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The Anchor of Money

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In the book Minimalism by The Minimalists, they talked about The Anchor of MoneyThey said that you need to take control of your financial life, but not just by moving your income upward.  You also have to make consistently good decisions with the resources you have, make good financial habits, and live deliberately.  The Minimalists say there are Five Steps to Control Your MoneyLet’s talk about them…

Step 1:  Budget

You must establish a written monthly budget.  Look at the last six months of expenses and divide them into three categories:  Need, Want, and Like.  Be very strict with what you put in each category.  The more strict you are, the quicker you will be free.  At the beginning of the month, be sure to give each dollar a destination.  Make sure you include everyone in the house when you create the written budget.  This gives them input and makes them aware.  You are not perfect and will make some mistakes.  Make adjustments along the way.  Also be sure to create an Emergency Fund, like the one discussed in the 5and2Guy post:  Pay Yourself First: Savings BucketThis will provide you a safety net.

Step 2:  Pay Yourself (Invest)

The Minimalist suggest four buckets of money:

1. Retirement Fund

2.  House Fund (Short Term Savings)

3.  Safety Net (Emergency Fund)

4.  Wealth-Building Fund (Investment funds)

You need to automate deposits into each of these funds.  The point here is to put the money in these accounts before you even think about spending the money for everyday expenses.

Step 3:  Debt-Free

The Minimalists believe there is no such thing as good debt.  You will not feel financially free until you are debt free.  As we all know, the debtor is always slave to the lender.  The Minimalists don’t believe in leveraging other people’s money if you want to be debt free.  Get yourself out of debt and don’t get into any more.

Step 4:  Minimize

Get rid of the clutter in your life.  Do you really need a television in every room?  Do you need four computers or three monitors?  Do you need an entire walk-in closet full of clothes?  For most people, the answer is no.  If you can cut what you don’t need in your life out, then you can focus on eliminating debt, changing your habits, and making better decisions with fewer resources.  In my experience, cutting the clutter from my life helped me to see what I really needed and how much money I was wasting for things I didn’t need.  It not only made my life easier, but also helped me change my perspective on spending money.

Step 5:  Contribute

The Minimalists suggest you donate your most precious asset…your time.  Donate your time to a local church, local group, or local event.  When you give of your time to a worthy cause, you tend to see how your financial problems are tiny compared to the problems in the world around you.  Make an effort to donate your time, at least once a month, for a few hours, to a worthy cause.  We can’t create more time, so we have to take time and give of it freely to others.  This is food for the soul!!!

Final Thoughts:

The Minimalists have provided some very simple steps here to put you in control of your financial well being and become financially free.  Following these simple steps will allow you to do more with less and focus on the things that really matter in your life.  By removing all the clutter and things you don’t need, you can focus on the things you have and the people in your life.  All of this clutter adds to the anchor of money that can weigh you down.  Git rid of the anchor, and get on the right path.  This is not only the path to financial freedom, but also a path to happiness!!!

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