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Be minimalist with your investments and money matters

Minimalism is about simplifying your financial life and making you more aware of how your money in spent

September 23, 2019 / 08:54 AM IST

Mrin Agarwal

As I grow older, I seem to be becoming a minimalist. This is not to say that I am living frugally, but I certainly am thinking much more about what I want to buy or what really gives me happiness. Basically, I don’t spend mindlessly but indulge in really matters to me. This has also helped in simplifying my life.

I see quite the opposite around me. There seems to be no stop to spending. Even for small events, people buy new clothes that are worn only once. There is constant peer pressure that leads people to spend more by splurging on expensive stuff – the mantra being buy bigger and buy more, thus leading to having lesser money for the things you actually need to be spending on.

Simplifying your financial life

While being minimalist has picked up in other aspects of life such as your household items, it is yet to make inroads in the financial life.  Minimalism is all about decluttering and prioritizing what is valuable to you. Minimalism in finances is about simplifying your financial life and making you more aware of how your money in spent, thus, helping you cut back on excessive spending.

For example, you may have subscriptions to most of the streaming services; but do you really watch programs on all the channels. Typically, we tend to stick to 2-3 channels. Everybody loves shopping and discounts. I am shocked to see how many more people purchase during sales. At a well-known European brand store, I found people buying 5-7 T-shirts per person. I would rather buy 1-2 T-shirts, which I would actually use.

The situation is similar with one’s finances. I would rather have five funds and 3-4 simple investments than have multiple funds/investments. Having a limited set of investments helps me in keeping track and also provides the right amount of diversification.

Here is how you can improve your finances by following the minimalist approach.

- List out what is necessary for you. What are your financial goals and priorities? Is paying off an existing personal loan more important than taking another loan for a vacation? Is saving to start a business more important than buying a house? Is being debt free a financial value that you believe in? Figure out your financial goals, how you will prioritize them and what financial values you will follow. Once you have these in place, it will be easier for you to know how to plan your finances.

- Fix the spending and budget. Follow the 30/30/40 rule, with 30 per cent for EMIs, 30 per cent for expenses and 40 per cent for investments. With the 30 per cent for expenses, keep 30 per cent aside for fun expenses. Track expenses to ensure you are within the above specified limits. This way, not only will you ensure that you are saving enough, but will also be more mindful of using the fun budget for things you need or on memorable experiences.

- Create a financial plan that will help you know how much, and where to save and invest for your financial goals.

-Simplify your financial life by cutting down the number of investments held. Do you hold more than 6-7 funds or policies? If so, do a consolidation exercise and exit from the underperforming funds. Do you hold more than two credit cards? If yes, give up the ones with annual fees or low benefits. The best card would be the one that allows reward points to be credited as cash, with which you are allowed to partly pay the credit card bills. Close unsecured loans such as personal loans and credit cards loans at the earliest. A home loan should be the only loan you should have.

-Automating payments and investments saves late fees and ensures that your money is getting invested regularly instead of just lying in your savings account. Further, having financial holdings held electronically instead of having them in physical documents is safer.

Moving to a minimalist mindset is challenging and long drawn. However, it is more fulfilling and will help you create wealth to be used for what gives you happiness.

(The writer is a Financial Educator, Money Mentor and Founder of Finsafe India)
Mrin Agarwal is a financial educator & a licensed financial advisor with an experience of more than 20 years in wealth management industry. She founded Finsafe, a financial education organisation focused on equipping Indians with strategies to handle their money based on goals, growth, and safety. The company has already impacted 30,000 people over the last 5 years of its journey. She also co-founded Womantra, a financial awareness program for women & working professionals to empower them to be truly financially independent. Before dedicating her expertise towards spreading financial literacy in India, she has served in names like Citibank, Deutsche Bank, Birla Sunlife. She has managed a multi-family office for UHNIs and has an extensive experience in investment advisory and banking services.
first published: Sep 23, 2019 08:54 am