Finances,  Minimalism,  Retirement

How Minimalism Can Help You Achieve Financial Freedom

In 2011 I broke free of wage slavery for my very first time. My book royalties had reached the point where I could live on them without the need for a job, so I quit it to achieve my goal of being a stay-at-home single mother.

I enjoyed that life for several years but I found myself too close to the problem when my royalties dipped. After struggling for a bit I went back to work to regroup for another attempt.

What I don’t discuss much on this blog is the fact that I would have never been able to make that first leap if it hadn’t been for minimalism. If I had not actively pared down my possessions and my spending, I would have never been able to quit my job to stay home with my daughter at all.

In hindsight, I realize now that my pursuit of minimalism was behind my ability to take summers off to stay with my daughter for several years previous to achieving that goal. By limiting my purchases and my household expenses, I was easily able to conserve enough money to support us for several months each year.

In light of that fact, I must confess that I haven’t given minimalism the credit it deserves in my success. Even now I apply minimalist practices to my life as I prepare for my next, hopefully permanent attempt to achieve financial freedom.

Anyone can do what I’m doing. While your individual circumstances may be different, the act of reducing what you own and spend can make a massive change in your life. If you add a passive income source into the formula, you have the secret to attaining complete financial freedom.

How to Attain Financial Freedom

  • Look at your life right now. Chances are you have stuff you rarely (if ever) use, rooms that stay empty the majority of the day, and a vehicle or two you rarely (if ever) drive. Eliminate them. If you can sell the items for extra cash, use that money to pay down any debt you may have and build up an emergency savings account. Don’t worry about investing at the moment; right now we’re just trying to reduce the amount of space you need and how much money you need to survive.
  • If your home isn’t paid for (or the payments extremely low), consider moving to a smaller home as close to your job and basic shopping (such as a grocery; Wal-Mart delivers these days) as possible. If you own your home, consider renting it out to develop a passive income stream. Use caution if you owe a mortgage on the property. Unless you can rent the property for more than the mortgage payment (and have enough set aside to cover any down-time between tenants as well as some basic repairs), you may end up struggling financially whenever your tenants move out. If you can manage it however, that passive income will take you closer to freedom.

I need to note here that this was the primary way that my daughter and I managed to minimize our expenses. By ruthlessly minimizing our possessions, we transitioned from needing a two-bedroom home down to a one-bedroom, slashing our housing expense immensely. I shopped around until I located a rental in town that was extremely cheap to maximize the savings. It wasn’t in the prettiest area of town but since we don’t own the things that thieves like to steal (and we keep to ourselves), no one ever bothers us. We managed to cut our housing expense in half (more, considering that local rents have went up a bit since we moved here) as a result.

By eliminating our excess possessions we also eliminated the need of having to rent a self-storage unit as well, which saved us a few dollars more each month. We also benefit from lower utility bills year-round since it costs significantly less to heat and cool a smaller home than a larger one.

  • As a result of selecting a smaller home that was close enough to stores that offered the essentials like food, we were able to eventually eliminate our next largest expense: our vehicle. We both walk to work, hitching rides with coworkers and friends occasionally when the need arises but for the most part we can easily walk wherever we need to go. At first, however, we simply settled upon a nice older van that we purchased for cash, since financing a vehicle can almost double the price you pay for it if you aren’t careful. This allowed us to gradually transition to a life that didn’t require a vehicle for our daily needs.
  • Limit your exposure to advertising. Advertising is designed to make you feel insecure if you don’t spend your money buying the stuff they want you to buy. Traditional television programming is filled with advertising so the fastest (and easiest) way to drastically cut down on the advertising you are exposed to on a daily basis is to eliminate it. If you enjoy watching shows and movies, consider investing in a Netflix or Amazon Prime subscription. Since many modern televisions allow you internet access, you can continue using it while limiting your exposure to ads that are designed to make you feel insufficient. I noticed an immediate change years ago when I cancelled our cable television subscription. My children asked for things less frequently and I personally noted a desire to purchase less within days of cutting the cord.

There are other ways to cut expenses but those are the ones that will save you the most money. If you wish to learn how to lower your expenses even more, I urge you to read my book The Shoestring Girl. It goes into detail about how I manage to live on $500 or less a month.

Once you have pared down your finances to the point where you know how much money you need to live on each month, proceed to the next section.

  • Develop a passive income stream. The Internet has created an immense opportunity for those who decide they want to escape the rat race of wage slavery. You can share affiliate links (like I do on this blog occasionally) to promote products and services that you believe in. You can develop your own products to market and sell on a website. There is a huge demand for steamy romance novels currently, so if you enjoy fantasizing about that, you could turn those fantasies into a passive income stream by publishing them online. I have a number of friends who have become quite wealthy doing just that. In fact, I have explored that option personally. While I am much more comfortable sharing my personal experiences to help others, you may find that writing romance novels both enjoyable and lucrative. If so, I highly recommend it. My friends report that they receive thousands of dollars a month in book royalties from their romance novels, and E. L. James became very wealthy simply by converting a piece of Twilight fanfiction into a book series.

For those who have no interest in writing books or internet marketing, don’t worry. There are things you can do to develop passive income streams as well. The most lucrative of those is in real estate. You can purchase inexpensive homes (mobile homes, even) to start out. Clean them up and rent them out. You’ll have to go around once a month to inspect your properties and collect the rent but that is a lot less work than having to show up each day at a 9-5. There are many books available that will help guide you through the process.

You can also invest in dividend-paying stocks as well as bonds. Both of these provide a somewhat stable income stream (no form of passive income is perfect). I am currently investing in dividend stocks as an additional passive income source for when I decide that I am ready to reduce or eliminate working at a public job again.

I highly advise you to create at least two passive income streams before you decide to quit your day job. Things can happen that will cause your passive income to drop, if not disappear. Everett Bogue discovered this the hard way and ended up stranded in Japan. He was forced to sell his laptop for air fare back to the states. I would link to that story but it is old news and has faded from the internet. He is currently working two jobs to survive.  I experienced this personally when my book royalties dropped to the point where I felt the need to return to a public job. If I had been smart back then, I would have heeded the warning his experience provided and adjusted my life accordingly. I could have easily invested enough money back then to have eliminated the need to go back to working at a public job. I didn’t, so I am paying the price of that mistake now.

  • Eliminate your debt. Every debt you eliminate will take the amount you need to live on even lower. While a credit card can benefit you if used wisely (pay off the balance each month), credit as a general rule is verboten. You want to spend your money enjoying your life, not funding the excess of the bankers. The only possible exceptions to this rule would be to finance rental property or to invest in a class that will teach you how to grow your passive income further. Use extreme caution before making these decisions.
  • Build up an emergency fund. You need to have several months’ worth of expenses saved away in an easily accessible interest-bearing account in the event your passive income takes a slight dip or another emergency arises. In hindsight, this was one thing I did right. I stashed away my excess money each month when my book royalties were high. That enabled me to survive for quite a while as my royalties began to drop.
  • Develop your passive income stream to the point where it will more than cover your normal expenses before you decide to stop working. This way you can invest the excess into dividend-paying stocks, bonds, or another form of passive income source such as real estate. This way, even if your current passive income remains stable (or drops a bit), your passive income will continue to increase over time.
  • Once you have created an emergency fund, paid down or eliminated your debt, reduced your expenses as low as you comfortably can, and developed a passive income stream that more than covers them you can safely make the leap. You can reduce the amount of hours you work gradually or eliminate working entirely.

Even now, by following these precepts, I am able to work only part-time instead of getting a full-time job. My monthly expenses are lower than ever now that my daughter has become my room-mate, so we have taken advantage of the situation by investing our excess money and using the time gained to our advantage. Katie enjoys eating out and spending money a bit more than I do, so she has opted to work full-time since she likes to keep busy. She still manages to set money aside each month into her savings as well as attend college full-time by paying as she goes. Like her mother, she has an aversion to debt.

I have money left over from my part-time paycheck every month. I combine that with my (once again) growing book royalties to invest in dividend stocks. I use the extra time I have available to go to college as well, take care of my home, and to write posts like this one that will hopefully help others achieve their own financial freedom.

If you found this post informative, please take a moment to share it with a friend. You may help them realize that they don’t have to be trapped in the chains of wage slavery forever. They too can achieve financial freedom if they want.

If you have already achieved financial freedom (or are working towards that goal), please share your story in the comments below. We all benefit when we share our knowledge.

If you have a blog of your own, consider writing a piece about this post. Do you agree with these steps, or do you feel that something is missing? Be honest in your comments. This will help others learn from our beliefs and experiences. If you feel that my experiences will help your readers, let me know so that we can arrange an interview. If you feel that your personal experiences may benefit my readers, email me as well because I would love to interview you. You can reach me at annie at annienygma dot com.

Have a great day,
Annie