Set aside, for a moment, your New Year's resolutions to lose weight, exercise more, organize all your family photos, and finally clean out that basement closet full of old sports equipment.
Instead, I propose a resolution that will make your life easier for the rest of the year. It won't pick up after the kids or organize your sock drawer, but it will make it easier to manage your finances. It may even give you a little more confidence and a little more control over your money. I propose you spend some time this month simplifying your financial life.
Sometimes things get complicated because we never take the time to weed out the clutter. But there's also a part of the human psyche that believes all things complicated must be superior, or at least more sophisticated. Thus, a complicated financial life must be better than a simpler one, right?
That's occasionally true, but often the complications just confuse us and make managing money more time consuming. It can take precious mental energy away from achieving financial goals, not to mention the fact that it can bury you under an insurmountable pile of paperwork.
So, here are some ideas for streamlining your money management. (If you get really motivated, look to the second article in this series for help purging your files and the third article for discipline-free ideas for meeting your goals.)
Checking accounts: Do you have old checking accounts left open that you no longer use? They may have been abandoned when you switched banks months or years ago. Or they may have been opened to take advantage of a rebate or promotion. Close the ones you no longer need. Then, take a good look at the ones you use. If you're constantly worried about keeping a minimum balance or counting your ATM transactions to avoid fees, it might be time to switch to a lower-maintenance account. Take a look at the Banking Center for more help.
Savings accounts and CDs: Here's one place where, in my experience, the accounts can flourish. Emergency funds seem to be particularly susceptible to being spread throughout the financial kingdom. If you have multiple savings accounts or money market accounts, consider consolidating them into the ones that offers the best interest rate. You might also consider consolidating your CDs if they've proliferated, though penalties may outweigh the value of shrinking their numbers. Check out the Savings Center for some ideas about where to stash your cash.
Retirement accounts: Do you have multiple 401(k)s lingering at old jobs, or maybe a couple of rollover accounts? Add your spouse's accounts, and this list can get really out of control. Consider consolidating them into one place for each of you. This has become a pretty simple process. Compiling them means you'll be better able to track your investments, your asset allocation, and your returns. Ditto if you have multiple IRA accounts. The IRA Center and Foolish 401(k)s discussion board can answer many of your questions.
Brokerage accounts: Here's another place where you may have opened multiple accounts to take advantage of promotions or rebates. Pick the one brokerage that best serves your needs and get rid of the rest. If you're in the market for a new broker, wander through the Broker Center. While you're at it, look over your investments. If you have so many funds and stocks that you can't keep up with all of them, it may be time to winnow them down to a more manageable number.
Credit cards: If you have a playing deck worth of credit cards, choose the one or two with the best rewards and the lowest fees and close the rest. Look around for old department store credit cards you never use, and close those too. As a bonus exercise, pull copies of your credit report. That will list any outstanding credit accounts you might have forgotten about.
- Credit card debt: If you're juggling several cards with outstanding balances, consider consolidating some of your debt to the card with the lowest interest rate. (Make sure you check the fees and other fine print before proceeding.) In addition to benefiting from the lower interest rate, you'll have fewer bills to track and fewer payments to remember. Check out the Credit Center if you want help paying off debt or bolstering your credit score.
Do all this while running on the treadmill and lose 10 pounds by February! No, actually, I can't promise that. But I can be pretty certain that tackling the rest of your financial resolutions will become much simpler if you first get rid of some clutter. Then, you can attack the closets.
For some related Foolish simplicity:
- Simplify Your Financial Life
- Your Stocks Need a Fire Sale
- Save: Unify Brokerage Accounts
- Take This Job and ...