Last Updated February 18, 2024 by Davina Kelly
Do you want to simplify your lifestyle and finances? Adopting financial minimalism habits will help you do just that.
Whether you are in debt or always waiting for the next payday, adopting a minimalist approach to your finances will be beneficial. It can help you learn to live with less and be more intentional with your time and money.
Most people underestimate how much money they spend on non-essential expenses until they take the time to review their spending. This was me too!
Once I became a financial minimalist I was able to save 10k in a year, pay off debt, build an investment portfolio and create a more peaceful fulfilling life.
In this post, I will share the simple steps you can take to become a financial minimalist.
This post is all about financial minimalism.
What Is Financial Minimalism?
Financial minimalism is adopting a lifestyle where you learn to live with less, simplify your life and manage your money intentionally. A financial minimalist fuses money and minimalism together allowing you to spend less, save more and work towards your financial goals.
The lifestyle of a financial minimalist is focused on making time for important things in life like spending time with family and loved ones and spending money on experiences rather than material things.
It is also about making time in your life for personal growth and investing your time and money in things that will bring you value and make you a better person.
If you are tired of feeling like you never have enough money and want to live a more fulfilled life, financial minimalism is for you.
Living a more fulfilled life isn’t dependent on how much money you have. It is about being more intentional with your time and consciously managing your money.
Benefits Of Financial Minimalism
Adopting a financial minimalist lifestyle will give you peace of mind for your financial future.
It will allow you to improve your spending habits, save more money, get out of debt and learn to live within your means.
When you practice financial minimalism you not only get your spending under control. But you learn to understand that you don’t need material possessions to live a ‘good life’.
Once you understand this you will naturally focus more time and energy on things money can’t buy like your health, relationships, and improving your mindset. In time you will naturally want to spend more time nurturing your relationships and you will opt to spend money on experiences instead of things.
How To Become a Financial Minimalist
1. Decide What Is Important To You
The first step to financial minimalism is understanding what is important to you. What are your values? Do you have a clear intention for your finances? What do you hope to achieve by adopting a financial minimalist lifestyle?
It could be because you want to stop living paycheck to paycheck, get out of debt, or save more money. For me, it was to get out of debt, build up my savings, and spend my money on experiences instead of material possessions.
These are important questions to ask yourself and the answers will serve as motivation for you along the journey. It will also give you a goal to work towards that is based on something meaningful to you.
2. Track Your Spending Habits
Knowing your spending habits is crucial when creating a financial minimalist lifestyle because you can’t make changes to your finances if you don’t know where you are spending your money.
Tracking your spending habits will not only show you how much money you are spending in each area, but it can also help you to understand why. For example, if you are spending a lot of money on takeaways it could be because you don’t make time to plan your meals.
Now that you know this, you can look at how you are spending your time and make some changes. For example, instead of watching Netflix on Sunday morning, you can make time to do food shopping and plan your meals.
This is the power of tracking your spending it allows you to identify your spending habits and make improvements to your money and lifestyle.
You can track your spending using an app or you can create a spreadsheet using Google Sheets or Excel. I recommend the latter as it will make you pay attention to the details.
Review your bank statements for the last 3 – 6 months as this will give you a good idea of your overall spending. Make a list of your expenses and how much you have spent. Seeing these numbers will help you to understand where your money is going and where you can cut back.
3. Create a Budget
Once you are in the habit of tracking your expenses and have an understanding of where you spend your money and the improvements you want to make, it’s time to create a budget.
A budget is a powerful tool for your finances. It is essentially a plan for your money so when you get paid you know exactly where your money needs to go.
Creating a budget can feel overwhelming, but it doesn’t need to be. You can create a simple budget that is effective and helps you to reach your goals every month. I have a post on how to create a budget, you can read it here.
Once you have created your budget I recommend setting up your bills, savings, debt repayments and any other important expenses on autopay. This will simplify the process and take the guesswork out of it. It will also ensure that each month you pay your bills on time and save a portion of your money.
4. Build an Emergency Fund
Having an emergency fund can help to reduce financial stress and it will save you from going into debt if any unexpected expenses come up. Life happens and sometimes unforeseen events will occur so you want to be prepared.
How often have you had to use a credit card or dip into savings to pay for unplanned dental work or car repairs? An emergency fund will prevent you from having to do that and allow you to maintain your standard of living if something does come up.
I recommend building up at least 3 months of essential living expenses plus a buffer. For example, if your essential expenses are $2,000 a month, you should save an additional $500. This way you can cover your expenses and be prepared for any emergencies.
You can include the amount you need to save each month in your budget. A quick way to build up your emergency fund is to declutter your home and sell any unwanted items like clothes. This is a great way to clear your space, eliminate unwanted items, and make some extra money.
5. Pay Off Debt
Consumer debt such as personal loans, credit cards, and car loans are expensive and they can be a burden. The high interest rates can make them difficult to pay off and leave you in a cycle of living paycheck to paycheck.
Making it a priority to pay off debt can eliminate this worry and leave you will more money to save and invest. This is the first thing I focused on while on my journey to financial minimalism.
There are different ways to pay off debt, you can choose the Avalanche method where you prioritise paying off the debt with the highest interest first. Or you can use the snowball method and pay off the smaller amounts and work your way up. Include the monthly repayments in your budget so that it is part of your monthly expenses.
There is no right or wrong way, the important thing is that you are taking the action to pay off debt so choose the option that works best for you. You can read more about how to pay off debt here.
6. Live Below Your Means
Living below your means is a major key when creating a financial minimalist lifestyle. By living below my means I have been able to save a lot of money, build an investment portfolio and go on amazing holidays every year.
To live below your means is to be content with what you have and not spend more money than you make. Spending more money than you make can lead to debt which is what you want to avoid.
If you stick to the minimalist budget you have created and spend your money on needs instead of wants you will avoid debt and be able to save more money.
Just because you can afford something doesn’t mean you need to have it. Read here to learn more about how to live below your means.
7. Avoid Lifestyle Creep
Giving into lifestyle creep is a surefire way to live above your means and get yourself into debt. Lifestyle creep is when your income increases and you start to spend more money on non-essential and luxury items.
One of the reasons many people give into lifestyle creep is because they want to keep up with the Joneses on social media. Social media is full of people’s highlight reels and it can be tempting to want to emulate what you see.
This quote sums it up perfectly. “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” – Will Rogers.
You don’t need to impress anyone except yourself! Financial minimalism is about living a lifestyle with intention. The intention you want for your life is based on your needs, not anyone else’s.
To avoid lifestyle creep you need to be self-aware, stay in your financial lane, focus on your long-term goals and stick to your budget plan.
8. Invest Your Money
Saving your money is important, but growing your money is critical. You must have heard a thousand times that you shouldn’t leave your money sitting in a savings account and this is true because your money will lose purchasing power.
With inflation rising and the cost of living crisis your money is losing value every day. Being a financial minimalist is all about making smart choices with your money and investing is a great way to do that.
I know that investing can seem scary in the beginning because you don’t know what all the jargon means and have probably heard many horror stories of people losing their money.
To be transparent, investing does come with risks. But if you educate yourself and take a simple approach you can grow your money and make passive income.
If you are a beginner I recommend investing in index funds as they are low risk, they have low fees, and they are diversified. Having all of these things in place with reduce your chances of losing money.
I would also recommend you take a long-term approach to investing because you will benefit from long-term gains, dividends and compound interest. Read here if you want to learn how to invest your money. It will cover everything you need to know before you get started.
Before you start investing there are a few things you should have in place.
- A minimalist budget you can stick to
- An emergency fund
- High-interest debt paid off
- Money to invest that you don’t need in the short term
Having these bases covered will give you peace of mind because your essentials will be covered and this will allow you to invest consistently.
9. Spend With Intention
A big part of financial minimalism is being mindful and spending with intention. This can be hard to do especially if you are used to overspending on material things.
Spending with intention means that you stop to consider the impact of your purchase on your finances and your long-term goals before spending. It doesn’t mean that you can’t buy the things that you want it just means that you ensure you can afford it and it is something that will bring you value.
I recommend that you dedicate a portion of your income to a personal allowance and include it in your budget. You can take this from the money you have left over once you have paid your bills and essential expenses. This way you will still be able to do the things you enjoy guilt-free.
If you enjoy having dinner with friends or going to the theatre you should continue to do that. Now, you will just be doing it intentionally and within a budget.
10. Become a Savvy Shopper
Being a financial minimalist isn’t about restricting yourself, it is about being intentional and smart with your money. You want to enjoy the fruits of your labour and that includes shopping, but now you can shop in a smart way.
If you do need to buy something take advantage of sales. There are many sales throughout the year like end-of-season sales, Black Friday, Cyber Monday, Christmas sales, etc. This way you can buy what you need at a discounted price.
For example, if you need to buy new shoes you can create a sinking fund and buy them during the next sale. This way you can buy what you need, save money on the purchase, and use money you have intentionally put aside instead of dipping into other savings
Also, consider shopping at thrift stores this is another way to get value for your money. You can get some really nice pieces for a fraction of the price and the clothes will last you a lot longer.
11. Live Life On Your Terms
While you are on your journey to financial minimalism it can be challenging because you are making changes in your life. The people around you may not understand and this can make the journey harder to withstand. In those moments you need to remember why you want to make these changes, this is what will keep you going.
Living life on your terms means that you get to choose your path, decide who you want to become and stop letting other people make decisions for you. This will lead to you creating a life of fulfilment and joy.
Everyone is on their own journey which comes with lessons they have learned. No two paths are the same so it is important to focus on your journey. You need to find your own path and become the best version of yourself.
12. Change Your Mindset
Changing your mindset is one of the most important things you can do. Everything begins in the mind so you need to ensure that yours is in the right place.
Don’t focus on the things you are letting go, instead embrace the benefits these changes will have on your life.
Becoming a financial minimalist will allow you to have financial security and a greater sense of well-being. These are all positive changes and will help you to live a life of intention.
Frequently Asked Questions
What Does a Minimalist Mean In Finance?
Living a financially minimalist lifestyle means that you spend less money on material possessions, learn to live with less, and manage your money with intention.
You focus on spending your money on essential expenses and needs instead of on luxury items that tend to be wants not needs.
How To Be a Minimalist With Money?
Being a minimalist with money is a great way to save money. It isn’t necessarily about being cheap as this stems from a scarcity mindset.
It is about getting the most value for your money, learning to enjoy life while having less material possessions and spending less money than you make.
Here are some ways you can be a minimalist with money.
- Cook more at home
- Make coffee at home
- Drink less alcohol
- Create a capsule wardrobe
- Buy foods in bulk
- Automate your savings
Final Thoughts
Adopting a financial minimalist lifestyle can have many positive changes on your finances and your lifestyle. It is about being intentional with your time, being mindful of where your money is going, having a plan for your future, and ensuring that your actions align with your goals.
You want to enjoy the fruits of your labour so finding balance is key. Once you prioritise spending money on essential expenses and needs and saving the rest you will create a life of financial freedom and a better quality of life.
Think about your current situation and what is important to you. Once you understand that you can implement some of the steps I have given in this post. Becoming a financial minimalist isn’t easy, but it is rewarding and your future self will thank you for making these changes.
Have you found these steps to financial minimalism helpful? What are some of the changes you will make?
This post is all about financial minimalism.
Davina Kelly
Hey! I'm Davina, the owner of Davinas Finance Corner. I'm passionate about finding ways to budget, save, earn more money and improve your life. After breaking free from payday loan debt and living paycheck to paycheck I want to share my experience to help other women improve their finances.