Minimalist Finance: Have you wondered how to be in control of your finances even as a minimalist?
Improving your financial situation is one of the best things that you can do for yourself and for your family. Even when living a minimalist lifestyle, managing your finances is paramount.
Even though you may not be spending as much, having a plan and tracking where your money goes can be vital to a solid financial future!
Here are 9 ways to improve your finances as a minimalist:
- Use a Minimalist Wallet
- Use the Mint App
- Simplify Your Banking Accounts
- Create an emergency fund
- Start tracking your spending (budget sheet)
- Utilize Your 401k Retirement Account at Work
- Open A Roth IRA
- Pay Off Your High-Interest Debt
- Save up for Large Purchases
Note: This is not financial advice and should not be treated as such, these are recommendations but should not be followed as a rule of thumb. For financial planning and other financial advice consult with a financial professional.
Disclosure: This post may contain affiliate links, which means I’ll receive a commission if you purchase through my links, at no extra cost to you. Please read full disclosure for more information.
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Minimalist Finance: Why Keep Your Finances Simple?
Embracing minimalism with your finances is great for removing the headache of keeping track and managing your income, expenses, and accounts that you hold.
Complicated accounts and managing tons of cards can sometimes get overwhelming.
But Keeping things simple can make personal and family finance easy and less stressful.
Benefits of Minimalist Finances
Here are some benefits of keeping your finances minimal:
- Prioritize your financial goals
- Track expenses to ensure your not overspending
- Keeping your finances simple makes it easy to organize where your money is going and coming in
- Avoid being overwhelmed when it comes to managing your money
How to Take Control of Your Finances as a Minimalist:
1. Use a Minimalist Wallet
Now this by no means is necessary at all when it comes to simplifying your finances. However, on a practical level, a smaller minimalist wallet helps to lighten the load when it comes to what you carry on a day-to-day basis when you leave your house.
I’ve been using a smaller wallet for a few years now and there’s just no way I’d ever go back to lugging around a big bulky wallet in my pocket.
These types of wallets are great for:
- Keeping your cards neat and organized
- Keeping only the essentials with you when you go out each day
- Makes your important credit cards and ID cards easy to find and easy to access
- Make carrying around your wallet much easier and more practical in your pocket
2. Use the Mint App
Now, this is a big one!
Using the Mint app has completely transformed how I view my finances and how I keep track of different accounts.
The app is super simple. You just connect your various accounts like:
- Credit Cards
- Student loans
There are more account types you can link and it’s all free!
But essentially the app is great for seeing all of your accounts in one place and tracking how your money is moving.
It helps to see my debt compared to my savings and the current amount of cash I have in my main checking account.
This helps me when I go to budget and need to allocate certain amounts to savings, debt, and investments.
Even though this app seems great, some of you may not feel comfortable giving an app access to all of your accounts, which is completely fine!
You definitely don’t need this app in that case, but it just makes it easier if you just want a snapshot of your finances in one place instead of checking each individual account separately.
Even though I use the Mint App, I still go to each account when I need to make transfers and check on my spending activity.
Plus there are other apps and other ways to keep track of your finances all in one place. Another way you could do this would be to use an excel spreadsheet and create a budget sheet, debt tracker, or in-depth personal finance tracker.
Luckily these types of budget planner templates come free on google sheets and Microsoft Excel. I’ve personally made my own custom spreadsheet that I use as an annual budget.
I’ll explain more about this later in this post.
3. Simplify Your Banking Accounts
Now that we’ve gone over what you can use to simplify your finances as a minimalist, let’s talk about actually simplifying your bank accounts.
This will obviously be different for each person and completely relative depending on your personal situation.
Along with your individual circumstances, there are also preferences you may have with certain accounts like credit cards.
Some of you may swear to never use a credit card, which is completely fine if you aren’t disciplined to use one. It’s probably recommended not to use one if you don’t have any self-control.
However, if you feel comfortable using a credit card, then that is also okay.
The differences involving those who like credit cards and building points can also be the fact that some of you may like having more than 5 credit cards, which in some cases can have a lot of benefits like:
- A higher credit limit
- More points for free stuff like hotels, vacations, and cash back
- % back on everyday purchases
- Makes it easier to track spending using credit cards for every purchase
This is all fine and good if you can handle it. I’ll give my recommendation for what I’m comfortable with as someone who has been bad with money and has recently improved my finances immensely.
I personally use 2 banks and have a savings and checking account open for each. My first account is my main account where my paychecks and income goes to first.
My second account is primarily for my emergency fund (ill go more in-depth on emergency funds in the next section of this post).
I have it set up this way because I want my emergency savings to be completely separate from my main account that way I’m not tempted to use it for any non-emergencies.
For long-term savings, I use the savings account in my main checking account.
However, you could open another saving account with a different bank to have those savings untouchable as well.
It really depends on your personal preference.
But here is my simple beginner recommendation for a minimalist financial setup:
- Use 1-3 checking and savings accounts
- Use 1-3 credit cards
- Use 1 broker for your investments (Vanguard, Fidelity, etc.)
This is by no means a set-in-stone recommendation, but can just be a simple guideline to start with when simplifying your finances.
If you find this works then you can stick with something similar to this, but if you find that you want some variation that is also totally fine as well.
For instance, you may want to have five different savings accounts for different savings goals:
- New car
- House down payment
- Emergency fund
However, having money in too many savings accounts is usually not recommended because this money could be growing when invested over the long run against inflation.
This can be another way to separate savings that could work for someone, but it’s really up to you and determining how many bank accounts you wanna have open before it becomes overwhelming.
4. Create an Emergency Fund
As stated in the last section, it’s a good idea to use a separate account for your emergency fund, but let’s step back for a second.
What exactly is an emergency fund?
Now, this may seem self-explanatory but for some of you that haven’t heard of an emergency fund, it’s essentially savings designed and used only for emergency expenses.
These types of expenses may not exactly be planned for, but are in place to protect us from accidents and everyday emergencies that can arise in our life.
With an emergency fund in place, we have a security blanket for unexpected costs for things that break or malfunction.
This could be unexpected expenses from our:
- Hospital bill
- Prescription drugs
If any of these types of unexpected expenses occurs you won’t need to tap into other savings or worse go into debt to handle these tough financial situations.
How to Create an Emergency Fund
Now that you know what an emergency fund is and why it’s important, let’s cover how you can set one up for yourself.
As mentioned above, you’ll want to open a new savings account, preferably a high-yield savings account to prevent the temptation of dipping into this money for non-emergency situations.
Once you have your new savings account created, go ahead and transfer money to this account each month automatically or manually.
A good starting point recommended by Dave Ramsey is $1,000 to start with. For a beginner learning to gain control of your finances, this is a good number to start with.
Once you’re able to start saving more, it’s recommended to save 3-6 months’ worth of expenses in the case of losing your job or any other type of serious emergency.
That way you’re covered for any time of long-term problematic financial situations.
A good number to shoot for is around $10k in an emergency fund and possibly up to around $20k. This can give you a significant cushion from unexpected life events, especially with a family.
This will vary depending on your situation, expenses, and ability to save.
5. Start Tracking Your Spending
This is by far the best thing you can do to really take control of your finances and become more minimal.
You need to see and know where your money is going!
This can reveal where you spend the most and see where you need to be more disciplined.
This helps a ton if you’re a shopper or enjoy eating out. You’ll notice that a large portion of your money is going into these places.
The best part about setting the budget is that now you are setting a spending limit to these categories and finally becoming intentional about where you plan to spend your money.
This is something I stayed away from for a long time, but after creating my own budget sheet and using it every month, I would never go back to not tracking my expenses and income.
You just have so much more control over what you do with your money when you’re intentional about what you want to do with it and know where it has gone.
Where can you Find Budget Spreadsheets?
These budget spreadsheets come in a variety of different versions.
Some free and some premium.
I will soon be offering my own premium budget spreadsheet that I use, but I’m currently still working on the design and functionality.
Here are some of the best places to find a budget spreadsheet if you don’t want to make your own:
- Google sheets templates
- Microsoft excel templates
- Premium spreadsheets on Etsy
- My Premium Spreadsheet on my shop
6. Utilize Your 401k Retirement Account at Work
Now compared to the other tips in this post, this is by far the easiest.
To take hold of one of the best financial benefits your workplace has to offer, please do not hesitate to set up and use your 401k at work.
Especially if your company offers a % match to your contributions, you’d be unwise to not take advantage of this.
It’s literally free money that your employer is giving along with your contribution for your retirement!
7. Open a Roth IRA
This is something you may or may not have heard of, but it’s a good idea to open up another retirement account called a Roth IRA especially if you are younger.
This is because a Roth IRA is a tax-advantaged account that allows you to invest after-tax dollars that can grow for years to come.
This means if you have $30,000 in the account and you want to withdraw, all of that money is yours. Some taxes can be taken from investment gains, but read up on Roth IRAs and how they work to get a better idea of the exact details when withdrawing.
Contrasted with a 401k plan, that money will be taxed when withdrawing later in retirement.
The max you can contribute to a Roth IRA was $6,000 in 2022 and up to $6,500 in 2023 for people under 50. For those people, ages 50 and above, the allowable contribution limit was $6,500 per year in 2022 and $7,500 in 2023.
But as stated above, this greatly benefits those starting out in their working careers or if you’re on the younger side because this can grow twice as much in the stock market over time and give an extra cushion in retirement or other uses later in life.
8. Pay off Your High-Interest Debt
It wouldn’t be minimalist financial tips if we didn’t talk about paying off debt.
As a minimalist or anyone in general, paying off debt greatly improves your finances and simplifies your life.
Paying off debt simplifies your life by:
- Reducing the stress and overwhelm of large amounts of debt
- Allows you to save more for other important purchases
- Improves your finances and reduces your financial obligations
9. Save up for Large Purchases
Finally, one of the best things you can do for your financial future as a minimalist is to make sure you’re saving extra money for larger more life-changing purchases.
These types of purchases include:
- New car
How to Maintain Your Finances Like a Minimalist
1. Save More Than You Spend
This leads in from the previous section regarding saving, but essentially you want to do your best to save more than you spend each month.
Part of this is done by tracking your spending each month, mainly with a budget spreadsheet.
This allows you to understand exactly how much you spend and to incorporate savings into those expenses going forward.
2. Create Savings Goals
Next, you’ll want to create some savings goals for some of those large purchases.
Make a plan for:
- What you want to save for
- How much money will be needed to save each month
- How much time it will take to save
- How much you need to make for this to be achieved
- What expenses you need to limit to achieve these financial goals
Once you’ve determined the answer to some of these questions, you can start to make some solid savings goals that you will reach over time with an effective plan!
3. Keep Everything Simple
All in all, don’t forget to keep everything simple.
Keeping your finances simple can seriously reduce the headache of keeping track of your money and make saving and living the life you want possible.
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