For some, life is complicated. Maybe too complicated. We have been working with a new client recently and her story inspired me to explore ways to for people to simplify their financial life. Our client is a mom in her early 30s who has a young daughter and is a single parent. Challenge enough, right? Well, lets expand on that story. She has been able to fund her own lifestyle, provide for her daughter and attend University at the same time. She is almost finished her degree and has already decided to do her Masters. She has had a hard life and has learned from her experiences to cope and overcome.
Our client is a testament as to what people can do when they put their minds to it or have to. What even makes it more remarkable is that my client wants to give back by assisting single mom’s who have or are living a similar experience and showing them that it is possible to persevere and achieve their goals.
So that got me thinking in terms of how people can simply their financial lives. As I have said, life is complicated but mostly of our own choosing. Financial life planning is all about developing life goals and simplifying it. It is so much more guided, manageable, and achievable. It all centres on minimalism for those who choose to, and want to experience the benefits of having less and living a simpler life.
I don’t know about you, but I have found that even in my own life, my finances sometimes are entirely too involved. I’ve found I’ve had to push the reset button. These aren’t ridiculous conclusions for most, considering how complicated finance has become on all levels, as well as the rapid pace of change that it throws at us. For those who want a more minimalistic life, let’s explore ways to simplify your financial life and put greater control back in your hands.
Most people can get by just fine with one chequing account and one savings account. If you have more, consolidate your various accounts into a single chequing account and one savings account. You’ll simplify your banking, without resulting in any loss in service level. The same is true of retirement accounts. If you have several, due to having previous jobs with RRSP or pensions plans, simplify your life by rolling those plans over to your personal retirement savings accounts. Not only will this reduce paperwork, but it will also eliminate account fees, and make it much easier to manage your retirement assets.
Having multiple accounts for various financial pursuits can lead to piles of paperwork building up around your home. You may not even take the time to read through them, but the existence of large amounts of paperwork can be stressful all by itself. Get rid of any paperwork that isn’t necessary, and shift account statements and notifications to online. And if you’re reducing the number of financial accounts that you have, the amount of correspondence will drop anyway.
Use one credit card
If you have a passion for rewards and zero interest rate promotions, you may have built up an impressive inventory of credit cards. But once the rewards and zero interest are gone, the cards have little value. Consider whether it makes sense to cancel them or to keep them open for credit scoring purposes. Focus your credit card use on a single card. Choose the one that offers the best benefits and, if not cancelled, put the rest away. It’s much simpler to manage your spending and handle payments with a single credit card then with several.
Become debt free
Debt doesn’t just cost you money, it also makes life more complicated. Not only do you have to spend more time paying bills, but multiple debts are serious sources of stress. Think of it this way: Each debt that you eliminate takes out one complication in your life. One of the very best ways to simplify your financial life is to become debt free. It won’t happen overnight, but just establishing a plan to make it happen can go a long way toward simplifying your life.
Invest in funds
Investing in individual stocks can be fun and rewarding, but it’s also messy. You must research, purchase, track, and sell each stock in your portfolio. If you have dozens, it can be the equivalent of a part-time job. You can avoid all that hassle by investing in mutual funds, segregated funds or exchange traded funds. Index funds are particularly attractive. Funds are also much simpler when it comes time to file your tax return. Individual stocks require a lot of tax related documentation and can raise the cost of tax preparation.
No, I am not a big advocate for this but for people who want to live a simpler, less complicated life, it can make sense. I know, I hear it, it sounds old school. But it does have its advantages. It avoids getting receipts, and tracking expenses after the fact, the way you do with both debit and credit cards. With cash, you can make your purchase and move on. Use your credit card on larger purchases that may require buyer protection or a potential refund situation. Then simplify your financial life by making your smaller purchases in cash.
You probably pay for subscriptions and services that you hardly use. By eliminating them, you will simplify your life and remove yet another payment from your budget. The fewer payments you need to make, the simpler your finances will be.
Cut down goals
It’s important to have goals established to achieve important milestones in life. But you probably can’t successfully manage more than one or two goals at one time. In fact, multiple goals can spread your efforts in too many directions, and cause needless confusion. Pick the one or two goals that are most important to you right now, pursue them vigorously, and let the other goals go for another time. Your chance of succeeding in any one goal will then increase dramatically.
Rent a home
There’s a world of documentation supporting the emotional and long-term financial benefits of homeownership. But owning your own home comes with a long list of expenses and responsibilities that you wouldn’t have if you rented. For example, you wouldn’t need to be concerned about repairs or maintenance. Your landlord would be responsible for those. Renting reduces you to just a monthly rent payment, and a small number of utilities. Anything beyond that will not be your concern. That will simplify both your finances and your life.
Focus on income
This applies most directly to the self-employed and to commissioned salespeople, but it does have relevance to salaried employees as well. The idea is to focus most of your efforts and time on the work activities that are likely to generate the most income. Reduce the amount of time you spend on administrative functions by either offloading or subbing them out to someone else. For salaried employees, this could be concentrating effort on activities that are likely to produce a larger bonus, or put you in a better position to be promoted. This single change in strategy can both increase your income, and simplify the income earning process of your life.
Turn off electronics
Information is good to a point. But after that, it turns into noise and promotes mental clutter. The electronic experts on TV and the Internet are there to relentlessly inform you that you need to do this, or to stop doing that, or to buy here, or to invest there. It’s an advice merry-go-round in which the specific advice always changes, but the flow never ends. Confusion is never a sound position from which to simplify your financial life. Limit the amount of information you take in, restricting it only to the most trusted sources, then tune out the rest.
Implementing just a few of these changes can go a long way toward simplifying your financial life. Now not all these strategies are for everyone. Use those that work in your situation. They are meant for those who really want to reduce their financial footprint. Its for those who either want to or need to minimize their affairs. I know that people that have moved in that direction haven’t looked back and, in most cases, their financial life goals reflect this. Instead of travelling in the fast lane, move to the right lane, and abide by your own life’s speed limit. It’s a great strategy in Keeping Life Current.