Finance Globe

U.S. financial and economic topics from several finance writers.
3 minutes reading time (694 words)

Simplify Your Finances

Complicated finances are difficult to manage and could even be costly. Simplifying your finances might be a much-needed stress reliever. It would also make it much easier to manage your money.

Organize your financial documents, getting rid of those that are outdated. In general, you should keep tax-related documents, like returns or W-2 forms, for three years, but you may need to keep certain documents up to six years. You don’t necessarily need to keep bank and credit card statements for as long, six months to a year is good. After that you can shred them. Or, sign up for paperless billing and you can save the statements to your computer.

Try to keep your financial files in one place, grouping them together in file folders. Dedicate one drawer in your file cabinet or one file box for all your financial paperwork. Every month, dedicate some time to shred outdated documents.

Consolidate your checking and savings accounts. For most people, one checking account and one savings account is enough. Having several accounts results in several bank statements (more clutter), several debit cards (more time choosing which one to use), and multiple balances to track. And since more banks are adding monthly fees to checking accounts, it could be costly to have multiple accounts.

Move all your money in the best accounts and close the others. Be sure you stop any direct deposits and autodrafts before you close accounts.

Pare your credit cards down to just one. Multiple credit cards complicate your finances for the same reasons as multiple checking and savings accounts. There are too many balances to deal with and you may stress over which account to pay off first.

Imagine life with just one credit card to pay. You can get there by transferring balances to one credit card or by paying off balances. It may take several months (or even years) to get down to one credit card, but you can get there if you consistently work toward that goal.

You can go a little more extreme and cancel your credit cards completely once they’re all paid off. Your debit card (which doesn’t offer as much fraud protection as a credit card) allows you to make all the same transactions as a credit card.

Automate what you can. Sign up for direct deposit if your employer offers it. This will save you a trip to the bank and ensure your pay is available quickly.

You can also automate some or all your bills. Fixed, recurring bills are great for automatic bill pay. However, be careful about setting autopay for variable, usage based bills like cell phone bills or electricity service. If you’re overcharged, the money will automatically be drafted and you’ll have to work with the merchant to correct the overage and get your money back.

Pay your bills once or twice a month. Your due dates might be scattered throughout the month. If you're paying according to the due date, you can get confused about which bills have been paid and which bills still need to be paid. If you can pay all your bills at once, e.g. the first of the month, you can go the rest of the month comfortable knowing the bills have been paid. Or, if once a month is unrealistic based on your pay schedule, try for twice a month, e.g. the 1st and the 15th. You may be able to change some payment due dates to better coincide with your pay dates.

Bundle services to minimize the number of companies you have to pay. Your cable, internet, and home phone (maybe even cell phone) can often be combined under a single company. You may even pay a lower rate by bundling your services than you would by getting services from different companies. Insurance is another product that can often be bundled with one company. For example, you may be able to get home, life, and auto insurance from a single insurance company.

It may be difficult to change the way you handle your finances, but try it out. You can always go back to how things were if the changes make things more difficult.
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Tuesday, 20 August 2019

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