We are in a three-decade long inflation. This means our money can purchase lesser goods than what we’re able to in previous years. Times are tough. That’s why we have to be ruthless with our finances.
Financial minimalism is on the rise. It’s not a new concept but it’s becoming more and more popular for people of many ages especially millennials. Gone are the days of collecting and buying as many staff as we can to show proof of wealth and success. So let’s talk about ways to practice financial minimalism.
Here are 6 Simple Steps to Financial Minimalism:
1. Get rid of non-essential expenses. This is totally depending on the individual. What is essential for you and what is not essential is a personal matter? But one way to look at this - what are those things that you are spending on that you can actually leave without? Or what are those things that you can cut back from? For example, I used to be a Starbucks addict. I had to have some Starbucks at least once a day. I started making changes by replacing Starbucks by making my own drink. I did not eliminate this in my expenses but I tried to limit my spending over a cup of Starbucks drink monthly. Again, this is a personal decision and it’s up to you to identify which spending you’re ready to cut back from.
2. Invest on Assets
I used to hoard a lot of clothes that I end up not wearing anyway. But through the years, I made changes and now if you look at my closet. You will see a few pieces of basic apparel. This change wasn’t even intentional. This was just a result of me having started to allocate my money on assets. I started doings startup investing in CrowdCube and Wefunder, investing in startups that I believe is paving the way for a better future. Naturally, I ended up cutting back from spending on items that are liabilities. There are many investment options out there and it’s good to be more educated about such opportunities.
3. Use High-Yield Savings
This is surprisingly easy but not many people are saving using high-yield savings. High-yield savings give you much larger returns compared to the 0.04% interest rate on traditional savings accounts. Qinta is working on a wallet that can allow you to earn up to 10% annual percentage yield on your savings. You can sign up at https://qinta.io if you’d like to receive an invite when we launch publicly.
4. Pay Off All Your Debts and Try Not to Have New Debts
A principle that helped me improve my personal finances is by spending within my means. If we have to borrow money to buy something then it’s probably because we cannot afford it in the first place. I will exclude big decisions such as owning a home as this is more of a personal decision and you are the best to know if you are ready to own a home through mortgage. However, there are items that we shouldn’t borrow money for but only pay for if we really can afford them.
5. Cut back on credit cards.
Using credit card to purchase items that we have no money for can really be tempting. It’s easy to swipe those credit cards after all. On average, Americans carry $6,194 in credit card debt, according to the 2019 Experian Consumer Credit Review. And Alaskans have the highest credit card balance, on average $8,026. Credit card has been one of the reasons for bad debt in America.
6. Find free things for recreation.
One thing I enjoy doing lately is walking in the park and taking my daughter to the public playground or just strolling by the beach. These are free activities that are enriching and can promote bonding with your loved ones. Before we spend on recreation, we can challenge ourselves and get creative - what can we do that is fun and also free? :)