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Why make your personal finances any more complicated than they need to be?

Complicated personal finances can lead to inaction or procrastination, stress, mistakes, and bad decisions. The more time and energy you spend just managing your personal finances, the less time you have to focus on earning and saving more money, and the less time you have for you. If you dread preparing your budget each month or dread just receiving a bill in the mail because, to you, it means one more thing you have to worry and stress about, you should consider simplifying your personal finances. Please find below 11 common ways to simplify your personal finances.

Consolidate Bank, Retirement, and other Financial Accounts

Too many people have multiple financial accounts from various banks, lending institutions, and investment brokers. Some people opened accounts and put the minimum required to take advantage of offers for opening the account (cash, stocks, and other goodies). Others opened investment accounts with a broker with good intentions to invest regularly, but never did.

If this sounds like you, it may be time to shut down the accounts you don’t use with any regularity. These accounts are a waste of your time, open you up to potential cyber security threats, and can easily be replaced by consolidating your banking into one account, investments into one account, and retirement into one account (or some combination of the three). This will simplify the statements you receive, make it easier to track your personal finances, and make it easier to transfer money between accounts.

Choose Online Statements, Notifications, Receipts, etc.

Paper statements have a way of piling up, taking up your physical space, and becoming a source of stress all on their own. Once you’ve cut down on the number of accounts you have, you can go in your settings for each account and change the paper option to the online option. If you need to keep a copy, you can back up the digital copy for reference later.

Invest in Funds Instead of Individual Stocks

For most people, their primary source of income is employment for a company or owning a company. They don’t have the time necessary to research and invest in individual stocks. To simplify your investing (at least until you either make the time for stock investing or it becomes your primary sources of income), I recommend investing in large groups of stocks or funds.

I personally utilize index stocks. They can track large segments of markets or the whole market itself. This diversification over many different stocks allows you to invest with minimal risk while still reaping the rewards of the market and, typically, well-outpacing inflation.

Ditch the Credit Cards (or at least all, but one)

In my mind, having and using multiple credit cards is like juggling knives. Sure, you may be able to pull it off for a limited period of time, but eventually you’re going to drop one and most likely, it’s going to cause all of them to come tumbling down. Credit card companies are not your friend, their sole purpose is to make money off of you; and they are excellent at it.

Ideally, it would be best to go without using a credit card, but if you must use them, choose one and use it sparingly. This will simplify the multiple accounts, spending, statement periods, etc. and hopefully minimize the stress and risk associated with using a credit card.

Bundle Insurance

As a rule of thumb, it’s a good idea to shop around for insurance once every 1-2 years. Also, for most insurers, you’ll get a significant discount by bundling all of your insurance together. If you have a different insurer for your home, vehicles, boat, motorcycle, etc., you may want to consider bundling it together with whatever insurer provides the best coverage and price. This will cut down on the number of statements and simplify your payment options as it should all be in one dashboard.

Automate Your Finances

Technology provides us the opportunity to essentially set it and forget it as it relates to our savings, investing, and bill paying. This isn’t for everyone and requires a little bit of cushion in your account if you implement it fully, but is an easy way to simplify your personal finances and keep you from tampering with your budget/financial plan.

For bill pay, most utilities and loan payment services (mortgage, student loans, car loans, etc.) provide some option for drafting the billed amount from your account each month on a date of your choosing. If you choose to setup an automatic draft, make sure to have a little cushion in your account for the fluctuation in utilities each month; electricity, gas, water, etc. may change significantly from month to month, so you’ll need to account for this fluctuation in some way.

If you don’t have the money in your account for this, you can just draft those items that won’t change each month like your loan payments.

A word of caution, if you do automate all of your bills, you still may want to review everything once a month to ensure there aren’t any problems. For example, if you notice your water bill increased significantly from month to month, this may be an indicator of an underlying cause like a water leak in your yard or house.

Pay Cash When Feasible

What could be simpler than starting with a set amount of cash and having to make it last until the end of the month? The easiest way to do this is to create a simple, household budget at the beginning of each month and after saving, investing, and paying for necessities; use cash for the remainder of your budget (i.e. food, clothes, gas, misc.). By doing this, it encourages you to be mindful with your spending and allows you to know exactly how much you’ve spent on these items for the month.

Cut Out Unnecessary Subscriptions and Services

Most of us have subscriptions or services we don’t really need or use (I’m looking at you gym membership). You should look through all of the current subscriptions and services you are currently paying for and decide whether or not each is worth the money and time you spend on it. When looking through this list, remember that less is more. The more of these you keep, the more money you’ll waste and more time you’ll eat up using and maintaining them.

Also, now is a good chance to reevaluate the subscriptions and services that you do use. Is there some way to save money or get an alternative that serves more than one purpose (i.e. eliminate cable and use one streaming service for your entertainment needs)?

Become Debt Free

This one should come as no surprise to anyone reading this, but is still important. The sooner you can get out of debt, the quicker your personal finances come back under your control.

When you’re out of debt, you no longer have debtors sending you statements. You no longer have to worry about spreading out your paycheck to make sure that everyone gets paid at least the minimum amount.

You have your full paycheck as a resource to devote to the future (saving, retirement, and investing) as opposed to having to pay off the debts of the past.

Focus on One Short-Term Financial Goal at a Time

I don’t care how much anyone tells you they are good at multi-tasking, we are most effective when we’re allowed to focus on one thing at a time. The same goes for your personal finances. When you split your focus between multiple financial goals at a time, more times than not, each goal suffers. This will cause the goal to take longer than normal to complete and may cause you to get discouraged along the way.

This is a big part of Dave Ramsey’s strategy and why he suggests using the debt snowball as opposed to paying off the largest interest rate first. Sure, if we were all robots and not subject to the whims or human psychology and willpower, paying off the highest interest rate first would make the most sense, but we’re not. We’re very much emotional creatures, which means focusing on one goal and experiencing that shortened time frame and small wins along the way are the fuel to keep us going. To keep us striving toward our ultimate goals be they financial freedom, retirement, owning a successful business, etc.

Ways to Simplify Your Personal Finances – Conclusion

This isn’t meant to be an all-inclusive list, but is meant to give you a handful of ideas for ways you can simplify your personal finances. Hopefully you’ll use this list and build on it by identifying other areas of your financial life that you could simplify, so that you’ll have more time to focus on your long-term financial goals as well as other things like spending time with family and friends.

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