Financial minimalism means being aware of what is essential and what makes you happy, so you can invest your resources in these things and avoid wasting money on useless stuff. When you practice financial minimalism, not only do you end up saving money — you also gain time, energy, and freedom.
Today I am going to share seven practical tips you can follow to have a more minimalist approach when it comes to managing money. When you change your mindset, as well as the way you invest your money, financial minimalism becomes easy. Let’s begin…
1. Improve your mood and self-esteem
This may surprise you: you may think that your mental health and the way you manage your money are not related. But the truth is that they are, because more often than not, we buy emotionally, not logically. We acquire material possessions because of the way they make us feel.
So if you base your happiness, self-worth, and confidence on what you have rather than who you are, being a minimalist is going to be difficult. This is why you must learn to detach from your possessions, and see them as mere objects, rather than part of your identity. This applies to the items you absolutely love, too.
Whether you like it or not, the first step to practice financial minimalism is to improve your self-esteem and happiness so you don’t constantly buy new stuff to “fix” them, and become really grateful for what you already own.
2. Identify which items make you happy
Some of our items are super useful and make us super happy, and that can only be a good thing. However, if you take the time to go through all the things you own, you will discover that only a few of them truly “spark joy”, to paraphrase Marie Kondo (a Japanese consultant and author who has written several books on minimalism).
Your goal is to identify which of your current material possessions don’t make you happy, and decide whether they are worth your energy, time, and, of course, money. Once you have determined that some of your items should not be part of your life, you can declutter.
Now, when it comes to buying things, ask yourself: is this item going to spark joy, or is it going to end up in a wardrobe under a pile of boxes? This simple question is key when it comes to financial minimalism — it helps you identify what would improve your life for just a few days versus what makes you happy long term.
3. Don’t be cheap
One of the reasons many of us tend to accumulate so much stuff is that we buy poor products. These products don’t really fulfil us, so we keep buying more and more. We feel the urge to acquire more items because we’re not happy with the ones we already have.
Of course, as we’ve seen earlier, compulsive spending and buying can be caused by a poor self-image, or even mood disorders. However in some cases it can also be caused by being too cheap, which results in buying bad products.
To be a financial minimalist, don’t be afraid to invest your money in high quality, beautiful things. They will last longer, make your life better, and probably prevent you from constantly buying new stuff. Quality is always more important than quantity (more on this in a bit).
4. Identify what you really need
The truth is that most of the items we buy and own don’t really help us in any way. We buy these items because we want them, not because we need them. There’s nothing wrong with acquiring art and beautiful products, but the issue is that most people can’t differentiate between wants and needs.
To better understand the difference between what is essential and what isn’t, you can even grab a sheet of paper and write down which items you need in your life in order of importance. For example, some of your clothes would be at the top of the list; expensive Starbucks drinks would be at the bottom.
Once you have identified which expenses are absolutely essential, you can then decide whether all the other expenses are actually worth your money. Some will be, some won’t. Take some time to think about this so you can become a financial minimalist easily.
5. Track your expenses
It’s easy to lose track of your expenses, especially if you don’t have a weekly or monthly budget. However, if you note down all the items you buy and all the things you spend money on, you can keep track of your expenses.
You can use a piece of paper, or an app on your phone. There is no need to track each and every purchase — the goal here is to simply become more aware of your spending habits, and how much you actually spend: surprisingly, many people go over their monthly budget without even realizing it.
If you become one of the few people who takes the time to track their expenses (it’s not that time-consuming anyway), you will be on your way to financial minimalism. Before you start to think of ways to make or save more money, be aware of where your money goes.
6. Pay in freedom
If you find it difficult to manage your money, or if you would like to have a minimalist approach when it comes to finances, there is a very simple concept that you need to adopt: when you buy something, you pay with money, but in reality you are paying with your freedom.
Especially if you value experiences over things, you can imagine each of your purchases as part of your time and freedom being eliminated, and each of your savings as more time and freedom.
So for example, if you cook your meal instead of eating out, it’s as if you gained several hours of free time (you no longer need to work those hours to earn the money required to eat out). And if you adopt a minimalist lifestyle in general, perhaps you could gain a whole year off work in a relatively short amount of time.
7. Focus on quality, not quantity
The last tip you should follow to practice financial minimalism is to focus on quality rather than quantity. I believe quality is what makes all the difference in life, and I have even written an entire article on it (you can read it here).
The truth is that once you identify what truly “sparks joy” and truly makes your life easier and better, you will focus on quality rather than quantity because you will appreciate the things that you already own; you will be aware of their value.
Just like you shouldn’t be concerned with the number of friends you have, but rather who they are and why you enjoy spending time with them, the amount of your material possessions doesn’t really matter — what matters is what you own, how it makes you feel, and how it improves your life.
What is your favorite tip to be a financial minimalist and manage money? Let me know by leaving a comment! 👇
