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The Minimalist Path to Financial Freedom

financial freedom

People from all walks of life are starting to adopt principles of minimalism to manage their personal finances. The minimalist way of life at its core is about owning as little as possible and valuing what you do have. Although giving up a lot of your wordily possessions may not appeal to you, there are aspects of minimalism that everyone can benefit from. Here are 7 simple minimalist steps for better money management and financial freedom:

 Cash is the Key

 Financial minimalism is all rooted in the concept of reducing the number of financial worries you’ve got swirling around in your mind at the end of the day. If thoughts of debt and pending credit card bills have made your life increasingly stressful, then go the minimalist way and chuck the cards altogether. Most people end up creating multiple credit accounts which only adds to their troubles because they need to keep a track of the balance in each account. A stress-free alternative is actually quite simple – keep one bank account and only use cash for all your expenditures. At most, keep a debit card which will allow you to make a purchase and pay for it right then, instead of accumulating it into a credit bill. However, if you must use cards, try to limit the number of cards you carry with you when you go out to buy something. For hassle-free management of money, stick to one credit account and carry one credit card. It will save you a lot of time when it comes to sorting out your expenditures and paying those bills. Financial freedom is about being able to live a worry-free life, and being able to enjoy what you earn. Nothing gives you a better perspective on your spending behavior than a shopping spree done only with cash in hand.

 Simple Budgeting Can Save You

Budgeting can be an extremely tedious exercise and more often than not, people try to avoid it altogether. The fact is that budgets can make your life very simple, provided you keep them minimal. The more items you start adding to your budget, the more difficult it will be to keep track of your expenses – the solution is easy; spend less. When you use your money only on things you really need, it will cut down the items you have to add to your budget every month. If you find it hard to keep a budget with simple pen and paper, use an Excel spreadsheet to make the task easier. The internet is buzzing with apps which are specially designed to help you manage your finances. It’s a good idea to embrace technology and use such apps to make the task less painful. Minimalism in budgeting is all about keeping things very simple and straightforward – fewer items to track, fewer expenses to make and smart tools to get it all organized. For people who are constantly on the move, mobile applications can be a major life saver since you can complete your budgeting tasks from anywhere.

 Frugality is a Virtue

 We live in an age of extensive consumerism, where everyone is out to buy more and more good and services. Financial freedom is not just about being able to spend your money the way you want – it also comes with the responsibility of spending it on things that matter. If you’re living under debt and want to manage your money better, then consider frugality as a virtue. Buying less means tracking fewer expenses and increasing savings. A good way of bringing frugality into practice is by making small changes in your spending behavior every day – whether it is in shopping for groceries, traveling or buying coffee every morning. Some recurring expenses might seem like investments when you start off, such as the payments you’ll have to make when buying a car, but in the long run, the need to maintain those expenditures can take a toll on your finances, especially if you are trying to pay off debts. As a blanket rule, start getting rid of recurring expenditures altogether.

 Eliminate and Create

Leading a life of minimalism has a lot to do with enjoying the simple pleasures of life, often which cannot be bought with a stash of money. In our highly urbanized ways of living, where there is so much to spend on, living from paycheck to paycheck is nothing new. But consider this – if we were to consciously work towards eliminating those hidden expenditures and instead use the money to create an emergency fund, wouldn’t we be better prepared to meet life’s unexpected circumstances? Emergencies can differ in intensity, but if your savings are little, you can be forced into debt, thereby sacrificing your financial freedom in the process. Hidden expenditures such as magazine subscriptions, gazillion newspapers, cable TV, unnecessary shopping for books, clothes, shoes, lunches/dinners with friends, colleagues and family – these all have the potential to burn a hole in your pocket and one mostly forgets about these expenditures because they seem to slip into the realm of subconscious spending. Start eliminating these expenditures as much as you can, and channel money towards an emergency fund, by putting at least $50-$100 every month aside till it reaches to a minimum of $500.

 Automate Your Money

 This one specifically deals with the stress that accompanies timely payment of bills and other credits. Banking technology has come a long way, and today one has the option of going for automatic payments to reduce the hassle of having to track all your payments and often paying a late fee for a delayed payment. To simplify your life, have automatic payments done from your savings or checking account for the bills which can be payed through automatic payments, or use other tools such as online bill pay facilities offered by almost all banks today. Furthermore, try to make payments in big chunks whenever possible, such as paying your rent or mobile bills for the next 6 months and putting worries to rest for these expenses. However, be careful not to automate every single bill of yours at the same time as this will obviously drain out your savings very quickly. Automate one type of payment every month and take it slow. There is no need to rush yourself into automated bill payments unless you are absolutely sure that you have enough finances to make those payments as well. If you have an emergency fund in place, use it whenever you feel your main income account might not have enough money. It’s also a good idea to check your accounts once in a week, or once every two weeks just to make sure things are working fine. Keep a reminder in your phone is you are prone to forgetting.

 Stick to the Basics

 The easiest way to prevent overspending on things you don’t even need is to stick to the basics. And no, television is not a basic need. If you live alone, you don’t need too big a house; you can make do with a one room studio just as well. Similarly, even if you are a family of four, you should see if you can work with one car instead of two. If you want to manage your money better and save more, then start living only on the bare minimum of needs when it comes to lifestyle. Minimalism is not about living cheap; it’s about living with an understanding that what is unnecessary cannot be made necessary and that you should be smart about where your money goes. A good way to start is by opting for less expensive alternatives of goods and services you need – such as going for a prepaid mobile connection instead of postpaid, opting for a basic cable TV connection instead of going for satellite TV, opting for a small car, using services offered by community health centres instead of going to costly gyms or personal trainers. The list does not end here. Eliminating two of everything is yet another intelligent thing to do – two cars, two credit cards, two televisions, two houses etc. Two of anything just doubles your responsibilities (and stress!), so why not remove half of that equation?

 Don’t Carry Debts

It’s okay to be in debt, but it is not okay to do nothing about it. If you’re in the habit of carrying your debts from a previous month or year into the next, then it’s time to stop and re-evaluate. It is never a good idea to keep waiting for your finances to accumulate and keep repayment of debts entirely dependent on how your money situation turns out every month. That is the wrong attitude to have. A more proactive person realizes that he/she needs to make some changes to their lifestyle to accommodate their financial situation. If one job is not enough to pay off your debts, get another job. If selling off the car means recovering money enough to repay all your debts, then do it. The freedom and peace of mind one can achieve by being under no financial burdens is unparalleled – it can provide you a stable footing to begin life again with more security and positivity. You might have to carry some if not all of your debts into the next month, but keep trying to actively eliminate them every day. An excellent financial tool to help you through financial crisis is Dave Ramsey’s Baby Steps for Total Money Makeover – a set of 7 minimalist, clear steps which can have you on the road to financial recovery in no time.

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