Many people struggle with personal finances. They do not keep track of their expenses, they spend more than they should, and they do not have enough money for emergencies -- among other significant problems. While potential fixes are many, one method that will almost certainly help is simplifying your personal finances. Here are six ways to do just that.
1) Keep a Budget
A budget is any means of tracking money you make and spend over a month. A budget is a cornerstone of effective, simple personal finance. Examining your budget will allow you to figure out where exactly your money goes. You can cut down where you need to, avoiding the phenomenon of not having as much left over at the end of the month as planned -- an issue that afflicts many people.
2) Consolidate Accounts
Many people have multiple bank accounts. Others, especially those who have switched jobs often, have several 401(k) accounts. More accounts can easily increase headaches for a person, as each must be managed separately. Having multiple 401(k) accounts with different companies can mean being subjected to additional fees too. It may be wise to roll over the various 401(k) accounts into a single IRA.
3) Save Automatically
Putting aside money for savings on a regular basis is a basic element of sensible personal finance. Making the process of saving automatic will simplify matters, eliminating another mundane chore that must be taken care of. It only takes a few minutes to set up an automated transfer from a checking to a savings account. This method also avoids the temptation to spend money rather than save it.
4) Go Paperless
If you haven't already, moving to an all-digital mode of tracking finances will make life easier. Having to keep track of paper documents is likely to be stressful. It's all too easy to lose an important file, as well, which can cause huge headaches. Receipts, tax returns, bank statements, and the like are much easier to manage online.
5) Prioritize Goals
You might have several different financial goals -- to pay off credit card debt, to save for a rainy day, and invest for retirement, perhaps. But prioritizing multiple goals is tricky. It's easy to lose focus and prioritize none at all. It's often best to put one goal (or maybe two) at the forefront. Then, focus on it until you reach it.
6) Spend Less
Spending a lot is a sure way to add needless complexity. Aside from the fact that buying things you don't really need only adds headaches to life, the less you stretch your budget, the less stressed you will be. The closer you are to living paycheck to paycheck, the more mental pressure you will feel. Controlling spending makes life easier to manage.
A complicated life is often a stressful one. This is as true in the area of personal finance as anywhere else. There are other, perhaps more important reasons to try to simplify your personal finances, but the basic peace of mind that can result from making things simpler should not be overlooked. Follow the six ways seen above to effectively simplify personal finances.