Budgeting – heck, establishing a budget – can be hard for anyone. It can be equally difficult to stick to it and achieve your financial goals. Spending wisely, saving money, paying down debt can all be accomplished with a minimalist budget system. And when you learn to budget like a minimalist, you just might find that you’re less stressed about money and on the path to achieving your financial goals!
So what exactly is a minimalist budget?
A minimalist budget is simple. Seriously, that’s it.
They way that you approach your budget, spending, and money goals through a minimalist lens makes the process of budgeting much simpler than before.
Before, you might have tried to budget for every single transaction and got too granular. Or maybe you didn’t leave yourself enough wiggle room (we’ll get to this later) and you’ve always struggled to stay under budget. Perhaps expenses crept up and you weren’t prepared – yikes! And that left you spiraling.
By approaching your money and your budget with minimalism and simplicity in mind, you’ll transform your budget and your spending habits so that you’re on track to save more money.
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Tip #1 – Add up all essential expenses
Minimalism tells use to live with only the essentials. Of course, we add creature comfort items into our lives. But what are your true essential expenses? That will be the base of your minimalist budget.
There are 4 categories of essential spending:
- Housing (rent, mortgage, home/renter’s insurance, regular upkeep)
- Utilities (water, sewer, gas, electric, NOT subscription services like Netflix)
- Food, Household Goods, Clothing (groceries, cleaning, diapers, necessary clothes)
- Transportation (loan payments, gas, regular upkeep)
Anything else should be considered non-essential. When questioning an expense, ask yourself “Do I need this to survive (water, shelter, food clothing) or to get to and from my job?”. If not, it can probably be cut from your budget.
What’s the total of these essential expenses on a monthly basis?
Tip #2 – Emergency savings plan
You don’t need to stockpile toilet paper to be prepared for an emergency to come your way. With an emergency savings fund, you’re able to pay for unforeseen (and necessary) expenses. That’s the second element of a minimalist budget.
What was your total of essential expenses? You should have 6 months worth of essential expenses saved in your emergency fund. NOT 6 months of income saved.
For easy math, let’s say it is $2000 monthly. Multiple $2000 by 6 = $12,000. That’s the total for your emergency fund.
If you lost your job suddenly or if you couldn’t work due to illness, your emergency savings would provide for your family for 6 months.
Tip #3 – Debt payments
Halfway through our minimalist budget, and this step is to identify all debt payments and total the payment amounts.
Debt payments can include:
- Student loans
- Credit cards
- Personal loans or payday loans
- Medical debt
These debts are outside of what your essential expenses are – therefore, it excludes your mortgage and auto loan – and should be paid every month. But can you pay more? If so, use the debt snowball payment methods to pay down debts faster.
Tip #4 – Calculate income
Check your bank statements or look at your last 2-4 pay stubs to find your income. If you share expenses with a partner, add their’s in too. Even if your income is variable, you should still do this step. For variable income, find the monthly average over the last 6 months.
Minimalist budgeting doesn’t mean that you need to make more money in any way. But if you have a passion that could be turned into a business, you can always explore that as an addition source of income.
Take your monthly income, subtract your essential expenses and debt payments. Do you have any money left over? Put that money towards your emergency fund or financial goals.
Tip #5 – Question all non-essential expenses and make cuts
Part of being a minimalist is wanting fewer things. Even if you’re not a minimalist and just looking to have a more simplified budget, you should reduce what comes into your home.
Things brought into your home, but could negatively impact your budget:
- Subscription boxes or services
- Streaming subscriptions (like Amazon Prime, Hulu, Netflix, etc)
- Too much food
- Overstocking on household goods
- New clothing every season
- Single use plastics
- Single function items (I’m looking at you, herb scissors!)
These are just some of the things that add clutter to your home and to your budget. They’re often sneaky purchases, too! The auto-debit feature is great for subscriptions, but do you actually use it?
Question all of these purchases. Do they add value to your life or contribute to your financial goals (Tip #6)? If not, they can be cut from your budget.
Consider using a 72 Hour List (printable found HERE) to allow yourself the time to thoroughly look at non-essential purchases.
Tip #6 – Establish your financial goals
The foundation of minimalism is establishing what’s important and prioritizing that. The same should go for your finances. What’s most important to you?
A few examples of financial priorities could include:
- Paying off all debts
- Saving 30-50% of your income
- Donating to your church or a charity
- Retiring early
- Saving to pay for your child’s entire education
You’ll want to get granular with this. Find the specific numbers. Ask yourself tough questions and be realistic with the answers.
How much is all your debt? Can you find in your budget to pay that down? How many months or years will it take you to pay that off?
The faster you want to reach your goals, the more motivated to save money you’ll be! Evaluate your spending every month and find what you can cut to save even more.
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