Interested in simplifying your financial life? You’re not alone. After all, most people’s finances are too complicated. As a result, other parts of their lives get affected.
Procrastination and stress are the results of a messy financial life. Your financial security, independence, and peace of mind can increase when you simplify your finances.
In order to spend more time and energy on what truly matters in life, here are 26 tips for simplifying your financial life.
Like frosted tips and Beanie Babies, paper bills should be relegated to the 1990s.
By going paperless with your bills, you can reduce clutter around the house — and even save some trees All the companies that you do business with make it easy for you to opt for electronic billing. This includes banks, credit card companies, cable TV providers, cellphone companies, and insurance companies. As a result, they sometimes offer bonuses, gift certificates, sweepstakes prizes, and other incentives to customers who opt for paperless billing to save money on stationery and postage.
On the other hand, some companies charge you for paper statements. If you receive bills via snail mail, you could be paying between $2 and $10 for the unnecessary privilege.
If you would like to opt out of receiving paper statements, you can log into your online account and go to the settings menu. Instead of receiving paper bills, enter an email address where you’d like to receive e-bills. That’s all it takes, and if you ever need a hard copy, just print it out.
2. Automate your bills.
When possible, set up auto payments to simplify your finances. All of your monthly bills, from credit cards to utilities to insurance to loans, mortgages, and even rent, can be put on autopilot.
Moreover, late fees and late payments won’t be an issue. That might seem like a priority. However, late fees typically range between $25 and $50. In addition to increasing account balances, late fees can negatively affect consumers’ credit scores as well.
By entering your bank account information on the website of the service provider, you can often set up automatic payments for your bills.
What happens if a business does not offer automatic payments? In your checking account or via your bank’s mobile app, you can set up recurring payments.
3. Bank and retirement accounts should be consolidated.
Having one checking account and one savings account is sufficient for most people. It is a good idea to consolidate your various accounts into one checking account and one savings account if you have more. After all, do you really need 2 savings, 3 checking, and 4 separate retirement accounts? Your banking will be simplified without sacrificing service levels.
Similarly, retirement accounts are subject to the same rules. As a result of previous jobs with 401(k) plans, you may have several 401(k) plans you would like to roll over into a self-directed IRA account. Besides reducing paperwork, this will also eliminate account fees, and make managing your retirement assets more convenient.
4. Create a 50/30/20 budget.
The purpose of a budget is to show how you can spend your money from month to month. Creating a budget will help you keep your finances in check every month. You can also save money with a budget for your goals or emergency expenses.
Thankfully, you don’t have to create an overly complicated budget. Case in point, the 50/30/20 budget.
This simple budget rule, popularized by Senator Elizabeth Warren, is a great place to start for those just beginning to learn how to budget. The plan appeals to everyone who wants to pay their current bills, pay down debt, and start saving for the future at the same time.
Simply divide your income into these categories;
- 50% is spent on necessities
- 30% for wants
- 20% goes to debt repayment and savings
Another benefit? It’s flexible enough to allow you to use different variations to meet your specific needs. The 80/20 rule, for instance, can be tweaked for a stripped-down version. 80% of your income goes toward essentials and luxuries, while 20% is saved.
5. Redefine “enough.”
Do you have everything you need or want? Does your life have “enough”? As a society, we are taught to believe that we deserve more because we are socially persuaded that we need it. In order to keep a possession current, relevant, and functional, you need to upgrade or update it regularly.
It’s assumed that the more you spend, the more comfortable you are. But are you really comfortable? Is it enough for you?
You can keep yourself sane by defining enough for yourself on a financial, physical, psychological, and moral level. Forget what everyone else thinks is “enough.” Stop keeping up with the Kardashians.
Repeat after me. You are enough.
6. Combine your insurance.
A single insurance company can provide you with both home and auto insurance, which can save you time and money.
“It’s easier to review your policies with one insurer and see at a glance if your limits and deductibles are appropriate for your needs,” Penny Gusner, consumer analyst at Insurance.com, told Kiplinger. Esurance, Progressive, and Safeco, for example, impose only one deductible for claims involving both your car and home if a storm results in a tree falling and damaging both.
According to Insurance.com, customers save 11.4% off the auto premium when they bundle their auto and home insurance together (9.6% if they bundle their auto and condo insurance, and 5% if they bundle their auto and renters insurance). There is usually a split between the two policies when it comes to the overall discount.
Bundling two or more policies, like life insurance or coverage for an RV, motorcycle, or boat, can result in a bigger discount. Insurers may partner with one another to offer bundled discounts and coverage they don’t underwrite. It’s important to keep in mind that bundling doesn’t always result in savings, so you should look for policies separately as well as bundled.
7. Maintain a one-in-one-out policy.
When you follow this policy, you will be able to control your spending, borrow (if possible) before you buy, and put an emphasis on experiences rather than possessions.
As an example, you need to get rid of one shirt when you purchase a new shirt. If you want to control your consumption habits, this rule of thumb is helpful. You should donate your old jacket if you purchase a new one. Try borrowing an occasional or seasonal tool instead of buying it if you need to buy a new one.
8. Knock down debt.
Eliminating high-interest debt is one of the best ways to reduce financial stress.
If you pay off even one large credit card or loan, it can ease your worries, as well as reduce your monthly financial obligations. Furthermore, you can use the money you would otherwise spend on debt to pay off additional debt or take that dream vacation.
Paying off debt can be accomplished by using a debt snowball or debt avalanche strategy.
By using the debt snowball method, you list your debts by size and then pay the minimum on any debt with the smallest balance while paying extra on the rest. You start with the smallest debt, then move on to the next. Your life can become simpler, and you may feel accomplished if you are able to pay off your debts in full.
In the debt avalanche method, you prioritize debts by interest rate, then pay extra money for the debt with the highest interest rate first, after which you pay the minimum on the remaining debts. As soon as that debt is paid off, you put extra money toward the next-highest debt. Using this method may take more time, but over time you will pay less interest on your loans.
9. Reduce your credit card usage to just one.
Credit cards are one of the best ways to earn rewards and take advantage of zero-interest rate promotions. As soon as the rewards and zero interest disappear, though, the cards are worthless.
Focus on one credit card for credit scoring purposes, but keep them open for other purposes. Put away the rest of them and choose the one that offers you the most benefits. A single credit card makes managing spending and payments much easier than five or ten.
10. Expenses should be paid annually or semiannually.
While some bills are recurring, you can eliminate some by paying them annually or semiannually.
Paying bills such as car and homeowner’s insurance every six months or once a year is an option. It is likely that you will qualify for a discount for setting up this kind of payment method.
With just two bills, you will have two fewer monthly payments to worry about.
It is likely that you will have to adjust your monthly and annual budgets in order to accomplish this. Even so, it’s always a good idea to review and adjust your budget.
Additionally, if you pay in advance for your home and car insurance, you will receive a discount. Most insurance companies offer discounts that range from 6% to 14% if you pay in full instead of breaking your bill up into monthly payments. By spreading out your payments, you will also avoid paying a monthly finance or service fee that some companies charge.
11. You can reclaim your time by unplugging.
As you know, getting rid of cable and your landline will save you money. In response, a growing number of people are streaming TV shows directly from television networks online and subscribing to more affordable services like Hulu or Netflix.
When you watch only a few shows anyway, or want to cut down on TV time, this is the way to go. In addition, landlines are becoming increasingly irrelevant as people use their smartphones to communicate and entertain themselves.
Consider this question: Which services aren’t necessary? By cutting the cord, you’ll be able to reclaim your time, while saving some money.
12. Hide your emergency fund.
Savings and checking accounts are typically held at the same bank. This may work for rotating savings goals like that expensive smartphone you’ve been eyeing or your vacation. However, it won’t help your emergency fund.
Emergency funds should not be easily accessible. Whenever you log into your online banking, you don’t want to see that large sum tempting you to use it “just once” for a non-emergency.
Don’t put it at your bank; put it elsewhere. An online bank or taxable brokerage account may offer money market accounts or high-interest savings accounts. In an ideal world, it would earn maximum interest while being available whenever needed.
Despite the rule that you should consolidate your accounts, your emergency fund is the exception. Don’t forget it, but keep it out of sight and mind.
13. Put your savings on autopilot.
Saving money can be highly effective when you set it and forget it. It’s convenient because you never have to remember to transfer money from your checking account to your savings account. In addition, you won’t have a chance to spend the money before it disappears from your checking account.
Setting up a recurring transfer from your checking account to your savings account each month — perhaps the day after your paycheck clears — is the easiest way to automate savings in just a few minutes.
It can be worth automating this task even if you are only able to handle a small amount each month. Regardless of what happens, your savings will accumulate over time since you will save every month.
14. Instead of investing in individual stocks, invest in funds
You can get rich investing in individual stocks, but it’s complicated too. Each stock in your portfolio needs research, purchase, tracking, and selling. In fact, the more you own, the more this resembles a part-time job.
If you invest in mutual funds or exchange-traded funds, you will avoid all that hassle. Actively managed funds rarely outperform index funds since they are very rarely diversified across asset classes. The tax return process for funds is also much simpler. It can also be costly to prepare taxes for individual stocks, since they require a lot of tax-related documentation.
15. Don’t spend money you don’t have.
This might sound harsh. Buying now, paying later and 12-month financing are scams. As The Motley Fool points out, BNPL can lead to overspending on items people could not afford otherwise if they had to pay upfront.
For some people, this can lead to excessive debt. Close to a third of BNPL users had difficulty making payments, resulting in them skipping a bill to avoid defaulting on their plans, according to the Consumer Financial Protection Bureau (CFPB). One in four Americans (22%) who use BNPL regrets their decision immediately and wishes they hadn’t signed up, as a result.
What’s the best way to get something you can’t afford right now? Save.
As you save and wait, you can research all of your purchasing options and find the best deal. As a result, I either discover a better alternative or realize that I don’t actually need the item.
16. Go used.
Don’t be afraid to buy used cars. New, fancy cars are often associated with prosperity, so this is a tough one for many people. Getting rid of your car as an object of status is a very liberating experience.
In addition to the money you’ll save on monthly payments, you’ll also save money on the cost of premium gas, repair and maintenance parts, and insurance premiums.
17. Streamline lifestyle practices.
What is the origin of your food? Do you gag at the smell of commercial cleaning products? Are you reusing and repurposing items, or do you toss them out?
Life should be made easier by convenience. The result is that you end up wasting money and damaging the environment as well as your own health by replacing products frequently. Get back to life basics by growing your own food and making your own cleaning products, for instance. In the end, you’ll be able to provide for your family in a way that’s rewarding and fulfilling, and it won’t take you much time.
18. Spend only with cash or debit cards.
Whether you’re looking for cash back or travel rewards, credit cards have tons of perks to offer. At the same time, credit cards provide plenty of temptation to overspend. According to USA Today, over 60% of credit card holders experience this issue. As a result, these cardholders are unable to pay off their credit card debt on time with their normal income, which leads to interest charges and increasing balances.
Putting your credit cards away in a drawer and spending only the money you have is the best way to pay off your credit card debt each month. For spending and budgeting, you could use the envelope system. Alternatively, you could set up a checking account for discretionary spending and use your debit card only.
19. Set fewer goals.
Having financial goals can be a great thing. Most of us plan to buy a home, pay for our children’s college, and retire. When you set too many goals at once, you can lose focus, and you won’t make any progress.
Focusing on just a few objectives at a time can be more effective. In order to achieve your retirement goals, you should start saving early. The sooner you start saving, the easier it will be.
Saving for a down payment on a house, paying off your credit card debt, or putting money aside to help pay for your children’s college may also be goals.
Your best chance of making progress may come from focusing your attention on just one or two specific goals. Best of all? After you achieve your first goal, you’ll likely be inspired to set and accomplish new ones.
20. Focus on what brings in the most income.
Multiple streams of income sound great in theory. But pursuing too many income streams can actually complicate matters. To me, having one primary and one secondary source at the same time is the best strategy.
As an example, let’s say you work a demanding full-time job, run a blog, dabble with freelancing, and drive for Lyft on the weekends. Decide which of these side hustles best fits your lifestyle, and focus on it. It is likely that you will achieve more success if you simplify your financial life.
21. Reduce the number of subscriptions.
There’s no denying the popularity of subscription boxes right now. The monthly subscription is like receiving a present every month, and who doesn’t like receiving gifts?
But, here’s the catch. This is an impulse purchase disguised as a box. Most people don’t return the items, so they make it easy for you to do so.
Keeping something you don’t need is easier than sending it back. So, while it may seem like a small amount, that $12 here and $25 there quickly adds up to an entire closet full of stuff we don’t actually need.
Don’t stop there, though. If you rarely use any subscription or service, cancel it. This could be a streaming service you never watch or that gym membership you never use. By removing them, you’ll simplify your life and save money. And, it is easier to manage your finances if you have fewer payments to make.
Thanks to tools like Trim, Rocket Money, and the Bobby App can can these subscriptions for you.
22. Don’t go big, go small.
Relocate or downsize if housing expenses are causing financial stress for you. After all, it might be possible to improve your financial situation by taking a similar job in a less expensive area. In general, if your total housing expenses, including rent or mortgage, insurance, taxes, maintenance, and utilities, exceed 40 percent of your income, then you may be in financial hardship.
Also, it’s easy to overbuy a house with credit if we leverage it to purchase a home. Buying a larger home means paying a higher mortgage, insurance, utility, and maintenance costs. Moreover, you’ll have to fill it with more junk.
Take a look at a smaller vehicle as another example.
Even though this is a big move, you may not need something that big if you own a large car or SUV. Besides being more expensive, it uses more gas, is harder to maintain, and is more difficult to park.
If you have a family, you don’t need to go tiny. But try to find the smallest car that your family can comfortably fit in.
23. Invest automatically.
In the process of paying off your high-interest debt, you might start thinking more about investing to build wealth. But what should you invest in?
Getting help from friends and family might not be as easy as you think. It is possible that they will tell you to invest in stocks or real estate, but not how to choose a fund or allocate your assets.
If you’re willing to accept algorithmic advice, anyone can now get free investment advice as well as automated investments and portfolio rebalancing. A robo-advisor may seem scary to novice investors, but the fact is that robo-advisors know more about investing than you do.
You should find a robo-advisor that fits your budget and wealth. Many offer free options, and all automate your investments.
24. Start a fitness plan.
Don’t mistake me for saying you need to join a gym. Exercise builds up over time. So, each step you take, every walk you take, every sit-up you do contributes to your overall well-being.
Furthermore, physical health contributes to financial health. With a clearer, more mindful outlook, you’ll make better decisions, stay healthier (with fewer medical bills), and make better decisions.
“One study showed that medical reasons may account for two-thirds of bankruptcies in the U.S. Even if that stat is skewed, we all know that medical costs can be really tough for the average family to handle,” Kate Underwood wrote in a previous Due article. “Keeping yourself healthy can prevent a ton of extra costs.”
25. Pay someone else.
Making money sometimes requires spending money. You can save a lot of money in the long run by hiring a professional in a few areas of life. In the case of real estate or a side business, or if you have a lot of assets, a good accountant is invaluable. Ultimately, a good financial planner can help you create a budget, an investing plan, and a plan to deal with your student loans.
You might consider hiring an electrician, plumber, or professional organizer to assist you with home repairs and decluttering, depending on your situation.
26. Say no sometimes.
Whenever someone asks you to do something that is not in line with your values, priorities, or time constraints, say no! Ultimately, it’s up to you how you spend your time and money.
However, if you say no to something, it doesn’t necessarily mean it’s for life. It could simply mean ‘not today.’ Keep in mind that every time you say ‘yes’ to one thing, you’re also saying ‘no’ to another. Think about what’s most important to you at the moment.
Why simplify your financial life?
Being intentional with your money begins with decluttering and simplifying. You should also be more mindful of what you consume.
When you declutter and simplify your home, you’re likely to be motivated to buy fewer items. This will help you maintain a clutter-free home. The more you buy, the more money you save, the more debt you pay off, and the more money you spend on purpose.
You can also keep track of what you have and find things more easily when you clear the clutter. If you avoid buying duplicate items or replacing things you cannot locate, you will save money.
As you simplify, you are able to spend your money more wisely. It also reduces financial stress by giving you a greater sense of control over your finances.
What are the benefits of clear financial life goals?
Oftentimes, people feel rudderless when their financial life goals are unclear, which leads to feelings of insecurity, anxiety, and scattered thinking, especially when planning for retirement.
Changing your mind through goal-setting is proven to change your brain. Furthermore, when highly motivated to achieve something, you begin to perceive obstacles as less important. The science also suggests you’re more likely to succeed if you keep regular track of your progress.
Are you ever done saving?
Simply put, no.
Expenses such as home maintenance, vacations, and special occasions gifts should be easily covered by your savings account from time to time, but not unexpectedly.
As well as regular savings, you need to pay off debt and replace your car’s tires in case of an emergency. Despite knowing these things will happen at some point, you should still prepare for them even though they may not happen at the right time.
What is the best way to evolve your financial strategy as your needs change?
There is no guarantee that everything will go according to plan, even with the best planning. It is natural for your life stage, preferences, and needs to change. Your financial plan should change when they do.
At one moment, you prepare to launch your children into adulthood at another. Then you’re taking care of your aging parents. As your journey evolves, your financial plan must adapt as well.
In order to avoid decisions that would jeopardize your most important previous or new goals, you can repeat scenarios that you conducted early in your planning. The best financial plans and processes adapt to you, not the other way around.
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Featured Image Credit: Photo by Anna Tarazevich; Pexels; Thank you!