Image credit: Sarah Dorweiler on Unsplash

Minimalism: A Personal Finance Cheat Code

In my previous article, I went over a few of the things I learned while living with less in 2021. Part of that involved eliminating or reducing the amount of clutter in my life — both physical and digital. I want to expand a little on that today and discuss why minimalism is, in my opinion, a cheat code when it comes to personal finance.

Let’s start by addressing what exactly minimalism is, and some common misconceptions. There are people who think that adhering to the principle of minimalism is akin to living in austerity. They may look at stock photos of rooms devoid of anything apart from a single mattress on the floor, or a YouTuber espousing the joys of living with nothing more than a mattress, one T-shirt, a coffee table, and a book. Minimalism to them feels like deprivation of a lot of the pleasures of life. But is that really what it’s about?

Merriam-Webster defines minimalism as “A style or technique (as in music, literature, or design) that is characterized by extreme spareness and simplicity”. This definition would appear to support the above characterization that minimalism is no more than austerity by another name.

My own definition of minimalism is somewhat different. To me, minimalism can be summed up like this:

“The act of living with intention, being able to separate needs from wants, and make the conscious decision to only include that which you need in your life.”

Ok, great. That was a bunch of floofy-sounding words that say…what, exactly? To rephrase it more simply, to me minimalism is being able to say no to the things you don’t actually need, and actively pursue a lifestyle where you avoid the physical and digital clutter that I mentioned above. Now of course the definition of “need” will vary slightly to each person, and I’m not saying that everyone should go and live with just the bare minimum that’s needed for survival. It’s more of a “What purpose does this object serve in my life? Is it making it better, or is it simply taking up my time, my money, and/or my attention without providing value in return?” question.

And so how does that relate to personal finance? The obvious answer, of course, would be that buying less means you spend less, ergo you save more money. Easy. That would be a very surface level response however, so here are a few more ways in which pursuing a minimalist lifestyle can help immensely with personal finances:

Breaking the mindset of consumerism — When you choose to follow the principle of minimalism, one of the first things you must challenge and overcome is the desire to consume. If you’re the type of person who loves to shop for clothes, for example, this can prove quite challenging. It’s not called “retail therapy” for nothing after all. But how much of what we buy do we actually need? Likely much less than you may have thought. When you actively choose to consume less, you develop the willpower to say “no” and break the spell that advertisers and marketers work so hard to weave over us.

A refined ability to ascribe value — What is value? It’s commonly described in monetary terms, but it is different than price. Value is the benefits, the worth, the usefulness, and importance of an object in relation to its price. In minimalism, we become much more discerning in our determinations of ‘value’. We evaluate things on a much more holistic level — what utility will this bring? Is it useful? What purpose will this serve in my life? Do I have something else already that serves the same purpose? If I don’t have this, how will my life be impacted? And does the asking price justify the intangible qualities I have just described?

You’ll find that you will naturally gravitate more towards quality items that fulfill a specific purpose, and that you purchase with intention — you know you have a specific need, and said purchase will fulfill that utility in your life. This oftentimes will lead to purchasing more expensive items, but ones that will last much longer than cheaper wares, which can save a fair amount of money in the long run.

More money, fewer problems — If you’ve never done so, I highly encourage you to create your household budget and track your expenses. You may very well be surprised at just how much you actually spend, versus what you think you spend. Add up all the ancillary expenses you have (not the non-discretionary ones, like rent or groceries). What are you paying for all your subscriptions? Is there money disappearing into a black hole somewhere along the line? When you have fewer things in your life that demand your attention (or your wallet), not only will you have more money leftover as a natural consequence, but you will also be more aware of everything you spend money on. Perhaps you’ve identified Netflix as a ‘need’ for you — it provides a lot of value to you, and so you prioritize it. There is absolutely nothing wrong with that. But what if you sign up for 3, 4, 5+ subscriptions and barely (if ever) use them? That is wasted money, and if you have other bills to pay they could get lost in the mix and you end up paying for something you don’t use (ask me how I know).

Achieve your financial goals easier and faster — By now, we all know that minimalism will help you to save money. So now, what are you going to do with that extra cash? If you love to travel, think of how the extra $50 a month you save from cancelling underused subscriptions can add up towards plane tickets. Perhaps you’ve wanted to start investing, but never had much cash to spare once all the bills were paid? Well now you can start investing in the stock market and start calling people ‘bears’ when they say something you don’t like. Or maybe you simply want to save up an emergency fund to have that extra layer of peace of mind and security. All this is much more doable now that you’ve taken the time and effort to follow a minimalist lifestyle.

And there you have it — my four main reasons for why adopting a minimalist approach to life can pay dividends for your finances for years to come. As with almost all things, minimalism does not simply exist on an ‘all or nothing’ basis. It’s a spectrum, and it will be up to each person to find out where they’re currently at, what they can do to start, and where they’re comfortable staying. You could be the person who spends all their money on anything and everything that tickles your fancy, and has a closet full of clothes you never wear, shelves of books you never read, and a monthly bar tab that numbers in the hundreds of dollars. Maybe you’re the person who doesn’t spend much money on most things, but has one thing (one ‘want’) that they allow themselves to enjoy (I’m one of these people — I really enjoy red wine, and that is the little luxury I will permit myself). Or, maybe you’re the person who wants to sleep on the mattress on the floor in the empty room. Whoever you may be, minimalism has something to offer for everyone.

Except the mattress on the floor person. You can’t get much more minimalist than that. Well, maybe you can — but I wouldn’t expect you to be very comfortable.

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