How to Simplify Finances: Best Ways to Gain Mental Freedom
How do I declutter my finances?
In this day and age, the average person’s finances are complex. You’ve got dozens of accounts spread out. You have constant bills to pay. And this is just the beginning. Mental clutter is a huge issue in our tech world.
But taking just one day to simplify your finances can make a huge impact on your future success and your mental health.
Here are a few great benefits:
You’ll stop feeling overwhelmed
Does the sight of your bills make your chest ache? No more!
Simplifying finances will help you take your power back. You’ll have fewer papers and apps, so you’ll no longer feel like tracking something down takes you all day.
You’ll find it easier to track your budget
With simple systems, budgeting can be painless. And you’ll be able to look (at a glance) to know how much money you have to spend.
You won’t forget about bills
If you’ve ever forgotten to pay a bill because it got lost under the kitchen counter mess, this article is for you!
You’ll Make Stunning Progress on Your Financial Goals
Because your systems are simple, you’ll save loads of time in the long run. This will be a catalyst for paying off debt and building wealth – at rates you wouldn’t believe.
You’ll Find Out Quickly If You Have An Issue
And finally, the best part of simplifying your finances is that if something gets out of whack, you’ll notice immediately. You’ll be eliminating any nasty surprises that would have gotten lost in the noise.
Now, check out 30 amazing ways to simplify and get your financial life in tip-top shape!
How to Simplify Your Budget
First, these ideas will help you simplify your budget in practical ways. This includes your common income and expenses.
1. Clear Up Your Budget With a Rule
Using a budgeting rule cuts down on countless decisions you make about your money. What freedom! Systemize your monthly budgeting with a great free template below.
What is the 50 30 20 finance rule?
For the popular 50 30 20 budget, 50% of your monthly income goes to needs, 30% goes to wants, and 20% goes to savings. But there are other amazing rule variations as well.
- 70 20 10 budget rule (great for those paying off debt or donating)
- 60 30 10 budget rule (for aggressive savers)
- 60 20 20 rule budget (a great option if your needs are greater)
2. Simplify Your Income Sources
When my kids were young, I quit my full-time teaching job. But then, I picked up 3 different side hustles to help bring in income. While I enjoyed all of these pursuits, juggling three kids and three side jobs turned into a nightmare.
I finally came to a boiling point. I threw all of my effort into the third one (my business).
What happened then? Well, simplifying allowed me to multiply my income in a way that keeping three jobs NEVER would have. Plus, I got my sanity back.
Let my experience be a lesson. Sometimes it’s better to simplify so that you can thrive with one opportunity.
3. Try a No Spend Challenge
In order to make the most progress while you simplify finances, cut down on your spending. This will keep you from adding to your to-do list, and possibly change your spending habits for the future. Try a “spending freeze.”
Here are a few more specific ideas:
- No new clothes for a month challenge
- No eating out 30 day challenge
- 30 days of decluttering challenge (this will put you in the right mindset!)
4. Use a Service Like Mint
Mint.com has simplified my monthly budgeting and makes it easy to search for past records. Quickbooks also helps tremendously with my business.
Use software to help you keep track, and you will save hours in budgeting time.
5. Pay Yourself First
The old adage is a good one for simplifying your financial life. Take the money you want to save out of your paycheck FIRST, and then live off of the rest.
How to Simplify Your Bills
Next, these ideas help you handle your pile of neverending bills. Plus, they’ll save money!
6. Go paperless To Simplify Finances
If you receive lots of paper bills, it can be almost impossible to keep track of. Instead, take 30 minutes of your day, and go into the accounts that send you bills. Mark that you want to receive “paperless” bills and then move on with your day.
7. Auto Pay
While you’re in your accounts choosing the paperless option, set your bills to autopay as well. This will greatly reduce your mental to-do list.
8. Use a Filing System For the Papers You Must Keep
For bills I might need to see later, I write the date that I paid them onto the bill. And then I file them in a cabinet that has a folder for every month of the year. If I need to pull the bill out later, I’ll know where it is and when I paid.
You can use a different filing system, but you do need one. Even if you go paperless on many bills, you’ll still receive a few by mail.
9. Pay in Full Instead of Monthly
Paying in full will often get you a discount, AND you won’t have to worry about the recurring monthly bill. That’s one less thing to fret about!
- pay your gym membership ahead to avoid a contract?
- pay for work subscriptions a year in advance? (I love doing this)
- pay for your insurance in 6-12 month increments instead of monthly?
Not sure how to budget for this? Calculate a sinking fund to cover these kinds of irregular expenses.
10. Declutter your credit cards
Back when I was trying to get the best deal on everything, I applied for 4 credit cards. This seemed ideal, and I was going to get rich on all the different reward schemes.
I couldn’t keep track of any of them. And ended up using one anyways!
11. Pay off your Debts
If you have multiple debts, pay off one (or more of them). This can make a HUGE impact on your money stress and mental clutter. Try a debt tracker printable to start >>
12. Cut out subscriptions you don’t use
For years, we’ve dropped Netflix during the summer months when we’re busy and outside anyways. It saves us money and declutters our bills for a bit.
Are there subscriptions you have but aren’t using? Give them a look!
13. Bundle Things That You Can
Bundle your car and home insurance with one company. The same goes for internet and phone. This won’t always work out, but the more you can do this, the simpler your bills will be.
14. Protect Yourself
When it rains, it pours. And it happens to all of us. But if you’ve done the proper work up front, your life will be much easier. These three actions are vitally important for saving your peace of mind and protecting your loved ones.
- Emergency savings
- Adequate insurance
- A will
How to Simplify Your Investments
Next, these are great ways to make investing easier and happen more often.
15. Set up Direct Deposits
The BEST thing you can do to consistently invest is to set up direct deposits. You don’t have to think about it and the money will be where it needs to be.
Here’s what we have direct deposits set up for:
- HSA accounts
- Savings accounts (for our sinking fund categories and short term financial goals)
You can set up a direct deposit online with any bank or brokerage account.
Just like with your bills, you’ll free up loads of mental space if you eliminate paper statements. Find them in your account or receive them in your email inbox instead.
Consolidate Old Accounts
How many accounts do you have?
If it’s hard to keep track of them, it’s too many. Consolidate and then close the old ones.
*This can also go for consolidating your debt. Just be careful that you’re paying this debt off regardless of where it is.
Invest in index funds instead of individual stocks
Index funds are less exciting than well, everything. But look at it this way…
You could have 25 individual stocks, or you could have 3 index funds. Which do you think is easier to manage?
Side note: Only 1 out of every 4 active funds have beat their passive counterparts in the last 10 years (morningstar.com). Keep it simple with index funds.
Buy and Hold (It Works Better Anyways)
Trying to time the market can be fun and exciting. But it also adds a mountain of complexity to your life. Plus, your taxes are going to be a bear (and you’ll be paying a lot).
Instead, use dollar cost averaging. This means that you put the same amount into your investments every month, and then hold on to them for the long term.
More Ways to Simplify Finances
Some of these are easy, others are major life changes. But ALL of them lead to a smoother financial ride.
Simplify your financial Life goals
Trying to keep track of multiple goals can take its toll on your focus. Instead, focus on the main 1 or 2. When you achieve those you can move on to others. This will help you meet your top goals more quickly (while freeing up mental space).
See these examples of financial goals for goal-setting help >>
Buy a Smaller Home
I know. It’s completely contrary to our “big houses are better” culture.
But think about it. A smaller home means that you are closer to your family. You spend less time cleaning. And it won’t be so easy to collect belongings. This is an extremely impactful way to simplify (and improve) your life.
Get Rid of a Car To Simplify Finances
Car maintenance, repairs, and upkeep take time and money.
If you have a car that you don’t use often, consider selling it and going without. Utilize public transportation or improve your health by walking or biking to where you need to be.
Rent Instead of Own
Owning can be smart because you’re putting equity into an asset.
But on the other hand, if you’re looking to simplify finances, rent. By renting, you don’t have to maintain your home, do repairs, pay HOA fees, or pay property taxes. That’s a lot of tasks you no longer worry about.
Outsource Tasks To Simplify Your Money
It’s ok to ask for help! In fact, in most cases, you’ll be saving yourself both sanity and money over the long term. Consider a financial advisor and/or accountant to help you get your finances in order.
Use Up Your Gift Cards
Have you been hoarding gift cards for years? Dust those old gift cards off and use them up! Not only will you enjoy what feels like “free money” but you’ll be decluttering your space too.
Simplify Your Day For Financial Success
Focus On Your 20%
20% of what you do will give you 80% of your results. It’s mind-boggling, but it has been proven over and over.
This can help you simplify your finances specifically. What are the 2-3 main tasks that, when done, contribute the most to your financial success?
Beware of Information Overload
Information is everywhere. This is an amazing advantage of the 21st century! And yet, it’s also a detriment to your attention, focus, and sanity. It’s also difficult to know what’s worth listening to.
Build boundaries around how many social media outlets you visit, who you listen to, and the number of financial rabbit holes you go down.
Rely on Financial Planning Systems
Systems can transform your life! Try one of these for your finances:
- Business checklists
- Tax checklists
- Processes that you use time and time again
- Schedule reoccurring calendar events to pay quarterly taxes and do regular financial tasks
Adopt a Minimalist Mindset
Simplifying finances for the long term requires a shift in mindset. Don’t add accounts, credit cards, or recurring bills without taking a good long look at how it will affect the complexity of your finances.
Declutter Your WorkSpace
Finally, clear off your workspace. Working in a clutter-free environment helps with focus!
Once you’ve done this once, make it a habit to clear your mess after each day of work. This way, you’ll come to your computer fresh every morning.
To Consider With Simplifying Finances
I hope you enjoyed this list! I’ve been using it myself to declutter and simplify.
What have been your favorite steps to simplify your finances? Have any of the simplifications saved you money? Leave a comment and let me know!
*Related Post: Don’t miss these good books for decluttering and declutter motivation that works!