6 steps on how to bring the benefits of minimalism to your personal finances
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Let’s learn about minimalism! Wait, what?!? I totally get the concept of “mental load” and if you’re a hard working woman you do too! It speaks to me on a deep and very influential level. Part of me thinks that my brain can’t handle ONE MORE THING! You too? Oh, and don’t forget all the “stuff”! With that, I am very much drawn to a minimalist approach to home and life. While I’m not a die hard minimalist, I am getting better at pairing down the excess, useless and cluttered every day. My finances and yours are no exception to decluttering! So let’s dive in on how you can bring in minimalism for your finances.
What is Minimalism?
The minimalism lifestyle philosophy may seem like a scary concept to some; hearkening images on sleeping on a pallet, in a one-room apartment, eating beans. A.k.a. deprivation! No, that’s not it, not it at all!
To me, minimalism is being careful about what you bring into your life or allow to take up your time, energy and space. Making sure that everything adds real value, and helps you live a full and meaningful life. The excess crap gets cut from your life, and you’re left with only what you really need and what brings you joy.
Scaling down your lifestyle, in addition to finances, can have some amazing benefits for you and your family. Some of the big picture benefits are less anxiety, less mind clutter, reduced depression, more family quality time, less stress on you, and the family, and so forth. There are tons of benefits, I couldn’t possibly list them all here. Google it; it’s a “thing”, I promise.
Here are six points to help you bring in minimalism for your finances, so they take up less of precious energy & brain real estate. Because once you do these, it’s smooth sailing as far as your To Do list can see!
6 action steps for Minimalist Lifestyle Approach to Personal Finances
Want to print out the FREE checklist and follow along…
1. Minimalism Can Give You Perspective – Get a snapshot of your entire financial life in one interface
Now that you’re onboard for minimalism to your finances one of the very best tools for you is Personal Capital! This interface lets you see all your accounts (bank, credit cards, loans, investments, etc) all in one spot. Perspective is something we can all use a little bit of, so step back, and look at the big picture.
Personal Capital gives you performance metrics on your investment growth, or if you’re spending a lot more than you usually do. My favorite metric is seeing my net worth (it’s not a lot, but hey, it’s great to see progress)! The best is, is that it’s free. Just sign up, put in your account info in and go! Now, I know some of you may be skittish about one place having all your info, fair enough. They have some of the strictest security standards and multilayered safety precautions, read it and feel better, then go sign up!
2. Minimalism Can Free Up Mental Space – Get all your logins & passwords together with LastPass.
Gather up all banking, investment, and credit card account login info and get on LastPass! This handy tool keeps all your login info on one site (yes it’s totally safe). All you have to do is remember your one main password to get access to everything. I just went into my account and counted up how many places I have logins for, and it’s 66!
How could someone ever be expected to remember those passwords (while not all being the same totally unsecure pet name of “Rover#1234”. All you need to do it’s open an account (there are paid and free versions), I use the free one and its great! You download a browser extension for it and you’re all set, it takes care of everything else.
It’s a lot easier to handle your business when you’re not spending 15 minutes trying to remember which kids birthday you used as a password, or do the insanely frustrating retrieve password email cycle nightmare.
3. Minimalism Can Give You Your Time Back – get rid of multiple credit cards
Now I know some of you are addicted to getting your points or 1% back or whatever on your eight credit cards. But are the “savings” really worth the hours and headache it takes you to track and reconcile everything? This step is key in bringing minimalism to your finances!
Keep or find the two best rewards programs and stick with them. Close the rest! Besides, how many times have you been lured by the call of “cardholders get an extra 10% off” sale at a store you don’t really need to spend money in. Kill the temptation and cut the card!
For myself and my family, we have three credit cards, but we only use two.
USAA Limitless Cashback Rewards – it’s a flat 2.5% cash back on everything, no limits. Easy Peasy Lemon Squeezy! We use this one for almost everything.
Target RedCard – 5% off everything, plus extra coupons for account holders. Now, this isn’t the debit, nor is it the Visa, its the Target store only card.
Capital One Savor Card – This one earns 4% back on dining, 2% at grocery stores and 1% on everything else. This is a confusing card, and I will admit that the only reason I got it was because it was offering a $500 signup bonus when you meet certain criteria. Once I reach the spend goal I will cancel it as it has a $95 annual fee after the first year.
Some people refer to this as bank card churning or farming. Basically just getting the card for the signup bonus. This process is a total “thing” and please only consider this if you have mastered your current system and have the time and focus on committing to doing this correctly. This process is NOT minimalism friendly, BUT you can make good money doing it if your credit score is decent enough. See Doctor of Credit for the pro at this practice.
Related article: How I made money from bank & credit farming
By only having two credit cards it takes hardly any time to go through and figure out where the money went and from which account to pay from. Yes, we have separate checking accounts for a few different main expenses; think Car, Vacation, House, etc. This is how we allocate our spending, and save for big purchases.
4. Minimalism Can Reduce Anxiety – Freeze Your Credit
Remember a handful of years ago, when Target announced that they had been hacked and over 110 millions customers personal info of names and credit cards numbers among other info was stolen. They ended up paying $18.5 million to over 47 states in that settlement.
People panicked, frantically worried over their compromised info for months, and some had to clean up a huge mess on their credit report. Data hacking continues to be an issue, companies like Marriot, Yahoo, eBay, and Equifax are among the most prominent victims in data breaches. One of the main worries is that your information could be taken and fraudulent accounts be opened in your name, charged up and not paid. The worst sinking feeling is when a person on the phone says you owe them tens of thousands of dollars for something you didn’t buy. But wait, you did, or at least your credit bought it. Cue: “oh fuuuuudge”, just like Ralphie from A Christmas Story.
So take most of the worry away and freeze your credit accounts. Then no one can open accounts in your name without first unfreezing them (with specific info and pins codes that should be known by only you).
You have to set up a freeze with each of the three main credit bureaus: Equifax, Trans Union, and Experian. Then you’ll set up an account freeze them, and be given (or choose) a pin that you need to keep as safe as can be! There has been some back and forth on charging for this service, max I have seen is $10. At least Equifax has now moved this service to being free. Just remember to unfreeze your accounts if you go to sign up for a new cc or to take out a loan.
5. Minimalism Can Create Much Needed Space – Shred it up!
If you still get paper bank, credit card or utility statements in the mail it’s time to shred it and go paperless! Once you look over your bills and pay them then please shred it (don’t throw in the trash or the recycling!). Empty out all those file folders, boxes, and drawers and clear the clutter!
Now there are some documents you want to keep for a certain length of time. FINRA (the Financial Industry Regulatory Authority) says…
- tax documents – 7 years
- mortgage loan main docs – keep until pay off the loan
- investment statements – keep until you get the annual statement and then shred monthly (if you don’t have online statements)
find the full list of docs and suggested keep dates see FINRA’s full article.
6. Minimalism Can Reduce Stress – Pick an uncomplicated and low maintenance investment strategy
This is a big one in having peace of mind so listen up. It seems that everyone has the best way for you to invest your money, with the invest now or lose millions of future dollars scare tactics. Or the comical guaranteed 12% return on investment line.
No! There are NO Guarantees for investing in the stock market. But if you want to keep a step ahead of inflation you must invest your money. So do yourself a favor and pick a strategy (and yes you MUST have a strategy) that you can live with comfortably and for the long haul.
For the sake of simplicity and common sense, I have chosen to follow the basic strategy laid on in JL Collins book The Simple Path to Wealth. Now, this is not a get rich quick scheme, it is precisely the opposite. It’s the slow and steady wins the race approach. This book has a cult following among FI enthusiasts because it’s a no-nonsense, and very realistic approach to investing. It checks all the boxes for long term wealth building!
If you’re interested in this easy but very effective strategy, and want a humorous read here is his book The Simple Path to Wealth.
My Personal Strategy
I personally invest my money in low-cost INDEX funds that match the market. It gets invested and then I leave it in there, forever! I don’t waste my time or energy following market surges or crashes, and I don’t second guess my investments. In fact, all I do is… nothing. My contributions are automatically transferred every month and that’s it.
This framework leads to significant returns over the long haul. Financial guru Warren Buffet (he’s kind of a big deal, with a net worth currently rumored to be 80 billion) believes in it too. He stated that upon his death, he wants his wife to follow to buy & hold investment strategy. To put her money in an S&P 500 stock INDEX. If it’s good enough for his wife then it’s good enough for me. Please note that I am not a certified financial planner, nor should you take my plan to be your plan, as everyone’s situation is different. This is the quintessential tip on embracing minimalism for your finances!
In the end…
Now, this isn’t a fully exhaustive list of tips on the concept of minimalism for your finances, but this is a great start to helping you spend less time and energy on paperwork and boring bill pay. Yet most importantly, free up all those brain cells for more enjoyable tasks. Or better yet for those big creative projects that you’ve been eager to get to.
For a checkoff list of these action items and a few more ways to simplify your finances even more, sign up here below.
- Create a Personal Capital Account to get a big picture view of your finances.
- Check our Doctor of Credit for great info on bank & credit cards
- Read The Simple Path to Wealth by JL Collins