Simplifying Your Finances
Tips to Keeping it Simple
August 6, 2015 by Mark Dye
It seems as though our lives are getting more complex by the day—cellphones, the Internet, cable news that never ends ... all of them have given us more things and information to process than we can ever hope to deal with in one lifetime. Because of this, it's becoming more important to find other areas in our lives to simplify. And one of the best places to do that is with your money. So to celebrate “Simplify Your Life” week, here are a few ways you can simplify your finances.
One of the best ways to reduce your debt is by the “Snowball Method.” Basically, pay extra on a bill that you can get paid off quickly. Then, once it is paid, you add all that money to the payment of another bill until it is paid, and so on. This way the amount you pay snowballs as you eliminate each debt, allowing you to pay off your bills a lot faster.
Another option is to get a consolidation loan, especially if you have a lot of credit card debt. The monthly payments might wind up being a bit higher, but you can save years of payments and will most likely pay a lot less in interest.
The key to a consolidation loan, however, is to keep at least one (or maybe a few) of those credit cards open, use it for a small purchase each month (say, $20-$50), and then pay it in full before the due date. Why? Because your credit score is partially based off the amount of credit you’re using compared to how much you have available. Keeping those accounts open will increase this ratio and, thus, might give your credit score a boost.
Timing is everything
If you’re like most people, you have one bill due on the fifth of the month, another the tenth, a few on the seventeenth, maybe a couple toward the end ... basically, your bills’ due dates are scattered all over the place. Most creditors, however, will move your due date at your request, so consider moving them to just twice a month or, if you can swing it, just once a month, to reduce confusing of when things need to be paid. (If you do choose the latter, make sure to save up what you need as the month progresses so you’re ready.)
If there’s one thing we can all expect it’s that we will eventually have an unexpected expense, which can make things a lot more complicated. To help keep such surprises from disrupting the financial Zen you’re trying to create, make sure to have some emergency savings set aside. It could be as little as $500 or as much as six months of take-home pay, depending on your situation (e.g., married or single, kids or not, etc.). However much it is, make sure to have it easily accessible, but not so easy you’re tempted to dip into before it is actually needed.
Almost every bank now offers free online bill paying, which allows you to set up automated payments. This is a great option for things like level-pay utility plans and bills that don’t change each month, such as rent or mortgage. It’s not totally “set it and forget it,” as you will want to check in every once in a while to ensure the payments are being made correctly. But it does come close.
You might also want to contact your creditors so you can receive electronic bills and statements rather than paper ones. Most companies love these because it saves them printing and mailing costs. Many consumers also love them, as it reduces the paperwork they have to slog through each month.
Cash it out
It seems as though the days of carrying cash are gone, with everything from vending machines to car washes accepting debit cards. Carrying cash, however, can actually save you money. For example, if you need to get something from the hardware store that costs around $20, just take out the cash—that way you’re more likely to stick to just getting what you need, rather than grabbing stuff you might not (which is a lot easier with a card). Basically, carrying cash can help prevent you form overspending.
While the world will most likely keep getting more and more complex, there’s no reason your finances have to do the same.