With my family of four boys, things seem to pile on top of each other endlessly. Does this happen to you too? Does life seems to get more and more complicated? We have more options and choices than ever. Do you sometimes struggle with finding things on the internet? What about picking from 250 TV channels? Is is difficult just to decide where to go for dinner?
We live in a world that likes to complicate things – more stuff, more clutter, more confusion! This is not good. If you think about it, our brains have a limited capacity. We can only do so much, and we can only handle so much.
With increasing complexity and confusion, there’s something to be said about simplicity. After all isn't simple better? When it comes to money and personal finance, I am a strong advocate for simplicity.
Over at Canadian Finance Blog, Alan Schram wrote about minimalism. For me it’s not as much about minimalism but more about simplification. Here's some things to look at simplifying:
Simplify your banking
Everyone needs a bank account. The problem is we have taken this too far. Most people have multiple bank accounts. They have a ‘his’ account, a ‘her’ account, a ‘joint’ account, a ‘just in case’ account, a ‘travel account, a ‘reno’ account and some even have a ‘I don’t want my spouse to know about it’ account.
If you think about it, the more accounts you have, the harder it is to keep track of everything. My wife and I have 2 high interest bank accounts. One for ‘us’ and the other for the business. That’s it and I like it that way because it keeps things really simple.
Related article: How much are you earning in your bank account?
I know an 80 year old with 11 bank accounts and when I asked him why he has 11 bank accounts, he basically said “I don’t trust anybody these days.”
Simplify your investments
When it comes to investing, diversification is a common mantra. While diversification makes sense when it comes to asset classes, I’m not sure spreading your money to too many different accounts makes senses. Again, there’s something to be said about simplification or consolidation.
Related article: Proper diversification using correlation charts
Lucy has $100,000 in RRSPs spread out among 4 different financial institutions. She is not happy with any of the companies not just because of performance but because she feels no one is interested in servicing her accounts?
The problem is the financial industry is a scaleable industry. Whether you like it or not, the more money you have, the more interesting your account is to a financial advisor or institution. By consolidating her RRSP into one account, she could look at a Self-Directed RRSP and streamline the portfolio overall.
Simplify your debts
Obviously having a lot of debt can be stressful. It can also be really problematic having many different debts because it means many different payments, more time, more statements, and more headaches.
Deb consolidation is not only a great strategy to lower interest cost but it can also be a great strategy to simplify your debts.
Related article: Time to get rid of debt
Simplify your documents
If you look at my desk from time to time, it gets pretty messy and needs to be cleaned and reorganized once in a while. When it happens, it always feels so good.
Organizing your financial documents from time to time is no different. Every month, I try to take an hour or two to organize all the bills and statements into my financial binders. At that time, I throw away stuff that does not need to be kept which is another form of simplification. Having a system for your financial documents is really important and the simpler the better.
Related article: Estate planning starts with getting organized
My five cents
So here you have 4 ways to simplify your personal finances. Obviously there’s many more ways to simplify. What are some other things to simplify?