How financial minimalism works

Before explaining what financial minimalism is, it’s essential that you know that minimalism is a term that emerged in the 20th century to refer to scientific, cultural and artistic movements.

However, it is only used to describe those whose characteristics are the use of a few elements.

In this way, minimalism is known for not having any kind of excess.

Today, the term has been adapted for use in different areas and can be defined as a lifestyle.

Financial minimalism

If you’re already familiar with the term, you probably think that a person with this lifestyle lives in a small apartment with very little furniture.

You may also think that the person has few clothes and all in a neutral color, as well as no pleasure in shopping.

However, minimalism goes further.

This is because it is a tool that can help you find happiness and freedom when you agree to get rid of excesses.

Therefore, with minimalism, it is possible to identify what is necessary in order to make more conscious decisions.

As a result, the person who prioritizes financial minimalism as a lifestyle frees themselves from fears and worries.

These feelings are the result of the consumer traps that are built up throughout life, making us feel as if we are trapped in a social circle or even in a particular job.

And since there are no rules or pre-defined steps in minimalism, you don’t have to get rid of everything in your life.

This is because each person knows what is important to them.

In other words, a person who applies financial minimalism in their life can have a comfortable car, a nice house and good clothes.

If the items are important to ensure the ease of your life, you don’t stop being a minimalist because you have them.

This is because the problem lies in sacrificing your well-being, relationships and health to attain items that are unnecessary for your life.

In other words, clinging to possessions as if they were the most important thing in your life is something that minimalism seeks to combat.

How it works

Since the Industrial Revolution, mass production has greatly increased the level of consumption.

And after the emergence of the internet and digital marketing, the new standard has become over-buying.

Through minimalism, people have realized that having too much is not synonymous with happiness.

But when it comes to finances, most people have a misconception about minimalism.

Apparently, minimalists seek to save money at any cost and their lives are full of deprivation.

But the opposite is true: 

The idea is to use money more wisely, while letting go of excess material goods.

In other words, to have financial minimalism, you don’t have to stop buying or be totally against consumption.

The idea is to prioritize quality over quantity and not live for money.

That’s why we say that a minimalist is able to free themselves from financial worries.

To do this, you don’t have to give up small pleasures, quality products or comfort.

The ideal is to prioritize what is long-lasting and, of course, cost-effective.

For example, you might be a minimalist who has a spacious house and travels with your family every year.

At the same time, you may not care about having the car of the year or going out to restaurants every month.

In other words, you invest your money in what really matters to you.

In this way, you cut down as much as possible on the less relevant expenses, which would be changing your car regularly and visiting famous restaurants.

You don’t necessarily have to prioritize only essential expenses. 

It’s about giving up some things in order to have others.

Benefits of financial minimalism

According to the study Paying with our health, published by the American Psychological Association, 72% of adults report feeling stressed about money sometimes.

In addition, 22% say they have extreme stress related to financial worries.

In this way, stress has also been associated with an increase in depression and anxiety.

Minimalism in finance tends to drastically reduce stress.

This is because the budget is organized so that bills are kept up to date and the person has greater peace of mind.

Secondly, it’s worth talking about the ability to control consumer impulses.

Minimalists know exactly what their priorities are.

As a result, they know how to control themselves so that they don’t buy unnecessary items that could get in the way of achieving their goals.

This is a great differentiator because according to a survey carried out by Slickdeals, 73% of those interviewed said that most of their purchases are unplanned.

The previous year, the percentage was 59%, which indicates that as the years go by, more people buy on impulse.

This not only affects mental health, but also physical health, as these people have to work harder to pay off their debts.

Finally, financial minimalism is important because it encourages you to invest.

With this strategy, you learn to prioritize your bigger goals.

For example, if you want to retire or buy your own home.

Tips 

As mentioned above, there are no rules or step-by-step instructions for becoming a financial minimalist.

However, there are some paths that are excellent starting points if you want to begin the journey.

First, think about simplifying your life.

Keeping your habits simple and avoiding unnecessary spending is fundamental for a minimalist.

To do this, you need to keep in your life or get close to people who are also adept at minimalism.

Or, you can avoid the company of people who make you buy too much.

According to the theory of American writer Jim Rohn, we are the average of the five people we spend the most time with. 

In other words, the environment in which we live inevitably influences our feelings, thoughts and actions.

As a result, both our professional and personal lives are affected positively or negatively based on the relationships we cultivate.

Of course, it’s hard to think that the people we love, whether friends or family, can influence us negatively.

But remember that most of the time, this happens involuntarily, so it’s important to pay attention.

Overall, we recommend that you keep interesting, challenging, intelligent and healthy people in your life.

In this way, you will work to become like the people you admire.

Balance

On the other hand, but still talking about simplifying your life, think about your standard of living.

What could be made smaller, simpler and cheaper in the name of other priorities?

For many, swapping a sports car for a more economical one is an option.

Or perhaps swap a spacious property for a more functional one.

You can also sell clothes that are taking up space in your closet and aren’t being worn and start investing in durable, basic pieces.

Here, it’s worth mentioning the 90/90 method by Joshua Fields and Ryan Nicodemus.

Basically, if you haven’t worn something for more than 90 days, and it won’t be worn for the next 90 days, it’s time to get rid of it. 

It’s time to get rid of it because it’s no longer useful.

On the other hand, you can go back to prepaid service options to pay only for what you use.

There are several alternatives, and you have to adapt them to your reality.

The ideal is to find a balance, without spending everything or saving excessively.

In other words, avoid being the person who spends everything they earn.

When get a raise, this person immediately uses it all.

This type of person may receive millions a year, but they will never be able to save because they don’t understand balance.

In the same way, there’s no point in failing to meet all your desires today, thinking only of future goals, because eventually you’ll get tired.

Live below your income

To deal with any problems, we recommend that you live below your income.

This means that you should spend less than you earn,

In other words, understand that what you earn does not define your standard of living.

Your standard of living is defined by an amount less than your monthly income.

As a result, money will be directed towards both your present and your future.

Conclusion

And speaking of the future, always remember the basics: emergency reserves and investments.

Minimalists understand that unforeseen events happen, which is why they prioritize the reserve,

In addition, these people are concerned about their well-being not only in the present, but especially in the future.

Hence the importance of investing part of their income.

Daniel 18 de March de 2024