On financial minimalism

The idea of minimalistic finance is rather intriguing, and it’s about creating a system about your finances that’s simple, stress-free and helps you prioritise for your financial goals. Here’s my take.

Financial goals

Financial goals are milestones in your life that involves money. You might be surprised that many life events have financial implications which can add unnecessary stress. As you get married, have children, buy a public housing, save for retirement, the whole adulting part involves money.

Some of us spend 10 hours a day at work, working hard and exchanging time for money. Others who might be younger spend even longer grinding or burning midnight oil to study hard for exams, in hope for a better future with the hopes of earning more money.

If you want to escape from your 9-to-5 job or unreasonable boss, you’d also need money. If you want to start your own business, you’d also need money.

By now, it should be clear that money and finances are an important part of everyone’s lives, regardless whether you like it or not. Schools don’t teach you much about money – you learn about it through experience.

You set your goals

While everyone needs to be concerned about money, the good thing is that everyone’s financial goals can be different – which impacts how much you are concerned about money.

For example, person A wants to start a cafe business with her boyfriend, sell coffee, cakes and tarts in the heartlands and hire a team to follow her dreams. That might be a life goal, but it’s also a financial goal. The cost? Maybe $150K capital and an annual run rate of $100K.

Person B might not have such dreams. Instead, he wants to retire and flexi-work from the beach in Bali and have cheap massages every day. The cost? Maybe $20K per year to sustain this lifestyle.

Obviously person A has higher levels of financial stress than person B. But both person A and person B worry about money to follow their dreams.

Financial minimalism

Because everyone’s goals are different, you need to find a system that works for you, and it’s your responsibility to take ownership of your finances.

It’s important to be accountable of your finances because nobody cares more about your money than you do. You are the one that worked hard. Nobody else knows the sacrifices you made.

Financial minimalism is about finding what matters to you, while reducing clutter in other areas. It’s not about spending less money, but spending more on less things that matter.

How do I get started with financial minimalism

I will write about this in a separate post so that this post doesn’t get too long.

The first step is to understand trade offs. This means whatever you are buying today with money you have, is a trade off for something you could have in the future.

The second step is to automate your money. Automation reduces complexity, creates default rules and keeps your life less stressful. I wrote about it previously.

The third step is to be empowered. Take control of your finances, learn more about it, understand what you can do with it, and soon you’ll become proficient in it. The earlier you start, the faster you pick up, the more experience you have with it, and the less mistakes you make in the future.

Finally, live your life. You want to be a free person, living the life you want to live. This means less stress, more energy, more confidence in yourself to bring you closer to where you want to be.

The execution is a bit harder, but the mindset change starts today.

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