Budgeting is a huge component of money management. Equally important to your financial wellness is simplifying your finances. According to Time magazine, the more financial accounts you have, the more difficult it is to successfully manage your money. As 2016 takes off, consider making adjustments to your financial activities.
Streamlining your finances in 2016 is a great way to complement a new budget. Looking ahead and planning for any huge purchases can help you better allocate your month. Daily Finance advised taking stock of your recurring monthly costs, subtracting from your monthly earning and then deciding how much you want to save. Dividing that number by four shows your potential weekly spending limit. Too low? Decide which expenses can be reduced.
Set a financial target
Time said having goals is great, but having too many can cause a bit of a traffic jam as you attempt to organize and track your finances. Financial simplification begins with identifying your most important financial goals. Consider no less than three and no more than five goals to reach this year. Once one goal is reached, decide on a new goal, but not before.
It helps to be specific about what you want. This can mean writing your goals down on a list, but it's better if the goal is written on a card and placed somewhere for easy viewing, say the refrigerator door or your bedroom wall. Keep it as a reminder. And the more you put into the description of the goal, the more you understand what steps it will take to complete. Artists should draw images of the financial goal. Yogis and joggers should cycle through their goals as they exercise and meditate on reaching them. Whatever helps to cement the end result in your mind is the best way to achieve the new task.
Consolidate your accounts
Credit.com suggested paring down your accounts until there is a single online checking account and a primary savings account. Having multiple savings and checking accounts open makes it hard to keep track of statements and final balances. Daily Finance advised closing old checking or savings accounts and transferring funds to the most current accounts. The same advice applies to 401(k) retirement accounts.
The U.S. Bureau of Labor revealed that Americans tend to stay with one job for a little under five years. It's easy to amass several 401(k) accounts throughout a career. Depending on the amount of money accrued in multiple 401(k)s, it might be easier to consolidate them into an IRA. Review the fees for your chosen IRA first before making that move.
"Once your various accounts are slimmed down, automate them."
Target-date mutual funds are also a worthy consideration when it comes to streamlining finances. As opposed to looking over too many different investment options, Time advised you focus on one fund. Target-date funds are rebalanced every year until the target year, usually the same year as the investor's retirement. The make-up may vary in the number of stocks, or Treasury bills and bank deposit certificates.
Once your various accounts are slimmed down, automate them. Daily Finance suggested setting up direct bill pay for your online checking account to avoid accruing any late fees in 2016. Set up monthly transfers to your online savings account and ensure a steady stream of money into your emergency or vacation fund. Payments into your 401(k) should be automated already; that's one less thing to worry over.
Follow Smart Asset's advice and set aside time every week to make sure everything is happening according to plan. It's important to keep track of any new adjustments to financial routines. Setting up alerts for your online checking account will automate your tracking, according to Time. Simplifying your finances now means having simplified finances later.
For more information about smart ways to manage your finances, contact Landmark Bank.
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