If you're suffering from financial avoidance — or just want an easier way to make better financial decisions — check out these tips to help you simplify your financial life.
Implement the 50/20/30 rule
If a detailed budget is more than you can bear right now, put the 50/20/30 rule into place. Quite simply, aim for spending 50% of your income on essentials, 20% on savings and investment, and 30% on personal expenses.
Essentials are things you have to pay every month, like housing, transportation, utilities, food and insurance.. Keep in mind that, it's less about actual costs than proportions. Some people may prefer to spend more on housing and drive an inexpensive car, for example, but it all works as long as the sum of those expenses doesn't exceed 50% of your income.
The 20% savings category isn't just for the money you tuck away for a rainy day; it also includes extra payments to pay down debt as well as money to fund your retirement.
Things get more interesting in the personal category, because it includes things like travel and entertainment as well as discretionary items like your cell phone plan, your cable package and other expenses that are more of a personal choice, not a necessity for living.
In the end, you'll be able to tweak the numbers a bit here and there, especially as your financial goals change, but keeping the ratios intact is a good foundation for simplifying your budget.
Take advantage of auto-pay
Auto-pay can be a win-win--you avoid late fees for accidentally missing a payment, and you save yourself time and aggravation paying your bills every month. You may even get a credit or discount on your bill if you go paperless and sign up for automatic payments.
And while you're automating your bill payments, why not think about automating your savings or investment account deposits, too? It's a great way to make sure you actually save the money and hit your investment goals as opposed to spending it on unconsidered purchases.
Look into consolidating bank, investment and insurance accounts
When your money is spread out at several institutions, it can be difficult to get a clear picture of your finances. It's also not the most convenient way to manage your accounts. Most people don't need more than one checking and one savings account or more than one or two credit cards — and fewer statements means less time spent reviewing and reconciling each month.
There are a lot of free and low-cost money management tools and apps that take the work out of budgeting, monitoring your finances, and saving and investing your money.
The same is true of investment accounts. Keeping all your investment accounts with one custodian, with one account number for your personal investments and one for your retirement accounts can make it easier to manage your finances. If you have several 401(k) accounts from past jobs, consider rolling them into one self-directed IRA. This should help lower your account fees and reduce your paperwork.
It goes without saying that having all your insurance policies with one company can make good sense. In many cases, you may be eligible for a multiple policy discount, and you may even be able to bundle premium payments, further simplifying your life.
Consider funds over individual stocks
Unless day trading is your job, you probably don't have the time to effectively monitor and manage your individual stock purchases. A mutual fund or an ETF that tracks a major index like the Nasdaq or S&P can be a better option — only about 14% of actively managed funds beat their index, and they usually have much higher ownership costs besides.
Another advantage happens at tax time: because the documentation burden is much higher for individually traded stocks, your tax preparation costs may be higher than with funds.