Too often people try to make complex budgets, go on spend free weeks, and use coupons like a mad man (or woman) only to quickly burnout.
With spring right around the corner now is the perfect time to “spring clean” your finances and set up simple solutions that you’ll be able to stay on top of.
Here are five ways to simplify your finances.
Know Where Your Money Goes
Before you can begin simplifying your finances you need to know where your money goes. Look through past bank statements and credit card bills and get an idea of where your spend the most.
If you’d like, try tracking your spending for a month or two. Set up a simple spreadsheet, sign up for a free Mint.com account, or use a piece of paper and pen and track where you’re spending your money at.
Know where your money goes.
Focus on One Area at a Time
When it comes to personal finances most people are looking to save as much money as possible. But doing this in overdrive will only cause you to quickly lose your steam.
Focus on one area per month to save in. For instance one month you could work on lowering your heating bill. Another month you can shop around for cheaper insurance. The next month you can try to lower your grocery bill.
When you consistently do a little at a time you’ll create lifelong habits.
Create a Simple Filing System
I used to have an insane filing system for all of my bills. I would create a folder for each and every little expense that came my way and keeping up with it was nearly impossible.
I simplified my system a couple of years ago and it’s so easy to keep up with and works wonderfully.
I purchased a thirteen pocket accordion style file folder. The first slot keeps all of my important financial documents – insurance policies, bank statements, etc. Then the other twelve folders are marked for each month of the year. When I pay a bill I put the statement in the appropriate month. When a year passes and I come upon that month again I shred the documents and start over.
With this filing system I only spend a few weeks keeping everything together.
Create Dedicated Financial Goals
Do you want to pay down your debt? Save for an emergency fund, house, or car? Start investing? It’s important that you have financial goals that you are really passionate about.
When I first started saving for my emergency fund I was extremely dedicated to saving. I would scrimp and save and throw every extra $20 I came across into the account. Once I had accumulated enough money to cover my expenses for several months I started to lose steam. So I started a new financial goal.
Now I want to save money to invest in real estate. It’s something I’m passionate about and motivates me to save.
When you make a goal that really means something to you you’ll be far more likely to keep up with it.
Consistently Work Toward Your Goals
If I start to slack off at working toward my goals I find that it creates a ripple effect. Instead of skipping one week and then saving again I’ll skip the whole month.
For me it’s better to add small amounts to my savings weekly than a lump sum once a month. When I make those weekly transfers I’m reminded of my goal and the progress that I am making.
This keeps me motivated.
By simply figuring where your money goes and staying on top off all your accounts and financial documents you’ll have a much better idea of your financial position.
When you take the time to make consistent efforts, even at a slow and steady pace, you’ll create long term habits that will have a profound effect on your personal finances.
Organize your money. Slowly look for ways to save. And work hard to reach your financial goals. After you practice this for a couple months your new habits will start to stick and you’ll start to see the results of cleaning up your personal finances.
Do you “spring clean” your personal finances? How do you simplify your money management?