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You’ve seen people use minimalism to get rid of items they no longer want or use. Capsule wardrobes, the Magic of Tidying Up, tiny homes, living with less than 100 things, and the KISS principal are just a few modern lifestyle trends that promote a minimalist lifestyle.

You can use the principals of minimalism to enhance your life in nearly any area. Simplifying your finances will allow you to focus on the things that matter most while moving toward your financial goals.

There are two main parts to creating a minimalist budget that works for you. First, you’ll prioritize what matters to you. Second, you’ll declutter your financial life. If you find managing your finances to be cumbersome, boring, or complicated, using minimalism to streamline your relationship with money is a great way to ease the burden.

Clarify your priorities

First, decide what’s important to you. What do you want to own? One of the things people who adopt a minimalist budget enjoy most is their eventual freedom from debt. If you juggle car payments, credit card debt, personal loans, or a mortgage that’s too big for your income, start by creating a simple budget.

The minimalist budget

Here are some things you won’t find in a minimalist budget:

  • Multiple credit cards opened with the goal of accumulating rewards and points
  • Complicated coupon clipping exercises that result in overspending
  • Store credit card payments that are the product of over-shopping

Make a list of everything that’s important to you as it relates to your budget. Some examples may include making your mortgage or rent payment on time, working toward a debt-free life, or eventually being able to save 20% of your income.

You’ll just need a piece of paper and a pencil. Write down everything you spend money on and the approximate amount you spend each month. Turn the paper over and write down everything you’d like to spend and what you’d like to spend it on.

Stop spending money on unimportant things

If you are currently spending money on things that don’t fit with your financial priorities, you may need to change your spending habits to fall more in line with your goals. Cutting unimportant expenses from your budget allows you to reallocate those funds to more important areas.

The goal with a minimalist budget is to align your actual spending with your true priorities. Start trying to make both sides of your budget worksheet match. You can start closing that gap right away. If you have credit card debt, plan to pay it off as quickly as possible. Stop carrying the physical credit cards and store cards. Your wallet should have a debit card, your drivers license, and cash in the form of several small bills.

Choose one bank or credit union

If you have more than one bank account, choose the institution that imposes the least amount of fees with the most conveniently located ATM network. Stop using the other accounts and move toward having only one checking account and one savings account. You’ll use the checking account for bills and discretionary spending and the savings account for your emergency fund.

Eliminate credit cards

For those that travel frequently, have a great credit card with a simple and lucrative rewards program, and are committed to paying off their balance each month, it may be wise to keep one credit card in your wallet. Many people have multiple cards and carry balances. This is a huge drain on your budget.

For most people, credit card rewards programs never pay off. The points or miles are difficult to redeem and the rewards program’s rules are always changing. If you carry a balance, interest charges quickly wipe out any potential rewards. If you want to declutter your financial life and get a handle on your spending, it’s best to forgo credit card use completely at first.

Store-branded credit cards

For credit-challenged shoppers, a store-branded credit card may seem like a great deal. You’ll get a nice discount off your purchase just for applying right in the store. The process takes just a couple of minutes. If you are approved, you can hang on to your cash and charge your purchase.

You can only use the card for purchases at that chain of stores and maybe its partner stores. If you read the fine print, you’ll find that store cards are the worst kind of credit.

Nearly all store-branded credit cards have an interest rate that’s at the highest legal limit for your state of residence. In some places, this is 29.99%. Certain cards don’t offer a grace period, which means interest begins accruing on your purchases the day you use the card. The rewards programs aren’t worth the extra cost and hassle associated with this type of account. If financial minimalism is your goal, avoid store-branded credit cards.

How to choose a single credit card

When you have your spending and budget under control, if you still want a credit card, shop for one with a simple cashback rewards program and no annual fees. Cashback cards are the most flexible. Good ones let you redeem your rewards any time and you can simply apply that money to the card’s balance.

The Discover it Cash Back card is a solid choice with 5% cashback rewards and no annual fee. You’ll need at least a 690 FICO score to qualify. The Chase Freedom card is another popular and simple choice. It offers 5% cash back bonuses in certain spending categories and also doesn’t have an annual fee. You’ll need a minimum FICO score of 690 to qualify for this card, as well.

Combine your retirement accounts

If you left an employer but didn’t roll over your 401(k) balance into the account you have with your current employer, make it a priority to do so. When you leave money in the hands of a former employer, you allow them to control your future.

In 2001, Enron collapsed. Former employees who still had money in the company’s 401(k) plan were unable to access those funds. Stock prices dropped and many people lost huge portions of their retirement accounts. Consolidating your accounts allows you to maintain control over your money.

If you want to simplify your financial life with a minimalist budget and spending plan, you must follow these guidelines:

No ATM fees

  • Find the ATM machines closest to your work and home where you aren’t charged a fee and only use those
  • Keep a small amount of cash in a variety of small bills in your wallet
  • Plan ahead for times when you know you’ll need cash and visit the bank or a no-fee ATM in advance

No credit card annual fees or interest payments

  • If you must use a credit card, choose one with no annual fee
  • Pay off your balance in full each month
  • Do not use, apply for, or own store-branded credit cards
  • If you can’t qualify for a no-annual-fee card with a cash back rewards program, work on raising your credit score
  • Never use credit cards designed for people with low or bad credit

Have one savings account and one checking account

  • Close accounts with any financial institution that charges you monthly maintenance fees
  • If you don’t already bank with a financial institution that offers a free checking and savings account, open one with an online bank
  • Decline overdraft protection to avoid hefty fees

Pay your bills automatically

  • When you are sure you have enough income to cover your expenses, start setting your bills to autopay out of one checking account
  • Include your savings with your bills and set aside money for emergencies and for your future automatically
  • Set aside time each month to quickly review your statements to make sure you are billed as agreed and aren’t overcharged

Cancel all subscriptions

Reduce unnecessary expenses by cancelling every subscription. Try to get by without any subscription accounts for a month. Only renew the ones you genuinely miss. If they add value to your life, like paying $13.99 per month for Netflix in place of a $199 cable bill, reinstate them.

If canceling all your subscriptions sounds like a gigantic chore, consider using a service like Truebill. This free service finds and cancels your unwanted subscriptions and can even get you refunds for outages and fees. They can also help negotiate a lower bill from some companies.

Trim is another reputable service that can help you streamline your spending by canceling subscriptions. If you want an easy way to automatically set aside savings, they offer weekly transfers into a savings account with a great interest rate. So, you could divert the money you save by canceling subscriptions to a savings account and watch the money you save grow as a result of your new minimalist financial management lifestyle.

How to apply the principals of financial minimalism to your paperwork

Financial minimalism allows you to discard anything that doesn’t move you closer to your ultimate financial goals. If it isn’t working hard for you, it has to go.

How to choose what to discard

Overflowing paperwork is a problem for a lot of people with disorganized financial lives. It’s hard to find the things you need when you have to wade through a pile of papers that you are afraid to throw away.

Here are some reasons people may hang on to financial paper clutter:

  • Fear of identity theft if their papers fall into the wrong hands
  • Distrust of electronic record keeping methods
  • Unsure about what they are “supposed” to keep

Keeping financial paper clutter at bay is a daily battle for most people. Switching to paperless billing is a great way to reduce the amount of important mail you receive. You’ll get emails with bank statements, credit card bills, and utility bills that you can file in a folder held in your inbox for easy reference. Some companies even offer a small monthly discount for choosing paperless billing.

Some papers, like birth certificates, social security cards, and vehicle titles, should be kept indefinitely in a safe place. They are replaceable, but it’s often a hassle to do so and there are usually fees associated with getting a certified copy of these important papers.

When organizing your financial paperwork, resist the urge to go out and buy supplies, files, or bins. The goal is to get rid of as much bulk as possible. You may want to purchase a small shredder for documents that have your personal information or account numbers on them. Don’t go shopping for organizational aids until you are done decluttering your financial paperwork.

If you try to declutter the paperwork in your home without slowing the speed of mail coming through the door your project will end in frustration. Put a small recycling bin by your front door and sort mail before you bring it into the house. Only bring in the contents of envelopes that you need to take action on or that hold sentimental value, like cards and personal notes.

Paperwork and kids

If you have children, your paperwork problem is exponentially larger. Homework, test results, correspondence from the school, artwork, notes from teachers, medical forms and records, and reminders may seem to cover every available surface. To battle this problem, assign a bin to each child and make it their job to put paperwork into the bin every day after school as they walk in the door. Things that you need to sign or return should be handled and returned to the child’s backpack right away.

If you have one big pile for bills, appointment reminders, kids’ homework, permission slips, bank statements, and important documents, finding what you need will be nearly impossible. When you decide to transform your clutter in favor of financial minimalism, you’ll be able to find what you need in record time.

Financial minimalism isn’t for everyone. If you find budgeting and managing your money a nuisance or consider it an unpleasant chore, adopting the principals of minimalism and applying them to your finances is a smart move.

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