5 Fearless Ways To Simplify Your Finances In 2014

Jan 10 2014, 10:42am CST | by

5 Fearless Ways To Simplify Your Finances In 2014

The first of the year can be overwhelming for many people. Even with the best of intentions, people overspend and are left with credit card bills to pay off. We go into the season confident we can stick to a budget but fall short when push comes to shove.

According to research by Hersh Shefrin, author of “Born to Spend: How Nature and Nurture Influence Borrowing Habits,” about 98% of holiday budget-setters he surveyed felt confident that they would be able to stick to their budgets. Well, it turns out that many were mistaken: 36% admitted to overspending when he followed up. That’s quite a disparity.

Add to that the sheer amount of paperwork that hits our mailboxes in January.

So how do you avoid feeling overwhelmed? Simplify and plan ahead. Take the next three weeks—21 days—to clean up and clear out the old, and plan your 2014 so you don’t end up in the same situation next year.

Here are five ways to fearlessly simplify your finances:

1. Get rid of everything you don’t need.

Start with paperwork; keep important papers and shred everything else. Make two tax files: One for 2013 for all of the important tax documents you receive in January and another for 2014 (so you don’t have to sift through a sea of paper again a year from now).

Keep anything you’ll need to substantiate or prove to the I.R.S. (or anyone else for that matter) income you received or a deduction you took such as:

  • Seven years’ worth of tax returns and supporting documentation (The I.R.S. can audit you for any reason for up to three years, but if they suspect you under-reported income, they have up to six years)
  • Records of anything that is active, such as a contract
  • Records for the sale of an investment, such as a home or stock until the relevant period of limitations expires or the year in which you sell them
  • Home improvement records for at least three years after the asset is sold
  • Disputed bills

Shred these documents:

  • ATM receipts once the transaction appears in your account
  • Any bank statement over a year old.
  • Any quarterly investment statements after you receive the year-end statement (Better yet, sign up to receive your banking and investment statements online so you never get paper in the first place)
  • Credit card offers (Or, even better, opt out!  Go to www.optoutprescreen.com or call 1–888–567–8688 to opt out for five years or permanently)
  • Convenience checks that come with your credit card statements (Or choose online statements, so you aren’t tempted to use them, or so there isn’t the danger they will get stolen and used)
  • Pay stubs after you’ve double checked your W-2 and paid your taxes. (Better yet, have your employer store them electronically for you)

(note – this is not intended to be tax advice.  Please consult your tax specialist for guidance specific to your situation. )

2. Pare down your accounts to what’s most important.

Though the average number of credit cards (for people with at least one credit card) in the U.S. rounds up to 4 per person, according to creditcards.com, I’ve seen couples with five or six credit cards between them. Add debit cards, savings accounts and investment accounts, and you can easily have 15-20 different accounts to deal with.

Multiple accounts add complexity to an already complicated financial life and can open the window to fraud. According to research from Experian, in 2012, people surveyed had an average of 26 different online accounts but only 5 different passwords. Who can remember more than 5 passwords? By ruthlessly closing accounts you don’t use or don’t need, you can greatly simplify your life and increase your fraud protection.

Keep in mind that the length of your credit history can have a positive effect on your FICO credit score. So if you do close accounts, close the most recently opened ones.

For the accounts you do keep, be sure to do a password audit! According to SplashData, the most common password is “password,” and “abc123” is in the top five. When it comes to your financial security, these just aren’t going to cut it. Create a really strong password instead – here is a resource from ConnectSafely.org.

3. Cancel all of your services (or at least pretend to).

Go through your bank and credit card statements to review all of your regular recurring expenses. Cancel any that you don’t use and pretend you’re going to cancel the others by calling up the vendor and bringing up the possibility. See how they entice you to stay.

My son did an audit of my cell phone bill a couple of years ago and asked me why I had an international calling plan for $5.95 a month. I thought we’d cancelled it after my husband returned from an overseas trip two years prior! Little things add up, and in my case, $6 turned into a wasted $150. Fearlessly cancel everything you don’t use and negotiate a reduced rate on what you do.

/>

4. Plan your finances for the year.

Review upcoming expenses and set aside funds for them. Every December, the holidays roll around, every year you have birthday gifts to purchase, and you may want to take an annual vacation. You also have home and car repairs, and although you don’t know the exact dollar amount, you can count on them to crop up. Use one of your existing savings accounts or add a sub-account for these expenses so you are prepared for them.

5. Automate everything you can.

 Choose an amount you know you can commit to putting away each month, and set up an automatic transfer from your checking to your savings account. Consider increasing your retirement contributions from your paycheck if you haven’t reached the maximum. If you invest in a Roth IRA, don’t wait until the end of the year—set up a manageable automatic investment from your checking account. Put your regularly recurring bills (at least the fixed ones) on auto-pay so you never miss a payment (review them regularly, however, to make sure they are correct). If you have recurring charges on a credit card, like a gym membership, set up an automatic payment so you never miss it by mistake.

The key to getting these things done is to do them quickly—focus on a short term, three-week “sprint.” Put the date on the calendar and celebrate when you reach it!

My husband and I set a deadline today to update our budget and our personal escrow accounts. This morning, while he was getting ready to go out, he remarked, “I’ve got a really busy day today.” I replied, “It’s going to get even busier since we made a commitment to update our budget by end of day today.” He saw the look of quiet calmness and determination on my face and smiled back at me. His (very wise) response was, “Sounds good.”

How to Take Control of Your Finances

Nancy L. Anderson, CFP ™ is a fee-only financial planner with LearnVest Planning Services and a blogger for Deer Valley Ski Resort. Company website is LearnVest.com (use code Retire50 for a discount).  Follow Nancy on Facebook – Twitter.

The opinions expressed are those of the author and may not be the views of LearnVest Planning Services LLC (“LVPS”), a registered investment adviser. The advice provided is not personalized investment or tax advice, may not be suitable for your individual situation, are not guarantees of future performance and may differ materially from actual events that occur.  The author and LVPS are not endorsing, sponsoring or responsible for errors or inaccuracies by the unaffiliated third party sources and links identified herein on which the author reasonably relies. 

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Bhopal fugitive Warren Anderson is dead (Roundup, Changing dateline)
Washington, Oct 31 (IANS) Warren Anderson, the former CEO of Union Carbide Corp, has died at 92 after living for 30 years under the shadow of the 1984 Bhopal gas tragedy that killed thousands.
 
 
Sit-ins delayed building powerhouses: Nawaz Sharif
Islamabad, Oct 31 (IANS) Prime Minister Nawaz Sharif Friday blamed sit-ins for delaying the construction of powerhouses in the country, as cricketer-turned-politician Imran Khan continued protesting with supporters in the capital city for over two months.
 
 
Britain to repay part of First World War debt
London, Oct 31 (IANS) British Chancellor of the Exchequer George Osborne Friday announced that the British government will pay off part of the country's First World War debt as part of the redemption of bonds stretching as far back as the 18th century.
 
 
UN-Habitat presents the first World Cities Day
Shanghai, Oct 31 (IANS/EFE) The UN Human Settlements Programme (UN-Habitat), headed by former Barcelona mayor Joan Clos, Friday launched its first World Cities Day in China, to be held every Oct 31 to promote sustainable development.
 
 
 

Latest from the Network

Arnold Schwarzenegger 'knew' he'd star in another Terminator movie
Arnold Schwarzenegger ''always knew'' he'd star in another 'Terminator' movie. The 67-year-old actor - the former governor of California - insists he wasn't surprised when he got a call from producers to appear in the...
Read more on Movie Balla
 
Anne Hathaway would 'love' a sequel to The Devil Wears Prada
Anne Hathaway would ''love'' to appear in a sequel to 'The Devil Wears Prada'. The Oscar-winning actress starred in the popular 2006 comedy-drama, which also featured Meryl Streep and Emily Blunt, and has revealed she...
Read more on Movie Balla
 
Lily Aldridge wearing mother's Playboy costume for Halloween
Lily Aldridge will wear her mother's old Playboy costume for Halloween. The 28-year-old model - who is married to Kings of Leon singer Caleb Followill - found her mum Laura Lyons' raunchy Playboy Bunny flight attendant...
Read more on Celebrity Balla
 
Rochelle Humes' daughter loves Marvin doll
Rochelle Humes is embarrassed by her daughter's obsession with a doll of her husband, Marvin Humes. The 25-year-old singer has admitted she found it ''cringey'' when she was recently photographed holding a doll of her...
Read more on Celebrity Balla
 
Keira Knightley annoyed Chloe Moretz didn't ask her advice
Keira Knightley was annoyed Chloe Grace Moretz didn't want her advice. The 29-year-old actress - who appears alongside the 17-year-old star in her latest movie 'Say When' - was disappointed that the young actress didn'...
Read more on Celebrity Balla
 
Daniel Radcliffe loses everything
Daniel Radcliffe loses everything. The 'Horns' star admits he constantly has to replace his mobile phone and often puts things away and can't ever find them again. The 25-year-old actor said: ''I lose things a lot. At...
Read more on Celebrity Balla
 
Apple Outsmarts Samsung in Terms of Revenue Generation
Samsung can sell more products, but it doesn’t mean that it will earn more profit, as Apple overtakes the Korean giant with respect to the earnings.According to the Cult of Mac, Samsung earned a profit of $3.8 billion...
Read more on Apple Balla
 
Apple Declares Not to Remove PCalc iOS Calculator Widget
The PCalc iOs calculator widget is free from the risk of being removed, as Apple decides not to drop it from the App Store.According to Tech Crunch, the officials of Apple have confirmed about the move, stating that it...
Read more on Apple Balla
 
Seth Rogen to Act as Steve Wozniak in the Steve Jobs’ Movie
Seth Rogen has got an important role in the biopic of the late Apple co-founder Steve Jobs, as he has been selected to play as Steve Wozniak.According to the Variety, Rogen will be advised directly by Steve Wozniak, the...
Read more on Apple Balla
 
Ponzy schemer cheats residents of $22 mn, gets 15-year jail
Washington, Oct 31 (IANS) If you have been one of those approached by some 'known' person for investing in something with an assurance of 'easy money', you may benefit reading about this Ponzi schemer jailed in the US...
Read more on Politics Balla