Personal finance is an important topic. I write about it often.
When I use the phrase “personal finance,” I’m talking about the personal decisions and disciplines we incorporate into our lives concerning the finances in our personal possession.
What is interesting to me about personal finance is that many of the same principles are repeated over and over again by money experts, advisers, and writers.
But not all of these principles get applied by people (which is why they get continually repeated).
From my side of the minimalism conversation, I can see clearly why so many of the most common financial principles are hard to implement for people.
In the US, according to some studies, we spend $1,500/month on nonessentials. By choosing to buy only the things we need, we provide more margin to follow these principles we keep hearing repeated.
Will buying only what we need solve every personal finance crisis in the world? Of course not.
But it’ll solve the crisis for more people than you think… maybe even you.
Minimalism isn’t just about owning fewer things; it’s about reshaping our attitudes and habits around consumption and finding contentment in less. This approach, as many are discovering, isn’t just freeing up space in our homes but is paving the way for a healthier financial life.
Here are seven universally recommended personal finance principles and how they become more attainable through minimalism:
1. Spend Less Than You Earn
The foundation of financial wisdom, yet often hard to implement in practice.
With minimalism, our wants decrease and we learn better how to discern between needs and desires.
This means we naturally spend less, making it easier to live below our means—and it doesn’t take long to realize it is not a sacrifice to do so.
2. Save Consistently
As we limit our purchases to only what adds value to our lives, we’ll find that we aren’t as inclined to make impulse buys.
With fewer unplanned expenditures, setting aside a consistent portion of our income becomes much simpler. “Save a little bit every month,” something you’ve been told from the very beginning, suddenly becomes achievable.
3. Avoid Credit Card Debt
For the first time ever, Americans hold $1T in credit card debt.
This is a problem. Credit card debt builds and builds and will eventually consume your time, money, and focus.
This type of debt can be tempting, especially when we’re eyeing the latest gadgets or fashion.
But with a minimalist mindset, we’re less swayed by trends, making it less tempting to go into debt for short-term pleasures.
4. Start Retirement Savings Early
Compound interest is on your side when you start saving for retirement early.
When we embrace the idea of buying only what we need, we find opportunity to prioritize our future selves, leading us to start that retirement fund earlier and benefiting from the magic of compound interest.
5. Maintain an Emergency Fund
Having a small fund of savings for little emergencies is wise and helpful in our financial lives. Dave Ramsey recommends $1,000 as a starting number—that number sounds good to me although $1,000 is buying less and less these days.
Again, you can begin to see the connection here, without the constant influx of non-essential items, more of our money can be directed towards building (and maintaining) this safety net.
This means when life throws its inevitable curveballs, we’re financially equipped to handle them.
Minimalism makes these personal finance principles, which you’ve heard repeatedly, easier and easier. Let’s add two more.
6. Diversify your Investments
Will every person who pursues minimalism have extra funds available to invest? Not necessarily.
But “diversify your investments” is very common personal finance advice—and it’s good advice. It’s never a good idea to put all your eggs in one basket.
For many people who overspend, their home becomes their only long-term investment (plus maybe a little bit deducted from their paycheck into retirement). Buying less offers an on-ramp of extra funds to invest in more places than your home.
7. Plan for Big Purchases
Every once in a while, a significant purchase is required. Maybe it’s a new car, a home renovation, or a much-needed vacation to recharge.
Almost every financial expert will advise us to save up over time, and plan for these big-ticket items.
Minimalism, again, makes this easier to do.
There are many life-giving benefits that we discovered living a minimalist life. And becoming more intentional with our finances was definitely one of them!
If you’ve been hearing this type of personal finance advice your entire life but have always struggled to follow it, let me recommend an idea to you: Buy only what you need. You’ll love it!
Ariel says
The greatest gift minimalism has given me and my husband is the space to have real conversations about money – not just a budget, but what we really want to do, and how we want to manage our lives. Less clutter = more physical and mental space for difficult things. We’ve had a lot of tough and big health costs this year. Minimalism gave us breathing room for the things that mattered.
Lohgan Swaggard says
All of these are great tips that I think of more naturally now. Once upon of time, they were very abstract. Sometimes it doesn’t take a whole algorithm to get on a good path with money but yet sticking to the basics.
Jessica Rupe says
#5. A lot of what Dave Ramsey says is on point. But $1000 these days is not enough. One month of income is better as a starter emergency fund. And three to six months of expenses is nowhere near enough for a full emergency fund. One year of income.
Lucy Anderson says
Why is there such support for Dave Ramsey? There are other financial advisors out there, who are much less controversial. If supporting Dave Ramsey is part of Becoming Minimalist, then please, count me out.
joshua becker says
Thanks for the question and comment Lucy. I’m happy to articulate why I encourage his method. Because in 25+ years of helping people get a hold on their finances, I have never seen a strategy and approach that people stick to longer and more effectively than Dave Ramsey’s strategy for how to get out of debt. No doubt, there are other financial advisors out there, many of them quite helpful I’m sure. But there is no approach that I have seen people stick to longer than Ramsey’s steps. Hope that helps.
Donna says
Agreed. Dave Ramsey’s methods helped me get out of debt and stay out of debt for over 20 years. I do not like his politics or religious views, but as far as finances are concerned, his baby steps and methods are spot on.
Tony W says
I found not purchasing things I do not need is more than helpful but not buying some of the things I may need and saving the cash is magical.
Building that extra cash for emergencies and the things I may really need relieves stress for me.
There is something soothing about watching the numbers grow knowing I have the cash for anything that may come up.
Betsy says
These are all great points. I wish someone had schooled us in this years ago. My husband and I are both retired and after our younger years of having to have it all older age has brought us clarity. We regret the things we purchased and didn’t need. We’re fortunate to be at a point where a meal with friends at someone’s home or a good movie curled up on the sofa makes us really happy.
Dennis says
Babylon become the richest city in ancient time because it’s citizens where rich ,they respected money and they save 10% of the copper.They let their money work for them.Consult financial experts .
Jenna says
Very common list. How about investing in mutual funds without taking every 8-year dives and losing everything. How about some out of the box thinking on real changes.
joshua becker says
Thanks for the comment Jenna. The list wasn’t out-of-the-box tips, it was supposed to show how minimalism makes all of the most-common personal finance tips become easier with minimalism – for anyone who struggles to keep them.