7 Tips In Simplifying Finances

Annoyed couple calculating their finances during recessionSimplifying finances is a goal a lot of consumers wants to achieve but this is easier said than done. As proof of this is that making ends meet is one of the major problems consumers have according to USAToday.com. This should be easy enough for people earning their own money but it seems that a lot are still having a problem with simple budget management.

This goes to show that financial problems of consumers vary from the very basic budgeting to the more complicated debt management. But with all this, the budget is in the middle of all these problems and can be a key tool in helping you manage your finances better. But how do you manage and even simplify the way you manage your own money?

There are a decisions that leads to financial troubles but there are also those that helps them achieve their goals a lot faster. This is tricky especially for consumers who are just starting to manage their own household budget. They might pick up how convenient and safe it is to use a credit card when making a purchase but fail to understand that they have to pay their statement in full every month and that the minimum payment amount is just a suggestion.

The way to do it so try and simplify the process in juggling your own money. If you over complicate the process, you tend to burn out and fail to reach your goal. The best thing to do is to look for a way to streamline and simplify the process to make it a lot easier to follow. Take for example if you are on a weight loss diet – it is easier to plan and prepare your meals ahead of time to simplify the cooking process to stick to your goals.

How to simplify your finances

There are a lot of ways that you can look into to help you simplify your finances. Here re some of them that you can consider practicing in your daily financial life.

  • Consolidate your bank accounts. You might want to start with your bank accounts and see if you can simplify your life by consolidating some, if not all your bank accounts. This is of course applicable if you have more accounts than you need and you there are times that you get confused with all the details. Although Statisticbrain.com shares that there are about 7.7% of the population who does not even have a bank account of their own, a lot more people do and a certain percentage have more than what they need. The best thing to do is to consolidate your bank accounts and stick to a few that you easily manage. One checking account is usually all you need. You can then set up some accounts for your savings, retirement and even rainy day fund.
  • Construct a priority list. When you set out to manage your financial budget for the family, it is not as simple as juggling income versus expenses. You need to decide what your financial priorities are in terms of the debt accounts that you need to pay aggressively. It can be your credit card debt where you pay it in full every month or your auto loan or worse, payday loans. The idea is to put a hierarchy of payments that you need to prioritize every month. This helps you put some structure in the way you pay off your debts every month.
  • Keep track and stick to your budget.  It is one thing to put together a household budget but it is a completely different ballgame when you are trying to stick to that budget. It is easy to write down that a specific amount that will go towards your groceries but you might have a hard time keeping within that budget when you get to the store as you go about picking up items you don’t need. It can also be a certain budget for utilities like electricity but you keep on cranking up the thermostat even on a cool day bringing your bills up. When you are finally able to put together a budget, simplifying finances means sticking to it as well.
  • Pare down your cards. This has the same idea with your bank accounts as it is easier and a lot simpler to manage your finances when you do not have to take into consideration multiple credit cards. But as you cut down your cards, be very careful in maintaining your oldest cards because these has a lot of bearing with your credit score. Credit history plays a big role in how credit reporting agencies put together your score and your oldest credit cards would have most of your credit history so spare them when cutting down on cards. Consider letting the newer ones go first.
  • Enroll in paperless billing. Paying bills will always be a big part of managing your budget and when your goal is simplifying finances, you might want to consider paperless billing. The way it works is that instead of getting a hard copy of your statement every month, you get a copy of it in your email. This lessens the clutter that you have to deal with every month and you get an easier time managing the statements.
  • Know what you have. Before you go out buying things that you need, it is best to check first what you have before heading on out the door. This can apply to how you do the groceries meaning check first what you in the cupboards and fridge before you buy supplies at home. If you need clothes, check first what you have in your closet. You might find something you can use or pieces you can mix and match.
  • Automate beneficial financial habits. Automatic transfer from your checking account to various funds can help you simplify the way you handle your finances. It can be that you automatically transfer amounts to a an account that serves as your rainy day fund or even one for your retirement. This makes planning and execution a little easier for you and for your family. Doing it even before you see and spend the money will help prevent you in spending that money.

Funds you need to keep in mind

Once you decide to focus on specific fund types when simplifying finances, you might want to consider these ones before prioritizing anything else.

  • Reserve funds. You will never know what will happen in the future and the best way to deal with it, especially those unexpected expenses is to prepare for it. This is where your reserve funds come into the picture. This consists of your emergency fund and your rainy day fund that are both meant to help you survive financial emergencies in the future. The biggest difference between the two is the emergency fund is meant to shoulder the big expenses you might have like job loss or medical emergencies The rainy day fund is meant to cover smaller expenses such as broken home equipments or minor car repairs.
  • Retirement fund. Gallup.com shares that the average retirement age for American consumers is at 62 years of age. This gives you a rough idea on how far along you need to plan out your retirement fund. Most financial experts would recommend starting as early as possible with your retirement fund. This is to take advantage of compound interest increasing your nest egg amount.
  • College fund. It might come as a surprise but saving up for a college fund for your children is actually being smart with your retirement fund. This is because the more your  children have for higher education, the safer you retirement funds are from paying for that cost of attendance. Help them prepare for college without having to shoulder the financial burden that comes with it.

Simplifying expenses can be a big help in helping you reach your financial goals in life. There are a few things you can look into to help you streamline your efforts in money management and make things a little bit easier for you and your family.