To be honest, a few years ago I was still of the opinion that frugality and minimalism
are one and the same.
After I became more and more involved with my own finances, read books and after a long
time made the decision to now completely change my financial situation and then also got me
mentors who were financially successful, I have recognized the differences and also realized
that if you combine both you have a very effective approach to build wealth and be more conscious
with your money.
And today I want to show you how I combined both approaches to finally complete the piece
of the puzzle that you are still missing to improve your financial situation and money
management.
But before we get to the main topic of the video, first of all welcome back and if you
are new on our channel...
We are the Finance Nerds and we cover topics in personal finance, from saving money to
investing and we support you on the way to your financial goals.
But now let’s dive deeper into the topic!
First of all, we need to clarify one thing....
What is the difference between frugality and minimalism anyway?
Because as I told you in the beginning, I never quite figured it out either.
For that, I'll briefly explain the broad difference and then go over 3 specific differences again.
A frugalist focuses on spending less money and a minimalist focuses on owning less.
On the one hand, one doesn't exclude the other, but on the other hand, neither does one.
Because a minimalist can own little but pay a lot of money for his material items and
a frugalist can pay little money for many material items.
It is known that especially the frugalists buy a lot on quantities when there are offers,
in order to save more money.
And on the basis of these very simplified definitions, one can already recognize in
which direction it goes.
But before we talk about it I would like to go deeper into the differences and show you
3 main differences between frugality and minimalism, so that a deeper understanding arises.
First of all, the biggest difference: Minimalism involves many more areas of life than Frugality.
Frugality focuses on your finances and doesn't go beyond that, whereas minimalism is a way
of life that fundamentally changes your thinking, your values, and therefore your actions.
As an example, the Stoics preached a simple life where superfluous things should be said
goodbye to in your mind, which is closely related to owning less in general.
The 2nd major difference is that frugality is about reduction and minimalism is more
about intention.
Means that frugalists rather have the goal e.g. to have more of their salary left, so
they can save more money and the minimalists for example focus on spending their money
on the things that are important to them.
Minimalists, for example, often spend wealth on the things that fit their value system.
Take a car lover for example: Imagine this car lover has a passion for classic cars.
They may not own much else and live a very minimalist life, but still spend $30,000-40,000
a year on their passion.
Let's move on to the 3rd and in my opinion the most important difference, which also
applies very much to the 2nd point: frugalists are reactive and minimalists are proactive.
Frugalists become frugalists because they want to change their circumstances such as
not being happy with their financial situation, whereas minimalists are more likely to make
their decisions based on what is important to them.
A Minimlaist is more concerned about what items they want to own than simply thinking
about spending less money, like the Frugalist.
By this I don't mean that it is bad to react, ultimately the decision to change one's financial
situation is a very wise decision, however it is important to understand the difference
so that both can be combined.
This is what we are coming to now, how to become a Frugal Minimalist.
To clarify what a Frugal Minimlist is and to describe it in one sentence: A Frugal Minimalist
is someone who wants to pay less i.e. save money and at the same time own less.
This person wants quality, but does not want to pay too much for it.
This person is conscious of every dollar and prioritizes their spending based on their
values, but tries to spend little money.
Of course, if we could combine 100% of both approaches, it would be almost too perfect.
However, we can do this to a certain extent and align ourselves primarily.
Means that a person is for example more frugal than a minimalist and vice versa.
To make it easier for you to implement it concretely, I'll give you a few examples of
how you can live more frugally and more minimally.
You can also just look at our channel, we now have many videos on these topics.
As I told you in the beginning, I also took this step at some point and realized that
if you combine both approaches, you have a very effective approach to achieve your financial
goals.
What I found difficult, for example, was the minimalist approach.
Because I've always been a frugal person and I've always been very good with my money and
I've been careful not to spend too much money, but to save and invest.
On the other hand, I kept things for a long time and took the "having is better than needing"
approach, which meant that while I paid little for items per se, I bought relatively much
of them.
So a piece of advice to you if you feel the same way is to ask yourself before every purchase,
"Did I plan on buying that today?"
If not, don't buy it.
But for now, let's look at how you can bring more frugality or minimalism into your life.
To clarify, if you want to combine both approaches.
you need to find your balance.
One will certainly be more frugal than minimalist and the other way around.
The point is to find your way.
I'm about to give you 5 ways for both frugality and minimalism that I've used and find useful
and effective if you want to integrate either one more into your life.
Let's start with the 5 for more frugality: 1.
live below your means.
Very simple and easy: Spend less money than you earn and calculate a buffer of 10% that
you save or invest.
2.
automate your investing and saving.
Has also influence on the 1st way, however this helped a lot more, because it takes the
thinking work off and you must make the decision only once.
Set up separate accounts for this and set % rates.
3.
Use your stuff as long as possible.
As an example, I've had the same cell phone for 4 years.
It's still the Iphone 7.
Simple, easy and saves a lot of money.
4.
set up a money magnet.
If you don't know what a money magnet is, save the video above right for after.
5.
combine your trips.
Back when I was going to college, I had a pretty long way to go to college that I always
drove and as I'm sure you know, as a student you don't have a lot of money so I planned
quite a bit.
So I combined several trips and then instead of having to drive 3 times I only drove 1
time.
And again my 5 ways for more minimalism: 1.
say "no" to unnecessary purchases that don't match your values and weren't on your list.
This also goes hand in hand with becoming more conscious about your money and the 2nd
way will help you with that.
2.
prioritize your life and set goals so that you know exactly where you want to go and
can adjust your behavior with your money accordingly. 3.
eliminate emotional dependence on material things.
Many people cannot live a minimalist life because they are emotionally dependent on
material things to please others or to increase their self-worth.
4.
donate or sell your things that you no longer need.
We often own far too much and it feels good to get rid of some of it.
5.
simplify the areas of your life.
Often we make things harder for ourselves than they are and tell ourselves that we still
need xy to achieve z.
Focus on what really brings you forward and what is important to you.
As an example, when I set up my Investment Strategy, I spent 3 months just messing around,
because I always thought I still needed this and that.
And do you know how simple my investment strategy is now?
It consists of a 1 page Word document.
And if you want to learn how you can achieve financial freedom with one simple trick, watch
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