How to Simplify Your Finances in 25 Sanity Saving Steps
We could all use a little more peace and simplicity in our lives, right? But, how much peace do you really want to experience? Could you perhaps save a little bit more for that vacay you’ve been wanting to take for a little breather? Could you maybe simplify your finances to help you save?
Computers, phones and apps were developed with the intention of making life easier, yet somehow, they seem to have added to the clutter. Only now, we have virtual clutter in addition to the actual things lying around our personal space. It has become easier than ever to get bogged down by the details, and buried in the many options available to use throughout our daily lives, making the achievement of our ideal life just a little bit harder.
If you have ever created a vision board, you might be familiar with the basic approach, which is that you look through magazines for pictures of anything that makes you happy and brings you joy. When you put those things together on a piece of poster board, you will have unintentionally created a vision of the things most important to you. The idea is to use this board to spark creativity and to help you focus in on what really matters to you in life, and filter out the noise.
This concept works for financial visions, as well. Consider this article your primer for creating a financial vision board. Ask yourself what parts of your life make you happy and bring you joy? Is it the daily latte you pick up on your way to work every day? Or those fabulous new shoes? Is it putting a bit of extra money towards your emergency fund or discovering a new mutual fund you might want to learn more about?
Only you can decide what truly brings you joy.
Here are 25 action items you can take to simplify finances and your life:
1. Clean out your filing cabinet
If you’re anything like me, you still have an actual filing cabinet with real paper in it. It probably weighs a ton and you likely never open it, let alone need any of the paper. Once a year, go through your filing cabinet and clear out the clutter. You will likely have a stack of paper that you don’t need to keep that can go right into the shredder.
2. Create a budget
It’s not uncommon for people to think that a budget equals restriction. In reality, a budget equals freedom. The more you know about what money comes in and where you send it out, the more mindfully you can make decisions. This leads to a feeling of empowerment with how you choose to spend your money. Heard of Tiller? It’s AMAZING!
3. Pay cash
Try this for a week: take the money you have budgeted as discretionary income and the money you have budgeted for gas and groceries. Put each amount in a different envelope. Put those envelopes in your wallet. Use that cash to buy food, gas, and incidentals throughout the week. This keeps you from overspending and helps curb impulse purchases. The peace of mind you develop from spending only what you know you have far outweighs any rewards points you might gain from using credit cards.
4. Increase your retirement contribution
It’s unlikely you will miss one percent of your paycheck. If you earn $50,000, one percent is $500. That’s a lot of money all at once, but distributed into 26 payments (assuming you are paid biweekly, 26 times a year), and it’s only $19 and change per paycheck. Contribute that money to your company’s retirement plan, and you are saving pretax dollars. This reduces the amount of income tax you will have to pay over the course of the year.
5. Up your retirement savings by 1%
If you’re lucky and get a cost of living increase, it’s likely around 3-4%. If you move 1% to your retirement fund, you still get a raise in your paycheck, you won’t miss the extra 1% that you never had at your disposal anyway, and now you also have more going to retirement. This is a way to save for retirement without feeling any pain in your budget.
6. Check your credit history
The three major credit bureaus allow you to check your credit once a year for free. Make sure you take advantage of this. Remember that knowledge is power. More than likely, checking the three reports won’t produce any surprises. But if they do, you’ll be able to jump on that sooner rather than later and have any issues corrected.
7. Use just one credit card
It’s easy to fall into the trap of using credit cards as your emergency fund. Please do not do this. The interest rate on those cards is high. You will pay a premium for not planning ahead. Credit cards are necessary and advisable sometimes (for example, there are insurance benefits with some cards when you book travel with the card), but always treat them like cash. Use one card, and then log into your account and transfer payment from your checking account right away. You won’t regret staying on top of your credit card bills.
8. Call your utilities and service providers
Once a year, call your cable company, internet service provider, and phone company. Ask them what new rates or promotions they are running and if you can participate and take advantage of the lower rates. Be honest and polite. Tell the customer service rep that you are calling to see what options are available to lower your rate. You might be placed on hold a bit while the rep determines what he or she can offer you, but the 10-15% savings you will likely net from the call make this an hour well spent.
9. Call your insurance provider
Your next phone call should be to your insurance provider(s). Most insurance products can be bundled together under one account for a discount. While you’re on the phone, ask them what options are available for you to save money on your plan(s). It can be worth it to place a call or two with a competitor in advance of this call so you armed with knowledge of what insurance levels and costs are competitive, and then ask your existing provider to match them.
10. Start a fitness plan
Note that I did not say to sign up for a gym membership. Exercise is cumulative, so every extra flight of stairs you scale, every walk you take, every sit up you do adds up to contribute to your overall feeling of wellness. The better you take care of your physical health, the better able you are to care for your financial health. You will make better decisions, enjoy better health (and fewer medical bills), and have a clearer, more mindful outlook.
11. Drink more water
This goes hand in hand with the need for a fitness plan. Water is perhaps the most important substance that your body needs. Staying hydrated and refreshed helps clear your head. A clear head leads to sound financial decisions and greater happiness. Plus, water is free.
12. Cut services
Do you really use that cable bill enough to justify the expense? If you use a streaming service like Netflix or Hulu, and if you have a streaming box, like a Roku or Apple TV, you likely have all the programming at your fingertips that you could possibly want. Subscriptions to a streaming service gives you more control over what you watch, without forcing you to pay for the 75 channels that you never watch. If you find you miss cable, you can always re-subscribe, and will likely score a low new or returning subscriber rate.
13. Cultivate peace
A cluttered home or office is often a sign of a cluttered life. Work on removing that clutter. Make it a habit to recycle your mail on a daily basis, clean out your closet and donate the things you truly don’t wear. Purge the shoes that hurt your feet. Sort through that pile of stuff that accumulates on the kitchen counter. You know which pile we mean.
14. Automate a small investment
Start by doing a quick web search for reputable investment firms (or check with us for some recommendations). While many firms require a large (~$1,000) initial investment, there are some that allow you to start with smaller amounts. Set up automated investing so that $50 a month goes into this account. Then, forget about it. You will not miss an extra $50 a month. Over time, that automatic monthly contribution will add up to a nice little bonus savings account.
15. Have fewer goals
How many people do you know have lots of side projects happening all of the time? They get pulled in so many different directions that they aren’t able to focus on any one of them for any length of time. As a result, they are a jack of all trades but a master of none, and are tired and distracted to boot. Instead of the “fire, aim, ready” approach of trying lots of different side gigs and hobbies and projects to see what sticks, work on the “ready, aim, fire,” approach instead. Really consider how you want to spend your time, and know that it’s okay to have – and enjoy – free time.
16. Stop looking at screens
For the love of all things sacred and holy, stop staring at screens all day long. Did you know that the average American looks at a smartphone for more than half of their waking hours? Think about that for a moment. Think about all of the things you could do with your time if you weren’t staring at a screen. Go outside. Take a walk. Read a book. Pick up a pen and draw or doodle. Give yourself the opportunity to get bored. See what comes of it.
17. Reduce subscriptions
Subscription boxes are all the rage right now. It’s like getting a present in the mail every month, and who doesn’t love to get presents? The catch with these boxes is that they are impulse purchases in disguise. They make it easy for you to return the items, but they also know that most people won’t. It’s easier to hang on to an item in hand and to rationalize keeping something we don’t really need than it is to send it back. That $30 here, $15 there, adds up quickly to a closetful of stuff we don’t really need, and money spent that could have gone to something we wanted more.
18. Pay bills online
But keep getting the paper statements. It can be too easy to miss one email or calendar alert among many, so paper statements that you have to physically shred and recycle once you have paid the bill can help keep you on track. But save yourself a stamp and the possibility of payments getting lost in the mail and racking up late fees by making payments online with a credit card (that you will then immediately pay off by bank transfer, right?).
19. Use target date funds
Many people think that investing requires research and experience and education, when in fact, investing is as simple as setting up a recurring payment in a money market account. Give us a call for recommendations on how to find the right fund for you or do some research of the bigger investment firms. They have solid reputations and a great variety of funds from which to use. Most of the bigger investment houses have what are known as “target retirement date” funds. Choose the bracket that targets the year when you will most likely retire. For example, if you are 30 years old and plan to retire at age 65, choose the 2050-2055 fund. It’s balanced to become more and more conservative the closer to retirement you get.
20. Consolidate your bank accounts
Stop banking here, there, and everywhere. It’s easy to lose track of your finances and a bit maddening to log in to various places all the time. Plus, you consolidate what little interest you earn by keeping money together. Some banks give you higher interest rates on larger balances, and every penny earned adds up. Many financial institutions will consider your money forfeit if the account has been inactive for a set period of time. Don’t give away your money.
21. Pay someone else
Sometimes, you really do have to spend money to make money. There are a few areas in life where hiring a professional can actually save you a lot of money in the long run. A good accountant is worth his or her weight in gold, especially if you own real estate or have a side business or a lot of assets. A good financial planner can help you create a budget, an investing plan, and a plan to attack your student loan debt. Depending on your situation, it might be worth the time back in your life to hire a landscaper to tend to your lawn and garden, or even a professional organizer to help work through the clutter in your home.
22. Stop signing contracts
If you would like your fitness plan to include time at a gym or fitness center, do not worry. There is room in a simplified financial life to enjoy these things. One strategy is to seek out fitness centers that charge per class. They typically offer a discount for classes bought monthly in bulk. Check your local adult education or community center for low cost fitness classes. Your local community college or hospital likely offers low cost classes on a seasonable basis as well. This way you can try new things, and spend much less than you would on a traditional gym membership.
23. Something in, something out
For every new item you bring home, plan to throw out, recycle, or donate one item. Or, go crazy and eliminate two items per week. Adopting a more mindful approach to the acquisition of things will help you simplify your choices and save money without even trying.
24. Think used
Embrace the concept of a used car. This is a tough one for many people, because a new, fancy car is often associated with prosperity. Once you let go of the car as a status symbol, the effect is very freeing. You will revel in the money saved from the high cost of premium gas, more expensive parts and labor on repairs and maintenance, and higher insurance premiums, not to mention the money you’ll save on the monthly payments alone.
This is a tough one, but a very important tip: be mindful of where you get your financial advice. Everyone you ask will have an opinion on how to save money, how to spend money, what you should do to earn more money, and so on. You will get a lot of noise this way. Filter it out by discussing financial matters with a select few trusted associates.
Enjoy your new, simplified financial existence
Managing money is more than just dollars and cents, it’s a philosophy of life. How you approach your daily choices and set your priorities spills over into how you handle your money. The more streamlined and uncluttered your life, the more streamlined and uncluttered your finances.
No matter what your financial situation or how big your debt, know that this is not an insurmountable burden. You can take control.