FINANCIAL MINIMALISM
CREATE A BUDGET THAT GIVES YOU FREEDOM, NOT LIMITATIONS.
YES, I SAID THE B-WORD: BUDGET!
Now don’t let me lose you here. Don't run for the hills. I want you to check your belief that, ‘a budget limits you’ at the door. This is a scarcity mentality that you need to unlearn, stat! Instead, when it comes to budgets, I want you to take on an abundance mentality and see it as something that creates freedom.
But how do you implement financial minimalism into your business? Same way you would for any other types of minimalism.
STEP 1
GET CLEAR ON WHAT IS NECESSARY / WHAT DO YOU LOVE?
STEP 2
DITCH THE REST
STEP 3
FIND THE SIMPLEST WAY TO DO IT
The first thing you need to do it get real on where your money goes! When was the last time you went through where you spend your money?
YOU NEED TO GET INTENTIONAL ABOUT WHERE YOU SPEND YOUR MONEY, JUST AS MUCH AS WHERE YOU SPEND YOUR TIME.
From a young age my parents have put an emphasis on teaching my brother and I how to handle money. Of course, kids being kids, we didn’t take on all their advice from the get go, but when I was ready to be responsible with my money, I had a toolkit to draw from.
Thanks Mum & Dad!
I remember there was one time my brother and I were each put in charge of the weekly grocery shop, with Mum’s modest budget in hand. It was up to us to make sure we got all the items we needed. If we just went walking around the shop without a plan, willy-nilly stuffing things in the trolley, before we knew it the budget would be used up, and we probably wouldn’t have everything we needed.
IT TAUGHT ME NOT ONLY THE IMPORTANCE OF PLANNING AHEAD, BUT ALSO TO LIVE WITHIN YOU MEANS. IT GAVE US A CONTAINER TO WORK WITHIN.
Something I later went on to learn was a little thing called Parkinson’s law, in which is theorized that our demand for a resource increases to meet the supply of it. This is why if you have one hour to finish a task it will take you one hour. If you are given two hours for the same task, it will take you two. Same goes for money; if you have €300 to spend on your weekly shopping you will, but if you only have €20 left in the bank, you will make it stretch. You will always figure out a way to live within your means. A budget is simply a method in which you predetermine those means.
When planning to travel the world, this is a skill allowed me to save over €30,000 on a basic income. When my baby was born and our combined income was halved, it allowed me to live on less that €2000 a month as a family of three in the centre of one and the most expensive cities in The Netherlands and still have a roof over our heads, a car, insurances, fun money, holidays and eat mostly organic.
Each time we nerded out on the numbers, broke it down to find what costs were a necessity, which we loved. We then ditched the rest and built a budget around that. Yup - you read that right. We took into account the things we love. Even on the tightest budget I have ever lived on still allowed me to go out for my morning coffee because a budget is meant to give your boundaries to live within, it is not meant to shackle you into feeling like a pauper.
For each expense that is a necessity or one that you love, determine how much you have to spend each month and as soon as money comes in, it gets split into those expenses. To make life easy we had multiple accounts and automated bank transfers in place.
THE BANK ACCOUNTS I HAD IN PLACE WERE:
Personal account (for all your incoming money)
From here incoming money is split into:
Expenses account (for fixed expenses: mortgage, electricity, insurance)
Groceries account (for all food and household purchases)
Daughter’s account (to save for her future)
Multiple savings accounts (one for each saving goal)
What’s left over, you can do with however you see fit. Treat yo’self!
Now my personal budget was already on point, but when I went from a salary job to being my own boss, there were so many things that I hadn’t dealt with before. Like, how much do I pay myself, how much tax should I be keeping aside and how many clients do I need to make sure I have enough? So when I was introduced to Profit First it felt like a match made in heaven. It’s a cash flow management system in which you predetermine exactly where how much percentage of every dollar that comes in, goes. It uses the same container method as above and taught me to live within your means, plus took into account the parts I hadn’t learned to deal with like salary, tax and profit.
THE BANK ACCOUNTS I HAD IN PLACE WERE:
Receivables account (for all your incoming money: salary/income)
From here incoming money is split into:
Profit account (before distributing any other money I would set aside profit)
Expenses account (for all fixed expenses: website hosting, office rent etc)
Taxes account (in which I would put enough aside for quarterly and annual tax)
Salary account (each month I would pay in a percentage of my receivables, but I would pay myself a fixed amount less that what came in, as to build a buffer)
Once taking the time to adopt this system, my financial admin has become a breeze. I never have to take the time to think about how much money I need for what. I just follow my predetermined percentages, divvy up the money and I’m done.
Rather than spending my money willy-nilly, before making a purchase I check out my expenses account. Is there enough money for the expense? I make it! Will I come up short this month? I don’t.
I hope you will see that the B-word is one to embrace and not one to run from. Set aside half an hour this week and take a good look at your expenses. Are you spending your money on things that are not necessary, nor do you love. Then it’s time to kick them to the curb!
NEED SOME HELP WITH WHAT QUESTIONS YOU SHOULD BE ASKING YOURSELF?
Where subscriptions do I have and do I need them to run my business?
What online tools do I actually use and do I need the paid plan?
Do I really need that industry magazine that I pay for each month but never really read?
Which insurances are actually necessary?
Should you be printing all the things you print or would an email / online document suffice?
How much do you spend on business trips / conferences?
Is that fancy office worth what it costs you or could you maybe downsize or move to a more affordable area?