Finances can be complicated! However, the simpler your finances, the easier they are to conquer. A few simplifications can renew your enthusiasm for finally mastering your finances. Many of the simplest actions you can take are the most effective. Making a habit of these simple actions is a sure way to ensure your financial life flourishes.
Creating and following a budget can be a great way to manage your finances.
In this post, we’ll look at two couples, the Jacksons and the Johnsons. The Jacksons follow best practices for simplifying their finances, while the Johnsons do not. Through their stories, you’ll see how small changes can make a big impact on your financial well-being.
Simplify Your Financial Accounts
The Jacksons
The Jacksons have one chequing account, one savings account, and one retirement account each. They chose the best options available to them and closed the rest. This simplicity makes it easy to track their money and avoid confusion.
The Johnsons
The Johnsons have three chequing accounts, two savings accounts, and multiple retirement accounts. They struggle to keep track of their money and often miss opportunities to optimize their savings and investments.
Tip: Do you really need three checking accounts, two savings accounts, and multiple retirement accounts? Unless you own your own business, it’s unlikely you require more than one of each. Pick the best and ditch the rest.
Pay Your Bills Once a Week
The Jacksons
Every Friday evening, the Jacksons sit down together to pay their bills. They have a set time each week to ensure nothing is forgotten. This regular routine keeps them organized and ensures all payments are made on time.
The Johnsons
The Johnsons pay their bills whenever they remember. Sometimes they miss due dates, leading to late fees and added stress. They often scramble to find the money to cover their expenses.
Tip: Have a scheduled day each week to sit down and pay your bills. Having a scheduled time will ensure that no bills are “forgotten.” Pay everything on time. Leave enough time to ensure that all payments post on schedule.
Use Electronic Bill Paying
The Jacksons
The Jacksons use their bank’s electronic bill paying system. They set up automatic payments for their mortgage, car loan, and other recurring bills. This saves them time and eliminates the need for paper checks and stamps.
The Johnsons
The Johnsons still write checks for most of their bills. They often forget to buy stamps and sometimes misplace their chequebook. This adds unnecessary hassle to their financial routine.
Tip: Use electronic bill paying. Most checking accounts will allow you to pay any bill you like online through your checking account. You can set up automatic payments or you can pay manually. Most importantly, you avoid the need for paper checks and stamps. Automatic bill paying works best with bills that have consistent payments, such as mortgage, automobile, and other types of loans.
Consider Level-Paying Your Utilities
The Jacksons
The Jacksons signed up for their utility company’s level-pay option. Their utility bills are predictable every month, which makes budgeting easier.
The Johnsons
The Johnsons deal with fluctuating utility bills. Their electricity bill is high in the summer, and their gas bill spikes in the winter. This unpredictability makes it difficult to manage their monthly budget.
Tip: Budgeting can be enough of a challenge without having to incorporate high electricity bills in the summer or high gas bills in the winter. Using your utility company’s level-pay option can keep your utility bills predictable.
Automate Your Savings
The Jacksons
The Jacksons automate their savings. A portion of their paycheck is deposited directly into their savings account every month. This ensures they save money consistently without having to think about it.
The Johnsons
The Johnsons try to save whatever is left at the end of the month. Often, there isn’t much left to save. Their expenses tend to expand to meet their income, leaving little room for savings.
Tip: Save first and save automatically. If you’re still trying to save whatever money remains at the end of the month, there’s a good chance you’re struggling. Expenses tend to expand to meet the availability of funds. Have money taken out of your paycheck before the opportunity to spend it presents itself. Your employer’s human resources department should be able to help you. If necessary, just put the amount you’d like to save into your savings account as soon as you receive your paycheck.
Review Your Spending Once a Month
The Jacksons
At the end of each month, the Jacksons sit down and review their spending. They use a spreadsheet to account for every penny spent. This helps them identify areas where they can cut back and save more.
Get our free Expense Tracker to see where your money goes each month.
The Johnsons
The Johnsons rarely review their spending. They have a general idea of where their money goes but often overlook small expenses that add up over time. They struggle to make a budget that works.
Tip: At the end of each month, account for every penny spent. Use a spreadsheet or financial software to chart all of your spending. You’ll find that you’re spending more than you think in certain areas. Those morning coffees, work lunches, and happy hours might be costing more than you realize. Reviewing your bills and other spending is one of the most effective ways to enhance your budgeting activities.
Re-Evaluate Your Financial Recordkeeping System
The Jacksons
The Jacksons keep their financial records organized. They have a filing system that helps them keep track of important documents. They consulted with an accountant to determine how long to keep each type of record.
The Johnsons
The Johnsons keep a lot of unnecessary paperwork. Their filing system is chaotic, and they often struggle to find important documents when needed. They hold onto old bills and statements that they don’t need.
Tip: Most of us keep more paperwork than necessary. Speak with an accountant and determine how long to keep each type of record. Most importantly, be organized. You can set up your filing system by the month or the bill. Most items necessary for tax purposes can be kept for a maximum of seven years. Most other records are safe to discard at the end of the month. Remember that many records are available online.
Do you really need to know how much you charged on your credit card three years ago? Does your cable bill from last April need saving? Probably not. Place current bills in one location to avoid loss. Keep your shredder handy and use it when the time comes.
Develop Systems and Habits
The Jacksons have developed systems and habits that ensure the most important financial activities take place each month in a timely manner. They have a simple and productive financial life, which reduces their stress and allows them to focus on other important aspects of their lives.
The Johnsons, on the other hand, struggle with their finances because they lack these systems and habits. Their financial life is more complicated than it needs to be, which adds unnecessary stress and makes it harder to achieve their financial goals.
Tip: A few simple adjustments to your personal finances can make life much easier. Develop systems and habits that ensure the most important financial activities take place each month in a timely manner. Habits and consistency are a key component to a simple and productive financial life.
Conclusion
By following the best practices for simplifying your finances, you can reduce stress, save time, and achieve your financial goals more easily. Like the Jacksons, you can enjoy a simpler, more organized financial life by making small changes that have a big impact.
Here’s a quick recap of the tips we’ve covered:
- Simplify your financial accounts.
- Pay your bills once a week.
- Use electronic bill paying.
- Consider level-paying your utilities.
- Automate your savings.
- Review your spending once a month.
- Re-evaluate your financial recordkeeping system.
Start implementing these changes today, and you’ll see a significant improvement in your financial well-being. Remember, the key to success is consistency and developing good habits.
Happy simplifying!
Disclaimer for ManageYourMoney.ca
The information provided on ManageYourMoney.ca is intended for educational and informational purposes only. It should not be taken as financial advice. The opinions shared are those of the authors and are meant to encourage sensible financial habits and decision-making. We recommend that you do your own research or consult a certified financial advisor before making any financial or investment decisions. All investments come with risks, and there is no guarantee of success. Past performance is not a reliable indicator of future results. Always consider your personal financial situation and risk tolerance before pursuing any investment opportunities.
As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.
Please share your thoughts in the comment section below.
