How Financial Minimalism can help you
You are here:
In today’s generation, the message that is being shoved into us is ‘Spend’. This makes it hard to save money for our future. And even though you may be planning to save and invest money, but financial products are plenty and everything sounds outlandish. It is something that we mortals won’t be able to understand. This is an impediment to our desire to save and in our road to financial freedom.
This is where financial minimalism can help you. Through financial minimalism you can focus on few important areas of personal finance. Minimalism is a practise where one revaluates what they need, what are the things that bring them joy and what do they actually want.
Finance should not be hard and how by embracing financial minimalism, you can cut the clutter and focus on the important things.
A minimalist personal finance system comprises of three parts:
Budget is the first step in this process. Do you always scratch your head at the end of the month and try to figure to where all the money in your savings account went?
Budgeting allows you to create a monthly plan for your money. It will ensure that you will have money for the important things. Having a budget and following it will also help you to get out of debt. Budgeting may seem like a huge task but it is not. If you are new to budgeting, the 50-30-20 rule can be a great starting point. According to this theory, 50% of your post tax income should go towards your needs, 30% for your wants and 20% of the income needs to be saved for your future goals.
Read: The Budget Rule 20-30-50
An expense tracker goes a long way in tracking your expenses. Keeping a track of the expenses and knowing the areas where you spend the maximum expenses can dramatically increase your financial wellbeing. Having an expense manager app is one of the easiest ways to track your spending areas. All you need to do is link your savings bank accounts with the app and let it do all the work. It will extract all the expenses that are taking place through online banking and debit card transactions, and beautifully segregates into different components such as utilities, dining out etc.
You can also set a budget in these apps which will warn you if you’re going to exceed your budget.
Read: How expense manager apps can help to manage your finances
The third and the most important part is automatizing your saving. The earlier mentioned 20% of the income should be kept for saving and investing for our future needs. The easiest way to do so is by automatizing your saving. It doesn’t depend whether it is Rs.2,000 or 20,000. Once the 20% of your income is automatically debited from your savings account, you will learn to live within the 80%. In this way, you won’t be able to spend money on useless things.
The most popular way to automatize your investment is by setting up a systematic investment plans(SIP) in mutual funds. However, if you don’t understand mutual funds, you can easily open an recurring deposit(RD) through your bank account. You can set the monthly instalment amount and the tenure. In this way, every month, the monthly amount will be debited from your savings bank account.
Here, we see that it was quite simple to manage your finances. Taking control of your finances should never be complicated. Take a minimalist approach for your finances and achieve your short term and long term goals.
Tags: Budget, expense tracker apps, automatise, automatic investment