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.
2. Buy only as much as you need. Minimalism and frugality go hand in hand. The less you own, the less you’ll have to pay for. You won’t have to keep track of all your stuff, either.
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.
Get rid of as many things as you can that involve recurring payments. This is why I don’t own a car. Cars are a money pit that seem to never end.
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
I definitely agree with your number 4. Having a simple to follow budget that you can track easily makes a huge difference to how successful you are financially. We have done this and it works out really well. We know what we can spend month to month and we can also review where things are at. We use Quicken and really like it.
Thanks, Miss T!
I’d love to try the 100 items thing. I think I could do it, if I lived along. Not really possible when you have a family.
Yeah I’m not sure it’s all that hard on your own, although I can’t say how many things I own right now. Maybe like 200? It’s hard to count with all the little stuff floating around that I’d love to get rid of.
Big fan of keeping it simple! And a big thumbs up for automated savings!
Thanks, MC!
I am a minimalist at heart, does that count? My husband likes to spend and I keep him in check as much as possible. As our family salary grew over the years, so did our possessions. Which in turn brings more expenses for upkeep. I think people neglect to realize this. For instance, you move from a 1200 sq foot house to 2500 because, frankly, you can afford the monthly payments and you have 5 kids that need that room. But many forget that your heating, cooling, upkeep and taxes will more than double. Now can you afford it? We don’t have 5 kids and don’t have a 2500 sq foot home but I know this has happen to many people.
I love your tips. I still own a beast of a car but I live relatively frugal everywhere else.
~Allie
I completely agree, Allie. It’s definitely hard to prevent scaling up everything in proportion to a family and a house. I live in a small apartment now, so I literally don’t have room to add a lot more stuff. I realize that it might not be that simple for others.
Thanks for stopping by!