Seven steps to practice financial minimalism
1. Set a maximum budget for subscriptions.
There is a subscription for everything nowadays. CatLadyBox, Henny + Roo Chicken, and Letters from Dead People are examples of subscriptions being offered. Maybe you don’t have any of these, but Netflix, Amazon Prime, Spotify, Disney+, a gym membership etc. easily add up. To maximize your enjoyment, decide the maximum amount you’ll spend on subscriptions each paycheck. If you are tempted to go over budget, consider replacing a subscription that you are not getting a lot of value from with a more desirable subscription.
2. Set text notifications each time your debit/credit card is charged.
Most banks offer this service. You can do this by visiting a local branch of your bank or setting it up online. A google search may help. Search for “how to set up text alerts when my card is charged.” This way, each time a payment is made from your card online or in person, you’ll know. This will not only create more awareness of how often you use your card, but it can also help you to catch potential fraud if your card is charged without your consent.
3. Invest as you spend.
There are many apps like Acorns, Webull, Robinhood, and SoFi that offer micro-investing services. It’s simple. Each time you buy something, you can choose to round your total to the nearest dollar and have the difference go towards an investment account. So, if you buy a coffee for $5.17, then $0.83 would be invested into an investment account of your choice. I used one of these apps for a year and barely noticed a difference in my monthly budget. After a year, I ended up with more than $2,000 in my micro-investing account. What I love about these apps is that you only need to set it up once and you don’t need to think about it again. Speaking of which…
4. Automate and forget.
No one tracks their spending and earnings with a checkbook anymore. We are very fortunate to live in a software-enabled world. Many of the tedious tasks of the past are now automated by computers that work to make our lives easier. Try to use that to your advantage.
Some essential payments that should be automated:
- Debt payments (credit cards, loans, etc.)
- Retirement contributions (401K, IRAs, brokerage accounts, etc.)
- Savings & emergency fund contributions
- Mortgage & rent payments
- Bills & insurance payments
5. Buy used.
I agree that some things should be bought new, but there are so many like-new items you can find in second-hand stores, donation centers, online marketplaces, or auctions that are priced at a 70-90% discount just because they are not wrapped in plastic in a store. Used cars are a great way of saving money. Refurbished electronics have a similar warranty to new electronics and can save you 20-30% off the retail price. It may take some time to dig for a good deal, but wearing a basically new pair of Nikes that you paid 60% less for is totally worth the search.
6. Identify your priorities, then intentionally spend without guilt.
The goal of financial minimalism is not necessarily about spending less, it’s about spending better. Spending better means identifying what you value most and choosing to spend money on that as opposed to other things. Do you want to prioritize traveling? Instead of eating out, you can put that money towards saving for your next trip. Do you prioritize designer clothes? Maybe instead of drinking coffee at Starbucks regularly, you decide to make coffee at home and save for that next clothing item. Or to the contrary, instead of buying new clothes every other week, you save that money to try a different coffee shop every day.
For every “no” you need a very exciting “yes” to keep you motivated. So, have fun with this! Once you have automated the important payments in your life, what are your priorities?
7. Don’t forget to give.
Even though I have far fewer belongings than I did five years ago, I still feel that I have more than enough. I aim to give to others whenever I see an opportunity. Whether it’s paying for the person behind me in line or leaving a $50 tip to a waitress that is a full-time student, being able to give to others enables me to be grateful for what I have.
Accumulating wealth is necessary, but it can also be blinding. It’s easy to fall into the trap of believing you’ll give to others once you have enough for yourself. The day of “having enough” may never come if you are only focused on achieving financial freedom through having more. If you focus on needing less and giving to others, you can experience what financial freedom is really about—having your own financial needs met so that you can spend your life helping others meet their needs.
The journey to reaching financial freedom isn’t always easy, and there are multiple ways to get there, but financial minimalism can help you reach financial freedom by needing less.