Since I first heard of the term “minimalist,” I’ve been intrigued by the idea and have at least loosely attempted to follow it in my own life. A true minimalist only owns few things (often less than 100 items). Minimalists have various reasons for doing so, but they often include their desire to simplify life or travel while carrying everything they own on their back.
While minimalism isn’t for everyone, there are a lot of lessons we can learn and apply to personal finance. Here are several minimalist-inspired ideas that I’ve applied to my own finances.
1. Use cash as often as you can, and keep as few credit accounts as possible. I’ve given up credit cards. I’ve done this mostly to simplify the number of accounts that I have open.
I hate having to track the balances I have on 5 different credit accounts and 2 debit accounts. Instead I’d rather just check one account to know exactly how much cash I have available.
If you’re set on using credit, try carrying only one credit card at a time. Then you simply have one balance on one card. It makes things easier for preventing identity theft, too, when you don’t have as many cards around.
I’m not always a big fan of buying in bulk simply because I end up wasting more. When this happens, you lose money instead of saving it. Buying multiples means that I’ll have to store things, hoping that I won’t lose things.
3. Automate. Right now I have automatic payments of $1,100 coming out of my account until I finish paying of my student loan debt at the end of 2011. It’s the first thing that comes out of each paycheck so I don’t have to think about where to send my money first. It’s a foolproof plan.
I also have automated transactions to fund my Roth IRA, an account for bicycle expenses, and to send spending money to my PerkStreet account. I plan to create automatic savings and separate accounts for even more things, too, since it makes saving easy and cuts down on stress
4. Keep a simple budget, and make tracking expenses as easy as possible. I hate budgeting, so setting up a complicated budget with 30 different items just isn’t going to work for me.
Initially I set up a quick spreadsheet to track expenses, which was a great start and got me to do the bare minimum to see where I spent my money and stay on a budget.
I’ve since graduated to using Mint and the Mint App for iPhone, which allows me to add transactions in only a few seconds. Mint really does it all for me (although I’m excited to give the Adaptu App a chance to take on Mint, too).
5. Make your entire financial plan as simple as possible. I’m not always a fan of Dave Ramsey, but, when it comes to simplicity, his plan is best. Simply follow his seven baby steps, which are crystal clear, and you’re in great financial shape.
I prefer a slightly less-minimalistic approach than Dave’s, but for those that are buried in debt and don’t have a clue, Total Money Makeover is easy to follow and solid advice.
Check out this post on Minimalist Money on Get Rich Slowly where I got some of my inspiration for this post.
How do you make your finances as simply as possible?
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photo by: mockstar