This week we’re talking finances. Minimalist finances. Money. How we use it for good and how we sometimes use it for bad. How we feel about ourselves when we think about our financial life. And if we’re in debt, the little sigh we let out when we open our student loan statement or why after getting news of an unexpected bill we order takeout instead of using up what’s in the fridge.
What are Minimalist Finances?
Honestly, I don’t know. But I do know that changing how much stuff we have and how much stuff we buy, and searching for more simplicity in our lives, has radically changed our financial life and how we view money. This change has lead to getting out of a considerable amount of debt and finally feeling some peace about where our money goes each month.
If you’ve struggled to stick to a budget or feel your finances are as cluttered and confusing as that giant box of family photos you grabbed from your parent’s house, I hope you’ll stick around this week. We’ll hash out ideas for spending less and look at ways to get out of debt and take control of our finances. I’ll share ideas from experts, our financial story and the many things we tried before we found success.
People would rather tell you about their most embarrassing moment or have semi-nude photos of themselves pop up on Facebook than talk about money. And not talking about these things is one of the reasons so many of us let things get out of hand.
If you’re in debt or feel like you’ll never be able to stick to a budget first know this: YOU ARE NOT ALONE.
So here’s my hall of shame for finances:
I once got a credit card because a picture of my rowing team was on it. The APR was ridiculous but I said I was never going to use. Guess what? I maxed it out.
From 17 to 33 I always carried some form of non-mortgage debt. I thought this was pretty normal.
Even after committing to getting out of debt we took a very expensive last-minute vacation. We were not perfect then and we aren’t perfect now.
Some of our minimalist finances wins:
My husband I paid off over $80,000 of non-mortgage debt in around two years. We used a lot of minimalist concepts to become debt free, it wasn’t easy and we got a couple of big breaks that drastically helped us get the number down quickly.
We’ve tracked 95% of our spending to the penny for the last four and a half years.
We haven’t carried a credit card balance in four years.
The biggest win: communicating frequently and without judgement about spending and our financial choices has been really good for our marriage. That hasn’t always been the case but today we’re on the same page about where our money goes and why.
UPDATE: It’s 2019 and we started this minimalist finance journey almost nine years ago. We’ve added kids, moved countries and homes a few times and managed to do it all without going back into debt. Minimalism, the realization that a lot of the stuff we spent money on didn’t make us any happier, has continued to be the back bone of how we decide where and when to spend money.
We’re not perfect. But I really see that minimalism has taken us closer to having our spending align with our values. We give more to charity, even when our income is lower than usual, and we make big and small decisions based on what is really important to us. It means that we don’t spend a lot of money on things like fashion (not important to us) or newer and cooler cars. Our home is nice but certainly not magazine worthy. We have splurged on trips with the kids, experiences like the whole family learning to ski and extra support for our child that has a disability.
We moved and bought a modest house. Financially we could have bought a lot more house, a pool, a beautiful kitchen, but we knew that the cost was higher than the value we would get from it. Instead, we have put money towards saving for retirement and the kid’s education. And working less. That was a huge part of our why when we decided to move to a small town. We wanted more time for ourselves and our kids.
We still only have mortgage debt. We still track all of our spending and pay off our credit card bills each month. Minimalist finances have helped us become better financial stewards.
A big question for you now: do your finances feel like your basement/attic/hall closet? Is there a correlation between the clutter in your home and the clutter in your financial life? There certainly was for us and I am interested to see if others have experienced the same thing.
Oh, and if you’re not comfortable talking about finances right now feel free to file these posts away for another time. It’s a big subject with a lot of emotion tied to it. Take a Clutter Cleanse rest week or pick away at some other areas of your home.
Thanks everyone for sharing your stories so openly and authentically. I also live in a high cost city and am thankful as a Canadian not to have medical costs and high student debt, but daycare and housing costs alone seem pretty crazy even with two incomes. I’ve really appreciated the tips, and even more so the mindset that less can be more.
One thing that can be helpful for people who are carrying higher cost debt is to look into lower-cost options to refinance – at least that way more of your payments are going to pay off the principal and not interest. In the US, companies like Lending Club, Prosper and SoFi (for student loans) have helped lots of people pay off their debt faster. Full disclosure: I wanted to help make the same kind of option available to Canadians, and am part of a company called Borrowell that gives Canadians the option to pay off their credit card debt with lower-interest loans.
You don’t have to use an online company (though at least they can give you a quote quickly) – your bank may be able to help you out with a loan or line of credit – but people with good credit should NOT be paying 19.9% interest on credit card debt.
I love all of this advice, but at the same time, I wish you didn’t give people the option to skip this step. Getting control of your finances is so crucial to success in minimalism. I was 23 when I came to terms with the fact that I didn’t know where my money was going, and I was just racking up debt. Six years of budgetting, paying off debts, and saving has given me so much confidence. Coming to terms with your bad habits can be really painful. I recognize that even with years of good personal finance practices, there is still room for me to improve. Which is why I’ve embarked on a 90-Day Shopping Ban. I’ve got my finances under control, and I’m saying goodbye to materialism! I wish all of your readers the best of luck with this week’s challenge! Also, I’ve been using Mint for years to track my finances, and I love it!
Lauren – I have an unusual amount of readers that easily live below their means. They’ve never been in debt and living a frugal simple lifestyle comes naturally to them. Many of them don’t track any spending and are able to easily live well below their means and save a lot of their income. I wish it came that easy to me and others!!
Lovely to hear that you got your finances under control at such a young age.
Thanks for the feedback. I did not consider that would be the case before I made my comment.
I am trying really hard to get out of debt, but I’m a divorce single mom who has to pay everything all by myself. Ex never works so no help from him. I am a minimalist and do not have even a mortgage, but my rent is high. I want to find a way to live as small as possible to save more from the expensive rent. It’s just hard with 3 teenage boys. I cannot stand debt. I read Dave Ramsey’s book and trying to use his snowball method.
Christy – I can only imagine how hard your situation is. My mom was a single parent with six kids – almost no support from our dad. It was such a struggle. Things really didn’t get better for my mom until most of us had left home. Dave Ramsey is wonderful and I hope you have great success with his method (it’s what we used to get out of debt too).
Our debt is student loans for college. A third of our income each month goes to paying them back ..and its still going to take a decade more (unless one of us gets a big pay raise!)
At least for my generation (and from the US, not sure about other countries) it *is* very common to enter your 20s with thousands in debt…because of tuition bills.
Thankfully we are making progress on paying them back, and though we have a credit card, we pay the balance in full each month (we really really want to have good credit!!)
We manage to live within our means (with crushing student loans on our shoulders…) But reading posts like this is a good reminder and refresher. We gotta keep it up!
I have come to realize that I will never be out of debt. It’s frustrating. My husband and I are both lawyers, and I own my own practice. My income isn’t great, but he’s is ok for a small town. We owe more than $130,000 in student loan debt (and one we pay only interest on so it keeps going up, up, up). We also have some credit card debt, maybe around $10,000 total (maybe a little less). But we cannot get ahead. We pay $1000 a month in child care. We pay $2000 a month in student loans. We pay $1000 a month on health care. We have tons of medical debt from the years before Obamacare when we didn’t have good insurance, and from this past year when our son was hospitalized twice. Some months we are living paycheck to paycheck and eating beans. We are minimalists and live in a 900 square foot house with four of us. It’s terrible. This year, my husband got a $200/month raise, and since our insurance and student loans were also tied to income, both of those went up $200 per month ($400 total). We keep going backwards.
Christie, have faith! You and your family will get out of debt! It may take years, but as long as you stay focused, you will eventually pay off the debt. Read “The Total Money Makeover” by Dave Ramsay. It will teach you that there is no such thing as a hopeless situation. I wish you the best of luck!
Christie – I feel for you. I live in a very HCOL city and hear all the time from people in well paying jobs – doctors, lawyers – that they are struggling because of student loan debt. Have you explored perhaps moving for higher paying jobs? Higher wages are usually tied to an increase in COL. Do you have any options to move closer to, or even in with, family and have them watch your children. I’m so sorry about your medical bills. Being Canadian I am always shocked and saddened to hear of families struggling with medical bills.
Have you considered doing something radical like moving overseas to work and save money? We were able to save a lot living overseas. We lived in a tax haven in the UK, free medical and very low taxes (I know Americans are taxed worldwide but even our American friends were able to save quite a bit). Good luck to you and my fingers are crossed that your situation improves. – Rachel
We don’t have any debt but the mortgage, but that is rather large, still.
As from Sept our firstborn will be going to a private secondary school, we will have to look at our finances even closer. Got the Dave Ramsey book to help us w it. 🙂
We don’t have anything but the mortgage, but that is rather large, still.
As from Sept our firstborn will be going to a private secondary school, we will have too look at our finances even closer. Got the Dave Ramsey book to help us w it. 🙂
For those looking for a software to help track finances, I highly recommend YNAB: http://www.youneedabudget.com/
It has making tracking and budgeting so much easier for me.
We’ve been using YNAB for six months and like it. My only hesitation to recommend it right now is that they have moved to a new subscription based pay model. We haven’t upgraded to this new model because we just bought YNAB – they really sprang this change in cost on their customers without warning and I’ve heard a lot of customers are unhappy with this. Me included.
Have you switched to the new YNAB? We’re still using the old program but at some point they will discontinue support for it.
I just started using the new YNAB last month, and I LOVE IT. It has really made me ‘fess up to some of my impulse spending, as well as being more realistic about our monthly expenses (oh yes, I do spend THAT much money every month on pricey cat food for our older, barf-prone furball).
The only thing that frustrates me is that they haven’t updated some of the training materials to nYNAB, so the learning curve seemed pretty steep. I’ve had to turn to Google and other bloggers to figure out things like how to add credit card accounts (I think I’ve figured it out, but it would be great if there were an official updated resource I could check my work against).
A number of bloggers have been running sponsored posts about it recently, so I was able to score an additional 3 months free (I had 1 week left in my 34-day free trial), so keep your eye out for those.
What is the best “Get out of debt” program?
I’ve heard so many great things about Dave Ramsey’s program. We followed something similar to help us get out of debt.
After making a ROYAL mess of our finances when we were first married, we did the Dave Ramsey program…it took a couple of years to get to the point of only having mortgage debt, but man was it worth it 🙂 It is not always easy living counter culturally, but being free from the burden of unpaid bills and debt is awesome.
My best encouragement to those just getting started (I do vividly remember the feeling of “WE WILL NEVER BE OUT OF DEBT” when we first added up our debt and it was over $140,000 WITHOUT our mortgage): Just get started! Find a plan that works for you and just get started!
Thanks for another Dave Ramsey vote 🙂 I’ve heard so many great things over the year. Our debt strategy was similar to what he recommends – gazelle like intensity.
Congratulations on getting out of non-mortgage debt!
I did the very time consuming but very revealing task of tracking all our spending retroactively. I went through every credit card, bank statement, etc., and tracked pretty much every $ spent for the previous year. I used those numbers to make a realistic budget. It helped me remember those weird tiny expenses that exist. It’s been life changing. We only just started into month 4 but have an automatic deposit into savings now and understand where we are at. It’s great. Hard work, but great.
🙂 Love reading this. Go you! That is a lot of work to track everything from a previous year. Gah! My mind is boggled thinking about it.
Tracking is worth it. Whenever someone tells me they don’t know where the money goes and they’re frustrated by that – I tell them to start tracking. Numbers don’t lie. SO many of us underestimate those small expenses and they add up.
I have a mortgage but apart from that am debt free. My problem is not earning enough to finish the month. So my financial challenge is to reduce the monthly spending to fit my income.