Carrying significant student debt is a terrible way to start adult life. The financial burden is self-explanatory, and the psychological burden can just as easily wear you down.
For me, it was the catalyst to adopt a minimalist lifestyle that eliminated expensive distractions. And as that more purposeful and focused way of living became ingrained, it felt like second nature to do what I call “minimalist budgeting.”
Rather than elaborate projections, minimalist budgeting is about simple steps as much as a simple life. After all, the entire point is to develop frugal but efficient and disciplined habits.
Below is how that played out for my own household. It’s not impressive or even novel in any way, but it worked to tackle major debt, and still works to strengthen our financial footing.
Your experience may vary — in fact, it almost certainly will — but the spirit of self-aware simplicity is what matters most.
Understand that “less” is worth more
“Less is more.”
That’s the most worn-out cliché of all, but it’s the truest.
And it’s also the bedrock assumption of a minimalist lifestyle.
A primary path to less is through conscientious budgeting that reinforces our essential priorities. Our why.
In my experience, the core of minimalist personal finance is simple, or at least it should be.
And budgeting is the core of the core, so to speak. Let’s walk through everything you’ll need to get off to a good start, or to validate your own long-term budget.
Write down essentials, including debt payments and an emergency fund
“Budget” is basically shorthand for “how much I have to spend, can optionally choose to spend, and have to save.”
To that end, the first step is writing down everything you simply cannot do without. We’re talking food and shelter and healthcare, not just Friday-night Netflix (nothing wrong with that!).
By the way, your emergency fund is a necessity. There are no two ways about it. You may not use it today or even this quarter or year, but you will draw on it eventually. Building it up to a reasonable level (perhaps $1000-$2000 for one young adult in North America) will save you from all sorts of hard times and high interest when the unexpected happens. Because, frankly, it will.
My own greatest benefit from this step was realizing how little my family and I really need. Yes, we’re still talking big numbers compared to what much of the world lives on. But compared to the salaries that so many of us grind ourselves into dust for? Not so much.
Write down nice-to-haves
Next up, you’ll write down the things that aren’t necessary, but make life a lot more enjoyable.
A key part of the minimalist approach here is to emphasize experiences and bonding with people. Those are what bring satisfaction and peace of mind, so they belong in the budget when possible.
Even if shopping sprees and splurge purchases are fun for a bit, they don’t bring the sort of lasting value that we’re seeking. I’m not saying never to indulge in them, but to do so rarely, deliberately, and not as a normal part of your budget.
Write down long-term goals
Within reason, this is the place to think big.
Retirement, real estate, college savings, all those very big goals that require years of discipline to reach.
Depending on your lifestyle and local cost of living, it might also include six or twelve months of living expenses. It’s a long-term goal for some but attainable in just a year or two for others.
The tricky part is prioritizing these appropriately when you’re still early in your financial journey. I’d personally place that six- to twelve-month savings buffer ahead of things like retirement, because I value security through short-term tumult more than cash flow decades from now. (To be clear, both are important. It’s just a question of what to focus on now.)
Write down normal spending that doesn’t fit the above…then kiss it goodbye
If it’s not strictly necessary, and it doesn’t add much value to life now, and it doesn’t serve a long-term goal, it’s just not part of the budget.
Hey, nobody promised it’d be easy!
The details here depend greatly on personal values, so I won’t even try to say what’s categorically in and out. Rather, I hope you were clear on your values going into this, and even clearer after writing down the three previous steps.
Now, you’ll simply record whatever you regularly spend on that didn’t belong in those categories.
Congrats, you’ve (probably) found some excess! Next up, we’ll see what to do with it.
Besides/beyond a minimal emergency fund, all else goes to debt
If you’re starting from square one, an emergency fund is the best use of any excess you’ve identified. Likewise, it’s the highest priority for any unexpected money you come into.
Once you’ve built a reasonable emergency fund, all else goes to any remaining debt.
If debt’s so bad, then why tackle the emergency fund first? When we’re unprepared, random life issues can easily force us into even more debt that’s even harder to get out of, which creates a vicious cycle.
However, the second you’ve met the emergency fund minimum, every additional penny must go to defeating debt.
At this point, it’s not rocket science: pay down the highest-interest debt first, and just keep on keepin’ on until your total debt reaches a big, beautiful zero.
Some advocate paying down the smallest debt first (the so-called “snowball” approach), and I wholeheartedly disagree. Seeing quick progress is nice, but ignoring interest rates makes it unnecessarily expensive to reach the exact same goal of zero debt. Unless interest rates are within a fraction of a percentage point of each other,
Plan a frugal celebration when you hit a big milestone
To lay out and actually follow a plan of zero spending outside essentials (emergency fund included) requires a lot of willpower for a long time.
So, when you’ve finally reached a milestone like a sufficient emergency fund for the first time, or all debt gone, or a savings of some multiple of monthly costs, it’s worth a reward.
Naturally, blowing cash on silly things won’t leave you feeling as good as you’d hope. Get creative, but consider treating yourself to some extra leisure time, a fancier-than-usual homemade dinner, or something else to celebrate the small but critical victory. The point isn’t the material value of the reward but the relaxed and (I hope) renewing use of your precious time.
Revisit priorities twice a year
Once a year would suffice, and is indeed more “minimal,” but I like to revisit budget priorities every six months or so. Work, family, friends, health, hobbies, and just about everything else can change greatly in much less than one year.
By reevaluating your essentials + nice-to-haves + excess a couple times each year, it’s easier to make sure your budget — and therefore your actions — reflect changing realities.
I’m not talking about a week-long planning retreat followed by row-by-row spreadsheet auditing. Just a frank reflection on what’s working, what isn’t, and above all, what’s changing.
Monitor it all closely to keep yourself honest
Finally, it’s wise to set up hands-off financial tracking from day one, using a tool like Personal Capital.
In the spirit of simplicity, this takes away the time-consuming steps of browsing your credit card history, looking through bank statements, and so forth. All those things add stress and consume limited time.
And because of the hassle, they make it too easy to neglect the critical process of auditing yourself. Soon, minor deviations from your budget turn into habits, and habits turn into addictions (to paraphrase St. Augustine).
When numbers are ready at a glance, you take away the main excuse for ignoring reality and make it that much easier to stay the course.
If you’ve made it this far, then you’ve noticed the utter lack of silver bullets. And that’s by design. Disciplined simplicity is the key, and there’s no silver bullet for that.
All I can offer are some tips to get started.
When all is said and done, it’s not exactly “minimalist” personal finance that we’re after, but “minimum effective dose” personal finance. In other words, what’s the most efficient way to get over huge hurdles like debt without wearing ourselves out on things with diminishing returns?
You’ll find your own answer, and I hope the plan above will be a useful starting point. It continues to work for me and — contrary to what some would say — I’m not that unusual.