It may feel like there’s nothing easy about money. The older you get, the more obligations you may have. Between checking, savings, 401(k)s, bills, loans, mortgages, and more — it can be a lot to keep track of and manage.
If thinking about your finances causes you to feel stressed and/or you find yourself putting off important financial decisions, it may be time to simplify. While streamlining your personal finances can take a little bit of time and effort in the short term, it can end up saving you time, effort, as well as money, over the long haul.
Here are seven simple moves that can help you manage your money more efficiently — and more effectively.
Key Points
• Automate bill payments to save time and avoid late fees.
• Opt for paperless statements to reduce clutter and easily access documents.
• Consolidate multiple accounts to minimize fees and simplify management.
• Focus on one or two financial goals at a time for better progress.
• Use the debt snowball or avalanche method to pay off debts efficiently.
1. Automating Your Bills
One of the easiest ways to simplify your finances is to set up auto payment whenever possible. Putting all of your bills — including credit cards, utilities, insurance, loans, mortgage, and even rent — on autopilot can save you significant time and hassle each month. Plus, you won’t have to worry about late payments — or late fees.
You can often set up automatic payments for your bills by going to the website of the service provider and inputting your bank account information.
If a business doesn’t offer an automatic payment program, you may be able to set up a recurring payment through your bank by logging in to your online bank account or using your bank’s mobile app.
2. Going Paperless
A major culprit of personal finance-related headaches is paperwork. Keeping track of the many documents — all those receipts, investment reports, bank statements, tax returns — can be a struggle.
Many services allow you to opt-in to a paperless experience instead. You’ll typically have access to all of the documents when you log into your account. And, with everything just a click away, you won’t have to worry about finding misplaced paper documents.
If you’re interested in next-level financial organization, you could even set up a digitized archive of your important information and files on your computer or an external hard drive, so you never have to spend hours searching through file cabinets and miscellaneous envelopes.
You can also reduce physical — and mental — clutter by taking advantage of the many retailers and service providers that offer email, rather than paper, receipts. Or, you may want to consider getting an app that scans, organizes, and stores receipts.
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3. Consolidating Accounts
Whether you’re married with three kids or single with two Labradoodles, there’s a good chance that you have more financial accounts than you need. Consolidating multiple bank accounts into just a few can help simplify your financial life. In some cases, it can also help you save you money.
If you’ve done a lot of job hopping in your career, for example, you could have multiple 401(k)s floating around. When you leave a company but don’t roll over your 401(k), you’re often subject to fees that your employer may have been covering while you were employed.
By rolling your 401(k) into an Individual Retirement Account (IRA), you may be able to minimize fees. Another plus is that you may be able to merge your IRAs and have all of your funds in one spot. And, you may be able to select from a wider selection of funds and investments than the ones selected by your previous employer.
If you have more than one checking or savings account, you may want to see if you can pare it down to one of each. They don’t necessarily have to be under the same roof. You can typically link your accounts even if they are at two different banks, such as a checking account at a traditional bank and a high-yield savings account at an online bank.
You may also want to look at bundling your insurance policies. Many companies offer substantial discounts if they write both your auto and homeowner’s policies.
4. Using One Credit Card
If you signed up for a variety of credit cards, chasing the promised rewards they offered, you may have racked up more than a few credit accounts.
To make it easier to keep track of your spending, you may want to pick the card that offers you the most in return, whether that’s cash back, travel rewards, or other perks, and focus on using only that credit card.
By putting everything on one card, you’ll only have one credit card bill to pay each month, a single statement to monitor for errors and fraud, and one rewards program to track. Plus, you won’t have to think about which card to pull out whenever you’re making a purchase.
Rather than canceling your other cards (which could negatively impact your credit), you may want to just store them away in a secure place.
5. Knocking Down Debt
One of the most effective ways to reduce financial stress is to get rid of high-interest debts.
Paying off even one sizable credit card or loan can not only ease worry, but can also reduce the number of financial obligations you have to deal with each month. It can also free up money that you can then put towards something else, whether that’s getting rid of other debts or something fun like a vacation.
Two common strategies for paying off debt are the debt snowball and debt avalanche method.
With the debt snowball method, you list your debts in order of size, then put any extra money you have towards the debt with the smallest balance, while paying the minimum on the others. When that debt is paid off, you tackle the next-smallest debt, and so on. Paying off debts in full can help you feel accomplished, simplify your life, and inspire you to continue crushing your debt.
With the debt avalanche method of paying off debt, you list your debts in order of interest rate, then focus on putting extra money towards the debt with the highest interest rate first, while paying the minimum on the rest. When that debt is paid off, you put extra money towards the debt with the next-highest interest rate. While it may take you longer to see progress on your loans, you’ll likely pay less money in interest over time using this method.
6. Putting Saving on Autopilot
The set-it-and-forget-it approach can be highly effective when it comes to saving money. For one reason, you don’t have to remember to transfer money from your checking to your savings each month. For another, the money will get whisked out of your checking account before you ever have a chance to spend it.
You can automate savings in just a few minutes by setting up a recurring transfer from your checking to your savings account for a set amount of money on the same day each month (perhaps the day after your paycheck clears).
Even if you can only afford to transfer a small amount each month, it can be worth automating this task. Since the savings will happen every month no matter what, your savings will gradually build over time.
Recommended: Savings Calculator
7. Focusing on Fewer Goals
It can be great to have financial goals. Many of us have plans to buy a home, put kids through college, and pay for our retirement. But if you set too many goals at one time, you can end up losing focus, and not making any progress on any of them.
A better approach can be to set just one or two goals to fully focus on at one time. Ideally, one should be saving for retirement, since the earlier you start saving for retirement, generally the easier it is to reach your goal.
The other goal might be paying off your credit card debt or student loans, saving for a down payment on a home, or putting money aside to help pay for your kids’ college education.
By focusing your energy on just one or two specific goals, you may be able to make real headway. Once you start seeing progress — or actually achieve the goal — you’ll likely be inspired to set, and accomplish, other goals.
The Takeaway
Simplifying your financial life may take a bit of legwork up front but, in the long run, it can help alleviate stress and also help you better plan for your financial future.
Strategies that can help you simplify your finances include paring down the number of accounts you have, crossing off debts, automating monthly tasks like paying bills and transferring money to savings, and focusing your efforts on just one or two financial goals at a time.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
How do I simplify my finances?
You can simplify your finances by consolidating accounts, automating payments, and using budgeting apps. Other ways to simplify your financial life include: setting up a budget with clear spending categories and limits, paying off high-interest debts to reduce monthly obligations, and getting rid of subscriptions and memberships you don’t use regularly.
What is the 50/30/20 rule in your financial plan?
The 50/30/20 rule is a budgeting guideline that splits your income into three parts: 50% for essential expenses (like rent and groceries), 30% for discretionary spending (like entertainment, dining out, and hobbies), and 20% for savings and debt repayment. This rule helps ensure a balanced way to manage money, ensuring both responsible financial habits and room for enjoyment and future planning.
What is the 7% rule in finance?
The 7% rule in finance suggests that a safe and sustainable withdrawal rate from a retirement portfolio is 7% per year. This means you can withdraw 7% of your total retirement savings annually without significantly depleting your funds. However, this rule is a general guideline and may vary based on market conditions, portfolio size, and individual financial circumstances. Always consult a financial advisor for personalized advice.
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