Most of us strive to be financially independent. While financial freedom may look differe/nt for different individuals, we all want to have multiple options at our hands. And the dream to retire early or not work for money is a common goal for many individuals looking to be financially free.
One of the uses that can help you do that is financial minimalism.
Financial minimalism is commonly considered a philosophy and way of living that can assist in achieving financial independence.
By incorporating financial minimalism, you get the freedom of choice and the mental space to prioritise what is most important to you in life.
Here are some of the ways to lead a life of a financial minimalist.
The Right Attitude
The thing that always comes first when talking about money is the ‘right money mindset or the right attitude.’
Having the right attitude or mindset is the number one step to make it easier to succeed in your quest for financial simplicity.
It would help if you were motivated to achieve your objectives with an eye on the eventual goal of financial independence and potentially early retirement.
We know that consumerism’s pre-existing concept causes us far more harm than good and is the primary driver of excessive spending.
Spending less, breaking free from societal influences and reclaiming control of your finances is an empowering feeling. It can be challenging, but it is a highly gratifying process.
The second step is to be financially aware of your situation.
Your capacity to handle your money is undoubtedly an important indicator when it comes to money management. Tracking your money and keeping track of your expenditures can help you determine if you’re overspending on your ‘wants’ or if your ‘needs’ are being met.
Moreover, it is essential to keep tabs on the debt situation.
One of the fundamental concepts of financial minimalism is accepting responsibility for your own decisions and taking the proper steps to correct the situation.
Make a Budget & Follow it
It is crucial to make a budget and give every rupee a place to lead a minimalist financial life. You can do that if you are aware of your financial situation.
The first step is to recognise and differentiate between your needs and wants. Needs are expenses that we can’t postpone. For instance, rent, transportation costs, utility bills, insurance premiums and loan EMIs constitute needs. Anything else that you can quickly shift to the next month is a want.
After you meet your needs, the next step should be to keep money aside for investing purposes. You can save the remaining amount for any emergencies.
Having financial freedom is one of the main reasons behind the adoption of financial minimalism. However, to take care of our livelihood needs, we need to arrange our finances so that our assets and investments can support our lifestyle even if we quit working.
Living frugally and saving and investing a large portion of our earnings in asset classes that can generate income are some of the ways that can help us do that.
This might be anything from rental properties to stock options that generate dividends. Investing in mutual funds consistently through the Systematic Investment Plan (SIP) can also help build a corpus and withdraw the required requirements regularly.
Diversifying your investment portfolio can help you reduce your dependence on a single investment option.
Many people around the globe have adopted minimalism as a way of life. It helps to bring clarity and focus to your life. Moreover, financial minimalism can also be a way to achieve financial independence.
In this article, we have talked about four ways to guide your path to financial independence through financial minimalism.
This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.