Financial Minimalism: Simplifying Personal Finances

Personal finance should never be complicated. Simplifying your finances does not only allow you to manage your money better but also makes it easier for you to make adjustments to your budget. By adopting a minimalist approach to your personal fiancé, you will be focusing on what matters most and choosing less but better quality items for yourself.

The concept of a minimalist budget also pertains to saving as much money as possible to reach your goals much faster. If this idea sounds interesting to you, let’s head over to the essential steps you need to take to simplify your finances the right way.

1. Understand your spending habits.

To start simplifying your finances, you first need to determine your average spending habits. How much do you spend on a day-to-day basis? How often do you go grocery shopping, and how much you spend in a month? How much you pay for dine-out meals? How often you visit a car shop for auto repair equipment and service? Are there hobbies, like hiking or painting, you love to indulge in from time to time?

Try to list down your expenses from last month or check your past credit card bill so you can easily have an idea of your monthly spending. Your spending habits must not include your fixed expenses like transportation, loan payments, rent and utilities, childcare, healthcare, and so on.

2. Switch to digital.

If you can, switch your transactions to digital. Just think about how many receipts or transaction slips you’ll have from various financial pursuits using your multiple accounts. You need to worry about where to safely keep them and even spend a lot of time going through them. Shift account notifications, statements, and receipts online. This makes it easier for you to organize them and not worry about them getting lost or ripped. It’s more eco-friendly too!

3. Consolidate bank accounts.

People opt to own five to eight checking or savings accounts for the organization. While that might work for some, others find it hard to manage and track multiple accounts. You got your accounts for personal savings, emergency funds, holiday and birthday spending, car repair and maintenance, home renovation, and so on. Simplify your banking without losing the drive to save. You can consolidate various accounts into one or two savings accounts and a primary checking account for your monthly spending.

In case you own several retirement accounts like 401k due to your previous jobs, check if you can roll the plans over to a single IRA account. Doing so won’t just make it easier for you to monitor your retirement assets but also help eliminate account fees and reduce paperwork.

4. Buy less but better quality.

Shopaholic woman

One of the basic rules in minimalism useful in finance is purchasing less but better quality items. It helps with sustainability as well. When you buy less yet better, you are helping to reduce waste and carbon footprint. Quality items may be a bit more expensive, but since they are more durable, too, you can save money in the long run.

But we’re not saying you should buy overly expensive items. Maintain a good balance of quality and affordability, or focus on purchases that provide you with great comfort or satisfaction. That’s the only way to get your money’s worth anyway.

5. Freeze spending.

This is a given, but let’s be honest, this could be the hardest part you’ll have to work on. Stop spending on huge money drains such as impulse buys and indulgences, especially if you want to save money and pay off your debt faster. You need to set a temporary spending freeze for a few months or so. You won’t just be building awareness and self-discipline here but also bulking up that emergency saving and get your budget on track.

If you can’t hold on for a couple of months, find at least one month in which you won’t spend money on any discretionary items. You’ll be surprised at home much you can save when you freeze spending for just a short term.

Adopting a minimalist approach to your personal finances does not necessarily mean you’ll deprive yourself of the things you want. It’s more of becoming cautious of how you spend your money and deciding how soon you want to reach your goals. By following our tips in this blog, you can put an end to that cycle of living paycheck by paycheck. In case the works seem tough for you, consider talking to a credible financial advisor.