Lately I’ve become overwhelmed with clutter. Everything from my office to my home to my finances is filled with unnecessary stuff. And all this stuff creates stress and reduces efficiency. Just the other day my wife and I spent one hour searching for two bills that, as we eventually learned, were at the bottom of a pile of stuff on our kitchen counter. And now I am just plain fed up with all this clutter.
So I’ve started embracing what Leo Babauta (famed blogger of Zen Habits) calls The Power of Less. In his new book of the same title, he describes “the fine art of limiting yourself to the essential . . . in business and in life.” And that’s what I’m trying to do, beginning with our finances. So here are 10 tips to help you declutter your finances:
1. Reduce your mail and deal with it immediately: Mail can build up into an unwieldy mound of paper in no time. Let the mail go for even a day or two, and you’ll find a pile of junk mail, bills, magazines and everything else growing on your kitchen counter or wherever you throw your mail. And if you are like me, when this happens an uneasy feeling begins to build in the pit of your stomach that somewhere in that pile is a bill or other important letter that you need to deal with if you could only find it. To avoid the stress and distraction, give your mail the one-two punch.
First, reduce the junk mail you receive. There are some paid services you can use, but the Direct Marketing Association offers a free service that they estimate will eliminate 75% of your junk mail. You’ll find DMA’s online application form here. Second, deal with the mail you do receive daily. If you receive a bill, pay it immediately or file it with your other bills to be paid twice a month or on whatever schedule you follow. The point is to deal with every piece of mail the day you receive it.
2. Automate Bill Pay: For bills that you pay every month, set up automatic payment from your checking or other bank account. We pay most of our monthly bills automatically, including the mortgage, home equity line of credit, utilities, garbage collection, internet phone, cable, and cell phone. Not only does automatic bill pay save time, but it also eliminates the chance we’ll forget to pay a bill on time.
3. Go Paperless (Part I): Credit card companies, mutual funds, banks and other companies are moving towards paperless statements. Vanguard, for example, eliminates certain annual fees if you agree to receive investing materials electronically. Not only do paperless statements save trees and money, but they also cut down on your time processing mail and dealing with clutter.
4. Go Paperless (Part II): For those documents you do receive and must keep, consider scanning the document and saving it electronically. We have an inexpensive scanner that also serves as our printer and a copier. Scanning is easy, and it reduces the clutter in our home. Here are some Energy Star scanners from Amazon that are reasonably priced.
5. Use Google Docs: This is one of my favorite personal finance tools. With Google Docs, you get a word processor and spreadsheet software for free. And because they are Internet based, you can access or share your documents via any computer with Internet access. The spreadsheet can be used to track your monthly budget or balance sheet. We also use spreadsheets to track important information, rather than keeping it in paper form. You can get started with Google Docs here.
6. Consolidate Debt: You may have debt from credit cards, car payments, a home equity loan and so on that can be simplified by consolidating some or all of it. Of course, there are factors that must be considered beyond just simplifying your finances, such as interest rates, the term of the loan, recourse, and so on. But if you can take multiple loans and reduce them to one or two, it can make life much simpler. I’ve done that with balance transfer credit card offers, and it makes paying the bills each month a lot easier.
7. Automate Investments: If you make regular investments or savings contributions, set up an automatic investment plan. You can have a portion of your paycheck directed to a savings account or broker. And you can set up automatic investments with any broker or mutual fund company. We invest each month in an automatic investment plan with Betterment. Once you set up the automatic investment plan, you don’t have to worry about missing an investment, and it makes saving a lot easier.
8. Use Personal Finance Software: Personal finance software such as Quicken or YNAB make tracking your finances really easy. You can download banking, credit card, or investment transactions into the software, and it makes setting up a budget really simple. There are also several free budget software options you can use, too. Either way, personal finance software packages are an important money management tool that beat tracking your finances on paper.
9. 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 our the same.
If you know of other tips to help declutter finances, please leave a comment.