Financial minimalism helps you change your mindset around money and spending. The goal is to declutter your financial life to remove stress — just like decluttering your home can help you feel more at peace.
So let’s take a look at how you can become a financial minimalist and how to maintain the lifestyle for the long term.
What are minimalist finances?
Minimalism, in general, is about cutting out the unnecessary things in life. A minimalist aims to live with only the things they need to get by. This lets them focus less on the clutter around them and more on life itself.
Financial minimalists do the same thing, but with their money. Financial minimalism works to cut out frivolous spending and simplifies your finances. You focus on putting your money only toward things that add value to your life.
You might spend your money on different things than another minimalist, and that’s okay. The most important part of minimalist finances is to spend with intention. You’re only spending money on something that is an absolute need (such as rent or car insurance) or truly matters to you.
Spending more for better value
It’s important to note that financial minimalism doesn’t mean you always pick the item or service with the lowest price. You don’t need to live in a tiny, run-down apartment with one set of clothes and a blown-out couch.
It’s often the opposite. A financial minimalist makes an intentional decision to spend their money strategically. This often leads to spending more — less often. You end up with nicer things that last longer.
Let’s say you need a pair of winter boots. You could go to Target and get a cheap pair for around $40. Or, you could spend the money on a quality pair that costs $150. The cheap boots wear out after one winter. The high-quality boots last for five winters and have a lower cost per wear.
Benefits of minimalist finances
Money is a common contributor to stress. A survey by Thrive Global and Discover found that 90% of Americans say money impacts their stress levels. Around 65% of those surveyed say they feel that they can’t overcome their financial struggles.
So that’s where financial minimalism can help. Benefits include:
You spend less
Financial minimalism helps you eliminate wasteful money habits. By leveraging a minimalist budget, you’ll spend money less often and cut out unnecessary purchases. This helps you save for the future, so you’re ready to spend on things that matter.
You learn to be content
Being content with what you have can help you reduce your overall stress. Using minimalist finances lets you shift your mindset from living to impress people on Instagram to living for yourself.
It helps you reduce financial stress
Imagine you have multiple credit card bills, a car payment, and too many subscriptions to count. You’re constantly worrying if you’ll miss a payment or won’t be able to afford a bill.
Financial minimalism helps eliminate financial stress by removing the stressors. For example, you might cancel all but one of your credit cards and trade in your car for one you can own outright.
6 Key steps to attain minimalist finances
So what does it take to be a financial minimalist? Some discipline and a mindset shift. Luckily, there’s no right or wrong way to practice financial minimalism.
As long as you’re spending money with intention and cutting down on unnecessary purchases, you’re on your way to being a financial minimalist. These six steps will help you get started.
1. Track your spending
You can’t spend less if you don’t know how much you’re spending. Before you can be a financial minimalist, you have to examine your spending habits. This can be pretty scary, especially if you’ve been ignoring your overspending.
I suggest sitting down with a pen and paper and writing down all of your purchases in the last month. You’ll probably surprise yourself by how much money’s gone to things you don’t even remember enjoying.
You can even mark each purchase with a “+” or “-“ if you thought it was worth it or not. Tracking your spending is one of the most important steps to minimalist finances because it shows you where your money is going!
2. List necessary expenses
Now you know where all of your money is going, it’s time to clean it up. There are some things you have to spend money on — and they’re not always in your control. Keep your pen and paper handy to make a list of your necessary expenses.
Your list might have things like:
- Rent or mortgage
- Car insurance and/or payment
- Health insurance and medical costs
You could also include items that aren’t necessary for survival but are important to you. If you consider yourself a gym rat, a gym membership adds value to your life and should be included. Or you could cut down on your membership fees and find an affordable online trainer instead!
3. Remove avenues of overspending
Credit cards are a great tool for building credit and taking advantage of rewards programs. However, it’s often too easy to overspend when you put everything on plastic.
Get rid of the chance of overspending by canceling extra credit cards. You’ll probably find that one card is enough to cover your necessary spending. You also still get to build your credit with on-time payments and earn rewards.
However, you should be aware that canceling several cards could affect your credit utilization ratio. You also might see a drop in your credit score. This drop should be temporary, however.
As your practice financial minimalism, you’ll spend less on your remaining card. Less spending will naturally lead to an ideal credit utilization ratio.
Be sure to look for other areas where you’re overspending. Subscriptions services, in particular, are an easy way to rack up extra monthly bills. So go ahead and cancel any recurring charges you don’t need.
4. Invest in quality — not quantity
Remember those slow fashion winter boots from earlier?
The idea of spending more for something that’s higher quality is a big part of financial minimalism. Quality items tend to last longer than cheap counterparts. Despite the initial financial investment, you’ll end up with more value in the long term.
The other side of spending for quality is avoiding quantity. If your winter boots are still in good shape, there’s no need to buy a new pair. A financial minimalist might spend more for an individual item, but they’re not buying them very often.
5. Consolidate your finances
Minimalism is all about simplification. That usually means consolidating accounts for more minimalist finances.
For me, this is one of the hardest parts of financial minimalism. I used to have a lot of different bank accounts that each serve a different purpose. This helped keep me organized — until it got too messy. I still have multiple accounts, but it’s a lot more manageable.
Instead, we should all try to take a page from my husband’s financial playbook. He manages money using a few basic accounts:
- Checking for spending.
- Savings for emergencies.
- Brokerage (investment account) for long-term investments.
- IRA and 401(k) for retirement.
That’s it. It’s simple, effective, and helps a lot around tax time. So if your money is too spread out (like mine was!) try consolidating accounts and closing those you don’t need.
6. Get out of debt
It’s hard to spend money on things that matter if most of it is going into debt. One of the best parts of practicing financial minimalism is not worrying about money.
In the rare case you want to buy something, you know you have the money. This is hard to do when you’re dealing with debt.
The good news? Financial minimalism practices will also make it easier to tackle your debt. Reduced spending helps free up money to pay off credit card balances, medical bills, or car loans.
How to maintain minimalist finances
You’re feeling good about being a financial minimalist, but you’re noticing some frivolous spending habits again. That’s okay. Minimalism is a mindset that takes time — and discipline — to become a habit.
If you’re struggling to maintain your financial minimalism mindset, try these tips.
Make mindful spending decisions
It’s easy to accidentally overspend. It’s also easy to make it a habit again. The key to maintaining minimalism is to slow down your spending decisions.
Think of it as a mental version of the “I’m not a robot” boxes at the end of online forms. Before you swipe your card or hand over cash, ask yourself if the purchase adds value to your life.
Schedule time for decluttering
Bringing minimalism into other areas of your life can help you keep up a financial minimalism mindset. Add a day or two each month to declutter your home, car, office, or anywhere that’s feeling overwhelmed.
You can declutter as much or as little as you want. Your goal is to use decluttering as a reminder of the benefits of financial minimalism.
You’ll get an immediate sense of relief after donating old clothes or tossing expired food items. Then you can carry the good feeling into your financial life.
Creating new habits is hard. The best way to keep yourself on track to financial minimalism is to monitor your progress. Your financial health is a lot like your physical health — regular check-ups help you catch problems early and stay on track to a healthy lifestyle.
Use minimalist finances to make your life easier!
Making the switch to minimalist finances can help simplify your life. It frees up emotional space so you can focus on what really matters in life.
Remember, there are no specific rules to being a financial minimalist. You can get started by exploring what’s most important to you — whether that’s a nice place to live or traveling the world.
Then you can work on adjusting your finances, so your spending and saving align with your goals.