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4 Ways To Simplify Your Finances

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How to simplify your finances. All too often the people who struggle to save money and stick to a budget are the same people whose finances are in disarray. This guide talks you through a simple process to make managing and understanding your money as easy as possible.One of the reasons why so many people struggle to manage their finances is simply that they make it more difficult than it needs to be.

Just consider what many people have to contend with…

  • Numerous bank accounts – one or more current accounts, plus supplementary accounts and savings accounts.
  • Numerous sources of debt – such as their mortgage, overdraft, auto loan and multiple credit cards.
  • Multiple sources of income – sometimes not just a single one-off salary but two or more salaries when couples are living together.
  • Multiple outgoings – bills going out at different times on different days, sometimes months apart.

No wonder so many people could do with simplifying their finances.

Trying to cut all these separate sources of financial information down to the bare minimum can make budgeting, saving and paying your bills immeasurably easier.

The downside, of course, is the process to get to that wondrous point.

Today I’d like to talk about the steps I’ve been through over the last few years to simplify my finances, making it easier than ever to stay on-top of everything…

Track

First things first, with so many different sources of data flowing around it’s almost inevitable that sooner or later you’re going to make a few mistakes.

The first step in simplifying your finances should be creating a single universal source of information. In this way once you’re all set up you’ll only need to consult this one central “command center” to stay on-top of your finances.

Fortunately there are a number of free tools that can help you accomplish this. In the USA one of the best-loved such tools is Personal Capital. In the UK Money Dashboard does a similar job.

Simply sign up for a free account with Personal Capital or Money Dashboard, connect all your financial accounts to it, and all your income and expenditure will be neatly displayed in tables, charts and graphs. Doing so makes it far easier to really see what your money is doing and to keep abreast of your finances.

Minimize

Once you’ve got your main “hub” of information set up, the next question is to ask yourself how you might minimize all these many transactions. Here are some handy ideas:

Pay Off Debt

Start off by eliminating as much debt as possible, closing down debt accounts as the balances reach zero. Worst case scenario consider combining multiple debts into one low-interest consolidated payment so you just have one to debt repayment to keep an eye on.

Bank Accounts

How many bank accounts do you really need? Consider how many accounts you have, and what you use them for. Consider closing down unnecessary accounts so you have less to track in the future.

Expenditures

At the same time, are there monthly expenses which you can eliminate or combine, in order to have fewer transaction to track? For example if you tend to buy a handful of groceries every few days, could you consider doing one big grocery shop each week? Rather than buying lots of little bits and pieces for your next vacation over an extended time period, could you buy it all in one hit from Amazon?

Plan

The third step I went through in simplifying my finances was to plan for the future. By carefully assessing my outgoings over a number of months I was able to make educated guesses about how much I spent in various categories.

For example I know roughly how much I spend on rent, utilities, groceries and so on.

This is handy because when I get paid I know exactly how much I need in my account.

The remainder can be transferred into savings and investments, without stressing about whether I’ll be regretting the decision in a few weeks time.

In the past I would spend what I needed, then transfer the remainder over to savings.

Of course, that didn’t work out too well; all that money sat in my account all month soon burned a hole in my pocket and encouraged me to behave richer than I actually was.

By the end of the month there’d barely be anything to go into savings.

Automate

The final stage in simplifying your finances is to automate as much of your financial house-keeping as possible. For example you can set up payments with your bank so that your rent, cell phone bill, utilities and more all out automatically. You can also carry out an automated transfer of money into your savings at the beginning of each month.

This automation works for a number of reasons:

Firstly, automating your finances in this way saves you time and effort each month.

Secondly, such automation ensures that your savings grow on autopilot. The day you get paid the money is transferred straight back out so you never experience the same feeling of “loss” when your current account depletes at the beginning of the month. Its almost like you never had that money to begin with.

What have you done to simplify your finances? Have you ever struggled with such a problem? Please leave your thoughts in the comments section below…

How to simplify your finances. All too often the people who struggle to save money and stick to a budget are the same people whose finances are in disarray. This guide talks you through a simple process to make managing and understanding your money as easy as possible.

Richard

Sun-worshipper and obsessive frugality blogger. For loads more money-saving advice come and join us on Facebook.

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