Only One Credit Card? Here's How I Budget Like a Minimalist And Take Control of My Finances
For most of my life, I was not very good with money.
In my two years of serving National Service (NS), I only saved $50 a month, and embarrassingly enough, it was only because my parents forced me to.
Most of my NS allowance was spent on frivolous things like an expensive guitar that is now collecting dust in my room.
It wasn’t till I graduated from university and attended this personal finance talk when it hit me: I have to #adult and get my finances in order.
I realised that the first thing I needed to settle was how I budget and spend.
This was also when I started reading more about minimalism and how it can be applied to personal finance, which I found really helpful.
In this article, I will be sharing a simple minimalist budgeting system to help you take control of your finances and achieve your personal finance goals.
It is something that works for me and you might find value in it too.
Let’s get started!
Personal Finance Minimalism Meaning
Regardless of your income, the minimalist budget is great as it can help you manage your money in a manner that best aligns with your financial values and personal finance goals.
This because essentially, minimalism is the process of intentionally prioritising what you really value in life and reducing the noise in other areas.
Although the practice of minimalism may seem like you will have to give up on certain comforts and suffer; why not consider it as a practice of trade-offs.
With minimalist budgeting, you are putting your financial goals first, making trade-offs with things that don’t really matter to you, and simplifying your finances.
With this simpler system, the path to achieving your financial goals can become clearer and easier to achieve.
Minimalist Budget Trade-Offs
To make things clear, this minimalist budgeting approach has trade-offs.
You will not fully benefit from benefits, credit card perks, sales or other free gifts that require you to sign up for multiple credit cards or accounts to game the system.
This system will not maximise your benefits or make you the most frugal person.
Instead, what you get is a simple system that will remove the clutter around your finances that will help you focus better on achieving your financial goals.
How To Budget Like a Minimalist
Here’s how the system works.
1. Outline Your Financial Values and Set Your Personal Finance Goals
To start, you will need to reflect and evaluate what you really value in life or define what is necessary to you. These are your financial values.
Some examples of financial values include:
- Living within your means and avoiding lifestyle creep
- Living without debt (or minimal debt)
- Striving for financial independence retire early (FIRE)
- Not comparing yourself to others.
These are just a few examples to get you started.
But once you have clarity about what your financial values are, you can proceed to set your financial goals.
Financial goals are the roadmap for getting from where you are to where you want to be and can vary wildly from person to person depending on your financial situation.
Examples of personal finance goals include:
- Getting out of debt within a certain amount of time
- 50-20-30 Rule: Spend 50 per cent of income, save 20 per cent and invest the rest
- Increase income by 25 per cent by starting a side hustle (here are some side hustles you can do from home)
- Achieve FIRE (here is a comprehensive guide to achieving FIRE in Singapore)
These are just a few examples to get you started.
It is vital that you outline your financial values and set your personal finance goals as they are the rock upon which a minimalistic budget is built.
The main idea behind the minimalist approach to personal finance is to priorities what is important and spending less on the rest.
To create a working minimalist budget, you will need to decide what is important to you.
If you are unsure of how to start, you can consider this salary allocation framework.
2. Automate Your Monthly Cashflow (Pay Myself First)
- Why: By allocating your monthly salary into two separate accounts, you ensure that you can only spend from ONE account (Expenses)
- How: Set up a Standing Instruction (SI) to automatically transfer money out — from an account which your salary is credited to — to your Savings and Wealth account. 30 per cent of your salary from the account should be then used to invest
- What: Look for savings accounts are which are easy-to-use and have solid online interfaces so it’s easy to set up recurring payments.
In fact, you can do all of this with a single bank account.
To break this down further, will look into how you can cut down don the allocation for the expenses account and allocate more to your Savings and Wealth account.
3. Evaluate Your Spending Habits
Speaking of smarter spending choices, the next step will be to list down all your spending habits with as much detail as possible.
Go through each line and evaluate each item.
Ask yourself if each item adds value and/or meaning to your life – does it spark joy?
Does it align with your financial values and personal finance goals?
To take a leaf out of the book I Will Teach You to Be Rich by Ramit Sethi.
You don’t need to scrimp and save on all the supposedly ‘right’ or ‘acceptable’ things.
Rather, you should pick what is really important for you to splurge or scrimp on.
For example, I value dining out and spending time with my friends but can’t really appreciate limited edition sneakers. Thus, I should be spending more on eating out with my friends and save on sneakers.
Your Expenses account should allow you to spend comfortably each month but still be more challenging to push yourself constantly to make smarter spending choices.
Start with the 50-20-30 rule for expenses, savings and wealth and see if you can push yourself to 40-30-30!
4. Keep a Buying Journal
In addition, to help you control your spending further, you can consider keeping a 30-day buying journal.
For example, if I find something I want to buy that aligns with my financial values and goals and gives me value, I will put this thing into the buying journal and wait 30 days.
During the 30 days, I will reflect on what I want to buy by asking myself if I would use this one year after buying it, and not just one week after I buy it.
At the end of 30 days and I still want to buy that thing, I will proceed to buy it.
5. Simplify Your Savings Accounts and Credit Cards
As for savings accounts and credit cards, less is more.
To implement this minimalist budget system, you can reduce your savings accounts to just two.
Your Expenses account should be used for all your expenses while your Savings and Wealth account should be used to store your emergency fund and hold the money you are going to invest.
Similarly, you should only have one or two credit cards. Although you will be forgoing some cash back, points or miles, this will make it easier for you to stay organised and keep track of your spending.
Having too many accounts or credit cards to keep track of can get messy.
I know people who shift money from one saving account to fund another and spread their money out too thin. Not to mention that you will gain less interest by spreading your money out over so many accounts.
Here’s how I manage this.
This is not an endorsement, but I use the DBS multiplier account for the Savings and Wealth account and a POSB savings account for the Expenses Account.
My monthly salary gets credited into the multiplier account and I pay myself an allowance into the POSB savings account for my expenses.
The 20 per cent of my salary gets stored into the multiplier account as savings, while I deploy 30 per cent of my salary into my investments.
Not to mention that I get a higher interest rate with my multiplier account too.
P.S. You can check out our FREE savings account calculator tool to find the best savings account for you.
As for credit cards, I mainly use a DBS LiveFresh card as it is a good fit for my spending habits and works well with the multiplier account.
I also have a Citi PremierMiles card that I keep for the rare big-ticket purchases that exceed the DBS LiveFresh card’s monthly cap.
Aside from the Citi card, everything is also consolidated into one app/account for convenience.
As a result, my personal finances become easier to manage as everything is clearer and easier to organise.
6. Accept That You Are Going To Be Viewed as ‘Kiam Siap’
Unfortunately, this path is not an easy one to take, as people might think you are Kiam Siap (Hokkien term for stingy), or even weird for living like this.
This is completely normal. Ignore the haters as it shows you are living intentionally, managing your money well and working towards your financial goals.