Simplifying your life doesn’t just involve physical possession. It includes your mental health, routines, money, etc. In this post, we’re going to specifically discuss creating a minimalist budget, because it takes living intentionally to a whole new level!
Decluttering physical possessions is great, but in order to stay decluttered, you have to take preventative measures to prevent clutter from creeping back into your home. One way to do that is by creating a budget.
What does minimalism have to do with a budget?
Minimalism is about creating intention within every area of your life. Budgeting is creating space for spending money on necessary things and knowing how much you’ll have extra at the end of the month.
When you combine the two, you intentionally tell your money how you need/want to spend it.
A minimalist budget helps you avoid spending money on things that don’t actually matter and create clutter in your life.
What a minimalist budget is not
Often times people mistake minimalists as people who are frugal. While some minimalists may be frugal, it is not the case for the entire minimalist community.
In fact, I believe that a minimalist budget is helpful for when you do choose to invest in quality items that cost a pretty penny.
The benefits of a minimalist budget
Now that you know what a minimalist budget is and is not. Let’s discuss the benefits of it.
1 // Focus on quality over quantity
While choosing quality costs more upfront, it can save you money in the long run.
For example, purchasing a cheap shirt that is made poorly might last a couple of washings, but a quality made shirt can last several years. This means that while you invested significantly more money upfront, you aren’t having to continually purchase new shirts.
This can not only save you money, but also a lot of time and is more eco-friendly.
2 // You stop frivolous purchases
When you establish a budget, you easily stop silly purchases like a $5 cup of coffee or a new notebook that you don’t actually need. These small purchases add up over time and could cost you as much as a really nice vacation.
3 // Less to declutter
One of the main reasons I finally established a budget was to reduce the amount of clutter I had. I was purchasing things I thought would help me achieve my dream life, and they honestly didn’t.
When I established my budget, it showed me what I was doing and I was able to stop spending money on these things.
Material things do not bring happiness. Only you can create the feeling of happiness.
When you realize this, it is much easier to reduce the amount of clutter you have in your life.
4 // Focus on growth and freedom versus financial strain
Having a minimalist budget allows you to work towards something. For me, it is the goal of building my dream house and creating my dream homestead.
When you focus on what you have left over at the end of the month, you see the freedom a budget creates.
If you have a negative mindset towards budgeting, it may take a little bit to see this benefit, but stick with it. The first time you feel the freedom of having a budget, you’ll wonder why you didn’t do it sooner.
5 // Become a conscious shopper
With a minimalist budget, you become a conscious shopper by default. This is a great thing, because it helps you see things for what they are: necessary or unnecessary.
Just because something is unnecessary doesn’t mean you won’t choose to invest in it. However, it does allow you to consciously think if this unnecessary expense is worth the splurge.
A quick example of this is a drying rack I purchased. It wasn’t exactly necessary, but for me it was worth the splurge. I see the benefits of reducing my dryer use and taking better care of my clothes as something that will reap more benefits than the investment of the drying rack.
Questions to ask yourself
When creating a minimalist budget, there are certain questions that will help you set up your budget:
- How much is my income each month?
- What things am I spending money on that I have to pay for? [Utilities, rent, etc.]
- What things can I stop spending money on? [cable TV, subscriptions, etc]
- What is my goal for my budget?
- What will I do with any money that is leftover at the end of the month?
- How can I be more intentional with my money?
All of these will help you establish a budget that works well for you.
How to set up a minimalist budget
Now that you know the what and why, let’s talk about the how!
1 // Adopt a minimalist mindset
When you identify with the less is more mindset that minimalists use as their primary focus, it is easier to create a minimalist budget.
Purchasing less, spending less, and having less material things actually create a more intentional life and align you towards your dream life sooner rather than later.
2 // Establish your values and priorities for your life
Aligning your budget with your values and priorities helps you see where you can cut spending. If I were to look at your spending right now, would I be able to tell what your priorities and values are?
3 // Analyze your current spending
Don’t be hard on yourself for the past spending you’ve done, but analyze it. The more you identify as necessary or unnecessary spending, the easier it is to create a budget that helps you accomplish your goals.
The difference between expenses
There are four categories of expenses:
- Necessary spending – utilities, groceries, gas/fuel, etc.
- Investment – mortgage, retirement, business, etc.
- Debt – car loan, credit card debt, etc.
- Wants – things that you like, but aren’t necessary to live
Depending on your values, you may think of different expenses in different categories. For example, you may think your mortgage is debt versus an investment.
Neither is right or wrong just as long as you are honest and align it with your values and priorities.
4 // Set up autodraft payments
One thing about minimalism that I take to heart is keeping things as simple as possible, which means setting up necessary expenses on autodraft.
This prevents forgetfulness, late payments, and helps you stay on track with your spending. When you know it is coming out of your account each month, you intentionally have that money ready to be drafted versus trying to figure out a way around it.
5 // Reduce credit cards to one with the best rewards program
If you have credit card debt, consider consolidating them to one credit card with the best rewards program or payoff abilities.
I’m all for earning rewards on credit cards, because I intentionally pay the balance in full every month. I vow to never pay a late fee or interest on a credit card or it is cancelled.
When you have multiple credit cards, it is easy to forget to pay them or only pay the minimum payment. Don’t do fall victim to that! Have one credit card or ZERO if you cannot pay them in full each month.
6 // Set up your budget
Now that you’ve set your values/priorities, analyzed your previous spending, setup automatic payments, and reduced the number of credit cards you have, it is time to set up your budget.
All that is left is to identify your income and expenses.
Your expenses should NEVER exceed your income. If it does, you need to reduce your expenses further.
Don’t forget to include some fun money, because having a zero sum budget [where you speak for each and every dollar each month] gets hard when you don’t leave a cushion for something. This could include dinner or coffee with a friend.
Remember your goal when establishing your budget.
Review your budget frequently
Establishing a budget isn’t a one and done thing. You have to revisit and review your budget frequently.
When you first get started with budgeting, I suggest you look at your money daily. This allows you to build the habit of conscious spending and keeps you focused when your brain wants you to splurge on unnecessary things.
Once you’ve gotten used to budgeting, review your budget weekly and monthly. Always keep an eye out for things you can cut or reduce, because there is always something you can adjust to reach your goals faster.
Also give yourself grace if you need a little more wiggle room. Don’t go crazy, but if you need to make an adjustment to splurge on something or an experience, do it.
Want to take a deep dive into a minimalist budget?
If you really want to take a deep dive into all things minimalist budget, you need to check out Your Sunny Money Method! This is where I learned how to cut out my unnecessary expenses, but still create room to enjoy spending my money.
Sami is a phenomenal teacher who provides compassion and grace and shares all she knows about budgeting. She started her journey nearly $500,000 in debt and is now DEBT FREE focusing on growing her net worth! She knows her stuff!
My life has changed a lot since stepping into the minimalist lifestyle. I reduced my consumption, spending, and focused on what is truly important to me – my family/friends, homestead, faith, and career.
The more I’ve learned to simplify, the more room I’ve created to enjoy my life.
You can do the same. You just have to commit to the changes.
The post Minimalist Budget: How to Create a Simple Budget and Save Money appeared first on The Tannehill Homestead.