Personal finance and minimalism are passions of mine. Melding the two into financial minimalism has been a work in progress.
It’s easier for me to talk about what financial minimalism allows me to achieve than giving a definition for what is. Practicing financial minimalism helps me simplify my financial life and the tools I use to manage my money. For me, it’s about:
Simplifying checking/savings accounts: One checking account and savings account. I don’t have a smartphone, so I’ve signed up for a program with my bank that lets me check my balance and recent deposit/debt history through text messages. What’s next? I’m trying out an online bank account for P2P transfers that my current bank doesn’t allow. I’m trying to eliminate my need for writing physical checks.
Simplifying expenses: I keep track of my fixed and variable expenses using a spreadsheet. Seeing how much I’m spending also helps me figure out how much I can save every month and transfer to my investment accounts or toward making extra debt payments. I’ve also signed up for automatic bill pay for every bill. What’s next? I review my expenses every month or so to see if there are ways I can cut back on things I pay for regularly. I’d like to go through my expenses with a friend to see if they can spot any places I can save.
Simplifying investments: I stick to low-cost life-cycle funds for my retirement accounts. And low-cost index funds for a taxable investment account. I’ve rolled over all of my old retirement accounts from previous employers into current accounts. I’ve set up automatic monthly deductions for all my investments and retirement savings. I know how much I can afford to deduct and save every month thanks to tracking my monthly expenses and income. For an excellent resource on a simple stock portfolio, jlcollinsnh wrote a guide. What’s next? I will take more control of my asset allocations as I get older and closer to retirement. I want to explore investing in small, local businesses. But right now, I’m okay with my investment mix.
Simplifying debt: My primary credit cards are limited to my two oldest so I can maintain their credit histories. All debt payments are made with automatic bill pay and deductions from my checking account. What’s next? I’m experimenting with travel rewards cards but am keeping careful track of them to see if they’re worth the annual fee.
I’m realizing now how much I rely on technology to help me manage all of the moving parts. I don’t know what I’d do without online banking, online bill pay, person to person transfers, or my spreadsheet tracking system.
If you’re interested in simplifying your finances, you may want to start with one area: accounts, expenses, investments or debt. Or try using the tracking spreadsheet so you can get a full view of your financial picture. Simplifying all of these areas took some time to set up at first. But now it functions pretty well without me having to monitor every aspect. I just do a full yearly check-up to make sure all of the pieces are on track and working smoothly.
The basis underlying all of the actions above is practicing minimalism to manage my personal finances.
Financial minimalism is about setting up systems that make sense to me so that I can spend as little time as possible handling money or worrying about money emergencies.
This system allows me to focus on pursuing my goals — which right now have nothing to do with money.