How To Be A Financial Minimalist

What's up you guys? It's Graham here! So this is a term I really want to make more popular and bring more mainstream, and that would be financial minimalism. It's a term I thought of last week while trying to find a catchy title for my video where I went over my philosophies of how I operate my finances, why I spend very little money, and the benefits of having very little financial overhead.

Now, this term is not meant to be confused with minimalism, where you'd imagine someone living in a completely bare apartment and fitting all their belongings in a backpack and sleeping on a mattress without a frame. Listen, I'll be the first to say I'm not a minimalist in the traditional sense. I don't mind having and owning stuff. I don't mind loading up my bookshelves with random trinkets, and I have so many leftover things that I've resorted to stuffing them in shelves because I know I'll use them at some point in the future. I promise, I'm not a hoarder.

To me, financial minimalism is a lot different than the traditional minimalism that a lot of people think of. The way I see it, financial minimalism is all about taking a very simple, uncomplicated, and bare-bones approach to your finances. It's about learning to live on less while still getting the same amount of joy as if you had spent more. By doing that, you can live a more financially flexible lifestyle with less obligation, and that gives you more freedom to pursue what you really want to do. It's all about cutting back on what doesn't matter so you can spend more money on what does; like smashing the like button for the YouTube algorithm.

So with that said, these are the core principles of financial minimalism, exactly how you can reduce your spending, learn to live on less, and how you can lead a more financially independent lifestyle, all without ever feeling like you're missing out on anything.

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First, it's really important to understand that financial minimalism is a lot more than me just saying "don't spend money," even though it also is just as simple as me saying "don't spend money." To me, financial minimalism really supports the notion that it's okay to spend money on something and enjoy yourself as long as that something brings you the equivalent amount of value as what you spent on it, and as long as you couldn't get a better value for that spending elsewhere.

Think of it almost like a dollar-to-fund ratio: how much enjoyment can you get out of every dollar, and where would it be its best use? Much like you would invest your money to get the best return possible and then balance that out with the risk it takes to get the money, the dollar-to-fund ratio is how much enjoyment you'd get from something versus how much that something actually costs. For me, a really high dollar-to-fund ratio is going to an all-you-can-eat sushi buffet in Las Vegas with some friends for $25. I can have a really good meal, spend a few hours with my friends, have a really great time, and that has a really high dollar-to-fund ratio given how much money it costs.

However, if that same meal were to cost $250, that would lower the overall ratio, even though I would get the exact same experience. That's because I could find other better ways to spend $250 that would give me a lot more overall enjoyment for the cost. We also tend to do this on a smaller scale when getting gas for our cars. We'll look at the four corners of an intersection that all sell very similar gas but with varying prices, and usually, one of those gas stations is significantly cheaper than the others, and that's the one we go to since it's pretty much the same experience no matter where you go.

So, you go to the place that saves you a little bit of money. Now I apply that thinking towards everything, and you're soon on your way towards financial minimalism. It's all about maximizing the value that you get when you do spend money and minimizing the experiences that just aren't that important to you.

And that brings us to our first financial minimalism principle: cutting out everything you don't need to spend money on. The basis of this is that the less financial overhead you have, the more profit you have left over. Now, go and apply that through everything, and you'll watch the savings add up pretty much instantaneously. Doing this is fairly easy.

The first thing I would do is use a budget tracking software like Mint.com, PersonalCapital.com, or YouNeedABudget.com to figure out exactly where your money is going. You're going to need to complete the audit and look at your income and spending over the next few months, and from that you're going to place your spending in one of these three categories.

One, you're going to sort through everything you don't need or don't use, and then you're going to cut it out entirely. No. You're going to have a second category of expenses that you can negotiate or shop around for. This might include your health insurance, car insurance, home insurance, or even a mortgage. I've switched insurance companies, IRA finance, mortgages, and I've switched service providers because I found somewhere else that was just cheaper. Doing this has likely saved me over a thousand dollars a month in unnecessary spending, really just for a few hours of work.

Then three, you're going to have a list of your expenses that you could simply just cut back on to save a little bit more money. Maybe you're just spending a little bit too much money on your car, going out to eat, going out for entertainment, drinks, you name it. It's very easy to get carried away. So by seeing your spending and being able to track that over a two-month period, you're going to be able to better budget for those expenses and find other ways to bring that down, and therefore increase the dollar-to-fund ratio.

Now, remember, financial minimalism is not about seeing how much money you could possibly cut down and selling all of your furniture and then going and living in a tent. But it is about recognizing which of your spending habits are really giving the most overall enjoyment of life and cutting back on everything else that's unnecessary and holding you back from reaching that goal.

Like if going to Starbucks every day makes you so unbelievably happy for a few dollars, then by all means, go ahead and do that. But if you have an awakening and you realize that you can get 95 percent of the exact same experience making coffee at home for five percent of the cost, then wait a second, that might be worth cutting back on so you could save the money. Or if going on vacations is what your true passion is, then by all means, go for it! But cut back on everything else that doesn't contribute to that goal and doesn't give you the same level of enjoyment.

Again, the entire point of doing this is just to have more money left over at the end of each month and using that money towards what really matters the most to you.

The second principle, speaking of spending money, is that as a financial minimalist, you should always aim to try to find the best value when you do spend money. I think once you start getting into it, you'll realize that not all spending is created equal. Everything we spend money on has a value to us, and that value is not correlated with how much it costs. The value is relative to exactly how we perceive it.

I know this is a very easy one that I bring up all the time, but it would be coffee for $4.95 at Starbucks. I realize that's probably not a good value for my money, and a much better option is making coffee at home and getting an almost identical product. I've applied this mentality throughout pretty much everything, even with my camera equipment. I bought a used Canon 70D camera off of eBay; it's the camera that I use to film all of my videos on, because I knew I was not going to get the extra $350 worth of value as they were just going and buying a new Canon 80D.

I just figured I would rather have an extra $350 left over that I could spend on something else than have a camera that's pretty much identical to mine with features that I would never really use. So I really challenge you to go through your life and do the same. Start looking for less expensive alternatives, price shopping around for a better value, and really thinking to yourself, "Is this worth it?"

Again, financial minimalism is less about not spending money at all costs and instead about getting you to spend your money where it's best valued and where it's best used. Like if you're really into travel, then by all means, go for it! But also understand that you could get the exact same experience for entirely free by using credit card signup bonuses or redeeming those points for free travel and free hotel. That's the same experience, you're saving money, and you're getting the best value.

When it comes to this, if I'm still on the fence about buying something, I'll usually end up thinking to myself in the long term: over the next year, is this going to matter that I bought it? If it's something I'm gonna buy and then rarely use or get bored of within a week, then chances are, I don't buy it, and instead, I put my money towards something that will matter long term in the future that I will use.

I also think to myself, if someone were to offer me a cash equivalent for this particular item, would I go and take it? Like if you're going shopping and you look at a jacket and someone offers you its value in cash just not to buy it, would you take the money? If not, and you would rather have the jacket than the money, then by all means, go and buy the jacket.

But if you would rather take the money than buy the product, then that means you should not be buying it. It's effectively like you're getting paid just not to buy something, and boom, that is financial minimalism.

Lastly, I always think to myself, is there a way I could get the same item or experience for less money? A perfect example of this would be my Lotus Exige S 240. I've been really into cars, and I wanted a car to take out on the weekends, drive around with, and have fun with. A Lotus Exige gave me the same car experience and enjoyment as a Ferrari would for one-fifth of the cost.

Or traveling to Hawaii for a friend's wedding, I could have spent $900 on round-trip plane tickets, or I could have spent 10 minutes of my time signing up for a credit card, getting the signup bonus, and then booking the entire trip for free just using those points. Same experience, less money, and that's where I choose to divert my resources to.

Again, this is just about realizing where you get the most enjoyment from your spending and figuring out what gives you the best bang for the buck in terms of your overall happiness. Then try to find the best financial value while removing everything else that gets in the way.

The third principle is that it's really important that as a financial minimalist, you learn to live on less despite how much you make, or in other words, live below your means. For me, how much money I make is completely irrelevant to how much money I spend, and the two are not correlated whatsoever.

I set a budget for myself every month, and most of those expenses are automated, and then everything else I make just goes right into a savings account without me even thinking about it. So with this, I highly recommend you set a very strict budget for yourself as though you're earning less money than you actually do, and everything else beyond that is just going to be saved and invested.

I nearly guarantee that if you decide to cut back on your spending by 10% next month, you're gonna find a way to do it, and pretty soon you're not even going to notice that you're spending 10% less than you did the previous month. From there, if you get a bonus at work or you get a promotion or you get a raise, just consider that extra money to save and pretend like it doesn't even exist.

Or if you're watching this and you know you're gonna be completely ignoring all of this advice and spending your money anyway, then I do recommend you at least set up a budget with a set amount that you're gonna be saving every single month, no matter what. And then, as hard as it is for me to say, you could spend the difference. For example, saying that no matter what, you're going to be saving 30% of your income every single month, allowing you to continue building up a nest egg that will support you indefinitely without you needing to work.

From my own experience, after a few months of doing this, you'll very quickly realize that you could just as easily spend less money without even realizing it. You won't worsen your quality of life, and you'll be just as happy spending less money as you were spending more. Once you start seeing this for yourself firsthand, you're going to start to decouple the thoughts that the more money you spend, the happier you're going to be, and you'll want to start saving more money knowing that the more money you save, the more options that's going to give you in the future.

As for all the money you now have leftover, don't just leave it sitting in a bank account; instead, invest it and put it to work. Like I mentioned in my original financial minimalist video, money is not for the purpose of flaunting to show off to other people. It is not meant to fill any deficiencies or voids in your life, and it is not meant to act as a band-aid to cover up anything that you're lacking. Instead, money is for the sole purpose of giving you two things: freedom and options.

The more money you have saved and invested, the more freedom that brings you, plain and simple. You'll have the freedom to go and leave the job you hate, or have the freedom to go and work on the projects you find most fulfilling. Or you could just go AWOL and do nothing, or work on your hobbies all day long. Best of all, you could actually afford to do that because you reduced your spending to only the essentials.

You figured out what gives you the most value for your money, and you have the savings and investments to cover yourself indefinitely by living off of the returns. Then, by going and doing that consistently, you'll start having some options. As weird as it is to say, I've noticed that sometimes just having the option to go and do something gives you just as much joy as actually going and doing that something.

Like just knowing that if I really wanted to, I could pick up and go on a vacation tomorrow makes it just as enjoyable as actually going on that vacation. Or being able to go and buy the car you've always wanted somehow gives you the same enjoyment as actually going and buying it because you know you could if you really wanted to. That type of freedom actually takes the pressure off of ever needing anything, as weird as that is to say.

Options don't even need to be about buying anything either. Maybe you have the option to work somewhere else for a better company that's a better fit, or you have the option to go and live somewhere you've always wanted to live. Or being able to rearrange your own schedule around your day and not your boss's day—things like that are absolutely priceless, and that's the lifestyle that I have always strived towards living.

So unless you go and build up a risk-free business that generates money indefinitely to cover that lifestyle, you're probably gonna have to do it the old-fashioned way: cut back on your expenses, save as much money as you can, and invest that money to build a Banesto to support you financially.

This one is a lot deeper than I intended to go for a video like this, but I felt like this one was really important to cover. Spend some time thinking about what you really want out of life and what is going to make you the most happy. In other words, what are you doing all of this for? I really encourage you to spend a few hours, days, or even weeks thinking about this and really envisioning the type of life you want for yourself.

So if you haven't done this one already, then please go ahead and do it. I want you to think about everything in your life that means the most to you. And I'm not talking about going and buying Gucci outfits because that's cool or going and living in a gigantic mansion as some false sense of accomplishment so you'll feel like you've finally made it. I'm talking about how you want to feel on a daily basis, and what do you want to do day-to-day, what sort of activities do you want to spend your time doing, and what do you need that you're currently lacking, and what type of person do you want to become.

Then, I want you to walk yourself through the perfect day: like what do you want to be doing, where do you want to be living, what time do you want to wake up in the morning or afternoon, like what would keep you busy, and who would you be with? I really want you to spend a lot of time thinking about this, and then from there, I want you to think to yourself, how much is this all going to cost?

So trust me when I say this, but that vision is going to now be your compass and is going to help guide you to actually achieving it. Not only that, but this vision is going to serve as a guide towards how you spend your money because every time you go and spend, you're gonna start thinking to yourself: is this going to get me closer to the goal and the lifestyle I want? If so, then yes, go ahead and spend money on it. And if not, then don't spend money on it, because that's gonna take you further away from getting to what you actually want.

I just know there's not going to be any better motivator out there for you to actually go and do this than if you envision a lifestyle in your head and you start seeing every purchase as either getting you closer to that goal or taking you further away from it.

And lastly, let me just say this: financial minimalism is all about enjoying the most out of life in a way that matters the most to you. For each of us, that will be different, and we each value different experiences and different things. But if you could learn to live on less, cut back on what you don't need, and spend more on what you do, you will set yourself up for a future where you could do whatever you want, whenever you want. I consider that to be the end goal of financial minimalism.

So with that said, you guys, thank you so much for watching. I really appreciate it. As always, if you guys enjoy videos like this, make sure to destroy the like button, subscribe button, and notification bell. Also, feel free to add me on Instagram; I post there pretty much daily. So if you want to follow me there, feel free to follow me there. Also, feel free to add me on my second channel that is called The Graham Stefan Show. I post there every single day I’m not posting here. So if you want to see a brand new video from me every single day, feel free to do that.

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