As I got older, obligations seemed to multiply. Life got more complex, and the myriads of the personal financial tasks I had to deal with left me stressed. Therefore I tended to avoid them. Guess what? My finances took a nosedive, and my spending spiraled out of control. It was when I got neck deep into consumer debt that I knew I had to do something fast. Determined to get my finances under control, I forced myself to start budgeting, tracking, and monitoring my finances. However, I didn’t make much headway until I adopted a minimalist approach to money management. It’s time to learn from my experiences – how to simplify your finances.
How to Simplify Your Finances: Save Time and Reduce Stress!
This post was written by Bernz JP – the blogger behind Moneylogue.com. BA in Accountancy, he entered the entrepreneur world by starting his first online marketing business in 2004. He’s passionate about personal finance, the stock market, and a digital marketing addict. He is also an avid golfer and a 15 handicapper.
If there’s one thing you can start doing today to manage your money better, let it be simplifying your finances.
- credit cards,
- systems, etc…
…makes it easier for you to get a grip on your money and help you keep more of it.
When your finances are organized, you’ll be on top of every aspect of your money. You won’t procrastinate endlessly when it comes to money management tasks because you have a system as smooth as silk.
On the contrary…
- working with a shabby disorganized personal finance system is complicated (and thus inefficient).
- Hence, you will tend to avoid it as much as possible,
- which will further entangle your finances,
- and possibly some of your hard-earned money may get lost in the intricate webbing.
Helpful tips for how to simplify your money
Want to learn how to simplify your money and get rid of as much complexity as possible? Of course you do! Let’s dive into the action steps below.
If you are like most people, you likely have too many accounts and investments scattered all over the place with different institutions. You may have opened several accounts and invested in mutual funds over the years and for good reasons too. You may have changed jobs several times and kept changing retirement accounts along with employers. Now you have a trail of various funds and accounts, which makes your finances needlessly complicated.
A better way is to consolidate your various accounts into a single checking account, and a savings account at a brokerage or a bank.
The advantages of this are numerous.
- Not only will you reduce the paperwork, you’ll also reduce or eliminate some fees.
- And with fewer accounts in one place, you can make decisions more easily and act on them faster.
For example, if you have a checking account in the same bank that gave you a mortgage, it could be free with no or little required minimum balance. Also, you are entitled to free checking accounts, zero annual account fees, and other benefits if you have your retirement accounts and investment accounts with one discount broker.
Another benefit to consolidating your accounts to one firm is that you can have an overview of all your accounts with a single sign on to the online banking portal. Since all your accounts will be linked, you won’t need to log into each account separately.
Consolidate your retirement accounts in the same way.
Rollover your 401(k) plans from previous jobs to a self-directed IRA account. This will help you easily and adequately manage your retirement assets.
When you have closed your surplus accounts and now organized your dealings with a firm or two, monitor the benefits available. This is because the firms offer excellent deals to attract new customers, but with time may not keep up with what is available in the industry. Always check to see what competitors are offering and negotiate better terms with your financial firm.
Creating a budget (and actually following it) is one of the best ways to simplify your finances. A budget helps you organize your financial affairs and track them easily. Creating and using a budget may seem like a lot of work, but it is key to being financially successful.
It even gets better: there are dozens of apps that help you…
- track, and
- manage your money.
Some of the top budgeting and personal finance software include:
- EveryDollar, and
- a whole lot more…
Choose an app that can connect to your bank accounts and download your transactions to it automatically. You won’t have to spend precious time entering the data manually. And reconciling your accounts monthly can be completed in 20 minutes or less.
With a good budgeting app, you can untangle your finances, track and reign in your spending, pay down debt, save loads of cash and invest profitably – all from the handy convenience of your smartphone.
Make use of technology to simplify your financial life by automating your transactions. Some of the tasks you can automate include…
- saving, and
- bill payments.
Start with the golden rule of personal finance – pay yourself first.
Automate direct transfers of a portion of your paycheck from your checking account to your retirement savings and emergency fund once your paychecks drop. Even if you have high-interest debts to pay down, contributions to your emergency fund and retirement savings should be non-negotiable.
Bills and expenses are also easily automated.
Charge recurring bills automatically to a dedicated card or account. That way, you won’t have to forget a due bill and therefore save money you would have otherwise paid in late fees.
- tuition costs,
- subscriptions, etc.
…are all bills that can be automated in a snap.
Automating bills will also save you time which you can dedicate to analyzing your finances.
With an automated bill payment system in place, you’ll easily track your spending too. Furthermore, you can generate and download this data into an accounting software like Quicken for in-depth analysis of your spending habits and patterns.
Automation is not limited to only bills and savings.
You can set up automatic deposits into your investment accounts periodically and into a mix of funds of your choosing. This will help you avoid the temptation to time the market.
Finally, when you buy investments with regular payments over time – a process, known as dollar-cost averaging, you diversify your purchase price. When you make equal dollar purchases over time, you buy more shares when the prices are low and fewer shares when the prices rise.
4) Limit Credit Card Usage
Credit card companies lure consumers with rewards and interest-free promos. But once the rewards and zeros interest rate elapses, your diverse collection of cards are often excessive.
However, the solution isn’t to close them.
For a good credit score, keep the card accounts open, but limit your usage to only one card. Research all the rewards program available for your cards and choose the one that offers the most benefits and stick to it. It is easier and simpler for you to manage expenses and payments with a single card.
Some people make certain types of purchases with a card that offers the highest reward for that particular expense. But they all likely come with a maximum number of reward points each year.
- Therefore, you can use each card to make purchases for which it offers the most rewards.
- Or you can exclusively use the card with the most benefits till you exhaust the annual reward limit. Then move on to the next card with great benefits.
While reward points are good, do not let them blind you to the annual fees and cost of the card. It won’t make sense to have card costs and fees that exceed the rewards.
- People who use their cards heavily could be better off with cards that charge an annual fee. This is because such cards are likely to offer better incentives and other benefits.
- While people who don’t use their card as much may want to opt for zero-fee cards, which usually provides fewer rewards and benefits.
5) Go Paperless
As much as possible, request for your account statements to be sent electronically.
- This way, you won’t have to process lots of mail
- And at the same time, you’ll minimize your environmental footprint.
- Some financial institutions will even waive fees if you choose to go paperless.
Sending mail electronically protects you from identity fraud, centralizes your business documents, and reduces the amount of paper you have to deal with.
Keeping track of all the paperwork – bank statements, receipts, investment reports, tax returns, etc, can be stressful. But if you opt to go paperless, your financial institution will let you access all your documents in one place once you log into your account. With just a click, you can dig up a transaction record from years back, you would never have to worry about looking for missing relevant paper documents
Also, you may want to create a digital file containing all your essential data and documents.
When needed, you can go online to view them or print them out if necessary. This will reduce the time you would have otherwise spent searching through musty file cabinets for that piece of mail that you may have or may not have kept!
Paper receipts are becoming a thing of the past. Most vendors offer electronic receipts for purchases that can be sent to your email. There are also several apps available to help you take pictures of receipts and store them digitally. These include
- Smart Receipts,
- Expensify, and
- Zoho Expense.
Simplify Your Finances – In Conclusion
Most systems become more efficient when you simplify the process. Managing your money in today’s world can be overwhelming.
When you have…
- mortgage payments,
- an IRA ,
- a 401(k),
- car loans,
- rent payments, and more…
…your natural instincts are to avoid handling them altogether.
But that is hardly the solution. Avoiding or procrastinating managing your finances is an invitation to disaster. With these money management suggestions, you’ll reduce the complexity in your personal finances, and ultimately gain control of your money without stress.
Are you ready to simplify your finances?
AUTHOR Derek Sall
Derek has a Bachelor's degree in Finance and a Master's in Business. As a finance manager in the corporate world, he regularly identified and solved problems at the C-suite level. Today, Derek isn't interested in helping big companies. Instead, he's helping individuals win financially--one email, one article, one person at a time.