Money

For years I avoided budgeting because of how restrictive it felt. I didn’t want to feel guilty every time I spent my own money.

Then I discovered the concept of a minimalist budget, and it was a total game-changer. Rather than spending money on things you don’t really care about, you can spend more money on the things you care most about. 

You’re probably familiar with the concept of minimalism, but minimalist budgeting might be a mystery to you. It’s the same concept — You’re eliminating the non-essentials to make room for the things you truly value. 

In this post, I’m explaining what a minimalist budget is and how you can create one to help you manage your money without the guilt and restriction that often comes with budgeting.

What is a minimalist budget?

Minimalism is the practice of eliminating the non-essentials from your life to make more room for the things you truly value. Most people use the term minimalism in reference to physical belongings, but you can apply the concept of minimalism to any part of your life. 

I particularly like to use it as it applies to budgeting. A minimalist budget is one where you eliminate the non-essentials and the clutter from your budget to leave more money for what you value most. 

A minimalist budget can help you to reduce your monthly expenses, simplify your financial life, and get out of debt. 

It’s important to note that budget minimalism isn’t the same thing as frugality. A minimalist budget isn’t necessarily about spending less money. It’s about spending money on fewer things, so you’re only spending money on what you truly value.

How do you create a minimalist budget?

Like many things, creating a minimalist budget is easier said than done. I’m not going to lie – this doesn’t come naturally, and you’re going to be hesitant to make cuts to your budget. Here are a few ways to help you create a minimalist budget that actually works for you.

IDENTIFY YOUR FINANCIAL VALUES AND PRIORITIES

One of the key benefits of a minimalist budget is that it allows you the freedom to spend money on the things that are truly important to you. To do that, you first have to identify what your values are. 

Identifying your values and priorities is an important piece of the puzzle. Consider how often you allow yourself to spend money on something because it’s a “necessity.” Maybe it’s hitting the bar with your friends or that new outfit you’ve been eyeing online. 

Sure, those things might seem like necessities. But what about when you compare the importance of a new outfit to being able to afford to fly home for the holidays? The outfit doesn’t seem like such a necessity when you identify your real priorities, one of which is that annual trip home for Christmas. 

MAKE A LIST OF ALL YOUR EXPENSES

One of the first things I think everyone needs to do when it comes to setting up a new budget is to take stock of where they’re currently spending their money. To do this, you need to make a list of all of your expenses. 

The easiest way to do this is to literally go back through your last three to six months of bank and credit card statements and document every single expense.

Yes, it sounds exhausting. But I promise you’ll get so much clarity from this one exercise!

I remember the first time I set up a budget for myself. I really had no idea how much I was spending on anything each month. I set up a budget and was honestly shocked to see how much I’d spent on take-out every month. It was a LOT.

Not only is this step important to figure out where you’re spending too much, but it also helps you to identify how much you should expect to spend. It’s simply not realistic to start budgeting $200 per month for groceries when you’ve been spending $600. 

ELIMINATE UNNECESSARY EXPENSES

Alright, you knew this part was coming! Once you make a list of all of your expenses, it’s time to start cutting. Go through that list and figure out what you didn’t need to spend money on or what you could have spent less on.

Some of these will be easy, as with my example of eating out. As soon as I saw how much I was spending, I knew I had to cut back. Others will be more difficult because lots of things seem like necessities. 

If you’re struggling to make cuts, refer back to step 1, where you identified your values and priorities. If something doesn’t fit within your values, cut it! 

For example, suppose you’re spending way too much on food, partially as a result of regularly grabbing lunch and dinner out. If friendship is one of your top priorities, then you probably don’t want to cut that weekly dinner with your best friend. 

But you could reduce your food spending by bringing lunch to work instead of ordering out. You’ve managed to cut your food budget without sacrificing one of your most important values. 

Here’s the good news: Only you get to decide what spending is necessary and what isn’t. You can decide you want to splurge on eating out or clothing, or anything else. Something that will seem unnecessary to someone else might feel necessary to you, and vice versa.

USE A 50/20/30 BUDGET

One of the toughest parts of setting up a new budget is knowing how much you should be spending on everything. After all, there’s no handbook that you get when you become an adult that tells you how much to spend on groceries. You just have to figure it out as you go. 

One of the best ways I’ve found to break up the budget is to do so by percentages. More specifically, I recommend the 50/30/20 budget. 

The 50/30/20 budget is a framework that says you should break down your take-home pay like this:

• 50% for needs, such as housing, transportation, and groceries
• 30% for wants, such as eating out, entertainment, and hobbies
• 20% for savings and debt

Remember, this framework is just a guide, and it’s not going to be right for everyone. For example, when Brandon and I had $150,000 of debt that we were paying off, we would spend more than 20% of our budget on savings and debt. 

SIMPLIFY YOUR ACCOUNTS

Listen, I know it’s popular advice in the personal finance community to have separate bank accounts for your different savings goals. At some point, though, it all becomes more work than it’s really worth. And if you have a good system in place, you don’t need a bunch of different bank accounts. 

First, popular online banks such as Ally (the one I personalize use) allow you to set up “buckets” within a single savings account where you designate different cash for different purposes. 

Additionally, budgeting apps such as You Need a Budget (YNAB) allow you to budget money for certain purposes. My banking app might say I have $10,000 in my savings account, but I can look at YNAB and see that I have $X budgeted for my emergency fund and $X budgeted for our new car. 

Another popular piece of financial advice is to shop around for the savings account with the highest interest rate. But then what happens is you’re constantly obsessing over whether your current bank still has the highest rate and constantly moving your money as banks change their rates. 

Here is some honesty for you — The difference between a 2% interest rate and a 1.75% interest rate on a savings account can literally come down to a few dollars, depending on how much money you have in the account. Just pick a bank with a high-yield savings account and let it go. 

Finally, credit card hacking. Far too many people take out loads of credit cards with different types of rewards, and then only use their favorite. Credit card hacking might be effective if you do it right, but for most of us, it just adds extra unnecessary credit cards to our wallets. 

AUTOMATE YOUR PAYMENTS

I don’t know about you, but I have a lot of monthly bills. Every month I pay bills such as my mortgage, car insurance, utilities, phone bill, and more. We also pay off our credit card each month so we never carry a balance. 

If I had to manually log onto my various accounts throughout the month to pay my bills, that would be a huge pain. In fact, I would probably forget once in a while, and that would cause a whole different set of problems. 

These days, you can automate just about everything having to do with your finances. And I recommend that you do just that. Automate your bills, transfers to your savings account, and anything else you can. 

GET OUT OF THE MONTHLY PAYMENT MINDSET

One of my biggest pet peeves about life these days is that everything is based on a monthly payment. For some things, it makes sense — I’ll happily pay my Netflix bill every month. 

But now, there are buy now, pay later apps that allow you to take out mini loans for large purchases. That way, instead of paying the total amount upfront, you’re paying it off over six months or so. 

But here’s the thing. Those services encourage you to buy things you can’t afford. If you can’t swing the cost of the shoes in a single payment, you can’t afford the shoes. 

These services also cost you more money. Nothing comes for free. If someone is lending you money, they’re getting something in return. Usually, it’s an astronomical amount of interest. And even if that’s not the case, they’re normalizing debt, which is not okay. 

One important component of getting out of the monthly payment mindset is getting out of debt. It’s easy to think about your debt only in terms of what it costs you each month. 

Your $5,000 credit card debt might only have a minimum payment of $85 per month. Or your $25,000 student loan might only have a minimum monthly payment of $150. And while those numbers don’t seem all that high, they’re costing you so much more than that. 

Let’s do some painful math real quick. Suppose you have $5,000 of credit card debt with a minimum monthly payment of $85. If you only pay the monthly payment, you’ll pay over $7,900 in interest before you pay the card off. 

$7,900!! 

You’ll pay more in interest than you had in credit card debt in the first place. All because $85 per month seemed like a perfectly reasonable amount to pay to have credit card debt. 

Here are some rules to live by when getting out of the monthly payment mindset:

• Prioritize paying off existing debt
• Don’t take on any additional debt
• If you use a credit card, only spend what you have in your bank account and pay it off each month
• If given the choice between a monthly subscription fee and an annual one, pay the annual fee. It’s almost always cheaper. 

QUESTION EVERY PURCHASE

When you’ve been spending money on the same things for years, it’s easy to see those things as necessities. One of the adjustments you have to make for a minimalist budget is to start questioning every purchase. 

Minimalist budgeting is about spending money on fewer things, even if it means spending more on those items. It’s about focusing on quality over quantity. 

Maybe you have a go-to pair of shoes that you buy, but the heels wear out in just a few months. This was me for a long time! I would always buy the same $25 pair of high heels for work. When the heels wore out a few months later, I’d replace them. I didn’t think anything of it because they were only $25. 

It turned out that once I started spending more money per pair of shoes, I started spending less money overall. Instead of buying a budget pair that only lasted a few months, I could buy a more expensive pair that lasted infinitely longer. 

Think about what expenses in your current budget you could replace with a higher-quality item. Instead of buying coffee out every day, what if you invested in a nice coffee or espresso machine? Instead of buying bottled water at the grocery store, what about buying a nice water filter? 

The goal is to spend money on quality items that last longer. 

Read More: How to Reduce Impulse Buying Once and For All

SPEND LESS THAN YOU MAKE

I know I said that budget minimalism isn’t necessarily about spending less money, and it’s not. But just like any budget, the most important rule is that you have to spend less than you make. 

It’s easy to rely on credit cards and monthly payments that trick us into thinking we can afford more than we really can. But if the amount you’re swiping on your credit card each month is less than the amount on your paychecks, it’s time to change direction. 

SCHEDULE REGULAR BUDGET MEETINGS

I think we can all relate to a situation where we set up a brand new budget that we swear is going to change our lives, and then we forget about it in less time than it took us to make it. 

I’ve gotten out of this habit by scheduling regular budget meetings for myself and my husband. We do one budget meeting around the first as I’m planning out the budget for the month and a quick check-in each time we get paid.

Even if you’re the only person sticking to your budget, these check-ins are still important. Putting time on your calendar will ensure that you’re actually checking in with your budget and noting whether you’re still on track. 

Read More: How to Create a Monthly Budget

Final Thoughts

Whether or not you practice minimalism with your physical belongings, a minimalist budget can be a great choice for anyone! Minimalist budgeting is all about eliminating the non-essentials from your budget to make room for the things that you value most. 

While budgets often feel restrictive, the minimalist budget is all about freedom — freedom to spend on the things you truly value without letting the less important expenses get in the way.

I know from personal experience that when you’re living on a tight budget, saving money feels damn near impossible. Every dime is going toward paying your bills, and there’s little to nothing left at the end of the month. 

I was at the point where I had nothing in savings, and every unexpected expense ended up going on a credit card. 

Eventually, I figured out that even making small changes in my monthly spending could make a huge impact, and I was able to start saving more money than I thought possible. 

In this post, I’m sharing all of the changes I made to help me actually start saving money and tips that you can start using today to save money on a tight budget. 

There are affiliate links in this post, meaning I may make a small commission at no additional cost to you. For more information, see my full disclosure policy here.

Pay yourself first

Regardless of how much extra income you’re able to set aside in savings, you have to take that important step of actually sticking to your savings goals.

First of all, I always keep my savings in a separate savings account. That way, I don’t have the option of impulsively swiping my debit card to use some of that savings. 

But the most important thing that I do is to pay myself first — and by myself, I mean my savings account. On the same day every month, I have an automatic transfer to move money from my checking account into my savings account. 

I do it at the beginning of the month, so I don’t have the opportunity to spend it on something else first. And because it’s automatic, I never have to remind myself to save. 

You see, I found that for years I always told myself I would save whatever I had left at the end of every month. Yet, at the end of every month, there’d be nothing left to put in savings. 

Paying your savings account first is the absolute best way to make sure it gets done every month. The rest of the advice on this list doesn’t mean much without this one!

Read More: How to Pay Yourself First and Finally Start Saving Money

Review your budget

If you haven’t reviewed your budget in a while (or you don’t have a budget), now is the time to fix this. It’s easy to set a budget for yourself and forget about it, but you’ve gotta keep reviewing it to make sure it still fits your life. 

Things change, and people go through different seasons of life. I’ve gone through seasons of life where I was driving a lot for work and had to budget more for gas. I’ve also gone through seasons where I spent little on gas but a lot more on eating out. 

I do this just about every month. As I’m budgeting out my income for the month, I ask myself whether my current budget really makes the most sense for where I’m at in life right now. If the answer is no, I change it up. 

I do all of my budgeting in the app You Need a Budget. This app is hands-down the best I’ve used for setting up a budget and actually being able to stick to it.

Not sure where to get started with your budget? Head over to my guide on starting a monthly budget.

Save your extra paychecks

For my entire career in politics, I got paid on the first day of every month. I loved getting paid monthly because I could pay all my bills and budget for the entire month at once. Then I knew right away how much I had for the rest of the month. 

Then I got married, and my husband gets paid biweekly. At first, it seemed inconvenient — It would have been nice to stick to my once-per-month budget. 

Then I realized that people who get paid biweekly have two months every year where they get paid three times instead of two — Then I started to come around to it. 

We plan our budget under the assumption that my husband gets two paychecks per month. So during those lucky months when he gets three, we’re able to send them directly to savings. 

If you get paid biweekly, take a look at a calendar and figure out what months you’re going to get three paychecks. Then make a plan to save that money or use it to pay off debt!

Set up sinking funds

You know those months where everything is going according to plan and your budget is right on track — and then something unexpected pops up? Maybe it’s a medical bill or a car repair you weren’t planning for. 

Those expenses are the worst because there’s no way to know when they’re coming, and you hate to use your emergency fund for them (especially if you’re just getting yours started). 

I struggled with this for years, and then I learned about something that seriously changed the game in my budgeting practice. 

Sinking funds. 

Sinking funds are when you set aside a certain amount of money every month for expenses you know you’re going to have, but you aren’t sure when. I have sinking funds for irregular spending categories such as medical bills, car maintenance, and pet expenses. 

I also use a sinking fund for Christmas. Rather than go into a state of panic when November rolls around, and I realize how much money I’m about to drop on Christmas, I put some aside every month so I know we’ll have plenty when Christmas rolls around. 

Track every dollar you spend

Have you ever made it to the end of the month and wondered where the heck all your money went? Sometimes we don’t realize just how much we’re spending until we make it to the end of the month and there’s no money left. 

The single biggest way I was able to get a handle on my spending was to start tracking it. I remember the first time I sat down and figured out how much I was actually spending — I was shocked at how much money was going toward eating out!

I track all of my spending in my You Need a Budget app. The app connects to my bank accounts and automatically pulls all of my transactions. Before YNAB, I used to just track all of my transactions in an excel spreadsheet, which also worked great! 

Separate wants vs. needs

One of the biggest problems run into when cutting their spending is that they aren’t able to separate needs from wants. I’ve been there — I could easily convince myself that eating out was a “need” because, hey, you gotta eat. 

If you’re really going to cut your spending, you need to get really honest with yourself about what counts as a need and what counts as a want. 

Try a 50/30/20 budget

One of the most effective budgeting methods I’ve found, especially for those living on a tight budget, is the 50/30/20 budget. 

This budgeting system directs you to spend 50% of your take-home pay on necessities like housing, utilities, transportation, and groceries. 

The next 30% of your budget goes towards wants — This is anything you want to spend your money on but don’t have to. 

The final 20% of your budget goes toward debt and savings. This would be expenses like student loans, credit cards, retirement accounts, and your emergency fund. 

One of the most eye-opening things about using this budget is realizing just how much you’re spending on housing. In parts of the country where housing is expensive, you might have to spend more of your pay on rent or your mortgage. But using this budget might also be a sign it’s time to change your housing situation. 

Refinance your student loan

Brandon and I had a lot of student loan debt when we got married — Like, a combined six-figures. Most of that debt was in the form of federal loans with fairly low interest rates. But a bit of it was a private loan with a 14% interest (painful, I know).

One of the best money decisions we made to help save money every month was to refinance that loan. 

If you’re shopping for a loan to refinance your student loans, I recommend Credible. You can see rates from more than a dozen different lenders to find the best loan for your situation.

We were able to go from a rate of more than 14% to less than 5%. That changed alone saved us thousands of dollars in interest. If you have private student loans with a high interest rate, refinancing could do the same for you.

Analyze your biggest money leaks

It’s probably safe to say that we’ve all got a money leak or two, which is the splurge item that you tend to spend a bit too much money on. For Brandon and me, those money leaks are food and concert tickets. 

Once you can identify your money leaks, you can start to address them. For us, this meant making several changes. 

First, we cut back on eating and drinking out. We also started cooking budget meals at home, and making cocktails at home on the nights we felt tempted to go out. Finally, this meant restricting ourselves to one concert per month. 

Everyone’s money leaks will look a little different. The key is figuring out what yours are and finding a way to cut down your spending while still allowing yourself the occasional splurge. 

Rethink your car payment

Car payments suck. In a perfect world, no one would ever have a payment for their car, and we’d all simply buy cars we can afford. Unfortunately, most of us have been at a point in our lives where that’s not possible.

When I bought my first car with a car payment, I was married to my first husband. I got the car in the divorce, but I also got the car payment. While I powered through it for a few months, it eventually became clear that I couldn’t keep up with the payment. 

I refinanced my car loan and ended up with a much lower monthly payment and a lower interest rate, which was a nice perk. 

Your car payment is a low-hanging fruit way of saving money every month. Whether it’s refinancing your loan or buying a car you can afford without a monthly payment, figure out what works for your life right now. 

Negotiate your bills

For most of us, it would never occur to us to try to negotiate our monthly bills. But it turns out that you totally can. 

There’s even an entire market of apps you can use to negotiate your bills on your behalf. Apps like Truebill, Trim, and Billshark all help you figure out where you’re spending too much money and negotiate lower payments. 

Cut your utility use

Your utility bill is one that you can’t get rid of — But there are definitely things you can do to lower it every month. 

First, consider changing the temperature on your thermostat. If you can stand your house a little warmer in the summer and a little cooler in the winter, you can save yourself a heck of a lot of money. We cut our bill in half in the months we don’t regulate the temperature in our apartment!

You can also reduce your bill by using a programmable thermostat. Turn down the heat or AC while you’re at work, and have it automatically turn back on before you come home. 

You can also do little things like using energy-efficient utilities and simply using less electricity. 

Use cash-back apps

Cash-backs apps aren’t going to get you rich, but they will help you to save a little money here and there. And that’s exactly what you’re working toward when you’re on a tight budget. 

A few of my favorite cash-back apps are Ibotta and Fetch Rewards, which give you cash back for scanning your grocery receipts. Another favorite is Rakuten, which gives you cash back for online purchases.

Unfollow and unsubscribe

Don’t get me wrong – I love Instagram as much as the next person. But I also know that when you see influencers sharing so many gorgeous clothes and products, it can be hard to resist doing a little shopping. 

Similarly, it can be hard to resist spending money when you get an email from your favorite clothing store saying they’re having a huge sale (which they seem to be having nearly every day).

If you find yourself having a hard time passing up deals when you see them on Instagram and in your emails, it might be time to unfollow and unsubscribe from anything that convinces you to spend money you don’t have. 

Tackle high-interest debt

One of the most frustrating things for me when I started my money journey is that I kept reading finance advice that told me to aggressively pay off debt. 

If I don’t even have the wiggle room to put money into savings, how on earth am I going to put extra money toward debt?

Then I started paying attention to how much I was paying being charged in interest every month on my credit cards. And I realized just how right they were. 

Paying off high-interest debt is one of the best things you can do to put more money in your pocket every month and, more importantly, save you a lot of freaking money in the long run. 

Trust me, I know how hard it is to put extra money toward debt when you’re just scraping by. But if you do everything else on this list, I promise you’ll have some money to spare!

Read More: How to Pay Off Credit Card Debt Fast

Avoid unnecessary fees

A 2019 survey from Chime Bank found that the average American spends $329 per year on banking fees. I don’t know about you, but that sounds wild to me. 

Those fees include overdraft fees, account fees, fees to redeem rewards, fees to receive paper statements, and fees for account inactivity. 

Try going through your bank account for the past few months and try to spot any fees your bank has charged you. If you find any, it’s time to either switch banks or change your behavior. 

If it’s the case that the fees you’re paying are a result of overdraft fees, try to figure out why that’s happening. Is it that you’re not paying attention to your balance or that emergencies are popping up that you have to pay for? What backup plan can you put into place instead of swiping your card when there’s no money in your account?

If the fees aren’t a result of your behavior and it’s just that you have a fee-happy bank, it’s time to switch banks! There are plenty out there that don’t charge these ridiculous fees. 

Start a side hustle

Listen, I can share all the advice in the world about how you can save money every month. But at the end of the day, there’s only so much you can cut. 

Rather than relying solely on cutting expenses to help me save more money, my favorite way to do it has been by increasing my income through side hustles. 

Today I run my business full-time, but for years I worked a full-time job while I worked on my blog and wrote freelance articles on the side. 

If you’re interested in using a side hustle to increase your income, feel free to check out my list of 11 ways you can make an extra $1,000 per month. 

Final Thoughts

When you’re on a tight budget, saving even the smallest amount seems like an impossible task. Trust me, I’ve been there myself. 

But since I started going all-in on my personal finance, I’ve learned so many legit ways to save money every month, even when there’s not a lot of wiggle room in the budget. 

If you’re on a tight budget, I hope you’ll give a few of these tips a shot to help you start putting money away to help you build an emergency fund or pay off debt.