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6 Easy Ways To Simplify Your Finance

January 10, 2008 by Pinyo.

One of my favorite motto is: “simpler is better.” I think it’s crazy how someone like Madison can have 181 accounts and still live a sane life (hi, Madison). Since she shared her strategy on how to manage her 181 accounts and complex finance, I’ll share how I simplified mine.

1. Start payroll deduction to fund your 401k

This is a no brainer. At the very least, everyone who has access to 401k should contribute enough to get all of the company matching fund. Why would anyone want to leave money on the table? Like my friend SGM put it, “Take Advantage of Your 401k.” Why not? It’s free money…it’s your money.

Setting up automatic 401k contribution is easy. In most cases, you just go to your company’s 401k web site and set up a new contribution percentage — usually, 6% is a good place to start since most companies match “50 cents on the dollar” up to the first 6%. If you work for a smaller company, you may have to call your human resource person.

After a few paychecks, you won’t even notice the small amount deducted from each paycheck.

2. Set up automatic bill payments and savings

What is the secret that enabled me to save a lot of money and pay a lot of bills, without going crazy? Do it little by little and automatically! Don’t try to do it all in one shot. As my friend ChristianPF said, “the best way to eat an elephant is one bite at a time.” You can even take it a step further by taking advantage of level payment plan (usually offered by utility companies) to make the ride smoother — i.e., I pay $175 a month for natural gas so that I don’t have to deal with $300+ bills during the winter.

Some examples of financial automations that I have are:

Payroll deduction to fund my 401k
Payroll deduction to fund my mortgage payment
Automatic monthly transfer to fund my son’s 529 college savings plan
Automatic monthly transfer to pay my car, house, and umbrella insurance policies

Just for a kick, here is a map of my automated finance:

Simplify Your Finance

3. Pay bills online

If you can’t set up automatic payment, then you should pay your bills online. There are many advantages for paying your bills online:

You don’t have to spend money on checks or stamps
You can pay from any where, any time
You can occasionally use your credit card to pay, and get reward points or cashback bonus
You are less likely to be late, thus reducing the chance that you’ll have to pay late fees

4. Retire your debt and use only one credit cards

If you have and use more than 1-2 credit cards, you are:

Carrying too many cards in your wallet — i.e., uncomfortable in pants pocket, a lot more phone calls if you lose it, etc.
Not using the best card (in term of rewards)
Have higher chances of paying late fees and finance charges
Have to write a lot of checks, and use a lot of stamps (if you are not paying bills online)

If you owe money on several credit cards, here is a 7 steps strategy to pay down your debt. Pay down your balances, put all your cards away (don’t cancel them), and use the 1-2 cards with the best rewards. Your wallet will be lighter, and you don’t have to call multiple companies when it’s lost or stolen. Moreover, you’ll spend less on checks, stamps, and potential late fees.

5. Consolidate your services and bills

If you are still a “one service, one company” consumer, you need to look around for companies that could provide you with bundled services at better prices. For example, combine:

6. Consolidate your accounts

Do you really need 3 checking, 5 savings, 7 online savings, and 9 investment accounts? I highly doubt it. Another idea to simplify your finance is to consolidate these accounts and move them into a few that serve you the best. For instance, instead of three separate checking, savings, and investment accounts, I have one brokerage account that:

Let me write free checks (aka, checking)
Let me pay bills online through electronic fund transfers (aka, checking)
Let me invest my cash in a money market fund (aka, saving)
Let me invest in stocks, bonds, mutual funds, and ETFs
Provide me with overdraft protection and short-term loans via margin account

One caution is not to put so much money with any one financial institution — i.e., E*trade, NetBank, etc.

How are you keeping your finances simple?

10 Ways to Simplify Your Life @ Remodeling This Life
Build your financial horcrux @ Brip Blap
10 Ways To Organize and Simplify Your Finances @ The Digerati Life
Setting Financial Goals for 2008 @ Five Cent Nickel

This post was featured in:

The Carnival of Personal Finance #135 hosted by Plonkee Money. For more information please visit the Carnival of Personal Finance.

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18 Comments

Money Blue Book, 10. January 2008, 10:20

All of my bills are set up with automatic debits so I never have to worry about due dates and such. Very handy! Sometimes I don’t even know the due dates since the process is so streamlined..I just make sure my checking is always adequately funded.
-Raymond
plonkee, 10. January 2008, 13:56

Automate everything. That would be my biggest piece of advise to *flexible organisers* like me. I get paid monthly, and so I make sure that all my bills are paid monthly, and leave as soon as possible after payday. Only now do I avoid late fees.
Mrs. Micah, 10. January 2008, 19:33

Very nice basics piece.
CiaranFromChance, 10. January 2008, 20:40

It’s funny how nice and basic that advice is and how many of those things I’m not doing.

I especially like points number 5 and 6. Consolidation makes things manageable, manageable make things accomplishable. When things are accomplished there’s achievement. When things are not manageable there’s a sense of hopelessness.

Funny enough, you wrote in December about that great deal from Verizon (the one with the 19′ flat screen giveaway) and I wanted to consolidate all my services and take advantage, but the thorn in my side was my AT&T cell phone contract that I knew if I broke would cost me, so I procrastinated and the Verizon deal passed.

Well, after reading Patrick’s post on CashMoneyLife today I’m going to take the steps to work that out and from there consolidate my cable, internet, digital phone to Verizon, including my cell phone. (hopefully try and work out a deal)

I’m genuinely excited about it and look forward to taking your advice and consolidating my services, engendering some nice cost savings and becoming more productive (via email and internet access on new phone Verizon Wireless enV by LG:)

I think I’ll detail it all, if successful, on my blog next week with a shout out to you.
Pinyo, 10. January 2008, 21:10

Hey, I look forward to seeing that post. Although that offer passed, Verizon offers something new all the time. You just have to be patient and be on the look out.
Laura, 11. January 2008, 8:59

Automating my bills and savings is the best thing I’ve done. I get paid on Fridays, the money for bills and savings is gone Monday, and what’s left over Tuesday is what I can spend guilt free.

Thanks for the tips.
kuanhoong, 12. January 2008, 6:58

Great tips. Found your blog randomly.

Will subscribe to your feeds.
Tim, 13. January 2008, 2:14

Hi Pinyo,

This is the first personal finance / money management blog I have found that makes sense that I can understand without feeling intimidated or overwhelmed with technical jargon.

Also it’s encouraging to know that I’ve got most of the basics right already.

Automation is definitely the best way to keep things simple. Best to pay all of those regular and predictable bills automatically. When people have the choice to pay or not pay, this is when they make the wrong choice in a tight month and start themselves on the slippery slide into trouble. Better to automate the payments so the cash never passes through your hot little hands!!

Awesome blog. Thanks and keep up the great work!

Tim
Pinyo, 13. January 2008, 7:46

@Laura - I agree. It’s the best way to do it. You’re secretly paying yourself first.

@Kuanhoong - Thank you and welcome to Moolanomy.

@Tim - I am (happy) speechless. I am glad you found my blog useful. It’s this kind of comments that make all the hard work worth it. Welcome to Moolanomy.
Vlada Kynsky, 13. January 2008, 11:07

Thanks for this post. It made me to think about some automization of money flow. Till now I start to do everything ad hoc.

Thanks again
My Dollar Plan, 13. January 2008, 21:07

Great list. For the most part I do these things, just on a little larger scale:)
Dividends4Life, 14. January 2008, 12:01

Another great post! Thanks for sharing it. I plan to include your article in my weekly carnival review this Friday.

Best Wishes,
D4L
Pinyo, 14. January 2008, 18:26

@Vlada - You’re welcome

@My Dollar Plan - Thank you. I would say MUCH larger

@D4L - Thank you! Your compliment made my day.
Larry, 19. January 2008, 3:03

Pinyo, you have done a great job. I went through your other articles but i liked this particular very much. These ways are simple yet very effective and can save your lots of moeny anyway.
nomorespending, 27. January 2008, 4:54

Hi Pinyo
Great post! Just what I needed today as I’m currently trying to simplify everything.
Pinyo, 27. January 2008, 16:01

@Larry - thank you for your kind words. Other than the six above, I’d say stay out of debt and avoid payday loans like plague.

@Nomorespending - I’m glad you like it. Thanks!
Mr. Stubbs, 29. January 2008, 16:34

great great tips, number 5 could be a real saver.

thank you
Make Friends, Earn Money, 4. April 2008, 11:44

Automated payments are a great way to save money, as the temptation is always too great to spend what you have in your hand. I have to be honest though and say that despite loving technology generally I would never bank online, I just think that there are too many security flaws, despite the banks assurances.