Adopting minimalism can help you simplify your personal finances.

Are you a minimalist? Are you interested in taking charge of your personal finances? The good news is that these two concepts go hand-in-hand.

In fact, the minimalist movement is a growing one that spans across the globe as a way of helping people fight against overabundance in all aspects of their lives – including the financial aspects.

Financial minimalism is self-explanatory at a glance, but there are components to the approach that go much deeper than you might expect. It doesn’t simply stop at saving money and spending on less. Sure, that’s the basic gist of the whole idea, but the actual practice takes a bit more effort and understanding. Let’s look at some of the key points of the minimalist approach and how it can apply to personal finance.

What is Minimalism?

Minimalism (referring to the lifestyle movement and not the art or music movements under the same description) involves living with fewer resources whether it be in the form of materialistic possessions or other conceptual forms of excess in our lives. It’s a state of being that revolves around doing away with unnecessary abundance and finding happiness in only the things that are important.

Under minimalism, one’s idea of things like ownership, assets, pleasure, and social standards are all called into question.

You can find videos, blogs and entire groups online dedicated to this philosophy, which often showcases people from all walks of life discarding a bunch of their stuff or wandering around barren homes with a look of contentment on their faces. It seems strange for someone looking from the outside, but the truth is that minimalism has brought a lot of benefits to various individuals which is why it’s becoming more prominent.

Why Minimalism is Gaining Popularity

British philosopher, Alain De Botton, speaks frequently about the issues pertaining to why an ordinary life isn’t good anymore – especially in a world filled with more external pressures than ever before whether it be from peers and colleagues, friends and family, or media and culture.

In most developed or developing societies in the world today, an ordinary life is something only dreamt of by generations before. Simple things like running water, solid shelter, consistent food supplies and access to education, technology or entertainment are taken for granted. Instead, many of us aspire for an extraordinary life instead of the ordinary one we’re living. To an extent, aspirations are healthy, but the social constructs we’ve built tend to propagate us towards an extreme desire for more, and more, until we lose ourselves to a ruthless and ultimately empty cause.

In a nutshell, minimalism is a response to this relentless materialism and uncontrolled desire for more. By learning to live with less, and by reprogramming our mindset away from the unhealthy obsession of excess, we inevitably learn to live more balanced and happier lives.

How Does This Apply to Personal Money Management?

It may sound counterintuitive to adopt a philosophy of having less for a concept like finance, which ultimately revolves around you having more in terms of wealth.

Well, there are a few misconceptions to tackle in that regard. For one, minimalism essentially focuses on fighting against overabundance (not abundance). Yes, there may be more extreme fringe sub-movements of minimalism that focus on destroying everything you have including the clothes on your back, but let’s leave those off the table.

In terms of finance, an unhealthy obsession with overabundant wealth can lead to various issues. You could make poor decisions in investment opportunities or put too much risk on the line while blinded by the prospect of ridiculous wealth. You could get scammed too (many criminals lure you in with the promise of riches).

Whereas specificity and emotional strength are the pillars of the financially secure. Think with your head instead of your heart when making big financial decisions, as Warren Buffet and other greats may advise new investors. On top of that, being specific in terms of the figures that you’re targeting and the long-term goals that you’re aiming for. Most importantly, ask yourself; Why?

#1. Be Specific with Your Money Goals

What would be the figure in your head that’s satisfactory to you, and why would that be enough? The more specific you are, the better. Many financial experts, entrepreneurs, and thought leaders abide by the rule of specificity. Everyone has the dream of being a billionaire one day, but they rarely have a detailed plan on how to get there, let alone a real reason of why they want to become a billionaire in the first place.

When you ask yourself these types of questions, you’ll start to notice your figure getting much more reasonable, and much more achievable. A hundred million bucks might turn into something more specific in accordance with what you’ll be using it for.

#2. Plan a Route to Your Financial Destination

From there, it’s a good idea to start breaking down the exact way in which you intend to achieve this figure over time. What types of investment vehicles would you require? What are the annual returns you’re expecting? How much should you save? How much more should you be making on a monthly basis? What can you do without?

The more you strategize, the clearer your journey towards financial enlightenment.

#3. Be Okay with Letting Go

The bulk of the minimalist approach lies in knowing what to keep and what to leave behind in regard to your lifestyle, your assets, your expenses and your habits.

Ever heard of FIRE (Financial Independence, Retire Early)? It’s a separate movement that focuses on retiring as early as possible through financial independence, and the most straightforward way of achieving this is by adjusting your lifestyle to your earning power until you have a sweet spot where savings and earnings are optimized for speed.

What many people don’t realize is that there’s a connection between FIRE and minimalism, in that they aren’t as glamorous as you might expect. Successful FIRE advocates have finetuned their living standards so much that many of us wouldn’t find it very appealing. Plenty of them use bicycles and have sold their cars, they live in tiny (albeit cozy) homes, they grow their own food, and they avoid many of life’s material indulgences that many of us love so much or have taken for granted.

They end up being millionaires, but they may barely look like the average wealthy person. Regardless, they claim to be happier than they ever were with all that extra stuff. They have learned to let go and be okay with stepping down the standard ladder to achieve their goals. In fact, they’ve made it a lifestyle.

Similarly, a minimalist lifestyle can be taken to what to some may be considered extremes. However, unlike FIRE, minimalism is less demanding. As you pare down your excesses, it is a personal choice as to what you feel comfortable with. You determine how much of simplifying your life is beneficial.

Start with taking a hard look at your expenses, spending habits, and revenue streams. Make a list of all the things you could do without (yes, it can be hard if you’re overattached), and make the leap to remove the unnecessary in phases. When things get uncomfortable, give it some time to see if you can adapt or whether it is too much too soon for you.

Conclusion

Minimalism isn’t for everyone. Some of us are happy chasing overabundance, or at least happy with the mindset of striving for more to be on the safe side. One thing’s for sure, it’s possible to extract pieces of useful aspects from minimalism to use for your own personal finance. Ultimately, many of the elements of minimalism exist in the routine advice from personal finance experts anyway, so it’s worth considering.

 

Have you been practicing financial minimalism? Do share with us your experience in the comments.

 

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