Recent job losses and sudden spike in unemployment have prompted many people to embrace minimalism. The concept of ‘minimalism’ is not new. Many people in the past have associated decluttering of their closets with good mental health. Minimalism applies to financial planning wherein many eschew unnecessary expenditures. This may include abstaining from spending recklessly on lifestyle maintenance to make way for timely payment of insurance bills and loans sought. Minimalism is not a substitute to mindful financial planning though the latter cannot be made possible without the former. Personal finance experts advise their clients to stick to minimalism like how they stick to their gym routines. The knack to establish yourself on a concrete financial footing must be synonymous with your obsession to get lean and big through regular gym routines.
Minimalism is not always about being about frugal but focusing to spend only on what you need. Financial habits become more in line with your financial goals. Here is how minimalism helps to strike the right balance between a sound financial strength while taking care of necessary expenses.
1) Sound budgeting strategy: Have a budget in mind. Start by paying off your existing liabilities, saving, and investing the money before deciding how to spend your earnings. Practice minimalism while exercising control over your spending habits. While it can be difficult to track every penny spent, it makes sense to record monthly earnings and expenses.
2) Focus on long-term growth: Today’s millennials can be very money-minded, which means that they will grab every opportunity to earn a few extra bucks. Unfortunately, minimalism does not feature in their spending habits. For every penny debited from your wallet, think if it can help grow wealth or achieve your desired financial goals.
3) Manage debts: Necessary expenses like student loans or home loans cannot and must not be avoided. Upskilling is essential to prolonged growth while having a roof on your head ensures security. However, not all loans are the same. Compare the kinds of loans along with their interest rates. Also, some loans must be repaid before opting to take new loans. High-interest credit card loans and personal loans must be first repaid due to the huge financial outflow in terms of penalty. The right kind of debt that helps you to build wealth is an essential way to leverage money for a financially secure future.
4) Re-evaluate your books of accounts: Mindful thinking habits must find their way to mindful financial assessment too. Pay for what you need and that gives you joy instead of simply cluttering your room to fill up space. Check your financial accounts regularly to see if you have set aside enough for your retirement and not carried forward your liabilities for far too long.