The modern lifestyle can be very chaotic and stressful. It is no wonder we are overwhelmed by our busy schedules, family responsibilities, and finances.
Money management can be complicated on all levels. Everything from budgeting, retirement planning, savings, investing, debt, and even types of insurance needed to be organized and managed.
I do not know about you, but I have found that often enough finances are in control of my life. I get overwhelmed with so many parts needed to be managed to keep my money goals on target.
Fortunately, there are many ways to manage money without getting overwhelmed. Learning how to organize and simplify finances eventually will help you stress less about money and focus on what is important in your life.
If you feel that your financial life is out of control, I encourage you to try one or two ways to organize and simplify your finances.
1. Organize financial paperwork.
It is hard to simplify your finances when you do not know where to find your financial papers at the last minute. And in case something happens to you does your family know where to find your important documents?
That is why the key to keeping your finances simple is to keep them organized in one place.
Collect all your bank statements, bills, legal documents, mail and set up a filing system in a way it suits you. The filing system should be simple and yet effective to keep track of your financial papers. I keep all my papers in simple manila folders and hanging file folders inside a 3-drawer file cabinet. All papers are divided into categories:
- Credit cards
- Tax returns
Once a year I go through all folders and get rid of everything I do not need anymore.
2. Track all financial accounts in one place.
It is hard to keep a track of everything you own if you do not have a system. If you want to simplify your finances, you should create a list of everything you own. Seeing all your financial information in one place will help you get a big picture.
Start the process by gathering your financial information in one place. This way you will see all your expenses, assets, debts, and liabilities at glance. Whether you want to list them down in a traditional ‘pen and paper style’ or create an Excel spreadsheet, call it “an inventory of your accounts”.
You can also do it with a personal finance app like Mint. This popular free online financial tool allows you to link all your accounts to get a real-time view of your financial life in one place. Also, this app helps you pay bills in one place, gives you updates on your payments, gets reminders on your due dates.
I personally use a combination of Mint and Excel spreadsheet and it works well for us.
3. Consolidate your accounts.
One of the easiest ways to simplify your finances is to consolidate your accounts. Many people still like to have multiple savings and checking accounts and keep money in several different banks. In addition to that, you may also have a mortgage, retirement and investment accounts, and insurance products. It is a lot to juggle.
I believe it makes your financial life is complicated. If you want to simplify your finances, you should keep your accounts to a minimum.
I even recommend closing your old accounts including your old retirement accounts. If you changed your jobs a few times, you might still have your 401(k) money with previous employers. And if you forget to roll over this money to your IRA or Roth IRA, you may even forget to track thousands of dollars invested in old retirement accounts.
Save yourself the headache of dealing with multiple savings and checking accounts by closing those that are not useful and consolidate them in one bank account. If you have fewer accounts to track, it means you have less hassle remembering logins, websites, and tracking your money.
4. Pay your bills automatically.
If you hate keeping old receipts and bank statements, you should take advantage of automation and go paperless. I personally do not remember the last time I mailed off a check to pay our bills.
There are many benefits of paying your bills online including convenience and security. By going online, you will not be using envelopes, stamps, and checks as much as it was popular in the past. Moreover, it will be easier to track your payments using a lot of tools like reports and alerts when you sign up with an online service. The best part of automation is to reduce the stress of money management and make it less complicated.
All our family bills are set up to be paid automatically out of our checking account. I just have to make sure I added money to that account before the bills are due. Even though I keep an eye on all our transactions, but I never have to worry about being late on bill payments.
5. Automate your savings.
Another great way to simplify your finances is to automate your savings. Learning how to automate your savings will help you stress less and save more. Every time we receive our paychecks, a lump of it automatically is going into our retirement accounts. Another portion of our income is deposited into our savings account and then the rest is going into our checking account.
We use our savings account for keeping our emergency fund money, and funds for future travels. The checking account is where we keep the money for our monthly bills and living expenses. I like to know that our income gets distributed in a few simple accounts. By automating it, I always know I am going to be saving a certain portion of our income each month.
Another great thing I like about automating our savings is that even a small amount of money will grow up over time. I started with a $50 automatic transfer from checking to savings account once a month, then increased it to twice a month. The automation really helped to raise our travel fund from $1,000 to $8,000.
6. Simplify your investments.
The simplest way to invest your money is through index funds. Index funds are low-cost and low-risk investments because they follow the market indexes. But you still have to deal with asset allocation and portfolio rebalancing.
If you are a new investor who likes hands-off investing experience, try using Robo-advisors.
I recommend checking out Betterment as a Robo-advisor.
Robo-advisors are known as online advisors or automated investing services. Robo-advisors are much cheaper than a human financial advisor. These online services make it easier for you to start working on your financial goals. You will get help with your investments at a low cost and with low account minimums.
If you want to learn more about Robo-advisors, I recommend reading What is Robo-Advisor and How Do They Work from Balance.
7. Pay down debt.
Carrying debt on a few credit cards makes your financial life stressful. When you face thousands of dollars in credit card debt you do not have enough money to save for retirement or to pay off your mortgage more quickly.
Set your financial goal to get rid of high-interest debt as quickly as possible. You can use recommended debt snowball or debt avalanche strategies to pay down your debt.
You can also reduce your monthly payments by consolidating your credit card debt. Consolidating a number of your credit card debt into a single one may be a good idea if the new debt has a lower percentage rate than your credit cards. It will help to reduce interest costs and make your monthly payments more manageable. One of the best ways to consolidate your debt:
- Refinance with a balance transfer credit card
- Consolidate it with a personal loan
However, it will depend on your credit score and how much debt you have accumulated.
8. Package all services in one place.
Consolidating your expenses in one or two places is another way to simplify your finances and save some money.
Many companies produce and supply multiple products and services. They sell these products or services separately or in packages or bundles, at a “bundle price”. As a result, you can buy them together as a package at a lower price than what you would pay for them individually.
You can bundle together services like your internet, cable TV, and cell phone. You can also package together with all your insurance needs with one company such as homeowner and car insurance.
The best part is that you can save money by getting a discount from your provider for combining two or more services on one bill. And you can reduce the number of bills to pay each month from several to just one.
9. Reduce the number of your credit cards.
Another way to simplify your finances is to get rid of numerous credit cards.
Once, we used to have nine credit cards and it was way too complicated to keep track of our spending. We used credit cards for promotional money transfers, to earn cash back, and other rewards. At some point, it became a nightmare to pay off those balances.
Eventually, we trimmed down the number of our credit cards to just a few. We prefer to use credit cards with no annual fee and cashback rewards. And we do not worry about high interest rates because we always pay the balance off in full each month.
If you want to simplify your finances, it does not have to be complicated. Just making small changes as I have described in this post can make a huge difference in your relationship with money.
Do you feel frustrated dealing with your finances? How do you simplify your finances?
Remember to share this post if it helped you!