9 Ways to Financially Declutter | What is Financial Minimalism?

Do you want to be a financial minimalist? What the heck is a financial minimalist anyways? Well, according to the skim.com, a financial minimalist is a person who spends intentionally on the things they value or things that serve a purpose and cut out the rest. That sounds pretty good to me. So if you are into this minimalism life, not with just your home, but with your finances to stick around, I have nine areas where you can get started. Hey, what's up guys? It's Justine with Debt Free Millennials, the channel to help you crush your debt and live payment free. This video is being sponsored by Capitalize. Capitalize can help you roll over your old 401k into a new IRA, but more on that later. So this idea of financial minimalism, it came to me as I was perusing YouTube, looking at decluttering videos and organization videos. Kyle says I'm kind of obsessed with it and he rolls his eyes big, but let me tell you, it brings my heart much happiness when things are clutter free and I can donate things to goodwill and just be done. And so I was thinking, how can I apply this same mindset to my finances to make sure that I am not cluttering my finances with unnecessary investments, fees, or paperwork? So there are nine key areas where you can start minimizing all of the negativity that might be surrounding your current financial situation. The first area that I think a lot of you will think of when it comes to financial minimalism is debt. This is definitely the area that I addressed first when it came to financial minimalism for my life. Now I addressed my debt right after college. So as soon as I got my student loan notification in the mail, six months after graduation, I was like, Oh crap, I need to come up with a plan. How the heck am I going to pay this off? So I really committed to just focusing in on that area. How quickly can I get rid of this debt so that I can simplify my life so that I can live in a high rise apartment that I can go out for sushi and cocktails and not feel bad about it. And also save for other important things like buying a new car, going on vacation, all of these things that really were important to me that I knew debt would hold me back from. So a great way to start this debt minimalism is to list out all of your debts in one place. I like to use my budget toolkit. This is the spreadsheet that's for free linked below that you can use to track your income expenses and also set up a tab where you can have a list of all of your running debts that you owe, including the name of the company, the total outstanding balance, the interest rate, and the minimum payment. Then you'll want to have a plan to pay it off. I've talked about those cold weather debt analogies. I don't know why they're cold weather, but debt snowball and debt avalanche. I will link to the video up here where I compare the two. So if you're going to DIY this, in other words, it's just you, you're not working with debt settlement companies, anything like that, you can actually pay this off in two very easy methods. Next are subscriptions. This is another area where you can minimize. So take a look at all of your subscriptions. Take a look at which ones are on auto renewal. Which ones do you love the most? Which ones do you use the most? Now this one actually got Kyle and I once, twice, but we had our master class subscription on auto renewal when we had full intention on getting rid of that subscription altogether. Then we saw the $180 annual subscription hit our credit card account. We're like, oh yeah, we forgot to delete that. So it's a good way to go back into all of your subscriptions. Take a look at what you have. There are certain apps out there that can help you do this, but take a look and figure out which ones you use the most often, which ones you love and which ones you can cut out. Next area is your investments. When it comes to your retirement, do you have a good blend of tax advantage and tax deferred accounts? Meaning you might have a 401k in which you can contribute pre-tax dollars. And do you also have a Roth IRA where you can contribute after tax dollars? And then when you go to withdraw money from that account during retirement, those withdrawals are tax-free. I think it's a great way to have a blend of both. And also speaking of retirement, if you have any old 401ks floating around, you want to make sure that that money is going with you and that money is benefiting you the most by being in the right and appropriate investment account. Let me tell you how Capitalize can help you roll over that old 401k. 401k rollovers historically have been tedious and intimidating. To say that the process is complicated is an understatement. Think about all the things that you have to do. You have to contact your old provider, sometimes contact the old employer, fill out complicated forms, sometimes even mail a paper check. It's a mess. That's where Capitalize comes in. Capitalize is an independent platform. So independent of any type of brokerage firm or investment company who helps you roll over your old 401k into an IRA for free. With Capitalize, you can let the experts do all the heavy lifting, easily compare your rollover options, do everything mostly online, and it's free. So why would you want to roll over an old 401k? Perhaps you don't want to leave it with an old employer. Plus that old 401k plan could have really high fees and limited choices on what you can invest in. Don't know where your old 401k is located? Capitalize uses proprietary technology to locate 75% of the 80 million 401k accounts in the US. Now Capitalize may make a referral fee based off of the IRA that you might choose that's listed on their website, but the choice is totally up to you. Look, there are 24 million forgotten 401k accounts that add up to $1.35 trillion. That's so much money. So don't let one of your old 401k accounts be one of those. Sign up for Capitalize for free using the link in the description box below. All right, the next area that you can clean up, anybody could do this today, is your discretionary spending. This is all the money that might be left over after you have paid your mortgage, your rent, your bills, and your debts. So any of that fun money. What can you clean up here and be intentional about spending? Now I did a whole 30-day intentional spending challenge. I will link to that video up here for you to check out, but I think this is a great way where you can challenge yourself for the next 30 days to see, okay, how am I spending this fun money? How am I spending my discretionary income that is making the most impact and also letting me live the life that I want to live? The next area that you can clean up are your tax documents. Now the IRS recommends to keep your tax documents for around three to seven years. So at the time of this video recording in 2022, that means it's okay to keep things as old as the year 2015. Anything older than the year 2015 at the time of this recording is pretty much safe to shred and get rid of while also protecting your privacy and your account information. Just reading this from the IRS, if you want to hold on to those paper documents by all means, but if we're talking about minimalism, another way that you could do this and the idea that I got from the LA Minimalist is that you can take pictures, and I think there are apps for this, where you can take pictures of physical documents on your phone and have them uploaded as a PDF into a cloud. So you can have that digitized. I think this is a great way to just make sure like you're not accumulating more file folders of paperwork that's just sitting there. The next area that you can minimize are your fees. Take a look at any bank fees that you might be paying unknowingly by going through your bank account statements and seeing exactly what's being deducted from your monthly statement. We used to get a dollar mobile e-deposit fee for doing mobile checks. Now that isn't the case anymore, but that was something that we were paying for. And it's like, is this dollar per month, $12 a year really worth it to us? You'll also want to take a look at investment fees, take a look at their expense ratios and any administrative fees that you might be paying throughout the year. If you are working with a financial advisor, like you have a dedicated person who is working on your investments, ask them, how much did I pay you last year? Can you give me a dollar amount? And then you'll actually know how much your financial advisor is charging you and you can make the decision whether or not to work with that person. And another area that you'll definitely want to check out are any credit card fees that you might be incurring. I'm not talking about credit card debt or carrying a balance. I'm talking about the fee to actually have the card. So this is something that I would like to clean up too, because I have a Southwest Rapid Rewards business card. And I thought my intent was that I would use it a lot to rack up points so that I could travel and get free trips through my business. Well, the pandemic happened and the truth is I really do not travel for my business at all. I really only travel just once a year, maybe twice a year. And I don't think that's enough to justify the rewards program that I am enrolled in with Southwest. And also there is a $70 annual fee for this credit card. And so I'm like, maybe it's time to look for a credit card that doesn't charge an annual fee and a credit card that I can get more out of. Next are your financial accounts. Your financial accounts, a great way to minimize and get started in this section is to consolidate any bank accounts, any multiple bank accounts that you might have. This is a great one to address if you are newly married or about to get married, talking about consolidating your bank accounts into one with your partner. Also an area that I need to work on here are your health savings accounts. I have two old HSAs that are floating around because you can take them with you, but I haven't actually like rolled that over into a new HSA and I'm not entirely sure how I can do that. So I need to figure that out, but consolidating your financial accounts is a great way to work on financial minimalism. Okay. Next category is insurance. A great way to minimize here in this area is to take a look at your car insurance. A lot of people like to pay the monthly car insurance payments because they can't afford the semi-annual payment at the time. But newsflash, if you start paying yourself monthly for that semi-annual payment, if you just set that aside in your budget every single month, then you'll have exactly the right amount of money to pay towards that semi-annual premium, which oftentimes gives you a big discount. And the last area that you can focus on are credit cards. Which credit cards do you use the most? Which one has been open the longest? Which ones have a balance? Those are definitely ones that you need to address first. And which ones have annual fees? Which ones are no longer serving you? I do recommend if you have the oldest card still active, I would recommend keeping that active to help boost your credit score just as long as it's paid off in full back to a $0 balance every single month. Be sure to check out Capitalize if you haven't done so already to help you roll over your old 401k. I will link to them in the description box below, and I'll catch you in the next one.