Over the years on the old FWF, I posted multiple topics on minimalism only to be shot down by most of the members. I understand that this approach won’t be for everyone, and that’s okay. The purpose of minimalism is to reduce clutter in your life to reduce the amount of time and focus you put on unimportant things.
On one hand, a “min/maxer” (to co-opt the term from video games) is a person who walks around with a dozen different credit cards in their wallet. One for gas. One for groceries. One for hotels. One for rental cars. One for office supply. etc. This person would have a dozen or more bank accounts so that when the interest rate went up 0.1%, he could ACH all his money into that account, constantly getting the best rates. If CD rates increased, he would have a spreadsheet showing all his outstanding CDs, and a running tab of early withdrawal penalties so it could be easily determined on a weekly basis if it makes sense to close a CD and deposit the funds elsewhere. He might do an IRA Horse Race, opening a dozen different IRAs each year, contributing the max of each into a triple leveraged ETF and then withdrawing all but the biggest winner as an excess contribution.
On the absolute other end of the spectrum, a pure minimalist might have a single bank account, single credit card, and that’s it. And to be fair, one could do better than 99% of the average American, if he knew what he was doing. For example, Capital One 360 MMF plus Capital One Quicksilver 1.5% credit card. Not perfect, but very good.
My goal is one of rational minimalism. Here’s some of the bullet points of the philosophy I would someday like to attain:
* Maintain the fewest number of relationships with banks as possible. Each relationship costs you in time and privacy. Every year you get a copy of each bank’s “updated privacy policy” and other nonsense documents. Each relationship is also a possible attack surface that could leak your private data.
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Maintain redundancy. If you only have one bank account, and it’s frozen or compromised for a short-term duration, it’s nice to have a backup to fall through so you’re not waiting in line at Walmart to buy a MoneyOrder to pay your electric bill.
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Maintain the fewest number of credit cards that give the highest reward potential across the fewest number of cards. If you don’t do MS or spend a lot of money at office supply stores, you don’t need a 5% office card. While you might get an extra $3 per year by using it, the goal is to reduce effort. Just use a 2% or 1.5% card and be done with it. If you don’t spend a lot on gas, you don’t need a dedicated 5% gas card. Etc.
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Be rationale about your minimalist approach. Consider average account length when closing some of your credit cards.
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Consider consolidating your investments into one or two brokerages max. Makes it easy to rebalance into your desired asset allocation because you won’t need to maintain spreadsheets.
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Consider maintaining at least one bank account that is nationwide like BOA or Chase, so you can show up in person even when traveling.
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Receive the fewest number of pieces of mail per year. Even though I have electronic statements set up, I still get dozens of snail mail letters each year. Every time one of my 20+ credit cards expires, I get a new one in the mail. I get a privacy policy update from each bank annually. 1099s all get mailed out, even if e-statements are set up. Even with marketing preferences set to 0, I still get some nonsense letters all the time from banks telling me things I don’t care about. I have to sort through all of this mail, scan some in, shred it, activate new CCs, update password aggregator apps with new CC security codes and expiration dates, etc.
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Make it simpler to trace your money. When you have 20+ credit cards and you need to track down a statement to prove ownership for insurance or tax deduction purposes, it’s a huge hassle. If all of your charges are on one or two CCs, it’s a breeze.
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Consider maintaining a relationship with a bank/credit union you already have, if you can reduce the mail down to nothing and avoid inactivity fees. For example, NFCU, NASA, PenFed, Alliant, USAA and others all have restricted membership. If you got in during some loophole window, it may be worth keeping open and forgetting about it. As long as they don’t send more than 1 or 2 pieces of junk mail per year and you can automatically set up your primary checking account to ACH in $1 quarterly to keep the account active.
My ultimate goal, which I have still not attained since I’m still in the planning phase, will likely involve 2 checking/savings accounts, 3 to 4 credit cards, and brokerage/retirement accounts at a single institution (Vanguard, Fidelity, Schwab, Etrade, etc).
The hardest part for me is giving things up. The feeling of missing out. I think in the end, I’ll be much happier with the simplicity even if it costs me a few hundred dollars per year in missed rewards.
