Minimalism interests all aspects of my personal and professional life. From material items to your thoughts, everything in your life should be deliberate. That doesn’t mean there is no room for fun or entertainment — not at all. It simply means to be aware and in control of your life and decisions.

By having fewer things in your life, you clear your mind of unecessary thoughts and behaviors which makes room for positive change. Here are a few areas that I find important to “declutter” and maintain control over:

Email inbox (subscriptions, inbox zero)
Service subscriptions
Video games
Documents (photos, videos, papers, etc.)
Clothing (shoes, hats, socks, shirts, etc.)
Storage containers
Decoration
Gadgets (tech, tools, kitchen appliances, etc.)
Apps (phone, desktop, web, console)
Food
Time
Finances

Financial minimalism

Financial minimalism involves steps in monitoring and reducing unnecessary financial outflow while maximizing income streams. Hopefully this will increase the control you have over your money, time, and life.

Consider the following facts:

There are 24 hours in a day
Most people work 8 hours a day
Most people sleep 8 hours a day
The average commute is 50.8 minutes per day
You have other stuff to do every day, like getting ready for work, preparing meals, eating, using the restroom, showering, etc.
The average household income in the US is $59,039 per year

If you’re an average person / household living in the United States, you use about 17 hours between work and sleep and probably spend a majority of the leftover time in your day doing daily chores or other tasks that you might not otherwise choose to do. Your time has value and the first step in controling the time is by being aware of your life and making conscious decisions to improve it.

The first step in making meaningful change is to note your goals. What are you trying to achieve? Then, work in reverse by creating the steps required to accomplish each milestone.

Reduce spending

Regardless of your overall financial goal, one of the easiest ways to increase your overall wealth is to reduce spending.

I have found it helpful to reduce spending by first tracking where my money goes. You have money coming in and money coming out every month. Without tracking the activity, you lose control. Personal Capital lets you connect and monitor the activity on all of your banks, credit cards, retirement accounts, investment accounts, and more. It’s the perfect tool to provide an overview of your finances.

Create a budget

The next step to financial minimalism and control is to have a written budget. Whether you do this on paper or an app on your phone, you should write down every single expense you plan to have every month. The goal with your budget is to have your income and outgo equal. Money is a tool and every dollar that you earn should have a job.

Here’s an example budget:

Income: 3000

Primary job: 2500
Side job: 500

Expenses: 3000

Rent: 800
Electricity: 80
Gas: 50
Water / sewer: 30
Internet: 65
Phone: 60
Trash pickup: 30
Pets: 50
Insurance: 200
Car payment + fuel: 250
Toiletries / clothes: 50
Food: 200
401(k) contribution: 250
Entertainment: 250
Vacation: 300
Student loan: 200
Savings: 135

Creating a budget is a fluid process that you will have to adjust as you learn more. After monitoring your expenses and creating a budget, you should have a good idea what your money is doing. One of the easiest ways to increase your wealth is to reduce your spending.

Reduce expenses

Some areas are easier to reduce spending than others. Certain things like rent and food may be difficult to reduce, but there are probably areas that you can! Take a look at recurring expenses like video game, music, and movie subscription services that you don’t use or use infrequently. If they don’t provide much value to your life, cancel them!

Consider how often you eat at restaurants and if it would be viable to instead prepare your own meals to save money and potentially be more healthy at the same time. This varies based on a few factors such as work environment or preference, but most people can see a financial saving by making their own meals. Financial minimalism is about reducing expenses so you can have money for what’s valuable to you — and if that’s not having to make your own meals or you prefer restaurants, then that’s your choice.

You don’t have to go on a vacation every year. Traveling can be nice at times, but sometimes it’s worth saving the money and relaxing at home during your time off work. Reducing this cost can help a lot in saving for your goals.

Debt is the root of all evil. The interest on it compounds and makes you spend more than you initially thought. In order to get financial clarity and peace, I’d recommend prioritising paying off debt over vacations, savings beyond an emergency fund, and even 401(k) contributions beyond an employer match.

Cut costs where you can, continue to monitor your spending, and always be evaluating if you really need to make a purchase or if you’d rather have your money make money for your future self.

Take a look at this personal income spending flow chart to prioritize your expenses.

Save and invest now, work less later

Tracking, planning, and creating an overall awareness of your finances is a great way to reduce financial clutter and save more money. Since money is a tool to help give you time away from your probably less than desirable job, any excess should be invested in channels that increase your wealth.

$1 today buys fewer things than $1 bought 50 years ago. This is because inflation of the price of good has gone up and reduced the overall buying power of the dollar. Over time, inflation has been roughly 3% per year. If any money that you have saved is under your mattress or in a savings account, it is losing buying power. It’s important to have an emergency fund so if you lose your job, need a new vehicle to get to work, have an unexpected health emergency, or any other emergency, you’ll be able to get to the money.

Anything beyond an emergency fund should be invested in something that will grow your wealth and empower you. This could range from investing in your education, experiences, or in more traditional stock, bond, and real estate properties.

Diversify, diversify, diversify, they always say when investing comes up. No matter what you invest any additional money, be careful not to put everything in one place since it could turn out badly. Diversification reduces your risk — it is up to you to decide how much risk mitigation you need.

If you invest regularly in an index fund of most of the companies in the united states, historically it has gone up around 7% per year on average over a long period of time. This means with inflation, your money would be earning roughly 4% per year — much better than losing purchasing power from inflation. The goal for retirement would be to have a big enough investment that you could live off of the 4% growth of the principle effectively forever. The 4% is just a rule of thumb safe withdrawal rate and would be much more secure to be 3%, but that increases your required principle significantly. To put it in a different perspective, assuming a 4% SWR, you’d need 25x your annual expenses in your investments in order to retire.

Investing in index funds is a way to simplify your investment strategy so that you only have to think about your risk tolerance (stocks are typically riskier than bonds).

Create multiple streams of income

The reason people say to diversivy your investments is so that if one company fails, you don’t have all your eggs in one basket and lose everything. Instead, the continued growth of all your investments offsets the losses of bad ones. This is the attraction of index funds that track the overall market like the S&P500 or vanguard total stock index fund. Most people don’t have the time required to research individual companies that would return better than the market as a whole.

The same can be said about other, more active areas of income. When possible, diversifying your income streams in all scenarios is a good thing to reduce risk. Having alternative sources of income will protect you if you were to lose your job, the market were to crash, or your house catches fire (insurance is also a way to diversify by protecting one of your investments).

Alternative sources of income could include:

Delivering pizzas
Getting a second job
Sell T-shirts online
Create content and sell ads
Take wedding photos
Caption videos
Website design / development

And so much more! The internet has created many possible channels of income stream that you can take advantage of. Creating multiple streams of income has never been easier with a lower barrier to entry.

Conclusion

By reducing your financial burdens and increasing your overall wealth, you create opportunities for your future self that you may not have otherwise had. The first step is to gather your own data through paper or online appsthat help keep track of your expenses. Next, create a written budget that you and your financial partners stick to and allocate every dollar to a category or task.

Remember, money is a tool that helps create freedom for your future. It’s easy to passively spend and lose track, so reducing and minimizing your spending can have a huge impact on your overall wealth.