A Minimalist’s Guide to Personal Finance: A 5-Step Guide

One thing that distinguishes millennials from older generations is our attitudes towards work and our careers. For many millennials, work is seen as a means to an end, a way to comfortably manage while you put talent and efforts towards things you are really passionate about. This notion is at odds with older generations who saw work as valuable in itself.

Millennials have sought to achieve the right work/life balance via a recent growth in a movement called minimalism —a way of living that focuses on removing clutter to minimise distractions in life and open more opportunities in other areas.

Busting The Myth Of Minimalism

Minimalism does not mean you have to stop spending money, it just means you have to be smarter about how you spend your money.

As such, if you are going to live a minimalist life you will probably need to change some things about your financial behaviour.

Here are 5 steps towards preparing your finances for minimalist living. Keep in mind these tips are not just about what you can explicitly do with your finances, but what kind of attitudes you should cultivate towards spending and saving.

1. Opt-out of Consumerism

The first thing to do is to separate your daily life from the cycle of consumerism. Many people get caught up in the mindset of buying things not because they need them but simply because they can afford them. We are not saying you can’t have some nice things you want, but there is a difference between buying a nice pair of shoes that you will use a lot and buying a nice pair simply because you can.

This is a tough attitude to cultivate in today’s consumer-oriented society that consistently reinforces consumer behaviour via advertising and social media.

You need to separate your self-worth from the possessions you own. If you have an urge to impulse shop, immediately stop, take a breath, and ask yourself: “do I really need this?”.

More often than not, you will find the answer is “no.”

In the same vein, it helps to find hobbies that do not rely heavily on consumer participation, like reading, exercise, and art.

Not only will this save you money by cutting the raw umber of stuff you buy, but it also will help you better appreciate what you already have. This does not mean you can’t consume any good, but you need to opt-out of the mindset of consumerism

2. Save Heavily

Since you won’t be buying lots of things, you can save all the extra money for an emergency fund.

Minimalist living experts recommend putting away at least 50% of your total income into savings.

Without a proper savings fund, you’ll always be on edge due to finances. To do this, you need to cut out any unnecessary spending. Here are some areas where you can cut spending to save more:

  • Magazine subscriptions
  • Monthly payments for online services you don’t use
  • Cable
  • Rent books from the library instead of buying them
  • A more fuel-efficient car
  • Daily food expense (coffee, snacks, etc)
  • Sell old things you no longer need
  • Wear old clothing and shoes until they fail
  • Fewer expensive electronics and tech gadgets
  • Don’t go out as much
  • Buy food in bulk and cook at home

Ideally, you should strive to have at least £1,000 in savings at any given time; that way you have a sizable cushion in case something goes wrong or you have to make an emergency purchase.

Start by putting away £50- £100 per paycheck until you hit that £1,000 mark, then add more to savings each month as time goes on.

3. Get Creative and Repurpose Materials

Nothing says thrifty like reusing old stuff for new purposes. Say you have some old cardboard boxes lying around from your most recent move.

Instead of tossing them in the garbage, with a bit of paint and fabric you can turn them into neat space-conscious storage units for your closet or garage.

Got some old t-shirts with holes? Don’t throw them out; use the old shirts as dish or window rags.

Repurposing old things keeps you from spending more on new stuff and allows you to get the most value out of what you buy. Here are some other ideas where you can repurpose things to cut costs:

  • Buy bulk cleaning supply and refill spray bottles
  • Reuse old glass and plastic containers
  • You can turn an old wine box into a perfectly competent shoe rack
  • Use old grocery bags to line your trash can

When it comes to repurposing old things, the possibilities are essentially endless. Once you get used to reusing materials, you’ll find that you are spending less money overall and that you are buying things with the intention to repurpose them later in their life cycle. This positive reinforcement loop helps you comfortably live minimally.

In addition to repurposing things, get in the habit of selling old stuff rather than throwing it out.

You’d be surprised just how many people on the internet want to buy your old junk, some that will pay a nice price. Websites like Craigslist or Facebook marketplace are all great avenues to sell your old things.

4. Try to Stay Away from Credit

Many people who try minimalist living end up putting expenses on credit cards and racking up exorbitant fees.

While utilising credit responsibly is important for financial health at any point in life, credit-usage can throw a wrench in your gears for minimalist living with monthly fees that could be used for savings.

To be clear, you should be using some credit, but you need to make sure that you could potentially do without credit if need be. You should never find yourself relying on credit to manage basic expenses like rent, food, or insurance.

Here is a good way to handle credit responsibly.

Try to get no more than two cards that you solely use for monthly expenses like utilities, internet, insurance, etc. Each month, make these payments on your card and then immediately pay the balance off. That way, you are using your credit but not spending any money you don’t currently have. If you budget properly for monthly expenses, you should be able to pay off any card balances in full and not rack up any interest fees. You can even automate these processes so they are handled every month without any of your input.

Otherwise, try to stick to cash or a debit card wherever you can. Cash is great because you have a fixed amount and there is no fear of overspending. With credit cards, it’s very easy to accidentally overspend and stray outside your budget.

5. Have Clear Financial Values and Goals

Lastly, you need to sit down and take some time to figure out your long term financial goals/values and a path to get there. You need to define what is necessary and valuable to you. If you are not trying to live according to some values, then what is the point of a minimalist life? Perhaps your main values are:

  • Living a debt-free life
  • Saving at least 20% of income
  • Retiring by age 55-60
  • Travel

When you know what your financial values are, then it’s easier to direct your behaviour in service of those values. Your priorities should be whatever it is that helps you achieve those goals. It always helps to put a determinate number on the timeline such as:

  • Pay off all debt in 3 years
  • Have £20,000 in savings in 5 years
  • Invest 5% of your monthly income towards a retirement fund
  • Pay off your house/car in 5/10 years

When you put a number to something it makes it more real and pressing in the mind. Having a determinate timeline will keep you motivated and give you a clear path to follow.

It is ok if you do not have all of these things fleshed out immediately, but they are certainly something you should keep in the back of your mind while planning your minimalist lifestyle.

If you aren’t really sure where to go at the current moment, the 50/30/20 budget is a good place to start.

Allocate 50% of your income to basic expenses, 20% of your income to savings, and the other 30% on what you want.  


Minimalist living is not for everyone, but for those who are committed, it’s a great way to achieve your ideal work/life balance.

The bottom line of minimalist living is that you need to be spending less than you are making and that you are cutting costs wherever possible. Minimalist living can be terrifying sometimes, especially if you have a less-than-stellar month in terms of income, but the freedom is worth the risk.

About author

Fully qualified CISI Investment adviser for 5 year. Managed UK private client portfolios.
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