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:
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 cash back 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:
- Gas and electricity
- Car, home, umbrella, and life insurance
- Television, telephone, and Internet
6. Consolidate your accounts
Do you really need 3 checking, 5 savings, 7 high yield 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
How are you keeping your finances simple?
- 10 Ways to Simplify Your Life at Remodeling This Life
- Build your financial horcrux at Brip Blap
- 10 Ways To Organize and Simplify Your Finances at The Digerati Life
- Setting Financial Goals for 2008 at Five Cent Nickel
Pinyo is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.