Let's talk about budgeting and minimalism. Minimalism isn’t just about cutting down on all the things you buy and letting go of items. You can also incorporate it into your finances. The idea is simple. You figure out what you truly need in order to cut back on unnecessary spending. A minimalist budget can help you determine your essentials, and help you change your spending habits.
But how does a minimalist budget work? Let’s dig in and find out exactly how to incorporate a minimalist budget and minimalism into your finances.
What is a minimalist budget?
Minimalism means identifying and figuring out what you value most not just in your physical belongings, but also in your life. According to Joshua Becker, an author, and minimalist advocate, minimalism is about intentionally removing the things that distract us from our life so we can focus on what matters the most to us.
That can mean spending more time traveling, working on your career, or spending time with your family. And it’s a concept that can easily be applied to budgeting.
A minimalist budget is when you get rid of what you don’t need to make room for more of what you value. By getting rid of unnecessary spending you free up room for things that you value, like investing in your IRA or saving for a downpayment on a house.
Who is a minimalist budget for?
Anyone can have a minimalist budget. But it’s especially good for people who want to cut back on their spending or set up a new budgeting system. If you’ve been trying to cut back on spending but find yourself making lots of splurge purchases, then a minimalist budget could be worth looking into.
When I find myself wanting to buy something spur of the moment, I find that using a minimalist approach helps me figure out if I really need it or not. Identifying your values and seeing where your money goes and why it goes there can help you prioritize your spending habits.
What are the benefits of a minimalist budget?
When it comes to its benefits, a minimalist budget helps you figure out where you want your money to go and why. It can help you reduce your monthly expenses and can even simplify your financial life.
It forces you to look at what you're spending and ask why you are buying that particular item. If that item isn’t aligned with your bigger goals and values, then it’s not for you. Another advantage is that if you spend less, you’ll be able to save more or get out of debt.
How to create a minimalist budget
So are you ready to simplify your routine and finances with a minimalist budget? Here is how to create a minimalist budget and different budgeting methods that will help you get started!
1. Identify your goals
The first step to creating a minimalist budget is to figure out your goals and values. Do you want to pay off your student loans? Put more money towards your retirement? How much of your spending is on things that are necessary? Do you really need to go out for drinks every Friday?
Identifying your priorities is an essential tool to fall back on when you’re tempted to overspend. That cute jacket might go with your shoes but will it take money away from your travel fund? Or maybe your old jacket ripped and is beyond repair, in which case a new, sturdy jacket would be a necessity. Asking these types of questions can help you figure out what is a necessary expense that is aligned with your goals.
2. List your expenses and cut back on unnecessary spending
Make a list of all of your expenses. And I mean all of it. Having all of that information in front of you can really make you realize just how much of it is unnecessary.
Identify things that are unnecessary and cut back on those things. Things like rent, insurance, car payments, loans, gasoline, groceries, phone bills, and the internet are essential. But Thursday lunches at Sweet Greens and that Starbucks coffee Monday are probably things you can live without. Pay close attention to subscriptions.
For years I was getting a monthly sticker subscription. Sure, it was only $12 a month and the stickers were cute, but when I saw how much I spent on them over the years and how little I was using them, I realized it was not a good use of my money.
3. Condense and simplify your accounts
Many of us don’t just have a lot of stuff. We also have a lot of accounts, whether that’s email accounts, social media accounts, or even financial accounts. And while there are benefits to having separate accounts for things like your savings and business, sometimes it can be overwhelming.
You may even forget that you opened up an account or an app. Instead, try to condense as many of your accounts as possible for your minimalist budget. Look for financial products that offer you a savings, checking, and investing service on one app.
And of course, if you have a credit card, it’s time to say goodbye. Credit card hacking works for some people, but for most of us it’s ineffective and worst of all, puts us in debt.
4. Make a budget that works for you
To make a minimalist budget work, you need to find a budget that fits you.
One popular budgeting system is the 60/30/10 rule. This system is great for those wanting to save more money or tackle their debt. It breaks down your spending into three different categories. For instance:
- 60% of your take-home pay would go towards your savings or paying off your debt or even your investment account.
- 30% would be spent on your needs, like food, housing, and transportation costs.
- 10% is for discretionary spending. This can include entertainment, travel, and eating out.
You don’t have to use this system to have a minimalist budget, but if you’re just starting out it can help you stay on track and make sure the bulk of your income is being spent on the essentials.
There are also a variety of budgeting methods you can use and it's good to choose one that is easy for you to stick with. Here are a few more methods to consider when creating your minimalist budget:
5. Think about every purchase you make before you make it
Once you make a budget, it’s time to get serious about what you buy. If you want to buy something, think about it first. Consider the values you identified in step one.
Does that purchase align with your goals? Do you really need it? If after a week the answer is yes, then go ahead and make that purchase. The essential thing is to stop making splurge purchases.
6. Automate your payments
Another way to simplify your life is to automate your payments. There are a couple of benefits to this. First, it ensures that your main bills are paid every month so you don’t get any late fees.
And second, it means one less thing to think about every month -- which frees up your time and energy to spend on other things in your life. Automating your deposits, bills, and investments is a key step to a minimalist budget!
7. Spend less than you make
This might be the last step, but it’s probably the most important one. Stop trying to keep up with the Joneses and live within your means. In fact, if you’ve evaluated your spending habits and values, you’ve probably identified things you don’t even need.
You don’t need all the things you think you need. Remember what I said earlier about minimalism is about removing things from your life to make room for things you value? Spending less allows you to do just that by not adding more clutter in your life and instead putting money towards things that are essential and valuable to you.
Make life simple with a minimalist budget!
There are many benefits to a minimalist budget, including paying off debt, cutting back on spending, and having less clutter in your life. By figuring out your priorities, setting up a budget, and simplifying your financial accounts, you can spend less time worrying about overspending and more time on the things you love to do.