliminate stress, take charge of your money, and live a more fulfilled life through purposeful purchasing.
How to create a minimalist budget:
1. Identify your fixed costs. The first step to creating a minimalist budget is to keep track of everything you absolutely must spend. This includes things like rent, groceries, bills, debt payments, etc.
2. Analyze your current spending patterns. Look for opportunities to slim down your budget where you can. Do you really need to pay for both Netflix and Disney Plus? Do you still use your yoga membership from 3 years ago? Could you downsize your clothing budget?
This doesn’t have to be all work and no play, though. Identify the purchases that truly make you happy and contribute positively to your life and keep them! Any budget you make should be feasible and achievable, so that you don’t crash and burn. You don’t want to resort back to your old ways of spending. Retaining a portion of your budget to spend on nice-to-have items will bring you mental peace as you ease into a more minimalist lifestyle.
3. Create your new budget categories. With both your fixed costs and newly streamlined “fun” budget categories in place, it’s time to compile everything. Within each category you’ve defined, decide which amount you’ll allocate to it, either on a weekly, bi-weekly, or monthly basis.
To help kickstart your journey, I’ve simplified a budget template by Excel for you, to create a sample minimalist budget that you can download! Download it below. Feel free to edit it and make it your own.
4. Automate as many payments as possible. Since you already know exactly what you’ll be spending and when, why not make things even easier for yourself? Set up as many automatic transfers for your bills and other payments as you can, so that aside from reviewing your statements at the end of each month, you won’t have to worry about a thing.
Banking services like Tangerine are great options for this. Not only can they alleviate your stress, but they’ll save you time each month, so you can focus on the things you love- unless paying bills is your passion, in which case, the more power to you!
5. Review your budget & check your credit card on a monthly basis. At the end of each month, review your budget, and how well you were able to stick to it. At the same time, carefully evaluate your credit card statement and make sure it aligns with your actual spending. If either your budget or your credit card statement is out of line with what it should be, adjust as needed. Dispute any wrongful credit card charges or re-adjust your budget to better reflect the amount of money you need in each category- not want.
Although this step isn’t the most glamorous, it is vital to ensure you’ll be able to make the long-term changes you need to reach your savings goals and stay in control of your finances.
Overall, financial minimalism can help you take ownership of your money and curb unnecessary spending habits. Start today to gain the financial freedom that you deserve.