Talking about Finances this week as part of the 2014 Clutter Cleanse.
One of the tougher pills to swallow when you purge your home is all the things you bought that you didn’t really need or use. Things that you spent money on. Things that you worked hard to make money to buy.
When a bag of items heads to Goodwill and you can calculate that you worked four eight hour days to pay for everything in that bag… it’s sickening.
First, don’t despair. As I have said before, the money was already gone. It was very helpful for me to remind myself of that, sometimes daily, when I did our big home purge in the fall of 2010.
Second, use the harsh reality of your poor purchases to help you reshape your financial habits. With fresh eyes for what you really need and use, for what really brings you joy, you’ll have built-in momentum to go minimalist with your finances.
The best strategies are simple and easy to implement.
Know Where Your Money Goes
You could be like us and enter every expense and bill into You Need a Budget. We’ve tracked spending for over four years now and YNAB as it is called is our current financial tracking app. If you want a review of YNAB check out this post.
Or you could make a quick note at the end of the month on where all your money went from receipts, bank statements and credit card statements.
It doesn’t matter what route you take to get there but you must, must know where your money goes every month if you want to have simpler finances. One of the easiest ways I slipped into more debt was from never really taking stock of what my actual bills were and what I was spending each month. Keeping yourself in the dark about your own finances is like avoiding standing on the scale. In this case, ignorance isn’t bliss.
Tip: if you try one tracking tactic and fail at it, do not give up. I went through at least a half dozen tracking systems and twice as many false starts with them, before I not only found a system that works for me, but made a habit of tracking.
Live Below Your Means
So so simple and yet, so many of us don’t do it.
Hopefully you’re smarter than me and embrace this simple and powerful concept early in life. I was 32 before I got it. Thirty-two may seem late or like I’ve missed the boat but it’s never too late to start living on less than your pay check and available credit.
This works. Really. It’s not always easy but when you get it right and make a habit of it, it gets easier. It’s automatic. When a whim or an opportunity comes up that you can’t pay for in cash you don’t justify a splurge – you decide if you’ll still want it in the months it will take to save for it.
What about those unexpected bills? When you’re living below your means you can save up an Emergency Fund. This is critical for the expenses you can’t plan for like a root canal or car repairs.
That’s the biggest thing I’ve learned about financial health in our minimalist journey: know what you spend and live below your means. Very simple and hopefully achievable for most of you. I’m obviously not a financial planner or even a financial blogger but if you want more on this subject I really enjoy Cait’s Mindful Budgeting series.
Note: there are families out there that legitimately can’t get their needs – food, clothing, shelter – met on their current income. I know about that scenario because I grew up in a large single-parent family and we struggled to pay basic bills.
If that’s your situation I know that minimalism might be able to help you rethink some areas of spending, but you’re probably already living where the rubber meets the road as they say. There isn’t any fat to cut or meals out not to buy or new cars to sell and replace with older cheaper models or preschool Mandarin lessons to opt out of.
Sites like Penniless Parenting, Money Saving Mom and The Frugal Girl can give you some ideas for stretching your dollars but you may already be doing all those things. All I can say is, solider on friend. Keep going and I hope your work or life scenario improves soon.
As you know I’m already in this game. I have an old filofax with 7 years of expenses tracked and still going strong! However there were years when, as a single parent, I could not cover basic expenses and at times I thought I’d lose my home or at least have to sell and move to some dump far away from my friends and support system. I got through by finding extra money making ventures. E.g. I rented out one bedroom to single women (a student or tourist) for short periods of time. I looked after someone’s holiday flat while they weren’t in the country. A friend of mine takes another child home from school with her child and looks after them both until the other parent finishes work. Eventually I found enough work to get us through the month if we live very frugally and I was able to let those other ventures go as they were lifesavers but they didn’t make us happy and were quite inconvenient at times.
It’s comforting to know that you tried and failed to track your spending a few times before finding the right app. I’ll have to check out YNAB… I’ve tried to track spending before and it’s always been too much of a hassle! Even though I *think* I rarely spend money, I still think it would be very, very helpful to see how the spending distributes over various categories throughout the year. I’m sure there are ways I can cut down. Thank you, this post was very helpful!