Here lately I’ve noticed a lot of “noise” in my financial life. When I started earning some money from my online ventures I piled business accounts (checking and savings) on top of what was already a chaotic mix of bank accounts. Apparently, those last two accounts were the final straw, because it was at that moment that what used to be a minor annoyance became a downright irritant – we had too many accounts floating around. It was time to simplify our life, and consolidate into just one or two of the best online banks.
While I did not officially declare it a 2009 resolution, we have made it a goal to consolidate accounts to simply our financial picture. Here are a few tasks we are working on now.
Photo courtesy of wrestlingentropy
Close unused bank accounts. There is the bank account I opened in college, and the one I opened for employee checking benefits at my last employer. Then there is the account at ING Direct, the local credit union, and the place that financed our family vehicle (which is just a month or two from being paid off!).
Few things drive me more crazy than getting statements for the $4.17 in accumulated interest from a bank I haven’t done business with in years. Time to make a few phone calls, write a few letters, and close out those old banks. Besides being a nuisance, there is added risk of identity theft in having my personal information scattered around several financial institution’s databases.
Reduce budget categories. In the last few months we have made progress towards this goal, but looking back at my budgets in previous months it looks like I was tracking everything under the sun. While there is some value in tracking expenses at a granular level, eventually it gets to be a real chore and we sort of lost sight of the big picture.
For example, we used to track budget categories like “paper products,” and “cleaning supplies.” It might be good to know if you spend $40 a month on paper plates, napkins and paper towels, but tracking to that level of detail required meticulous reviews of all receipts or using separate shopping carts. That was a pain. We decided to just consolidate these categories into a “household” category where we track combined budget amounts from most of the old, smaller categories.
Consolidate debt to as few accounts as possible. When we first began our debt snowball plan we had several debt accounts – credit cards, student loans, a car loan, and an old consolidation loan. The first step to simplify our finances was to consolidate a few of the smaller debts (mostly credit cards) to one or two credit cards with a low interest rate. We then cut up all but one card and worked to pay off other debts in order of their balances, smallest to largest. Every time we work one down to $0.00 it feels great knowing that’s one less statement we’ll get in the mail each month.
Automate utilities and other fixed-rate payments. One of the best things we did related to monthly utilities was sign up for levelized (or budget) billing from our energy company. The service averages your last twelve months of usage and charges the average amount each month. The extreme heat of summer isn’t quite as painful when offset by cooler months where we use less electricity, and it’s nice to know within a few dollars what your utility bill will be each month.
We also have a number of our “fixed” payments automatically drafted from our checking account. I distinguished between “fixed” payments and “variable” ones, because variable payments can catch you by surprise if something goes wrong. For instance, a friend of mine once had $1,600 debited from his checking account to auto-pay his cell phone bill because his phone was stolen and used to make unauthorized long distance and 900-number phone calls. It was eventually straightened out, but it took a few days to get that $1,600 payment reversed from his checking account. Probably safer to stick with things like cable service, utilities, insurance premiums, etc.
This is just a sampling of things we have implemented recently to simplify our financial life. Some may work for you; some won’t. That’s the great thing about personal finance-it’s personal. You may enjoy tracking spending to 27 budget categories (I used to). Or you may find creating master categories and tracking at a higher level frees up time to spend doing things you enjoy more. It’s your call.