Last week, Experian asked a question on X: How can adopting a minimalist lifestyle contribute to achieving financial freedom and long-term wealth growth?
Many financial advisors and experts chimed in with answers:
- A minimalist lifestyle helps you enjoy the present–without all the clutter–and save money for the future. —Beverly Herzog
- There’s a clear correlation between intentional living and financial stability. By focusing on your personal values and what makes you happy, you can prioritize your spending, hold yourself accountable to your goals, and simplify your life. —Chloé Moore
- Adopting a minimalist lifestyle means less things to buy and more money for financial freedom. Spend less money on things that don’t mean as much in the grand scheme of things. —The San Diego Financial Literacy Center
All of which are wonderfully true.
I was alerted to the conversation when Experian graciously linked to my article on What Is Minimalism? to explain the lifestyle.
When I saw the chat, I thought it would be helpful to take a deeper, more specific dive into the question: How can minimalism contribute to achieving financial freedom and long-term wealth growth?
Because the answer might be even more exciting than you think. In fact, the specific answer of how minimalism can contribute to long-term wealth might even shock you.
But more than anything, I hope it inspires many to embrace a lifestyle of intentionally owning less. The life-giving benefits of owning less are significant and all-encompassing. But the long-term financial benefits are almost unbelievable.
According to my calculations (based on US averages), you can end with over $400,000 after just ten years of practicing minimalism. And if you live a minimalist life for 20 years? You can end up with $1.2 million.
Here’s how I get there:
By becoming a minimalist, according to my calculations, you can save $28,634/year.
Almost certainly, the actual specifics of your financial situation will be different than the numbers I am using here. But wherever possible, I chose to use US averages for my calculations.
Let’s look at some areas where minimalism leads to financial savings:
1. Reduced Spending on Non-Essentials
The average American spends $1,497 per month on non-essential items. This study, which I cite often, is from 2018—so it’s safe to say the number has increased since then.
To arrive at this number, a variety of categories were labeled nonessential, and I should point out that food/drink accounts for the top four expenditures: 1. Restaurants; 2. Drinks, 3. Delivery, 4. Eating Out for Lunch.
Does becoming minimalist mean that you never eat out or get drinks with your friends? Certainly not. But intentionality in our physical possessions does bring intentionality in other areas of life. So let’s keep the designation of this list and save on non-essential purchases.
You can save $18,000 a year by removing nonessential purchases.
2. Savings on Housing
Minimalism provides opportunity to downsize your living space. There are certainly lots of factors to consider in making a move other than the amount of stuff you own, but (from experience) I can attest that embracing minimalism resulted in our family of four downsizing to a smaller home—a move we have never regretted.
And the cost of housing, whether rent or mortgage, constitutes a significant portion of our spending.
Using us as just one example, we downsized the square footage of our home by 25% three years after discovering minimalism. The move cut our mortgage in half (although we also moved to a state with a lower cost of living).
But nationwide, as of June 2024, the national average monthly mortgage payment was $2,390. All things being equal, saving 25% each month by downsizing results in $21,520/annual savings. That seems like too high of a number to plug into our equation. So let’s compare rent rather than mortgage.
The average rent difference between two-bedroom and three-bedroom apartments in the US is $407 per month or $4,884 per year, as reported by Apartments.com. Let’s use that number.
You can save $4,884 a year by moving into a smaller home.
3. Lower Utility Bills
Smaller living spaces tend to use less energy, leading to lower utility bills.
According to Home Guide, the average monthly residential utility bill is $550. By minimizing your space, you might reduce this cost by 25%, saving you around $1,650 a year.
4. Reduced Maintenance and Repair Costs
The more items you own, the more things break and need repair. And the larger the home, the more expensive upgrades become. A minimalist lifestyle allows you to save on these unexpected expenses by owning fewer things.
Homeowners in the USA spend, on average, $6,000 on repairs and maintenance each year.
A conservative estimate might be a 10% saving on maintenance and repair costs, which averages to $600 a year.
5. Reduced Home/Renters Insurance
The average homeowner’s insurance cost (July 2024) in the US is $2,230 per year. Continuing with the cost savings of living in a smaller home, let’s assume you can save 20% of that amount each year. That is $450/year.
6. Savings on Clothing
The average American household spends $1,500 on apparel each year.
With a minimalist approach, you can cut this in half by only replacing worn-out clothing rather than expanding your wardrobe, saving around $750 per year.
7. Food Waste
Planning meals, shopping with a list, and avoiding impulse buys at the grocery store aren’t necessarily considered part of a minimalist lifestyle, but all of those healthy habits accompanied our decision to own less. Intentionality in our shopping habits elsewhere naturally spilled over to the grocery store as well.
According to some estimates, the average American family of four wastes about $1,600 worth of food each year. By adopting mindful shopping and eating habits, you could significantly cut down this waste and save money.
Becoming more intentional with your meals and grocery shopping, you could likely cut that down by 25% saving $400 per year.
8. Gifts
Minimalism doesn’t mean you stop celebrating special occasions or giving gifts. But minimalists usually embrace a more thoughtful approach around gift-giving seasons.
The average American family spends over $2000/year on gifts. By agreeing with friends and family to limit gift-giving to necessary items or experiences, let’s assume you can save $500 per year.
9. Debt Repayment
The average credit card user pays $1,657 in credit card interest every year. Spending less money on things we don’t need is the first step to overcome credit card debt.
By adopting minimalism and using the newfound savings to pay down debt, you’ll save that expense.
Let’s not assume you’ll get out of credit card the first year you embrace minimalism, so I’ll plug in a $1,400/year savings.
Total Potential Savings
Adding these up, the potential annual savings of becoming a minimalist could be around $28,634.
Again, this number might be more or less depending on your personal circumstances, but it gives you an idea of how minimalism can have a positive impact on your financial situation.
*There are other categories of items that I could include in this list but did not: luxury goods, home goods, home decor, car payments, toys, hobbies, etc.
But the Math doesn’t end there.
Your Savings Reinvested
If you were to invest that $28,634 ($2404/monthly) into a fund that moves with the market ($VOO) and earn an average 7% rate of return, after ten years, you’d have $395,592.54 saved.
And if you lived a minimalist life for twenty years and invested every dollar saved, you’d have $1,173,782.94 in savings.
General assumptions and comments about how minimalism can change your financial future are helpful and true. But the specific numbers are even more convincing!