Financial debt and minimalism

A little backstory

Like a lot of people my age, I am all too familiar with credit card debt. Living in a consumer driven culture, we are constantly bombarded with ads for the next phone, a nicer car, or that new home that will make our lives so much better. It is really hard to get away from the ‘rat race’, but with the right tools we can be successful. Enter Minimalism.

I learned about Minimalism the same way a lot of people did. My house was filled with stuff I didn’t need, and I had a mountain of credit card and personal loan debt. After spending what felt like an eternity reading about debt consolidation programs, guides to how to shuffle debt around, and a slew of other ‘strategies’, I was exhausted.

Then one night while browsing Netflix, I discovered ‘The minimalists’ documentary. After giving it a watch, I was fascinated, so I started reading all I could on the topic. It seemed like the people who followed this were able to reach their goals in a few years time. The process seems simple enough. By being intentional with our spending, we can free up time and money to focus on what’s important.


The tools I use

I know you have heard these words before, but I will say it again. For this to work, you MUST have a budget. My moment of awakening to just how screwed I was started when I wrote down a realistic budget. I use the words realistic budget, because just any budget won’t do. It has to be tailored to you, and will only work if you can stick to it. If you simply pick a random boilerplate budget, your chances of success are very low. You should write down all the money going out versus coming in, and then figure out where you have money left to spend toward the debt you owe.

Debt snowball

If I could recommend any process to help, I highly recommend the debt snowball method.

https://www.ramseysolutions.com/debt/how-the-debt-snowball-method-works

To sum this up, you essentially do the following:

  • List all debts from smallest to largest
  • Pay the minimum payment on every debt, except the smallest debt
  • Pay as much as possible on the smallest debt
  • Repeat this until all your debts are paid off

Tools – Digital

  • Credit Karma
  • Simplifi by Quicken
  • My Banks app

Tools – Physical

  • A notebook & pen

For the digital tools, Credit Karma is the tool I use the least, but only because it has to do with my credit score. I check it once a month, just to verify nothing malicious has happened and my credit score is healthy. Simplifi is an app I use to keep my bills in line, and it helps me visually see what bills are coming up, as well as sources of income. It gives me a nice breakdown, and is presented in various graphs and charts (What can I say, I am a data nerd), and this helps me stay in the know. Lastly, I check my banks app daily to make sure I know what is going on with my checking & savings account. All 3 of these services have mobile apps and web apps, so they’re usable on any device.

For the physical tools, I use a notebook to write things down so I don’t forget. By writing down any notes and getting my thoughts out of my head and onto the paper, this helps me move closer to my goals.

The tools I use make my life easy, which is exactly how I designed it to work. I don’t have to adjust spreadsheets, or constantly update things. As my finances have changes, I have used different tools that better meet my needs.


A Simple Budget

My budget is categorized in just 4 categories. I keep it simple so it is easy to follow.

  1. Home
  2. Wants
  3. Needs
  4. Auto

I keep this simple, because I have found success in fewer categories. “Home” is for my rent, my utilities, and my insurance. “Wants” is for things like my streaming services, books, and personal items. “Needs” are for groceries, personal care products, and any bills that I must pay. “Auto” covers gas and auto insurance.

I recommend going through your bank and categorizing the recurring items into whatever system you set up. This will make it easy to track your spending. I have learned that banks typically use a wide range of categories to organize your account, which can be a pain to sift through.


The Magic Formula

This is kind of misleading, but there is no magic formula. Every finance blogger or guru will tell you how to get from point A to point B, but they are not you. They do not know your situation, nor do they know your habits. This is where you have to sit down and do the hard work.

Take out a sheet of paper. Write down what you spend, what you can reasonably allocate toward your goals, and set aside some money to enjoy the ride. If you want something to use as a template, utilize the 50/30/20 rule. Spend 50% of your budget on needs (rent, car payment, food, etc.), 30% on your wants (eating out, buying clothing, seeing a movie, etc.), and the last 20% goes toward your savings account. These numbers can be adjusted as you see fit, because this process is about you and what you are able to do.


Final thoughts

As you have read, I strive to keep things as simple and minimal as possible. I am sure my system will be tweaked again soon, but for the time being this is how I handle my finances. While I am far from a financial expert, I thought I would share what has worked for me. If you have any feedback or comments, don’t hesitate to reach out!

The Author: Jeremy Grice. If you’d like to follow me, here are my Twitter and GitHub accounts.

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