Note: This is a guest post from Bob Lotich of SeedTime.
I began my journey into minimalism a little over a year ago, and soon began experiencing the benefits of having less and living a simpler life.
Running a personal finance blog, I began to ask myself, “How can I apply these principles to my money?”
I don’t know about you, but I have found that in my life, my finances are entirely too involved. And too often, I feel that they are controlling me.
Those aren’t ridiculous conclusions, considering how complicated finance has become on all levels, as well as the rapid pace of change that it throws at us.
But here are 11 ways to simplify your financial life and put greater control back in your hands.
1. Consolidate Bank Accounts and Retirement Accounts
Most people can get by just fine with one checking account and one savings account. If you have more, consolidate your various accounts into a single checking 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 401(k) plans, simplify your life by rolling those plans over to a self-directed IRA account. Not only will this reduce paperwork, but it will also eliminate account fees, and make it much easier to manage your retirement assets.
2. Get Rid of as Much Paperwork as You Can
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 absolutely 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.
3. Cut Back to Just 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.
Keep them open for credit scoring purposes, but focus your credit card use on a single card. Choose the one that offers the best benefits and put the rest away. It’s much simpler to manage your spending and handle payments with a single credit card then with five or ten.
TIP: For most people wanting a good rewards credit card, the Chase Sapphire Preferred is the way to go.
4. 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.
5. Invest in Funds Rather than Individual Stocks
Investing in individual stocks can be fun and rewarding, but it’s also messy. You have to 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 of that hassle by investing in either mutual funds or exchange traded funds. Index funds are particularly attractive, since very few actively managed funds ever outperform the market.
Funds are also much simpler when it comes time to file your tax return. Individual stocks require a lot of tax related documentation, and that can also raise the cost of tax preparation.
6. Pay Cash Whenever Possible
Yes, 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.
7. Cut Out Any Services You Don’t Need or Regularly Use
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.
8. Cut Down on Your 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 with a vengeance, and let the other goals go for another time. Your chance of succeeding in any one goal will then increase dramatically.
9. Rent a Home Rather than Owning
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, maintenance, or HOA special assessments. Your landlord would be responsible for those.
Generally speaking, 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.
10. Do More of What Brings in the Most 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.
11. Turn off Your TV and Go Easy on the Internet
Information is good – to a point. But after that, it turns into noise and promotes mental clutter. The “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, I’d love to hear from you. What have you done to simplify your financial life?
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Bob Lotich is the founder of SeedTime, a blog designed to help people live financially free lives. Stop by to take the FREE email course to help you get control of your money.
These are great tips to create a simpler financial life. I completely agree on the idea of owning funds (especially index funds) instead of individual stocks. By owning funds, you have less you need to keep track of and remember – instead you get great diversification and only need to own 2 or 3 funds. The best part, index funds have historically beaten an active investing approach over the long term. You can get better returns while creating a simpler investment strategy.
Thank you for your blog! I have simplified my account by becoming paperless, and have automatic payments. Bills are never late, and not having bills arriving removes typical bill anxiety. Also I charge all other transactions on one card, then pay in full when due. I can see a full record to keep track of spending, but I only have to physically pay that one bill a month.
Retirees move out of index funds upon retirement and pick high dividend paying blue chip stocks for income. Banks pay nothing. Tax free Muni bonds and other bonds are also paying more. I use Visa and sometimes Am ex. prepaid for ebay purchases. Many retirees move into rentals like apartments with no yard maintenance over time. Renting may be cheaper depends on where you live. Our 401k had s &p index for years.
Yes this is good advice,I retired eight years ago and have implemented most of your ideas,we all want to simplify our lives now.
I really like #8, and I took it a step farther by eliminating the time table that I had placed on my goal of getting out of debt. Life has thrown me a lot of curve balls this year, and I found myself regularly getting super frustrated that I was off track from reaching my goal. I’m still attacking my debt with a vengeance, but I’m doing so without any pressure. This is definitely a much simpler way for me to live!
This is exactly whats happened for me this year too. I was 100% committed to getting rid of a certain debt by Christmas…I have tried all I can, but as with you, a lot of curveballs have hit which has unavoidably taken this aim off-track. I was very frustrated (which caused unnecessary added stress every time I thought about it) that this goal isn’t able to be reached by my ‘goal date’ – so have now let go of the ‘date’…but still doing as much as I possibly can to still get rid of that debt ASAP.
My husband retired from banking twenty years ago. These are wonderful, sound and wise suggestions. Thank you!!!
Thanks for your #9 item on renting. I retired, am alone and have a drastically reduced income and, although I have no mortgage, have a house that I cannot now afford to maintain. Rent may increase but all service folks have gone up over 50% in the last year – if you can even find a trustworthy or reliable one in my area. Things fail at an alarming and unscheduled rate. Everyone keeps telling me to stay and I would be crazy to consider renting but it is looking about equal to me now.
If you can avoid renting, it is best to continue to own especially in a growth housing market. Renting sounds good, but takes from ones monthly income when you can live in your own paid for house. It is best just to reduce the home by selling it for something smaller and easier to maintain, but still continue own. Purchase an apartment or townhouse and get it new, or just get a new smaller house without the condo fees. Another thing I tell everyone who has retired completely, is to semi-retire instead, by working part time. Makes a heck of a difference in quality of life.
You still have to account for and pay property and school taxes on your home if you own it outright. So while downsizing might help reduce those costs, your home will still always cost you money. In my area taxes are very high and even my house is paid off I’ll still be shelling out $1000 a month for taxes ($12k+ per year).
Where on Earth do you live?!
I love your tips to create a simpler financial life, especially #3 (Cut Back to Just One Credit Card). I don’t know when it became popular to own as many credit cards as you can. It really can be a problem just waiting to happen.
I’m going to disagree with #3. Two is a good number. I’ve had a credit card number stolen a few times (due bad web site security, data breaches, or who knows what else), and being able to use the alternate card at that point saved a lot of hassle. I was still able to pay bills online and otherwise proceed with life normally while the CC fraud investigation was under way.
I pretty much ended my home 100M/10M cable modem internet I paid for two full years 40 € month. I realised I have enough of Internet in my phone, unlimited 3G 2M/2M data plan and costs only 10 € month. I also sold out all my possessions, like TV, and made a big save on my electricity bill. I always check a price online before I buy something I need. I rent my house and I have no debt. I have no credit card, it is only debit card. I don’t have a car and I use my bike often. This all is so good for my life, I don’t need to pay much bills and I don’t have stress about money. I also can save a lot for future, because I don’t buy much. I also refuse to eat out, mostly I do food at my house. Saving a lot of money!
I agree with your advise, take it seriously and try to live by those same principles..as a result my life is simpler. The only thing I’m doing different is: our house is paid for (took 13 1/2 yrs.) it’s been 5 years. I’m 53, my husband is 47, I made it a goal, we worked hard- (took Dave Ramsey advise) and got rid of our biggest debt..what a relief! (renting is not for me)
Thank you for your blog-
We’re following Dave Ramsey too. Our credit card debt is gone and we paid cash for our cars, have a little under four years left on the mortgage. We’ve gone back and forth on rent vs. owning. Sometimes it’s terribly tempting to sell, but we’re so close!
Keep going with your plan Christi. Being mortgage free after 19 years of the monthly payments for me is more than great. It is fantastic and provides contentment and a financially free life. You feel safe and if one loses his/her job, oh well. You can laugh it off and look for a new one taking your own sweet time.
I own one credit card and the points get me $150.00 a month in free groceries. All other point cards are for luxuries. I figure, if I am going to use a card at all, it should get me a free stuff that is a necessity of life.
Conal,
Would you please share which credit card gets you $150 a month in free groceries?
Thank you!
Good tips Bob, I look forward to checking out your blog more.
These tips would definitely help simplify my financial life. I follow some but also choose not to follow some others. For instance, I keep multiple credit cards and pay everything I can with them for the rewards. But it certainly isn’t easy tracking multiple cards and wouldn’t do it unless I had a system in place to monitor them.
Thanks again for the post!
Check out award wallet to track credit cards and link automatically. I started serious travel hacking a year ago 1500000 points for retire travel. The cards after sign up bonus are not used. I use one or two cards to collect points to cancel travel charges Barclay arrival plus. I do most of the 11 points out lines in this article. Thank you. Steve O
Great tips! Thank you! :)
Thanks Green Swan!
I especially love tip 9. In a culture of home ownership, I have always loved the freedom of renting. As a result, I’ve been able to enjoy the moment and day-to-day pleasures of living in memorable, beautiful locations that would otherwise have been financially out of reach. It’s not for everyone but equally I ‘owned’ a home once for a year in the city while in a corporate job. I suddenly felt shackled by having a mortgage. I sold up and just escaped the credit crunch of ’07. A year later, after leaving the job and going travelling using the small profit I was left with, I rented a beautiful home by the sea, set up my own little business and aside from a few panic moments, I’ve never looked back.
I love that – “aside from a few panic moments, I’ve never looked back.” Thanks for keeping it real. Even when it turns out well things sometimes require some panicking!
Renting saved my family’s hides during the recession. We got so many negative comments about not buying a house when the market crashed and rates dropped, because “it’s a great time to buy!” Well, not for us. We looked at our job security (and lack thereof) and said absolutely not. Being renters, we survived the recession by being able to cut our losses and follow the work across country and back as we could find it.
My house-owning friends were angsting over the real possibility of losing their job and stressing because they were tied to mortgages and a house and couldn’t up and move for work if needed. One had to turn down a promotion to a place she loved because she couldn’t move since her house wouldn’t sell in the down market. We don’t plan to rent forever, but we’re not interested in locking into a house until we’re sure we won’t be moving again for work for quite a while.
Feeling “shackled”. Yes! This is how I feel. We are putting our house of 12 years on the market in the next couple of weeks and we can’t wait to rent and be free. Its not for everyone, but we’re very excited about it. I keep using the word “tethered”. I don’t want to be tethered to a house any longer! If I want to move somewhere new every year – so be it!
I think it’s common for people to mask their uncertainty over their own life choices by insisting that anyone on another path is doing it wrong. I finally paid off my student loans, but it will still likely be a few more years until I will have a down payment ready for a small place. Part of me would love to own, but renting allowed me to build financial stability – a luxury that even many homeowners don’t have.
Good job, Country Mouse!
It sounds like you made a good decision, and that it worked out well for you.
:)
Vicky!
I am so happy for you! I too prefer to rent my home now.
It sounds like you have created a beautiful and fulfilling life for yourself. It sounds absolutely wonderful! Good for you!
Enjoy!
On home ownership I disagree. Eight years ago I bought an one bedroom condo. Two years ago I retired. Now the rents where I Iive are higher than mortgage, HOA & utilities. Every year when I rented my rent went up. Talk about stress. On my pension I could no longer live in the area of my choice.
Bob- I liked the “cut down on your goals.” I used to have goals all over the place, and didn’t accomplish much. Then I simplified and found that sustained focus on only a few goals leads to greater success. Thanks!
John, I am with you. I used to fall victim to the same thing. Ruthlessly focusing on one or two main goals has helped me get so much more done.
Bob, your advice was refreshing. #11 really spoke to me about my the “advice merry-go-round” of the internet for many aspects of my life, not just the financial area. The many ideas I gather just create mental clutter.
I’m reviewing what I subscribe to in my RSS reader right now and asking what the most trusted sources? I’ll delete the rest.
Thank you for your guest post.
Great idea Shannon, and you might want to check out a free service called Unroll.me – a very simple way to eliminate and better organize all your subscriptions.
Great information as always although I don’t necessarily subscribe to the idea that we should all be putting our money into index funds or ETF’s.
No doubt they have their place in someone’s portfolio, but question this idea that this is should make up the majority or all of one’s holdings.
The notion that few actively managed funds beat the index so there’s no point trying is crazy. A good fund manager (particularly in a falling market) is worth their weight in gold.
Food for thought…?
I disagree with the ‘renting instead of homeownership’.
Yes, it may cost more to invest in home-ownership but in the long run, it’s worth it. The money that you’re putting in is for something that is going to be yours (or already is yours). With renting, yes, it may cheaper but you’re investing into something that you have no potential in owning. You can sell your house, you can rent parts of your house, you have the freedom to do what you want with your house, you can pass it down to your children and etc. With renting, there’s limits to what you can do. And as a matter of fact, sometimes the rent is much higher than the mortgage that you’d have pay.
Roberta, 1. The point of this article is how to simplify your finances, not which one is the absolute best financial decision. And most people would agree that renting is a lot simpler than owning.
2. As far as which is better financially, this is an eternal debate that never seems to end and from my experience doing both for many years I prefer to own, but in many cases the benefits are negligible if any. Paula Pant did a great analysis that I would recommend checking out here… http://affordanything.com/2015/11/24/is-renting-better-than-buying-should-i-rent-or-buy/
Your thoughts are so beautifully simple.
These are really great tips. I especially agree with #4. Nothing complicates our financial life more then debt. Of course #6 helps maintain #4. I very rarely pay for anything, other then with cash. Another thing we did that really helped simplify was to cut out cable. We did that a few years ago, it was tough at first, but now I can’t imagine dealing with cable, so thankful we did it.
Thank you. It’s amazing how simplifying can be so empowering.
#2 Paperwork -check
#3 Creditcard -check
#4 Debtfree – in the end of the month, yay!
#7 Cut services -check
#9 Rent home -check
#10 More income -check (dumpster diving)
: D
I have followed most of the 11 points for years: paying cash for everyday purchases, consolidating retirement accounts, one credit card, online statements etc; however, you are foolish if you can afford to buy a house and don’t. The house I bought sixteen years ago has added over a million dollars to my net worth. My house payments are about on par with a one bedroom apartment in my area. Furthermore, by participating in the home sharing economy, I’ve added to my income considerably. I use the additional income generated by homesharing for upkeep on my house as well as those unexpected expenses that pop up from time to time.
” you are foolish if you can afford to buy a house and don’t.”
I don’t agree with this at all – it’s really a matter of personal preference once you can afford to do either comfortably; some people do prefer freedom of movement to property investment, and that’s fine for them – and I don’t believe judgmental name calling is really that useful – but I will add this to your argument: one big trouble is that a large number of people seem to be confused about whether or not they can truly afford a house and if their job/income is stable enough to merit a mortgage.
See: Recession of 2007+, housing market crash, subprime mortgage crisis, risky lending standards, income falsification, “underwater on the house”, unsustainable mortgage debt, foreclosures, rise in homelessness and food insecurity among the middle and lower classes.
None of THAT is going to simplify anyone’s financial life.
If property investing is where you want to put your money, that’s fine for you. Some people like their assets more liquid, and that’s fine for them. Either way, the important part is actually knowing what you can and can’t afford long-term.
Love this, thanks for posting! Many of these are areas are family has simplified over the past three and half years, and I’m excited to be debt free by next spring to begin looking into investments.
The one area that was actually more simple for us was using our debit card instead of cash. We tried the cash system, and it made keeping track of our expenses more complicated in the day to day purchases. On the other hand, using a debit card also takes more diligence in sticking with our budget–so I guess it depends on your organizational style.
All good stuff, thanks again!!
There were some good thoughts and tips in this article… however, two points are really bad advice: 1) don’t purchase individual stocks but instead funds because they are easier to manage, and 2) rent don’t own. Better advice would have been to say understand your investments and don’t just put things on “autopilot”… as well as “rent until you CAN afford to own.” Not understanding investments and real-estate breaks leaves a ton of money on the table unnecessarily.
I live by 1 to 8, and would definitely recommend these as tips for anyone.
With regards to 9, I agree that renting is certainly financially simpler than owning your own home. However, renting can come with other complications. Where I live the housing market is very tight at the moment (driven by the popularity of the area with those seeking a simpler life!). It is difficult to find somewhere to rent or buy. Friends renting face a lot of uncertainty, with landlords selling up to realise capital gains. Some have had to move more than once a year because of this – and we all know how far from simple moving is. Other friends have had to settle for a place across town, commuting their kids each morning to school with the hope they will be able to find a place to live in the area eventually.
I am glad that you include 9, as so often we blindly follow the homeownership dream like the “American Dream” when it may not be what is best for us given our goals and state of life.
Great tips! ;)
These are great advice. But renting instead of owning a house? I thought property prices are going up over the long-term?
In my country, the rent is almost the same as the monthly mortgage payment. So owning might be better. :)
Great list of actionable items, Bob. I especially agree with your point about watching less TV. I have noticed a direct correlation between my personal and professional success and the amount of TV consumption.
The average adult reads very little if at all and watches hours of TV each day. These are the same people who complain about being “busy.”
Thank you so much for including renting as a way to simplify! It truly has facilitated a much simpler way of living for me personally. Culturally there is a lot of pressure to own a home and very little support to forgo that goal in life. I am a nurse and absolutely love having the flexibility to practice my profession in different communities (in the U.S. and worldwide) as well as the ability to go to the graduate program of my choice without having to figure out what to do with my home. For me, owning a home again would limit me. Even though renting is a choice for me and I have no desire to ever again exchange my freedom for home ownership I still have micro-moments of shame surrounding renting, especially when meeting new people. Renting (except in very large cities) is often perceived in the U.S. as “not having arrived” financially or not being financially savvy. I am so appreciative for your validation that renting is sometimes a better option, especially where simplicity is concerned. Thank you for giving a voice to this and giving it credence.
All fantastic ideas. :) When Mr. Picky Pincher and I got married, it took some time to simplify our finances. But now we have one credit card, one savings account, and one checking account. That’s it. We’re proudly living on just 50% of our income, which enabled us to pay off $14,000 in credit card debt.
Getting rid of debt is hands-down the best way to simplify finances and remove a lot of stress.
Awesome post! I especially love cutting down your goals and renting instead of owning a home.
My husband and I recently simplified our finances and started working with a financial planner. We had too many goals (save for a next car, emergency fund, vacation, house, etc) that it was becoming overwhelming and we weren’t getting anywhere with any of it. We are now focusing on no more than two goals at a time and are doing much better because of it!
I didn’t read all of the comments on renting vs. owning, but this is a debate I hear all the time. We currently rent. We are looking to move out of state within the next year, so buying a home is not realistic. There’s no right or wrong and just because someone rents their home doesn’t mean they are throwing their money away. There’s pros and cons to both – everyone is different and everyone’s situation is different. We would love to own one day, but are in no rush. All we care about is a safe roof over our heads, food in our bellys, and clothes on our backs. :)
Also, just because you can afford to do something, doesn’t always mean it’s the right decision.
One of the best things I did to simplify my financial life actually goes against one of your tips, but for me it works — I established a separate checking account for travel expenses. That way, when I go on trips, I don’t have to track the expenses in my general checking account and question if I’m going over budget or anything like that, because I know everything in the travel account is designated for that trip.
Great list! Even picking just a handful of these will go a long way. My wife and I recently consolidated to one bank account and LOVE it. It makes life so much simpler. One less log in, one less bank account to worry about. The small things go a long way!
Bert
Hi Bob,
I really loved this post. Thank you for sharing.
Number 8 is great for me. I’m currently working on getting myself in the habit of focusing on just one or two goals at a time. It has already made a huge difference! For most of my adult life, I’ve always had a huge “Goal List”. In so doing, I created stress, anxiety, and disappointment for myself because I was for the most part unproductive, and lived in a nearly constant state of overwhelm. Thanks again. Looking forward to checking out your website!
Can you combine Roth IRA’s with 401’s and other IRA’s, etc. ? Thank you
My biggest piece of advice is do not charge anything on your credit cards that you can not payoff when the statement arrives. Always think if you really need the item you are charging. Keyword is having a BUDGET and sticking to it.
good advice for the most part.
In my part of the world, however, renting is not a better option to owning if someone wants to stay here. The prices of homes have gone up so much, and developers are making so much money, that rental buildings are being demolished for new condos and highrises — especially near transit hubs. Those who have lived here for years in their suites and invested their lives in their communities are now facing the very real possibility that they will be evicted, and that there will be nowhere else they can move to rent. And, because of the high demand, if there is a rental place available it will be well over most budgets. At least one landlord started a bidding war on his rental unit — no set rental amount; instead, he had an open house, and the suite went to the highest bidder.
I’ll add one more I’ve learned the hard way after my son was born early and spent a month in the NICU, relating to exorbitant medical bills: negotiate a payment plan directly with the provider instead of paying with a credit card. Especially if you contact them right away and explain your willingness to pay but your limited means, not only will most providers be happy to setup a payment plan with no finance charges, but you may even be able to negotiate down the bill or apply for financial aid. At worst, even if it’s just $5 a month, they can’t legally pursue you for collections as long as you never miss a payment, no matter how much they may threaten. Or so says my sister who’s been a Medical Biller in CA over 10yrs.