Managing your finances can be a challenge. Fortunately, with a little planning you can simplify your financial management, saving you time, energy, and money.
The one habit that can help you to get your finances in order is a well thought through money plan. At the beginning of the year you probably promised yourself you’d cut your spending, pay off your debt and start saving. If you’re wondering what happened to those plans, one thing’s for sure, you didn’t stick to a personal money plan.
Money planning is the simple habit of regularly structuring your finances so you don’t end up wondering where it went. You may already track your spending, but without a money plan you were just recording clutter.
A money plan gives you control over your finances. It will relieve the stress of constantly wondering how you’re doing financially. It will also free up mental space to think, make good decisions and focus.
Check out these tips to declutter your finances.
Know what matters to you.
Budgeting your money starts with your values. Other than financial necessities, identify the purchases or spending decisions that matter most to you. Choosing to spend on the things you value makes it easier to let go of the things you don’t.
Declutter first, organize second.
A common mistake in decluttering is to try organizing your way out of the mess. Starting with organization allows you to avoid the tough decluttering decisions while feeling like you are making progress. But organizing first means you are often trying to find space for things you don’t want to keep—while ignoring the root of the problem at the same time.
A similar mistake with money management is forcing a tracking system onto your spending habits without first examining those habits and eliminating the ones that aren’t working for you. This has become even more common nowadays with the countless banking apps that will track spending for you.
But trying to track your spending when you spend more than you can afford is just another way of organizing clutter. It doesn’t get to the root of your financial stressors, and it gives you only a false sense of progress. As with physical declutter, it’s better to start by eliminating the purchases you don’t need before getting into the nitty-gritty of organizing your finances.
Start with easy-to-declutter items.
So if you need to cut expenses in your budget, start with the items that are not important to you or that you simply will not miss. That could be anything from your cable subscription to your unused gym membership to the extra data you never use on your cell phone plan.
Do you have stacks of mail, bills, and statements that pile up? An easy way to avoid the clutter is to move to paperless billing and e-statements. Most companies and banks also allow you to automate monthly payments, like utility bills, insurance, and loan payments. By making these payments automatic, you can save significant energy and time. Just be aware of when automatic payments occur and make sure that there is enough money in your account to cover the withdrawals.
Create a debt payment plan.
When you pay off debt, you free up additional income which can be used for savings, retirement, or investments. There are several ways to pay off debt, but the most common are the debt avalanche method and the debt snowball method. With the debt avalanche plan, you use the money you have left over each month after paying bills and other expenses to pay down the debt with the highest interest rate first. The debt snowball method involves using your leftover income to pay down the debt with the lowest amount first, regardless of interest rate. No matter which method you use, paying off debts will reduce your number of monthly transactions, simplifying your finances.
A financial detox is the process of giving your wallet some room to breathe. It’s pressing reset on your spending habits. And it’s being more intentional about how you view and relate to money
Use a Debit Card
We use our bank debit card for just about everything. Because it is a MasterCard, it is accepted just about everywhere. By using a debit card, we have a record of every purchase we make. It makes tracking our expenses very easy, and we don’t have to worry about carrying a lot of cash around. For online purchases, we use a credit card for security reasons. We also use a credit card to take advantage of travel rewards. But whether it is a credit card or debit card, the convenience and expense tracking are the same.
Limit the Number of Credit Cards You Use
In today’s day and age, it’s pretty easy to build up an impressive array of credit cards. Every store you walk into and even Amazon offers some large discount or cash incentive to sign up for their store card.
The truth is, having as many credit cards as you can is really a problem just waiting to happen.
If you need to, keep them open for credit scoring purposes, but focus your credit card use on one or two cards. I’ve found that using two cards is the best way to simplify and declutter your finances.
A little bit of decluttering every day not only helps to maintain your space, but it also saves you time and frustration.
Managing your finances should also be a similar daily habit. Make it part of your daily routine to log into your bank account, check your balances, and look over your purchases. This will help you keep track of where your money is and what it is doing, and it will give you a chance to head off potential problems.
Committing to these strategies can help you feel more in control of your life and finances and more connected to the things that matter most to you. To declutter your finances, make sure to declutter and simplify your home too.