News Advisor Nine ways to simplify your finances

Nine ways to simplify your finances

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Art has minimalism, fashion has basic, and linguists have plain English, but where did oh-so-chic simplicity go in the world of money?

Buried beneath reams of receipts, invoices, bank statements and overdue bills is probably the answer.

Far too much time and dollars can be wasted on our finances, but it doesn’t have to be this way, money experts say.

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Financial Counselling Australia board member Rosalyn Williams told The New Daily it is “really important to keep things simple” because this makes it easier to keep track of your money.

Complicated finances can lead to overspending and result in us becoming “a slave” to whomever we owe money, she said.

“We can easily fall into a spend-thrift type of habit if we’re not disciplined around planning what we need and balancing our needs more closely. We’re more likely to see things and on a whim buy them without consideration to whether we can afford it.”

Here are some tips to declutter your money.

Dance the Rumba with your bills

Get in a rhythm to keep your bill payments simple. Photo: Shutterstock
Get in a rhythm to keep your bill payments simple. Photo: Shutterstock

Paying your bills at a regular time – with what Ms Williams calls a “certain rhythm” – can prevent missed payments and a pile of overdue notices that drag down your credit rating.

For example, you could set aside an hour every second Sunday to pay whatever falls due in the next week – although you do need to match your income patterns as well.

“Even if people aren’t paying the same bill on the same day, it’s good to have certain rhythms to ensure that things aren’t missed, however that might happen,” Ms Williams said.

Many energy companies now offer fortnightly payment plans, which can be better than “getting hit with those quarterly bills,” she said.

“That helps a lot with budgets and day-to-day management, and helps to take a lot of what stress away.”

Put your hands back on the wheel of your debits

Caption. Photo: Shutterstock
Direct debits need a regular mirror check. Photo: Shutterstock

Direct debits are “one of the biggest traps” because of overdrawn fees and unnecessary payments, Ms Williams said, especially for those on a low income.

“We find that people have direct debits for things like loans that have already been paid, or are paying utilities well beyond what they need to and they end up in credit, but they haven’t stopped it,” she said.

There can be “quite a lot of savings” found by reviewing your automatic debits, Ms Williams said, although she noted that these debits can still be a “good management strategy” if you are confident that you will have no cashflow problems because of their set-and-forget simplicity.

Forget about impressing others

Woman car show
The pressure to fit in can leave your finances in a mess. Photo: Getty

Keeping up with the Joneses, the Smiths and the De Lucases is hard work, and only makes things more, not less, complicated.

Shelling out for a bigger house, a nicer car and deeper debt can lead to heartache – and a serious financial headache.

“One thing we do consistently find as a difficulty for people is the social pressures of life and trying to keep up with other people,” Ms Williams said.

The antidote is a change of mindset, “so that people can feel comfortable about living within their income”, she said.

Budget for the future

Tips from our grandparents like 'envelope budgeting' can be applied today. Photo: Shutterstock
Tips from our grandparents like ‘envelope budgeting’ can be applied today. Photo: Shutterstock

Financial Counsellors Association of WA executive officer Charlie Brown told The New Daily that a realistic budget is the “first thing to clear clutter”, and should be “the foundation for all your finances”.

“You should always revert back to having an idea of what income you have, what expenses you have, and where you’re at,” Mr Brown said.

A simple pen-and-paper spreadsheet will do, or you could use the free Budget Planner from ASIC MoneySmart.

Plastic is not fantastic

Cutting down your credit cards to one, or none, is another great way to limit your life’s complexity, and your debt levels, Mr Brown said.

“Sit down and work out which one charges the most interest and focus on that one. Pay that one down first, and because of the domino effect slowly as one falls over you work on the next and so on,” he said.

ASIC MoneySmart says paying the smallest debt first can work as well, as either of these strategies will decrease the amount of fees you are paying overall.

Read more here about why ditching your credit cards could be a good idea, and the ten rules to control your credit card.

Trim your bank accounts

Four could be too many bank accounts. Photo: AAP

Mr Brown also suggested taking a look at how many bank accounts you have to see if the number is “sensible” given the potentially doubled or tripled-up fees.

But other experts do say that having multiple savings can be useful when trying to meet separate savings goals.

Consolidate your super

Many of us accumulate dribs and drabs of superannuation from multiple employers, which then get whittled away by fees.

For a guide on how to track down and simplify your super, click here and here.

Get a pink pig

At the end of the day, “simplifying comes back to saving,” Mr Brown said.

“I’ve got a little pink pig I use, and I just put gold coins in it, and there was $550 in that.”

“It all comes down to delaying gratification,” said Mr Brown, who suggested that for every $100 you intend to spend, delay the purchase for one day.

For example, wait at least 10 days before making a $1000 purchase to “put the brake on emotional spending and testosterone-driven decisions”, he said.

Update your Will and other important legal documents

Mr Brown said that it is important to have your Will and other important documents up to date, as not doing so can leave a very complicated situation behind for your loved ones.

“It’s a good thing to do with your partner, to sit down and do that, because when somebody dies there are all sorts of issues that arise,” Mr Brown said.

Here are some tips to make sure your finances are hassle-free when you die.

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