Learn to Simplify Your Finances Today With These 7 Profitable Tips
Money seems to be everyone’s least favorite topic to talk about. Everyone has an opinion about what to do with money. Save it, spend it, budget it, etc. I myself have fallen into research rabbit holes. Want to know what I discovered? That the best thing to do with your money is to simplify it. And so today I’m sharing some tips on how to simplify your finances.
I want to point out that I’m no money expert. When it comes to my finances, I only want to keep things simple and easy to understand. Math was never my strong suit. So feel free to try these tips. Or don't. All I'll say is that they have made my finances easier to handle and keep track of, which is why I’m sharing them with you.
Here are 7 ways you can simplify your finances today
#1 — Have fewer accounts
The first tip that can help simplify your finances is to have fewer accounts. And by that, I mean having fewer credit cards, debit cards, and general bank accounts. I’ve had one credit card since I was old enough to get one. And I mean one. When I see friends and family open their wallets and find 3+ credit cards, I wonder how they keep track of it all?
I know people use specific credit cards for specific purchases, but trying to keep track of all those statements would drive me insane. That’s why I encourage you to look at how many credit cards you have and limit yourself to no more than two. Having fewer cards will make you more intentional with your spending, which we’ll get to soon.
#2 — Create a budget
Budgeting is one of the best ways to ensure you have enough money to pay for your essentials. It also tells you how much spending money you have to work with. But creating a budget is tricky, especially if you’re a freelancer like me. Our workflow varies month to month, making our income difficult to predict.
Still, there are many programs available to help you create a budget. NerdWallet and EveryDollar are two that come to mind. Using a program is easier than tracking things yourself. All you do is input the information they ask for and the program does the rest.
But if you’re someone who prefers to — and remembers to — update your own personal spreadsheet, then skip the programs and do the next tip on the list.
#3 — Track your spending
In order to simplify your finances, you need to know where your money is going. It really is as simple as that. But too often we spend our money and don’t bother to look at our statements. I used to never look at my statements because I thought, “I know what I spent my money on.” But one day I caught something that I didn’t remember purchasing. Since then I look through my statements with an eagle eye.
One way you can track your spending is by using one of the above-mentioned programs. Or you can create your own spreadsheet on Excel or Google Sheets. I track mine on Google Sheets. At the end of every month, I update the list. I have my credit card statement open on one tab and my spreadsheet open on another.
This allows me to go through each purchase one at a time. If I notice anything off, I follow the steps to resolve it. Is it tedious and time-consuming? Yes. But it gives me an overview of my spending habits, allowing me to make a better plan for next month.
#4 — Automate payments
Whenever possible, automate payments. Most give you this option and you should take advantage and set it up. By automating payments you’re taking a little bit of weight off of your shoulders. How many times have you forgotten to pay a bill on time? Even if you have reminders that go off, I’ll bet you missed one or two. I have and I’m adamant about keeping track of when bills are due.
Automation was created to make things simpler. That’s the whole point of them. Still, it’s good practice to check to make sure the payment went through. Technology is amazing, but it’s not without its issues. Programs crash, storms knock out power; it’s always best to check.
Schedule payments to be sent three to five days before the due date. This way if something happens and the payment doesn’t go through, you have some leeway to get it in on time. That’s why it pays — pun intended — to check that the automation went through.
#5 — Spend with purpose
Since becoming a minimalist, I’ve learned to spend my money with more intention. What does that mean? It means I don’t buy a shirt in Target if I know I already have one like it at home. I don’t shop clearances and do my best to resist impulse purchases. Don’t get me wrong, I’m not perfect. Any minimalist will tell you they’ve fallen victim to a clearance sale or bargain bin. But we avoid them more often than others.
If you want to simplify your finances you need to first see how you’re spending your money. This is where your spreadsheet will come in handy. Do you order out every night? Do you get an alcoholic beverage every time you hang out with friends? Do you buy the latest fashion trend even though it’s nowhere near your style?
Before you take that new shirt to the cash register, give yourself an extra ten seconds and ask:
Do I need this?
Will I use this?
Do I love this?
These questions aren’t just for clothes you want to purchase. You should ask yourself them every time you want to buy something, no matter what it is. If you can’t answer yes to all three of those questions, put it back. When you learn to spend your money intentionally, you’re going to save way more than you ever thought.
#6 — Focus on becoming debt-free
If you have any debt, the first thing you want to focus on before you can hope to simplify your finances is to become debt-free. This is where learning to spend with purpose will benefit you. If you start cooking at home instead of eating out every night, you’re going to save money. If you skip the beer and have water instead, you’re saving money.
Once you start spending with purpose, you can then make a plan to get debt-free. But the hard work doesn’t stop when you’re out of debt. The trick is to stay debt-free. Staying debt-free will make creating a budget easier. You’ll have more freedom in what you spend your money on, though I encourage you to keep a purposeful spending habit.
#7 — Build an emergency fund
Emergencies happen, often without warning. Look at the destruction Hurricane Ida left in her wake. Or look at how COVID caused the unemployment rate to spike. Because you never know when an emergency will strike, it’s important to start building an emergency fund now.
Ideally, you want your emergency fund to cover 3-6 months of expenses. These expenses cover your essentials such as utilities, food, and shelter. If you’re starting your emergency fund, don’t think you need to set aside that much money right away. Build it up slowly. If all you can add to it every week is $5 then do that. Before you know it, it’s going to fill up.
And whatever you do, DO NOT use this money to buy something expensive. Even if you never need it for an emergency, you can always use it for retirement. Don’t spend it because you haven’t been in an emergency situation before. Having a reserve is good no matter what. Because you just never know.
In the end, how you choose to simplify your finances is up to you. You can keep doing what you’ve been doing or you can try to get a better grasp on things. I prefer to keep track of my finances as it gives me better peace of mind.
If I spend too much one month, I focus on limiting my spending to only essentials the following month or two. Finances are a balancing act. If you can learn to balance them, you’re going to be okay.
If you feel brave enough to share, I want to know: what’s your relationship with money like? Do you keep track of your finances? Are there ways you’ve learned to simplify your finances that I didn’t mention here? Comment below.
