Do you feel as if you are in control of your finances or are they in control of you? Managing your finances can feel like a lot of numbers and paperwork. You earn X amount of money, you spend Y on your rent or mortgage payment, Z on food, etc., etc.
You can make this process much easier by simplifying your finances. And this doesn’t necessarily mean always choosing whichever option saves you the most time and effort. It’s cutting out everything in your life that is between you and whatever you’re passionate about. At heart, radically simplifying your finances means exploring, learning what works for you, and getting rid of everything else. Here are eight tips that could help you seriously simplify your financial life.
Pick one financial goal and focus on it
Are you juggling a bunch of financial goals at the same time ike creating an emergency fund, saving money for retirement, for a down payment on a house, to pay for your kids’ college … and more? Stop doing this and focus on one goal at a time. If your problem is your debt, tackle it. Achieving whatever goal you focus on first will give you momentum to go on to your second goal, and so on.
Cancel your credit cards
This one may be tough but you need to cancel your credit cards, and then burn or shred all the paperwork related to them. This will reduce the risk of having your identiy stolen, you’ll have fewer financial accounts to worry about and less miscellaneous fees. Most importantly, your credit reports and your credit score should improve. If you just can’t bring yourself to cancel all your cards then freeze them in a block of ice. That way you won’t be able to use one unless you run into a true emergency.
Contact as many of your vendors as possible and authorize them to provide online billing. For important paperwork, scan and keep digital copies. Depending on where you bank, you may be able to download your statements in electronic form. Going paperless should also reduce your junk mail, which will be good for both the environment and your sanity.
Batch your bills
The idea here is to contact your vendors and your lenders and arrange to have all your scheduled bills due the same day of the month. You should even be able to do this with your student loans. If you have only one due date a month it will be much easier for you to remember it, and will eliminate the possibility of being late or missing a payment.
Automate everything you can
You should be able to arrange to pay your bills online – either through your vendors or via your bank. Have your paycheck direct deposited to your checking account. However, it’s best to not automatically pay all your bills. It’s better to main control of authorizing the payments each month. This way, you’d be able to review your bills and see if there are any erroneous fees or changes in your service. There is actually such a thing as too much automation.
Always budget using last month’s income
There are three reasons why this is an effective solution. First, it can solve your budgeting problems if you have irregular income. Second, it makes you feel sort of like you’re a month ahead of your bills, so that you have at least a small cushion. And it works with zero-sum budgeting. which is where you allocate every dollar to some specific category at the beginning of the month.
Create an emergency fund
This is the most important thing you can do for peace of mind. If you don’t have an emergency fund, you have no idea how much stress this will eliminate if you create one. You can think of it as just another form of insurance. Don’t worry about the interest the money earns or about optimizing it. You just want to have it there when you get hit with an unexpected financial emergency – and you will eventually get hit with one.
Cancel all your subscriptions
Subscriptions, particularly the small ones, can creep up on you. That $2.99 for American Greeting Cards may not seem like much until you add it to the $9.99 for Netflix, the Dollar Shave Club, $8.99 a month for panty hose, at al. Don’t pick and choose. Cancel all of them and then start from scratch. Be totally ruthless. Don’t re-subscribe to something, even if it’s free as as it’s just something else you’ll have to deal with.