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 vacation 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. 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.
Here are 15 action items you can use to help simplify your finances today.
15 Ways to Simplify Your Finances
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. 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.
11. 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.
12. 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.
13. 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?).
14. 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.
15. 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.
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.
