Minimalism x Financial Management: Journey to Financial Freedom
Minimalism as a way of life. What is Minimalism?
Minimalism is finding things that you value, focusing on the things that people value, this means focusing less on the accumulation of stuff but more on personal development, relationship with people, and helping the world. While the concept of minimalism has been around for years, it became increasingly popular after the Great Recession. More recently, it has seen a renewed interest with Netflix’s “Tidying Up With Marie Kondo,” in which a well-known Japanese decluttering expert encourages participants to keep items that “spark joy” while donating or trashing unloved belongings.
Minimalism lifestyle is the way to learn to live minimally, that automatically guide millennial to spend less (in financial perspective). Moving towards minimalism lifestyle can be the catalyst to creating financial independence that millennials wants.
Example: Ditching an unneeded extra car as part of a minimalist lifestyle can have powerful financial benefits. Not only do you nix auto loan payments and insurance bills, but you slash maintenance, repair and storage costs. But don’t forget that you can be a minimalist without being frugal. After all, if you only own one car – but it’s a $200,000 Lamborghini – then you aren’t necessarily saving money.
Can Minimalism improve my financial health?
Money mindset for millennials is basically how they come to see money in today’s world. This comes from past conditioning, from how their parents handled money to the lack of money management education in today’s school system. Money mindset plays a big impact on how millennials perceive money and how to spend money. In the end, money is just a tool to live in this world. This post will focus on a few strategies including minimalism to start the journey to financial freedom. Step to become a minimalism that lead to financial freedom can be different to everyone, but you can try to do stage 1-stage 6:
Stage 1: Spend Less Than You Make
In this stage one, extremely important to start to live below your means. Your income must surpass your monthly expenses. This stage can do by one of two ways: Increase the income or reduce the expenses. Things that help millennials to do this stage:
- Review the expenses and figure out what is a need versus a want.
- Take inventory of the current possessions, sells what you don’t need and use the funds to pay off debt
- Combine minimalism with good budgeting strategies:
- Open an online saving account. With new era of financial technology, you can find e-wallet or online banking that has no administration fee that saving up expenses per month.
- Review the credit cards. Create a spreadsheet with the advantages of each: interest rate, bonuses, etc.
- Master your cash flow. Take a month to track every money spent, including writing down how much you spent and the products you bought. Do audit of those regular expenses and fix unnecessary regular expenditures.
- Align minimalism with long-term goals. Make sure that every expenditure is help to grow wealth or get closer to your particular goals. For example, if all that unspent money is sitting in a no-yield checking account, think about moving it to a high-yield savings account, certificate of deposit or low-fee mutual fund, depending on your financial goals.
Stage 2: Manage Debt
In this stage, you need to make a plan to get rid of your debt as fast as you can. There are two methods that are used most commonly when conquering debt:
The Debt Snowball Method is a method of debt repayment which focuses on putting any extra money towards paying off debts, starting with the smallest amount owed first and then progressing to those with the highest amount owed, regardless of interest rate. The Debt Avalanche method on the other hand, focuses on paying off high interest debt first regardless of how large or small that debt is.
Stage 3: Learn
In this stage you need to fully fund your emergency account or buffer account in case of unexpected expenses or opportunities that come your way. Your emergency account should have enough in it, to cover about 4-6 months of your living expenses. You should begin to identify your life & financial goals and spend some time learning about personal finance and investing.
Stage 4: Passive Income
In this stage your focus is on creating income producing assets that spit out enough passive income that you can cover your living expenses. The most common or widely talked about approach to doing this is by investing the savings into stocks, bonds, annuities and with the ultimate goal that down the line that will be able to live on dividends and appreciation of the investment (stocks, bonds, annuities, real estate investment).
Stage 5: Independence
You did it. Congratulations! In this stage your current lifestyle expenses can be met with your passive income. You can choose to quit working, change careers into something you’re more passionate about or kick back and relax.
Stage 6: Freedom
In this stage you grow your wealth beyond covering just your monthly expenses. Not everyone chooses to progress to this stage. Maybe you’ve expanded your goals and want to tackle a new adventure or perhaps you want to do more charity work and be in a position where you can give back more or maybe you just want to leave a legacy for your children and your children’s children. Whatever it is, your focus here is on continuing to grow your wealth beyond what you need on a month to month basis.
Hope this article will help to get financial freedom in the future. Happy trying!
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good article, i know this minimalism from raditya dika’s youtube and now you peel and add what raditya is said to have not explained
thanks grace