Minimalism and financial independence, what’s the difference? If you are like me then maybe you have wondered if the two complement each other. After all, don’t they both share similar values of self-reliance? I have embraced both into my life and I have done quite a bit of research to determine if minimalism helps financial independence and vice versa.
Yes, minimalism does help financial independence and vice versa because both share so many similarities in their school of thought.
While both concepts share many things in common, they are not exclusive to each other. You must know what both concepts represent individually, only then can you see why they can go together well and help each other effortlessly. Once you understand where they are different and where they are similar, you can begin to develop a sense of how each one can be a compliment. Living with a minimalist mindset almost automatically makes you buy less stuff, which can be very helpful for achieving financial independence. Applying minimalist tactics to your personal finances can ease your mind and create a simple short path to financial independence.
Jump Ahead To:
What Is Minimalism?
Minimalism can be said to be a lot of things (which kind of goes against the point of being minimal). The definition should be simple to unravel, and there are certainly more qualified people to define it than I. Yet it can mean something a little different to each and every one of us. These are some of the most important points I believe define minimalism:
Minimalism is about being free from possession and greed. Not completely free from all possessions, but from the overreaching of owning as many things as possible. Of course, minimalism has much more to do with just physical possessions, but they do share a large part of it at least in my eyes. It is not so much as being free from the physical items themselves as it is being free from the urgency to call them yours and acquire so many of them.
In a word, minimalism is simplicity. Simplicity usually entails a free and clear mind as well. Freeing your mind is the biggest proponent of minimalism, and in doing so it allows you to focus on the things that truly matter to you and the things that actually make you happy. It is finding enjoyment in the small things in life that minimalism allows us to do. Having so much space filled in your head can clutter your mind and lead to unhappiness.
Another smaller element that goes along with minimalism is that it truly is counter-culture. Our culture today is focused on consumerism. By default minimalism is anti-consumerism. There is however no quantifiable measure to minimalism. Whereas we can quantify financial independence, we cannot quantify minimalism. It is more of an idea that can be taken on and applied to life slightly differently by the individual involved.
What Is Financial Independence?
Financial independence is being able to live your life without having to rely on work income. To be financially independent, one simply needs to have enough assets to support their spending pretty much indefinitely for the rest of their lives. It is a modern-day self-reliance method. Although many different people have many different reasons and beliefs on why they want to achieve financial independence, it is completely quantifyable. It is quantifyable based on the 4% safe withdrawal rule that states that if you can spend 4% or less of your assets per year then your assets should last you for life if they are properly invested.
So defining financial independence is much easier than defining minimalism, but both have very deep meanings behind them. The ideals commonly followed in both can be remarkably similar. Simply put, both concepts seek to be freeing in some way for the follower. Financial independence seeks to free your time by eliminating the need to work and rely on income generated through work.
Minimalism And Financial Independence Similarities / Differences
Similarity: Both Are Freeing
Minimalism seeks to free your mind by adopting concepts to clear your mind and simplify your life. Simplifying your possessions is just one of the many things associated with minimalism that can free your mind. Financial independence seeks to free your time by accumulating enough wealth to support your spending. Doing so gives you almost complete control over your time and what you do with it. Imagine combining both concepts and having a free mind and near unlimited free time.
Difference: Minimal Doesn’t Always Equal Frugal
Although you could always utilize minimalism in a frugal way, the minimalism concept could be used in just the opposite fashion. There are many minimalist designed buildings, furniture, and decor that have ultra-high price points simply because they can apply to modern tastes. You can be a high spender that is not at all concerned with becoming financially independent and still follow minimalist ideas.
Similarity: They Are Both Counter-Cultural
Going against what is normal is often one of the best things you can do for yourself. After all, if you take a look at what kind of life most people are living, and I mean really take a look at it, you will see that its not all that great. Sure it can be much worse, that is true, but guess what? It can be much better too. These two concepts go against what our culture has become. Financial independence is concerned with a high level of investing, which if you look at today’s statistics, people aren’t saving or investing very much of their money at all, it is being spent just as fast as it is being earned. Minimalism goes against consumerism in our culture by finding happiness without the strong desire for accumulation. If you are a follower of either of these two approaches to life then you are not normal, which is a good thing.
Difference: Financial Independence Doesn’t Always Mean Less Stuff
While it is much easier to achieve financial independence when you are very conscious of what you spend. The scales of financial independence can be obtained at super high levels of wealth. You can become financially independent while spending $100,000 per year and owning many possessions and consistently acquiring new things. This lifestyle of accumulation and unlimited wants would go against minimalism, but not necessarily financial independence because at its core, financial independence is concerned with numbers and there are so many paths that you can take to get to that number. Minimalism is just one path that could speed up your journey.
Similarity: Both Require Deep Thought Of Actions
A lot of actions taken today are based on impulses. Impulse is the enemy of both financial independence and minimalism. Impulse requires little thought and reflection. It is a natural human tendency to act on impulse, but we have come a long way and most daily interactions we experience today are better left to being thought over. These two concepts try to look beyond our natural tendencies and to question them.
A Minimalist Mindset Makes You Buy Less Stuff
Wanting less stuff makes you buy less stuff which leads to spending less, who would have thought? Adopting minimalism helps financial independence because it helps you spend less money. Buying stuff that doesn’t really make you happy can be very costly for financial independence. This is probably the most obvious benefit for minimalism being involved in your path to financial independence, but it doesn’t stop there. Applying minimalism to all of your personal finances can make the process so much easier.
Applying Minimalist Tactics To Your Finances
Now we know that minimalism seeks to free our mind by keeping things simple. We can apply that simplicity to our personal finances and reap the rewards even further. Here are a few suggestions that I personally use in my own finances that I have taken from minimalism.
Put Everything On Autopilot
Automation can make our lives so much easier. Automating our finances is one of the easiest things we can do with today’s technology. Make everything happen behind the scenes as much as possible. First thing you should do is have all of your investments and savings come out automatically and go to their respective accounts on a set day of the month. Next, have all of your bills automatically come out or get charged to your cards. Then you can set up automatic payments to your credit cards if you use them.
I personally have everything charged to my credit cards and then I have the credit cards automatically paid off in full at the end of the month. I also put all of my investments and savings to come out on the same day, usually towards the end of the month. I prefer it that way because it is a wave of transactions at one point in time coming from my checking account. I can monitor it and adjust if I need to, but it is all done on its own.
Develop A Simple Investment Plan
Simplifying your investments can make investing a lot more enjoyable. After all, the simplest investment plans are often the ones with a good balance of risk and reward. Personally, I stick to index funds for my investment needs. The index funds offer great diversification, low fees, and its easy to get started and continually invest in them. You also do not need that many different funds to be adequately diversified. The 3 fund portfolio is a very popular and successful model for index fund investing that comprises of U.S. Stock, Foreign Stock, and Bonds. Investments can also be put on autopilot like stated before.
Have Fewer Financial Accounts
This is essential in making your personal finances as easy as possible. The fewer accounts you have to deal with, the easier to manage it all is. Sometimes it’s not technically optimal to have as few accounts as possible, but what the simplicity will bring is a greater return than having a complicated strategy of excess accounts. This minimalist concept applies to bank accounts, brokerage, accounts, bank cards, and credits cards, etc. Doing this has certainly freed me from lots of headache and worries, and it will not hold you back.
Make Fewer Transactions
Since you won’t be buying as much stuff following the minimalist way, you should have fewer transactions. Additionally, thinking about your purchases and not acting on impulses should save you from having too many transactions. You can better plan to make fewer trips even for the things that do bring you to joy, and as a result, you should have fewer transactions to look over each month. That makes money management easy, especially on the scale of financial independence.
Conclusion
So there you have it, minimalism is helpful in your path to financial independence mostly because you can apply its way of thinking to your personal finances and make the journey so much easier. Minimalism is a concept that has no quantifyable meaning, and its true meaning can vary person to person. Financial independence is quantifyable and while the reasons we seek it can vary person to person, it does hold a true meaning of modern self-reliance. Knowing the similarities and differences between the two can help you decide if you should follow minimalism on your path to financial independence.