January is a fantastic time to simplify and streamline your financial life. The simpler you make things, the less chance there is for confusion and mistakes, and the more time you have for doing the things that you love. I offer four suggestions to bring more calm and organization to your finances:
Arrange for direct deposit. Whether your income is from Social Security, a paycheck, or stock dividends, having the money deposited directly into your bank account will reduce the number of misplaced checks and trips to the bank. Your account will also be replenished even when you are unable to get to the bank.
Streamline bill paying. You can do this one of two ways.
- The first method is setting up automatic payment plans with your utility and cable companies, mortgage lender, insurers, and other vendors that you pay on a regular basis. With automatic payments, you authorize the companies to debit your bank account for the amount that you owe. Many will send you a bill in advance that states the date and the amount to be withdrawn. You can call in advance of the withdrawal if you question the charges.
- The second option is to pay bills on-line. Collect all your bills in one place as soon as they arrive. Schedule two bill-paying sessions in your calendar every month. I recommend that you keep them the same days of the week (for example, every second and fourth Wednesdays) so bill paying becomes routine. On the designated days, go to your bank’s website and make your payments.
With either method, you may still need or want to pay a few bills with paper checks.
Consolidate accounts. Consider bringing your investment, brokerage, and retirement accounts together under one or a couple of investment houses. Close unused bank accounts and consider whether you can combine others. Look at buying your auto, home and umbrella insurance from one insurance company. What are the benefits of consolidating? Less work to keep track of your accounts, reduced paperwork and junk mail, simplified taxes, and possibly fewer fees. You may also save money on your insurance.
Cut back on credit cards.I recommend getting rid of all store cards. Their interest rates are typically high and why have so many cards hanging around in your wallet? Two major credit cards are sufficient for most people: one card for everyday use and a second to use for internet purchases and as back-up if the first card reaches its limit, gets lost, or is stolen. Having only two means fewer accounts to keep track of, fewer companies to call should your wallet get stolen, fewer bills, fewer payments, and less paperwork.
Now that is simplification.
