Minimalism and Budgeting

 

“Any half-awake materialist well knows – that which you hold holds you.”

 

-        Tom Robbins

 

 

 

 

The budgeting and financial side of minimalism creates clarity and a life of simplicity that few get the opportunity to enjoy. Whenever you have fewer possessions, you need a smaller house. Whenever you have a smaller house, your rent or mortgage costs less, your electric bill gets smaller and it takes less time to clean; thereby giving you more free time. When you have fewer bills, your necessary annual earnings do not need to be as much; thereby allowing you to have more free time as well. Ultimately, needing less frees you from the grind of materialism that keeps us slaves to our jobs, careers and side gigs. These “occupations” indeed do keep us occupied an inordinate amount of time. This time could be much better spent enjoying our friends, loved ones and our so called lives. While everyone technically “lives,” few people actually get to the point where they feel alive. The truth is few people will lie on their death beds wishing they had spent more time at work. Human relationships are one of the most cherished institutions in this world that makes life actually worth living. In this section, I will be discussing the following categories of budgeting and finance as they pertain to minimalism: defining your basic minimum budget, extraneous expenses and designing a future budget.

 

 

 

 

Define your basic minimum budget by category

 

 

 

“The greatest wealth is to live content with little.”

 

-        Plato

 

 

If you currently have a budget, it’s likely filled with both needs and optional “extras.” Just remember, that all those “extras” are not bought with money, but with hours of your life. In order to maintain those luxuries, you must work more hours in order to pay for them. The fewer indulgences that you select, the fewer hours you will be required to work. Remember, while this list will look similar for most people, others who are closer to achieving a minimalist lifestyle will have fewer expenses. The following is a list of basic human needs in modern society:

 

 

1.   Shelter: rent or mortgage, renter’s or homeowner’s insurance, utilities (water, sewer, trash pickup, natural gas, electric, etc…)

2.   Food and water: groceries, budget spending for restaurants per month, snacks, supplements

3.   Transportation: car payment, car insurance, gasoline, maintenance, etc…

4.   Physical fitness, Health insurance and medical: health insurance premiums, medication, ongoing medical care, gym membership

5.   Communications: cell phone, internet

6.   Paying debt on time: credit cards, loans, medical bills, car payment, sell house and choose to rent

7.   Emergency fund: enough to live on your budget for six months

8.   Savings: at least 5% of your income if not much more

While some may not agree with the entirety of this list being classified as essential for basic human needs, this objection is not entirely surprising. The reason being, part of what makes this method so successful for so many is the fact that honesty is a key component. If you are not honest about what is important to you, then you will not allow for those items in your budget that you truly value and end up overspending later. I find that it’s best to plan for a little extra and have the flexibility to pivot later than to cut back too far and pay for possible startup services for a cell phone or installation services on a new internet connection a month or two after you cancelled! Once again, every version of minimalism looks a little different based on each person’s “Why” for the transition to this radical lifestyle. Each person’s approach to this method will be very personal and unique to their needs, values and desires for the life that they are trying to build for themselves and their family.

 

 

 

 

 

Define your extraneous expenses

 

 

 

“That man is richest whose pleasures are cheapest.”

 

-        Henry David Thoreau

 

 

 

 

The next step is to reduce or eliminate everything not previously listed in the eight basic needs categories. While some of these cannot be eliminated on day one, we will put them on the list to give us an idea of the direction in which we are heading. Though not a comprehensive list for all, here is a basic list of extraneous expenses that can be eliminated for most people:

 

 

1. Entertainment: cable TV, Netflix and other streaming services, restaurants (keep under budget)
2. Paying off Debt: credit cards, loans, medical bills, car payment, house payment (sell house and choose to rent)
3. Frivolous spending: clothes, electronics, impulse buying beyond basic needs, etc…

 

 

 

 

As minimalism is unique to each individual, this list may look different from person to person. In fact, some may even choose to add items like gym memberships, cell phones and internet to the “extraneous” list. As for me, I can see the value of maintaining my health, having a smart phone in my pocket at all times and plenty of bandwidth as items that I choose to not be without.

 

 

Paying off debt is such an important part of this list. By paying off debt, not only do you get to eliminate expenses from your monthly budget, but you also avoid costly interest fees that would otherwise plague you for many years to come. You will notice that paying debt is on both the budget list and the “extraneous” list as well. While we do want to eliminate these debts from our budget, it is so crucial to pay debts on time as to avoid late fees. The more money spent on interest and late fees, the more hours we have to ultimately work in order to pay them off.

 

 

 

 

 

 

 

Design your future budget

 

 

 

“A budget is telling your money where to go instead of wondering where it went.”

 

-        Dave Ramsey

 

 

 

 

Finally, by taking the first two steps and combining the results, you are now ready to design your future budget. Take the eight basic human needs categories that you constructed in defining your minimum current budget and use the list of “extraneous” expenses to design your future budget. Highlight which items will no longer exist in your refined budget. For instance, did you pay off your car? Did you sell your house? Have you paid down any medical debts? Did you pay off any credit cards? Combine all these facets of your finances into a future refined budget to account for any frivolous spending habits, unnecessary debts or convenience purchases that can be eliminated. By writing out not only where you currently are, but also where you want to be in the future, then you are able to successfully make a plan as to what level of income your household must generate in order to live within these new reduced financial parameters.