Many people struggling with their finances because things get too complicated, disorganized, and overwhelming.
It’s easy to follow too many financial plans and get yourself tangled up with the added complexity. Once you get disorganized or overwhelmed it’s easy to throw the whole system away and ignore your finances – which just leads to a worse financial situation.
The best way to manage your finances is to make it very, very simple.
Simple is good. It’s understandable and manageable which means you are more likely to stick to it.
When you stick with something you eventually achieve the goals you set out to achieve. That is why keeping your finances simple is so important.
5 Ways to Simplify Your Finances
Below I’m going to share 7 ways to simplify your personal finances so that you are able to stick with your money goals.
Automate your money.
Automating is the simplest way to manage your money and stay on top of your bills. For most people automating savings is the only way to consistently save money as well.
Automate everything that you can.
Automate your bill payments so they are paid on time every month. Automate your retirement savings so your 401k and Roth IRA is funded each paycheck. Automate your savings so your sinking funds have money allocated after every paycheck hits your bank.
Setting up everything in your financial life be automated will save you a lot of mental energy and effort.
Pay yourself first.
I truly believe paying yourself first is the foundation to success with your finances. It’s also a great way to keep things simple.
When you pay yourself first by automating your investments to happen immediately when you get paid you are able to guarantee that your goals are funded.
Making sure your big goals are funded first makes the rest of your spending plan a lot simpler. You are able to spend what’s left without being as stressed because you don’t have to use the remainder.
Most people leave their savings and investing to the very last line of their budgeting. They save what’s leftover after spending and this is always stressful because it feels like there is never enough.
If you only save what’s left after spending there will never be enough.
Switching to a pay yourself first method will eliminate that stress of feeling like there is never enough.
Less stress and better funded financial goals? Simple and perfect.
Limit your investments.
It’s easy to get caught up in stock picking and trying to chase the next best investment opportunity.
But in reality? The best investment plan is a simple one with limited investments.
Do your research and choose one or a handful of investments that are already diversified like a certain index fund or target date mutual fund. Once you’ve made your selection stop looking for new investments and just focus on sending money to fund this one thing.
You don’t need to constantly research and change your investments in order to get great returns. You just need to choose a good option and then actually fund the investments.
Create an emergency fund.
Saving money can be incredibly hard and it’s even harder if you are working toward multiple goals like paying off debt.
However, an emergency fund will help you simplify your plans for when emergencies come up.
Having an emergency fund set aside allows you to focus on handling your life and letting go of worries. You know that the money is there when you need it. The security of an emergency fund makes life and your finances much simpler.
Organize your finances.
If you want to simplify your money then you need to get organized.
Luckily this can be done with whatever system works for you. There is no need to struggle with any style of money management if it doesn’t click for you.
You can use a number of useful free apps like Mint or Personal Capital for budgeting, or you can use pen and paper with budgeting printables, or you can do a simple anti-budget method utilizing automation and multiple accounts. Whatever way works best for your personality and lifestyle is the one that will be simplest for you.
Here’s what you need to know to be organized:
- when you have income coming into your account
- when your bills are due
- when your bills will be paid
- if your account has enough to cover your bills
- how much you have for spending money
These are the basics of budgeting and knowing these things will allow you to get organized in a way that makes sense for your life.
I always like to tell people it might take a couple of attempts before you find the budgeting and money management style that fits you best. Don’t give up if one doesn’t work out for you. Just try another!
When you find the right option things will feel simple and easy.
Simplifying Personal Finances
Personally I am aiming to live a life that’s easier and less stressful which is why I’m constantly looking for ways to simplify everything in my life.
My finances are no different and I’ve done a lot of work to personally find the systems and methods that make managing money a breeze for me.
It might take a bit of upfront work to set up things like money automations but once you are done you will be able to benefit from a simpler, easier system for many years to come!
Mary is the founder of Pennies Not Perfection where she shares her journey to build wealth through online income. She quit her day job in 2021 after she paid off her debt and doubled her 9-5 salary.
Mary's favorite free financial tool is Personal Capital. She uses their free tools to track net worth and work toward to financial freedom.