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When my wife and I got married, we both had multiple accounts in different locations. We must have had dozen or more accounts between the two of us. We had multiple 401(k) accounts, various bank accounts, and a handful of credit cards. It was pretty messy, and we both quickly decided that we needed to simplify our finances.
Truthfully, it wasn’t a super smooth transition. It took us about a year to get all of our finances in order. We had to open up new accounts, transfer old accounts, and then close old accounts, which was more than a process than we had anticipated.
At the time, certain aspects of the process definitely felt more like a headache than something helpful. But in the end, it was worth all the time and effort. Now that we have consolidated all of our finances, life feels less cluttered. In turn, our stress levels have decreased, and we are able to be laser-focused on our goals.
So here is my list of ways to simplify your finances.
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Combine Finances Once You Get Married – This took my wife and me some time. We had to figure out which of our banks we would primarily use- hers or mine. Credit cards- hers or mine. Even which brokerage firm made the most sense. It was time-consuming but a great sense of relief in the end. Of course, some advocate to keep finances separate in marriage. While I would disagree, in some situations, separate finances might be beneficial.
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Automate Everything You Can – I pretty much paid bills via physical checks before I got married. My wife looked at me like I had three heads when I pulled out the checkbook to pay the gas bill one day. She suggested that I start automating bills with our credit card. Honestly, I didn’t realize that I could do that at the time. Whether it was our 401(k) payments or our utility bills, automating our bills has improved our quality of life (and even saved us money on stamps!). For a great book on automation, check out the The Automatic Millionaire by David Bach.
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Cut Back to Using Just One Credit Card – Firstly, I want to be clear that I am a big believer in having two credit cards. One credit card should be your main credit card, and the second simply serves a back-up incase your first becomes compromised in any way. Having more than two credit cards is a big no-no in our family. We just find it to be overly messy to have more than two. When in doubt, we opt for simplicity. The less credit cards, the more simple life is.
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Go Paperless – If you still receive all of your bills and paperwork in the mail, please stop. There is no reason that you can’t automate your payments and also have electronic copies of the bills sent directly to your email. Paperwork causes clutter around the house all too easily. Plus, you could potentially overlook something that you owe with paper all over the place.
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Buy One Fund and Be Done – Instead of tracking multiple stocks, bonds and mutual funds, consider finding a fund that encompasses everything that you are looking for. This will reduce the frequency of rebalancing in the future and furthermore reduce the number of funds that you need to pay attention to.
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Rebalance Investments Automatically – Too many people buy stocks and bonds and then forget to rebalance their portfolio when the stock or bond has become an outsized position in their portfolio. This can be dangerous if your company goes into bankruptcy, like Enron. I would definitely encourage you to rebalance your portfolio if the position has become greater than 5% of your portfolio allocation.
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Consolidate Retirement Accounts – According to the latest figures from the Bureau of Labor Statistics, U.S. employees have a median job tenure of 4.2 years. That means that people frequently enter into new jobs and potentially leave their old 401(k)s behind with their previous company. Don’t forget to move your old 401(k) once you move into a new position.
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Aggregate All Your Accounts – One of the best things that I ever did was eliminate my Excel financial spreadsheet and sign up for Personal Capital. With all my accounts in one place and updated in real time, I receive a complete picture of my financial situation. More importantly, I am saving time from filling out an Excel spreadsheet each month. Personal Capital does all the book-keeping work for me!
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Become Debt Free – What better way to simplify your finances than by getting rid of all your debt. Having paid off all my debt, including my mortgage, I feel much lighter. I shudder thinking about ever going back into debt again.
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Pay in Cash – This sounds incredibly old-school. However, paying with cash means that there is one less thing that you have to track along the way. Plus, you don’t have to compare your receipts against your online bank account to ensure accurate charges.
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Get Rid Of Services That You Don’t Need or Use Anymore – I use to subscribe to a few different Sports magazines. But, each week, they’d end up in the trash because I didn’t have time to read them. It didn’t take long for my wife to ask me why I continued to subscribe to these magazines when I never read them. The explanation of “I’m planning to read them when I have more time” was not a sufficient answer. Needless to say, I saved $50 a year by cutting out two magazine subscriptions that I never read.
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Stop Buying Stuff – Have you wondered why when you start spending money such that it becomes addictive? During the Christmas season, I always seem to be itching to buy more stuff. It always seems to bleed over for a couple of months after that, too. It’s like I have to turn off my brain to stop consuming. Once I turn that impulse off, I can go months and months before I feel the urge to consume more stuff.
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Focus on One Financial Goal at a Time – I am a terrible at multi-tasking. My wife can attest to this. It especially comes to light while I am working on my computer and she tries to strike up a conversation with me. I just can’t do it. I know I’m not the only person that struggles with multi-tasking. That’s why focusing on one financial goal at a time is imperative.
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Fund an Emergency Fund – Having an emergency fund is one of the best things that I ever did in order to simplify my finances. It was a great feeling knowing that I wouldn’t have to go into debt or sell investments in order to cover an emergency cost. Before I had an emergency fund, I felt like I was teetering on the edge of a financial cliff. I was constantly worried about covering costs if something went awry. Eradicating that fear is definitely one of the better things that I have done in my financial journey.
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Buy and Hold – It took me a long time to catch on to this principle. When I first graduated college, I valiantly tried to time the market and buy and sell the hottest stocks. Needless to say, I wasn’t very good at timing the top or bottom of the market. Plus, the stress involved was just too much. Moving to a buy-and-hold portfolio allowed me de-stress my life and simplify my portfolio.
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Learn to DRIP – I use to spend quite a bit of time trying to figure out ways to maximize the cash dividends that I would receive. However, after I learned that I could turn on a DRIP (Dividend Reinvestment Plan), I never looked back. This allowed me to buy more shares automatically and take the guess-work out of figuring out the next investment to buy.
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Pay Someone Else to Do the Heavy Lifting – At one point, my financial situation was incredibly complicated, but I was insistent on handling everything. It wasn’t until I owed the IRS a huge bill because I filed my taxes incorrectly that surrendered and handed off some of the work to experts. I realized it was okay to pay for the peace of mind.
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Sign Up to Track Loyalty Programs – If you decide to go with a credit card reward program with points instead of cash back, make sure that you stay on top of your rewards by signing up with a company like Award Wallet that can track your points and rewards. Otherwise, you may be like the many people that forget to claim their points and let them expire.
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Close Old Accounts – This seems so obvious, but can be incredibly hard to execute on at times. The problem is some accounts charge fees and require minimum balances. Even if the fees are nominal, over the years, those fees can add up. So, don’t let old accounts linger longer than they need to.
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Figure Out What’s Important to You – Stop spending money just to spend money. Figure out if the money you are spending you is actually bringing you joy vs. just spending to spend. If your purchases are not yielding you joy, figure out a way to break the cycle. I have always advocated value spending.
Great list. Regarding #8 tho- Ive found that not manually importing transactions has made me lazy. In theory I still scan all my transactions for errors. In practice… not so much.
All told tho, solid list of suggestions.
Dan @ Pennies and Dollars recently posted…How to Save Money on Insurance
Thanks for stopping by Dan!!! I definitely agree that I’m not nearly as diligent as I once was. Luckily I haven’t had any problems 😉
Nice article. Another tip would be to have all of your credit cards have their statement closing dates on the same day of the month. That means you can easily pay all of your credit cards in one sitting, instead of over the course of the entire month.
That’s super smart. Great suggestion!!! I definitely forgot that one.
A topic I’ve thought about alot recently. Less for me and more so it’s easier for my family should something ever happen to me. The more complex the more knowledge someone would need to take over from you in the event of your incapacity.
FullTimeFinance recently posted…Why do Americans do so little International Travel?
Thanks for sharing!!! You are absolutely right. The more difficult your finances are the harder they will for someone to take over.
Our mortgage was recently purchased by another company and for whatever reason I finally decided to set up autopay for it. I couldn’t handle not being responsible to actually physically paying it myself. For whatever reason … I’m not really sure. So, this month, I kept checking to make sure it hit my bank account and that it posted to the mortgage account. It obviously all worked out, but I was very skeptical and hated not having that control!
I’m with you Dave. It took me awhile get things automated and I checked the first couple of months. But after awhile it proved reliable 🙂
I’d say we follow most of your points, except for #3 and #10.
We used to just have two cards, but recently have given travel hacking a try. So now we need to think which card gives us the best reward before making a purchase. We will see if the extra hassle is worth it, although the signup bonuses have been nice.
Which leads into #10. We hardly ever pay in cash. Primarily for the benefits of tracking all of our spending through our card statements. I would never have the discipline to track my spending if I did it in cash.
Mr. Need2Save recently posted…How To Mix & Match Your Retirement Savings
Thanks for sharing Mr. Need 2 Save!!! You’ll have to share how the travel hacking goes. I have heard some people have had a ton of success with it. Since we aren’t doing a ton of traveling right now, travel hacking definitely slipped my mind 🙂
I like the way that some of these interplay. For example, following the advice in Number 5 completely eliminates the need for Number 6. Once you start simplifying, it starts a snowball rolling that builds on itself.
Matt @ Optimize Your Life recently posted…Does the Meaning of Life Matter?
Thanks for sharing Matt!!! I definitely agree that some of these can easily be eliminated if you eliminate something above it 🙂
Good advice!
Mrs. Freaky Frugal and i do something a little different with Credit Cards. We have multiple cards and we try to maximize cash back rewards. For instance, my Chase Freedom Card has rotating 5% of categories, so we sometimes use that card for certain purchases.
It helps that we have time to fiddle with this stuff because we’re FIREd. 🙂
Mr. Freaky Frugal recently posted…Bank bonus bonanza!
Thanks for sharing!!! That’s really smart to do the rotation. We unfortunately don’t have a ton of discipline. We definitely need to look closer at this. Thanks for the reminder!!!
I would move your last item, figuring out what is important to you, to the top of the list. You could make a lot of money and spending most of your money may make you happy. Hopefully, this isn’t the case. Most of us in the FI community need to think about what happiness means both now and in the future. We may have to sacrifice a little now so that we can achieve happiness long-term. For me, I keep grinding at a job that I enjoy for the most part, but I don’t like the long hours that keep me from my family. Long term, I want to have a job that enables more flexibility and a shorter work day.
The Grounded Engineer recently posted…Traditional 401(k) or Roth 401(k) – what is the best option for you?
Thanks for sharing!!! I thought I’d try to capture the most important point last 🙂 That way I could leave a lasting impression 🙂
Great list Rob! Don’t beat yourself up about not being a multitasker. In reality, multi-taskers waste a lot of time jumping from one thing to the next and back again. Often I wish I had a better laser like focus.
Thanks for the encouragement. I definitely feel like until I finish a task that I can’t move on from it. Definitely too laser focused at times 🙂
I think if you’re already automating your credit card payments, why not try to maximize your purchases by using the highest cash back depending on the situation? I typically keep about 5 cards with me that are used frequently and the rest of the cards were set up for their sign up bonuses and never used.
Thanks for sharing Jeff!!! You make a ton of sense and it’s definitely something that we need to look into. Thanks for the great suggestion.
This is a great checklist for people who want to get started. For me, I’ve been managing my finance for quite a few years now, but I still find quite a few inefficiencies in the things that I do. I find that the most important thing to do is to set goals. If you don’t have goals then you don’t have something to achieve and measure yourself against. Also, there is no motivation for you to do anything as there is nothing for you to celebrate or to feel good about.
For people that want to clean up their finance, it best to start with a couple of simple and achievable goals in the short-term. Once they are more comfortable working on their goals and had achieved them, then start to work on medium and long-term goals.
Leo T. Ly @ isaved5k.com recently posted…Basic Personal Finance Concepts
I definitely agree Leo!!! Taking small steps towards goals and then building is definitely ideal. You can’t expect to run a marathon if you can’t walk a mile 🙂
I love finding ways to automate our lives. There are so many useful online tools to streamline almost every process. It is even easier since my wife and I manage our finances together.
dave recently posted…Financial Independence: A Universal Goal
I definitely agree!!! Automating our lives has been such a burden lifted. Especially with bills!!!
Good advice all around. I have done more than a few of these steps and it is working nicely. Set it and forget it is great, both for investing but also paying debts, bills, etc. Closing old accounts is something that is often forgotten too.
Ok I am off to work so I can become debt free and follow your 20 step checklist!
Dads Dollars Debts recently posted…Start a taxable investment account
Hahahaha…take what works for you 🙂
Great tips MSM!
On the “automate everything you can” – we’ve really had success. We haven’t written a check (even an online e-check) in a couple of years. 100% of our bills are either auto-drafted from checking or auto-charged to our (one!) credit card. It’s nice not having to worry about that.
Brad – MaximizeYourMoney.com recently posted…Practical Retirement Withdrawal Strategies Are Important!
I love trying to get everything on my credit card. It’s nice knowing when money is going out of my bank account. Which is once a month 🙂
Focusing on 1 financial goal at a time is a great one… I’m focusing on paying down PMI, but it’s tough when I want to invest more! 🙂
Erik @ The Mastermind Within recently posted…Influence: The Psychology of Persuasion
It’s definitely to your advantage to get rid of that PMI. Paying that PMI stinks. It benefits the bank and seems like such a farce to me.
Great list man. #1 is something I couldn’t agree more with. I think I might have to give this Personal Capital thing a shot. Seems to be quite the big deal now days.
Mr Defined Sight recently posted…My Favorite Financial Advice
Personal Capital is wonderful. I can’t emphasize how much I like them 🙂
I’m another rewards-chaser, so I don’t follow #3 and #10. But this is a great list, especially for those just getting started in streamlining their finances. Online and automatic bill pay has made my life a lot easier.
Gary @ Super Saving Tips recently posted…Money Lies We Tell Ourselves That Make Us Poor
Thanks for sharing Super Savings Tips!!! Automating seems like a popular answer and it’s definitely smart 🙂
Personal Capital has been SUCH a benefit to my wife and I, especially now that we have more accounts than when I was in college. Now we just go through that once a month and we can easily see where our spending has gone. That’s another way my wife and I simplify. Instead of making budgets, we go through our expenses each month and write down 3-4 ways we can bring down certain categories. Then we implement those 3-4 things throughout the month and our expenses typically get at least a little lower. It’s the idea of improving by 1% each day (or month) instead of trying to change everything at once.
Matt @ Profitable Matters recently posted…Starting In Tech: Why Tech Skills Can Benefit Your Life and How To Get Started
Thanks for sharing Matt!!! I personally preferred Mint’s budget to Personal Capital’s but Personal Capital’s has such a better investment interface 🙂
Creating a list to simplify your finances is a sure way to reach your goals and reward you with a comfortable retirement. I agree in all the tips shared here particularly about becoming debt free, stopping buying a lot of things and funding an emergency fund. I’m guilty of buying too much stuff especially if it’s on sale. I end up giving away most of my stuff because I don’t need them. I should really work on my habit of buying impulsively. Another thing I am guilty of is credit card debt. Slowly but surely my credit score is going up and I can’t wait to be debt free. I’m thinking about having an emergency fund or just buying insurance. I have a life insurance right now and still thinking if I’ll buy a long term care rider or get a stand alone long term care insurance. My parents had one and I was spared from their care expenses. I still have a few more years to think about this and I hope I’ll make the right decision.
ALTCP recently posted…3 long term care strategies that will step up your game plan now
Thanks for sharing!!! Long term insurance is definitely a big deal and something to think about in the future.
Another perfectly written post with amazing advice!!
I chuckled at #13 because that’s what Jared does. I ask him to bring me up the water bottle after filling it when he takes Grace out and he usually does 2/3 of what I say and forget the rest. He left the bottle outside on the lawn hahaha. It’s very cute considering he’s so smart.
#2 was an issue with me and my husband. He wanted to automate payments and I was like…”I don’t trust half of these companies to auto charge me before I read the bill.” I lost the fight and we automate everything now…it’s quite nice I must say
Lily He-Prudhomme recently posted…July 2017 Family Income Report & Budget Breakdown
Hahahah…I fought #2 for far too long especially given the benefits. So glad my wife convinced me 🙂
Great tips here! I think #20 says it all – Figuring out what’s important to you. To me, the answer to that question really drives whether you want to pursue financial independence in the first place. I know many people that continuously spend without questioning the intent of their purchase. They spend just to spend, and then half the time may not even use what they purchased. Determining whether a purchase truly adds value to your life is key towards finding financial freedom.
Chad @ Finding Your Financial Balance recently posted…Emergency Funds: Weathering the Storm
I definitely agree Chad!!! There are too many people that mindlessly spend and definitely don’t get the value that they hoped for.
Number 13 is more powerful than we think. Everything can’t be done all at once. Take one step at a time with little goals (cut down credit cards and eat out less with milestones) and in just a little time it can make a big difference.
Thanks for sharing SMM!!! I definitely think taking one step at a time works best, at least for me. I feel too scattered brain otherwise.
Great list Rob! The wife and I consolidated all of our finances as well. It’s been tremendously helpful because we can easily see right away where we’re at financially. I can’t imagine having to juggle his and hers accounts outside of the usual 401K and IRA accounts. Sounds like a nightmare.
Thanks for sharing Tim!! Aggregating our accounts was definitely one of the best things that my wife and I did. Being able to see everything all in one picture is WONDERFUL 🙂
MSD –
Solid ways. Other areas to harp on:
-Reduce your monthly expenses, like you did with magazines, that don’t add value. Prefer to run and do body weights? Cancel the gym. Have internet and don’t mind your Netflix service? Cut the cord. Enjoy going out to eat? Make it more special by reducing the # of times a month you go, i.e. 6-8 to 3-4. It’s fun when you realize, how simple you can make finances.
In addition – if you need to pick up groceries, gas and other items – try doing that in one trip/one store – that way you have more time and less finance clutter.
-Lanny
Dividend Diplomats recently posted…Lanny’s Recent Stock Purchase – Cisco (CSCO) X 2
Great ideas Lanny!!! Reducing expenses is definitely a great way to simplify ones finances. Cut out that fat!!!
I’m all about automation and this definitely applies to finances as well. Thanks for #18, I didn’t know I can keep track of my rewards cards in one place, I have so many it’s hard to oversee these accounts.
Thanks for stoping by Edwin!!! Glad tip #18 helps 🙂
They should teach that in schools! 🙂
I definitely agree!!!
Great post!! Getting rid of stuff, not buying any more stuff, and being out of debt are all amazingly important. Impressive you paid off your mortgage! Awesome 🙂
Thanks Kristin!!! It definitely wasn’t easy but it was definitely well worth it 🙂