The path to a financially successful life is paved with simplicity. The simpler your finances, the easier they are for you handle! You can take simple steps that have a massive impact on how well-managed and organized everything concerning money in your world will be from now on – so get started by making some easy adjustments today. Here are seven simple ways to simplify your finances:
1. Keep Your Finances Simple With Automation
Automating your finances can help you avoid late payments and save money on interest charges. How many times have you had the money in your account or set a reminder to pay a bill, but got distracted and forgot? Then the next thing you know the payment is late and now you have a late fee. Those late fees are no fun and can be frustrating when you may be on a strict spending plan.
Automated systems make it easy to stick to a budget because you don't have to remember to pay bills every month! However, if you have bills on autopay coming directly out of your checking account it’s important to make sure you have enough money to cover those bills. If not, that’s when those bank fees completely ruin your budget for that money. Some banks charge up to $35 per transaction that overdraft your account. Just two overdraft fees can cover a cellphone bill or gas expenses for the month.
2. Consolidate Your Debt into Simple Categories
Consolidating your debt can simplify the process of paying off debts and reduce the amount of money you spend on interest each month. By having just one payment to make versus 3 or 5 different accounts this streamlines the process and reduces your chances of forgetting to pay a bill, especially when you have 5 different credit cards due on different dates. When you consolidate, be sure to choose a low-interest loan or credit card so that you save as much money as possible!
3. Use Paperless Billing To Simplify Payments
Let’s first celebrate we are saving paper and the cost of mailing your bills to you! Are you giggling? Well, I am. Now let’s celebrate how simple it is to be able to pay all your bills on the computer and not have to take a special trip to the local grocery stores customer service counter every week to pay your bills. Or make a trip to the providers business and pay the bill. If you have your credit card and passwords saved on your computer on autofill you can simply confirm the payment amount and click submit! No need to make the process any more complicated than it needs to be.
4. Simplify Your Finances by Setting Goals
Setting financial goals gives you something to work towards and makes it easier to stay on track with your finances. When you have specific goals in mind, it's easier to make the necessary sacrifices to achieve them! There are so many people that have never sat down to set financial goals for themselves.
Think about the last time you created a spending plan (budget) and after a month or so you stop following it and went right back to your old spending habits. That’s probably because you had no real reason to be budgeting. You weren’t saving for anything, you weren’t working to pay off a specific debt, you weren’t planning to invest in anything, you were you just budgeting.
Trust me, if you have a reason why you want to master your finances and simplify them it will help you stay on track.
5. Use Cash Envelopes.
Cash envelopes can help you stick to a budget by giving you a physical representation of how much money you have left to spend each month. When the money runs out, so does your spending! In this modern day, checking accounts have been our kryptonite. We rely heavily on the bank tracking all our spending, and we try to calculate everything in our head based on the last time we checked our bank account. That’s a recipe for disaster.
How many times have you did the math in your head and when you checked your bank account you were unpleasantly surprised by the balance? Those $2.35 and $5.87 purchases here and there add up! Having the cash envelopes eliminates the guess work when it’s gone it’s gone.
6. Avoid Unnecessary Expenses
Unnecessary expenses can quickly derail your efforts to simplify and improve your finances. Yes, we all have those expenses that have been on autopay for the last 6 months to a year and we only used it once. Whether that’s the gym membership you signed up for last January when you were determined to have a six pack by summertime, or newspaper subscription you have had for 2 years and all you ever do with the newspaper is pick it up off the lawn and throw it in the trash. Identify areas where you are wasting money and find ways to cut it out of your life. Every little bit helps!
Having a process to track your spending and your transactions on a regular basis will help identify these expenses faster. Creating a weekly habit of sitting down to review your money activity for the week will help you prepare for the week to come and have a clear view of money you have available to spend.
7. Keep Your Finances Simple and Live Within Your Means
Living within your means is a key component of financial success. When you live within your budget, you have more money available to save and invest for the future! One major expense that most people don’t want to compromise is their housing cost, but if your mortgage or rent is more than 28% of your income, it’s time to reconsider your zip code.
Believe me, I completely understand we all want to live in a decent neighborhood and have our children in the best school district. As a single mom, being safe and giving my son the best education possible are my top priorities. However, I know how stressful it was to have the rent consuming almost half of my paycheck. How are you supposed to enjoy your living space and life if your rent or mortgage is taking up half of your money. Becoming a homeowner and not getting a mortgage outside of 28% of my income was life changing. It allowed me to have more money to pay off debt and live comfortably. Have you ever considered moving?
The same goes for the car you are driving. If you are working to simplify your financial life your car payment should not be the same amount or close to the amount of your rent/mortgage payment and should be about 10% or less of your income. Here’s a quick visual, your income is $42,000 per year, your car payment should not be more than $4,200 per year ($350 per month). It’s okay to have a reliable economical vehicle. Believe me, no one really cares if you are driving a Honda or Mercedes, except your bank account and lack of investments. Save the luxury for when your income increases, and you can truly afford it.
If you're struggling to stay on top of all the bills or find yourself with too much debt, we've given some easy-to-follow advice that will allow you to simplify your money and start living a life without financial stress. Ready to put these methods into practice? Let me know in the comments if you have tried any of these steps in the past and how it worked out for you.