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Simplify Your Finances to Achieve Your Financial Goals

By Jane Young, CFP, EA

It is essential to spend time on your finances but when they become complicated, the task can feel overwhelming. Complicated finances result in stress and inaction. Simplifying your finances makes it more enjoyable to manage your money and leaves you with more time to spend on other areas of your life. Simplification also frees up time and energy to focus on activities that will improve your financial situation. Here are several steps that can be taken to simplify your finances.

Evaluate your current situation and create a budget. Make a list of your current assets and debts to calculate your current net worth and get a picture of where you are. Make a budget by creating a simple spreadsheet listing your income and expenses. This will reveal how much money is available to save and invest or if you need to cut back on expenses. A budget will also provide you with spending guidelines. Clarity on your current situation and your budget can reduce stress and help you feel more in control.

Consolidate your bank and investment accounts. Over time it is common to have accounts at multiple banks and brokerage companies. This is difficult and time consuming to monitor and manage. In many situations, accounts are forgotten or neglected. Consolidation makes it easier to understand where you are and enables you to manage your portfolio more effectively.

Stop receiving paper statements. Switch all of your accounts to electronic statements that can be quickly accessed online. This will reduce clutter and will allow you to view the status of your accounts at any time. This can also save money because many companies charge fees to provide paper statements.

Automate the payment of your bills to save time and avoid potential late charges. Automate monthly contributions to savings and investments. This allows you to pay yourself first and have a more disciplined approach to saving and investing. This also enables you to invest using dollar cost averaging. Dollar cost averaging is where you invest a set dollar amount on a regular basis, regardless of market performance. When prices are low you buy more shares, when prices are high you buy fewer shares.  

Simplify your investing by using mutual funds and exchange traded funds rather than a large number of individual stocks. This will make it easier to monitor your investments and rebalance your portfolio.

Minimize the number of credit cards you use. Avoid signing up for new credit cards to get a one-time retail discount. Make every effort to pay off high interest credit cards. If you are unable to pay off your balances, consolidate credit cards to get the lowest rate possible.

Hire professionals to help you manage your finances. If your time is better spent on your career or other pursuits, consider hiring a financial planner, a tax preparer, or an estate planning attorney to assist you.