Do you ever feel like life gets a too complicated? Whether it’s related to personal finances, or not, there are all kinds of things that can make life hurried and complex. It can be quite exhaustive at times if we don’t slow down and and try to simplify. Complexity is typically the result of trying to do too much in too little of time.
Fortunately, personal finance is an area that we can take some immediate action to become more efficient with time. But, make no mistake, managing money wisely does require some work. There’s just no getting around it.
I haven’t done a post on simplifying your personal finances, so I thought I would put a few ideas together based on my experience. I tried to keep this post to just 10 solid ideas that are in no specific order. Why just 10? Well, I thought listing too many might over complicate things. And we’re trying to simplify, right? Also, with only providing 10, I’ve left the door open for you to provide your favorite tips.
10 Ways to Simplify Your Finances
1. Use online bill pay
Most banks or online budgeting software offer online bill pay features today. It’s been several years ago that I started paying all of our bills online. What used to take an hour (sometimes more) to write checks, stuff them in the envelopes and mail them, now takes just a few minutes. Tip: if you use personal finance software, such as Mvelopes Personal, you may find a built in bill pay feature. With the Mvelopes bill pay feature, I can pay bills out of any of my accounts. Obviously, in using one bank’s bill pay feature, I can only pay bills out of that account.
2. Create a financial file system for documents and papers
Our financial file system was adapted from the Finish Rich File system by David Bach. It has saved me plenty of heartache by providing a quick easy way for me to store all of our important documents. The approach here is to avoid the pile of papers on your home desk each week. I’ve recently converted from a metal file cabinet to a smaller portable storage file for filing paperwork I receive in the mail each week. The idea here is to file as you go and don’t let the papers pile up!
3. Sign up for electronic delivery of bills and statements
Most of your bank accounts, brokerage accounts and service providers have the ability to delivery all of your bills and statements electronically. This is quite nice if you pay attention to your email. It saves the environment, but also helps you avoid organizing paperwork at home. If you ever need to review a bill or statement, you can check the online archive after signing into your account. Note: make sure you’re able to review 1 year’s history before signing up.
4. Create a monthly spending plan
You probably knew I was going to go here. Having a budget, or spending plan for your money, as long as it’s not overly complex, helps determine in advance how your money will be allocated for the month. Also, determining spending decisions in advance of the month helps avoid emotional spending decisions and conversations with your spouse later. I’ve always looked at having a monthly plan as a road map to the larger goals I’ve set for the year and beyond.
5. Reduce categories for your monthly spending plan
This one is very important and I’ve learned the hard way. Having a plan for your spending is important, but don’t over complicate it. The more spending categories you create, the more you have to track spending to them. Remember, you’re not a public accountant for a business, so just keep your tracking simple. If it’s not, you won’t do it and cash flow management is critical to staying on track with spending each month. Tip: Start with these 10 simple categories: housing, food, auto, insurance, debts, entertainment, clothing, savings, medical, miscellaneous, investments, school/child care.
6. Roll over your 401k’s and consolidate other investment accounts
If you have 401k’s from past jobs it’s much easier to manage them and review results while under one financial institution. While it may take a little bit of time to set up 401k rollovers it’s well worth it. I just recently went through this process and it wasn’t so bad. Now I just log on an review all my accounts in one place. If I need to make any future changes, I can go to one institution and talk to them about making those changes.
Tip: Also, review how many checking and/or savings accounts you have open. Generally, more than 2 savings accounts or 2 checking account becomes a lot to manage. Consolidate these where possible!
7. Level pay your utilities
Consider setting up level pay for your utilities to help make budgeting for this expense easier each month. Just make sure it doesn’t tempt you to keep the house warmer in the winter and cooler in the summer resulting in increased spending. Why is this simplifying? Well, a budget or budget category that fluctuates each month can become more to manage. In the middle of winter or summer, you have to think about where the extra money will come from to pay the increased bill.
8. Own less stuff (including your house).
Clearly, the more things you have, the more time it takes to organize them, use them, play with them, look at them, etc. Try to purge your house of unused clothing and other items at least once per year. This is also a great opportunity to either make extra money by having a garage sale, or receive a tax donation by giving your items away. Just make sure you receive a giving receipt for any items donated.
9. Have an affordable mortgage
In talking about owning less stuff, it’s appropriate to include the mortgage in the conversation. The bigger your house, the bigger the bills and the more work associated with maintaining it. If you’re looking for a new house this year, make sure it’s affordable, within your budget and don’t take on more home than you really need.
10. Prioritize your personal finance to do’s
I will typically keep a list of personal finance to do’s such as update our will, file income taxes, change to electronic billing, etc. But I’m realistic to know there isn’t any way possible all of these things are going to get completed in one day. Having a list of to do’s is good management. But also schedule when those to do’s are to be completed so that you’re not overwhelming yourself each day with them. It’s just too difficult to get everything done in one day (or week) sometimes.
I’m sure I’ve brushed the surface of ideas to simplify your personal finances. What’s your favorite idea either from this list or another tip you have to share with other readers?