Is it time for you to simplify your finances? Keeping track of your finances can be stressful. And when you’ve got multiple accounts and payments, it can be chaotic. Especially as we get older, our finances tend to get more complicated.
From 401(k)s to IRAs, multiple checking and savings accounts, mortgages, student loans, car payments… checking up on everything can be overwhelming.
And with so much to keep track of, it’s not uncommon to lose track of accounts, forget passwords, or even forget to make a payment. Which is one reason it’s a good idea to simplify finances.
So, let's discuss further why you should start simplifying finances and the steps you can take to do so!
Why should you simplify your finances?
Simplifying things is not just for your home! There are a lot of benefits to simplifying finances.
Money is easier to track
For one, when you simplify finances, it makes it easier to keep track of your money without making it too complicated. You'll essentially be aware of what money is going where.
Bills are paid on time
You’re less likely to forget to pay your bills, and reduces the amount of paperwork you’ll have to do every quarter or year. This can be especially beneficial come tax time if you have a complex tax situation and income that needs to be reported.
Less financial stress
Another benefit of simplifying finances is that it creates less financial stress. It’s normal to be stressed about money – in fact, 65% of Americans are stressed about money. Simplifying your finances won’t get rid of all of your money-related stress, but it can help alleviate some of the burdens.
Financial issues can be identified and addressed
And when you simplify your money, it forces you to face your financial issues head-on. This is essential if you’re trying to pay off debt, or simply want to become better about budgeting.
While it can take a little bit of work to set everything up, it can save you a lot of time and money in the long term.
How to simplify finances in 12 simple steps
If you want to simplify your finances, there are a number of things you can do. Here’s our list of the 12 ways you can simplify money.
Step 1. Consolidate your bank accounts
You don’t need a lot of bank accounts. Most people need just one savings account and one checking account. If you have more than one account, consider consolidating them. You’ll get rid of any unnecessary accounts without needing to sacrifice convenience.
There are some instances when it might make sense to have multiple accounts, such as if you want to take advantage of a high-yield savings account or put your money in a Certificate of Deposit (CD).
If this is the case, try to open an account at the same place you normally bank at. This makes it easier to apply and keep track of your accounts, as you can often access all of your accounts in one place if they are all from the same bank.
Consolidating all of your accounts to one bank is the easiest way to simplify money.
Step 2. Go paperless
Getting a lot of junk mail and having papers piled up on your kitchen table is one way to get overwhelmed. Instead, opt for paperless statements. Today companies make it easy to save trees by having all of your bills online.
You can get your TV, water, electric, mortgage, bank statements, and cellphone bill all online. In fact, you might even save money if you go paperless. Some companies charge a few dollars for sending out paper statements.
If you want to opt out of getting sent paper statements every month, log onto your accounts and go to the settings menu to make the change. And if you ever need a physical copy of the bill, you can always print it.
Step 3. Automate your payments
If you often forget to pay your bills, then automating your payments could be the answer. Not only does automating simplify finances, but it also helps you make sure your bills are paid on time.
Once you set up automatic payments, you won’t need to do anything. Your bank account will do all the work for you, leaving you more time to focus on other things. Not to mention you won’t have to stress about remembering to pay your bills every month!
Step 4. Have no more than one credit card
Americans have on average four credit cards, but if you’re using credit cards correctly, you should only have one. It can be tempting to sign up for rewards cards and get special deals, but those deals only last so long.
And once they are gone, you end up with a pile of plastic cards that aren’t doing you any good and may even be costing you in annual fees.
Not to mention that having more than one credit card could tempt you to spend more. Instead, just choose one card that has the best benefits for you.
Managing one credit card is much simpler than having five or a dozen. You’ll have one payment to worry about each month and only one card to think about when making purchases.
Step 5. Automate your savings
If you have a savings goal every month, why not automate it? Not only does automation help you simplify your money, but it will also help you set aside cash without having to think about it.
Instead of putting aside whatever extra money you have at the end of the month, pay yourself first. Set up a recurring transfer from your checking to your savings account for the same amount each month (ideally when you get paid).
Even if you can only set aside a little bit each month, it will slowly build up and help you build up your net worth.
Step 6. Automate your investments
Similar to automating your savings, you should also automate your investments if you want to simplify finances with ease. Set aside a certain percentage each month to have put into your investment account, such as your IRA or 401(k).
Many Robo-advisors make it easy to set up recurring investments. It’s even simpler if you invest in exchange-traded funds instead of individual stocks. Plus, funds are much easier to handle when it comes to filing your tax return.
Step 7. Get rid of your debt
Having a lot of high-interest debt like credit cards not only causes a lot of stress but can also make managing your finances difficult and eat into your bottom line. It can also make it difficult to plan for the future or save or invest properly.
Instead, focus on paying off as much as you can each month. You can use different strategies to pay off your debt fast, such as the debt snowball method, or the debt avalanche method.
Getting rid of debt is one of the best ways to start simplifying finances!
Step 8. Cut out any service or subscription you don't use
If you have a lot of subscriptions or services you don’t use, then cancel them if you are able to. This will not only free up extra money each month but also eliminate extra bills and paperwork.
Subscription services are great for businesses, but do you really need a sample box of makeup products every month? And do you need to stream from five different companies?
Do a deep dive to figure out what subscriptions you actually use each month. If you haven’t used the service at all that month, then chances are you don’t need it all.
Step 9. Close old accounts
Closing old accounts is another way to simplify finances. That includes old bank accounts, as well as retirement accounts. Instead, rollover your IRA or 401(k) into one account that you can keep track of.
If you rarely sign into your account and have forgotten the password, it’s maybe time to think about closing it. Having fewer accounts means having less paperwork and things to keep track of. Plus you’re less likely to forget that you have funds.
Step 10. Go cash only
Using cash might sound old-school, but it’s an easy way to simplify money. With credit cards and debit cards, you’ll need to keep track of receipts and payments. But with cash, you simply pay and move on.
It doesn’t work for everything, but using cash is a way to focus on how much you spend each month. Once you’re out of cash, you’re out. You can try out the classic envelope budgeting system.
Step 11. Keep track of your accounts in one place
One of the best ways to simplify finances is to keep it all in one place. There are plenty of apps that allow you to see all of your financial information in one place.
This can help you see the full picture – all of your debt and assets in one place so you can have a good summary of your finances.
It also will keep these numbers in a place that is easy to access, so you don’t forget an account or bill. Seeing your funds grow every month is also a good motivation to focus on your financial and savings goals.
Step 12. Focus on only one or two financial goals
If you have a lot of goals, you can feel lost and overwhelmed. This can cause to you stop focusing on those goals altogether. Instead, pick one or two to focus on over the next six months or year.
That can mean putting money aside for your retirement or paying off your student loans. Or maybe you want to save for a down payment on a house.
Whatever the goal, try to keep it simple. This will make you more likely to reach your goals. And you can always change your goals in the next six months or one year if you find your circumstances have changed.
Simplifying finances by limiting your goals will help you stay focused and motivated.
Simplify finances and free up your time today!
When you simplify money, it frees up your time to spend on other things. And it helps you figure out what your financial goals are.
By simplifying your finances, consolidating your accounts, getting rid of debt, and automating your investments, you’ll have to spend less time and energy managing your money and can instead focus on other ways to accumulate your wealth!