Four ways minimalism can help your financial health (& the way it can’t!)
Minimalism is growing in popularity across the world. Documentaries, podcasts, and books have been made and written about minimalism, explaining how it can change your life for the better leaving you debt free and with more time to work on personal relationships.
What is minimalism?
It’s difficult to define minimalism because it means something different for everyone.
Minimalism is widely regarded as a lifestyle in which participants think carefully about the items that bring value to their lives and avoid those that don't. It can take many forms. For example, some people use it to travel the world owning only the belongings in their backpacks, while others use it to scale back on unnecessary purchases or lead a more environmentally friendly lifestyle.
Many of you may think that minimalism sounds just like being frugal – perhaps the main difference is minimalism combines frugality with a moral meaning, which in some ways can make it more ethical and guilt-inducing.
Why is minimalism popular now?
The concept of minimalism has been around for years, though there are plenty of reasons that minimalism has become so popular recently. Perhaps it’s more popular after the Great Recession, or as a result of the Netflix series Tidying Up With Marie Kondo, and possibly as a “side effect” of some negative aspects of modern society such as consumerism.
How can minimalism help your financial health?
Naturally, there’s a direct relationship between minimalism and personal finances. Here are four ways that minimalism can help your finances – and the major way it can’t.
1. Less expenses means more money
In the modern world, the idea of minimalism is foreign to most people. Most of us have been conditioned since birth to believe that material possessions lead to happiness. Collecting unnecessary junk has become a habit for many of us, and we might even spend a large chunk of our lives amassing items we don’t need.
It may seem like an obvious statement to make, but when we spend less, we have more money.
If we all take a good, honest look at our budgets, most of us will find more frivolous expenses than we’d like to admit. For example, hefty monthly subscriptions to gyms we don’t attend or streaming devices we hardly use, overpriced coffees, clothes that sit in our closets untouched, or food that was purchased and not consumed.
2. Focus on good spending habits
The idea of only focusing on what brings you value is completely aligned with how nearly everybody should be spending, saving and investing. Eliminating mindless spending behaviours and redirecting precious funds to what really matters will ensure that daily habits align with values and goals.
It's very easy to get caught up on what you're doing – or what you’ve done in the past – and lose sight of why you're doing it. For instance, getting rid of an unnecessary extra vehicle (such as a car, caravan, motorbike, boat, etc) as part of a minimalist lifestyle can have powerful financial benefits. Not only can you get rid of maintenance and insurance bills, but you can eliminate registration (‘rego’), repair, WOF, and storage costs.
3. Alignment with things that really matter
Everything that we spend money on holds a certain value in our lives. It's up to us to determine what is necessary versus what is superfluous when it comes to our expenditure. For example, we can buy food because we are hungry or because we are bored and feel like eating. We can purchase clothes that we want because they’re trendy, or because we need them. We can buy a glass of wine because we are genuinely craving one, or because everyone around us is drinking and we feel like we should join in. Approaching purchases with a critical eye helps evaluate just how much value (or lack thereof) a purchase contributes to our quality of life.
Look at the big picture – you want to ensure that you’re allocating any funds you do have to what you really want in life, such as what is genuinely valuable to you as a person.
This means that, in addition to stamping down on spending, you should be redirecting cash to savvy savings and investments that are aligned with your long- and mid-term goals.
4. Avoid the consumerism trap
Our “fear of missing out”, or FOMO as many people now call it, has become an irrational and unproductive obsession in the modern world, and its negative effects reach far beyond financial impacts.
FOMO could relate to any number of things, perhaps an experience that others are having such as a concert or holiday, or it could relate to having the latest tech gadget that others have just purchased. In contrast, there is something very inspiring about living a little more of a Spartan existence, and there are some definite benefits to doing so. It helps you avoid the consumerism trap, or ‘keeping up with the Joneses’.
In basic terms, living simply allows you to live freer.
Importantly - how minimalism can’t help your finances
The big financial drawback of minimalism is that you can’t save yourself wealthy. To get wealthy you’ll have to focus most of your efforts on wealth generation – usually a combination of investing and increasing your income.
In other words, to truly be effective in a financial sense, minimalism needs to be coupled with other aspects of money-management.
The bottom line
To some extent, everybody is materialistic, and a degree of materialistic consumption may not necessarily be bad. That said, incorporating aspects of minimalism into your life along with other good money-management will provide the greatest benefit. Let’s recap the top four ways minimalism can help your financial health, and the way it can’t:
Less expenses means more money
Alignment with things that really matter
Avoid the consumerism trap
But remember, minimalism alone won’t help you become wealthy – to do that you’ll need to invest and grow your income.