Sunday, January 13, 2008

Simplify Your Finances

I want money management to be easy. Yes, I like organizing and planning and reviewing... but I don't want to do it for the same subject forever.

Below are the steps I am either taking now or plan to take very soon to simplify my finances. If you scroll down to the end of the article you can find some links to other writers who have some great suggestions.

Direct Deposit
Oh the joys of not having to get myself to the bank and deposit my paycheck! Now I just need to find a way to automatically deposit the rent from my tenants. Ideas anyone?

Automatic Retirement Deductions
This is taken out of my paycheck and sent directly to the 403b brokerage account. No muss, no fuss.

One Checking Account
Everything comes into and goes out of the same account

The Orange Savings Account by ING

Maybe if I did more research I could find a simpler way to manage savings.. but I'd be surprised. I love how ING lets me have as many savings accounts as I want (there may be a limit but I haven't come close) and lets me transfer money between them instantly. And I can close them and rename them with just a few clicks as well if I start feeling overwhelmed. I have brought my savings accounts down to four:
  1. Financial Freedom: this also serves as my emergency fund. Any amount above a certain level will go into a mutual fund.
  2. Save to Spend: Here I save for quarterly or annual bills, upcoming vacations, irregular bills, etc.
  3. Rental: All funds related to my rental account get transferred to and from here
  4. Interest Income: this is a just-for-fun account so I can see how much interest I have been accumulating over the year.

Consolidate Debts

After I purchased my house I did some remodeling (definitely worth it) on 0% credit cards. But now I have 6 credit cards and too many due dates, which is a pain. Plus it hasn't been good for my credit score to have so many maxed out cards. My wonderful sister has offered to be my next 0% balance transfer offer (gotta love family). I am using her to consolidate my credit card debts and cashing out some old investments to pay off the remainder. Now I make one simple monthly electronic transfer to her bank account instead of paying 6 credit cards.

Online Bill Pay
I love online bill pay and have been using it for years. Organized as I am, putting a stamp on an envelope and putting it in the mailbox is one of the hardest things for me. Go figure. The first time I get a bill from a vendor, I quickly input their info into my account and from then on it's two clicks and we're done!

Automatic Payments
I do this in two ways:
  1. On my credit card: This is my first choice. If a vendor will accept an automatic credit card payment I add 'em on and rack up the cash-back rewards.
  2. Through my bank: Some vendors will automatically deduct payments from my back account on the due date. This saves me from having to send them a check through bill pay.

One Rewards Credit Card for all Purchases
Using a credit card isn't recommended for people who have problems with over-spending. I don't have that problem so this system works amazingly well for me. I put all of my purchases on my credit card- from the smallest to the largest. This gives me a nicely organized and categorized statement of all my spending on a monthly and yearly basis. It also gives me rewards for purchases I would have made anyway. Using a credit card over a debit card also has the advantage of giving me some float time and simplifies my bill paying.

I have been using Discover Card for about ten years but I am going to switch this year for two main reasons. Discover still isn't accepted as ubiquitously as Visa/Mastercard and there a couple of places I frequent that don't take it. I don't want to miss out on the cash-back by having to use my check-card. I can also find a card that gives me a higher cash-back percentage. I will keep you posted on which card I decide to go with. (And obviously, I won't be closing my very old Discover account with the perfect payment history or my credit score will likely plummet).

Having a Schedule
I keep a master schedule (which has been so regular for so long now that I just keep it in my head) of when I get paid and which bills come out of which paycheck. Most of my bills are automatic so I don't have to do anything. The only ones I pay are my monthly credit card bill, the transfer to my sister, and the transfer to my savings accounts. My bank doesn't allow me to automate a payment to another account holder (and my sister doesn't want me to send her a bill-pay check because she dislikes lines at the bank as much as I do). The other two I like to do manually because they are irregular amounts and I like to check them over before I send the payment.

Going Paperless
My life changed after I decided to stop receiving paper statements. Now I no longer fret about mounds of paper I should keep or shred. Online statements are all I need.

Online Account Aggregation
There are many services that will gather data from all your financial accounts into one place for you. I do this through my bank and I highly recommend it to everyone. This process allows me to see all of my accounts at a glance with the most up-to-date information. It keeps old but unused accounts on my radar for suspicious activity. And it calculates my net worth for me as well. Wonderful stuff.

Below are what some other folks have said:

How to Automate Your Personal Finances at Get rich Slowly
17 Ways To Simplify Your Personal Finances at Your Credit Advisor
6 Easy Ways to Simplify Your Finances at Moolanomy
4 Ways to Simplify Your Finances Where Possible at Consumerism Commentary
Simplify Your Finances at the Motley Fool
10 Ways to Organize and Simplify Your Finances at The Digerati Life

What are your best tips for simplifying your finances?


Pinyo said...

Great post there. And you found even more post about simplifying finances. I guess I didn't search enough.

moneychallenge said...

if i were to cut this post down into two tips, they would be 1)automate and 2)go online.