Too often I feel like money is running me. One month goes great and the next…well, before you know it, it’s off the rails like a runaway train. When you get tired of these ups and downs, you know it’s time to simplify your finances and de-clutter your money life. Our finances somehow have a way of controlling and overcomplicating our lives.
When I took my first steps toward debt freedom and financial independence, I made a big mistake. I had the wrong mindset. I looked at debt in terms of what I couldn’t have and from a place of lack. I hadn’t started thinking of the debt freedom journey as an intentional choice to have more of what mattered in life. I neglected to look at all the abundance I already had.
It caused a problem. It kept my financial world complicated and cluttered.
Focusing on the abundance you do have and being grateful brings about a surprising change. You’ll want to simplify. The clutter no longer matches your values of leading a simpler, less complicated life.
Your finances don’t have to be complicated, time consuming and stressful. You shouldn’t be stressed out by the simple act of checking how much money is in your bank account or managing your day-to-day finances.
How then, do you simplify your finances in a world that makes it so complicated? Glad you asked. I’ll give you my minimalist approach to money that I’ve taken on for 2017.
You can simplify your finances in three simple steps: Organize, Purge and Simplify the Rest.
Start with the right mindset. What’s important to you? Find your why.
Simplicity is about exploring what works for you and getting rid of the rest.
What brings you joy? Keep that and find more.
What makes you absolutely crazy mad? Get rid of that and don’t let it back in.
For me, simplifying my finances means going back to basics, and living with less stress and overwhelm. It means achieving debt freedom and financial independence all while being happy.
Your money life needs to align with the rest of your life and values.
Organize your finances.
The key to keeping your finances simple is to keep them organized. When you know where everything is, you won’t be running around the house trying to find something at the last minute.
Gather up all your bills, bank statements, tax returns, etc. and set up a filing system.
I keep mine filed by institution followed by categories like car, insurances, tax returns, and receipts/manuals to keep.
As part of this, you’ll have all your statements handy when you move on to cutting what you can and creating a budget.
If you have to toss anything, be sure to shred it or tear it up into small pieces if you don’t have a shredder, for security reasons. Protecting your financial identity is super important.
Purge and cut what you can.
Ah! My favourite step – tossing the clutter. I believe that simplicity is all about cutting out anything in life that stands between you and what really matters to you.
When I lost my job in 2015, I was burnt out and tired. I wanted things to be simple again. The first thing I did was redo my budget and cut whatever I could. I no longer had the income to support my lifestyle, so things had to go. Home phone, TV/iTunes, Starbucks were all the first things to go. Next up, I started renegotiating with everyone else. I called my insurance company to tell them I wasn’t driving my car as much. This saved me $8 a month. I told my bank I needed a less expensive banking plan, it went from $10.95 a month to $3.95 a month.
Sit down and write out all the monthly services you have, subscriptions, and any apps you pay monthly for. Then ruthlessly cut the ones that don’t align with your ideal simple life. If you use them sporadically, cut them, if they make life complicated, cut them. If you know they’re a splurge instead of an absolute need to survive, cut them.
Create a budget and track your spending.
Having a budget is the way to understand where your money is going. By tracking your spending, you’ll find your strengths and weaknesses and be able to course correct.
If you can, I highly recommend creating a budget with pen and paper. Writing something down not only commits it to memory but it forces you to use broader categories and lower your overall spending.
If your budget can’t fit on one piece of paper, it’s not simple.
I use two budgets, yep two. I have a one-page pen and paper version to keep me focused on simplicity, and I use YNAB to track my spending and analyze my net worth. Get a FREE month with my exclusive link!
Go cash only for every day spending and cut the cards.
Yep, we’re going old school here; it’s cash for everyday expenses and credit card for monthly bills and major purchases (like travel).
If you have debt like I do, in order to master your debt you have to stop letting it run you and slap you around.
That means finding the weakest link in your finances and fixing it. Credit cards are my nemesis. So no more Apple Pay, no more auto reload to your credit card for Starbucks or iTunes, and no more credit cards period. If you’re an impulse spender and/or shopaholic, these apps make it too easy to shop to your heart’s content (or discontent when you see the bill). You need to stop the cycle of “I’m happy I’m shopping, I’m sad I’ve seen the bill, let’s go shopping to make me happy again”.
For 2017, I’ve chosen to stop using credit cards for everyday expenses and go cash only. It’s too easy to lose track of your spending by swiping. There’s no emotional connection with swiping compared to seeing your money leave your hands.
For everyday expenses like groceries, pet supplies, fuel, and restaurants, I’ll be using the envelope system and cash. I’ll make a monthly cash withdrawal, fill the envelopes with the budgeted amount and not use my debit or credit cards.
So, if I want Starbucks and still collect points, I take my budgeted amount in cash to the store and ask them to load it. No more cash, no more Starbucks.
Need gas for the car? I’ll be taking cash into Costco and buying a cash card to use at the gas bar. No more credit card. This will make it easy to keep accruing cash for gas from month to month.
Choose one (or two max) financial institutions.
I’ve always had a hard time with this one. There are so many institutions out there offering either free everyday banking or better rates on savings accounts. But if you want to simplify, you have to stop using five different banks.
I chose to have one big bank as my main provider for my checking account, loan, credit card, and US banking. I have a smaller credit union for all my savings accounts. I did this to make it harder to access my savings accounts and to earn a better savings rate. There are added benefits besides simplicity. When you consolidate, you might be able to get better deals on loans, investment/brokerage accounts and credit.
Focus on 3 goals.
Have you ever had so many goals you couldn’t see straight? I hear you. I took that on one year and overwhelmed myself.
When you take on too much, you can’t focus and you’ll feel like you’re making no progress toward your goals. Keep it simple and focus on no more than 3 goals at once. Depending on how your mind works, make one a primary goal and keep others secondary until you complete the first goal. Maybe you want to have $500 in your Emergency Fund. Focus on doing that as quickly as possible, then move on to the second goal in your list and so on.
I don’t know about you, but confusion and complication is never what you want for your financial life. Implementing just a few of these suggestions will get you closer to simplifying your finances and bringing peace to the money chaos.
I’d love to hear your ideas! How do you simplify your finances?
P.S. Looking to simplify and take control of your money? Try my fave money management software YNAB FREE for 30 days!