Liz Weston: 5 ways to simplify and reduce money clutter

Financial Planners


A professional organizer might define a messy home as a pile of undecided decisions. So is the money mess.

Do you have a credit card that you no longer use but have not closed? It’s a money mess. The same goes for retirement accounts you left three years ago, or financial documents you keep but no longer need. Money chaos can also include broken systems that need to be fixed, such as bill payment routines that lead to overdrafts and late charges.

You can simplify your financial life by addressing long overdue decisions now and streamlining how you manage your money going forward. There are several tasks to consider.

Merge accounts

The more financial accounts you have to monitor, the more likely you are to be stressed, says Sheila Padden, a financial planner in Chicago and chairman of the Alliance of Comprehensive Planners. It’s all too easy to forget an account, miss a due date, or fail to notice a fraudulent transaction.

“Like any machine, the more moving parts there are, the more likely it is to fail,” Padden says.

One relatively easy way to consolidate is to consolidate your workplace retirement accounts. For example, you may be able to transfer your old 401(k) account to your new employer’s plan or roll it up into a single Individual Retirement Account (IRA).

Closing your account can hurt your credit score, but closing unused credit cards is also worth considering. Minimize potential damage by using the oldest and highest denomination cards. If you have multiple cards from the same issuer, check to see if you can reassign the credit limit of the card you want to close to the card you want to keep. Also, don’t close your card if you’re trying to apply for a large loan such as a mortgage or car loan.

All in one page

Budgeting apps let you link your bank accounts, credit cards, and investment accounts so you can see all your transactions in one place. Banks and brokerage firms may also offer similar functionality that allows you to link external accounts.

Learning how to use these tools will take some time, but once you get this overview, you’ll be better able to manage your money without having to log into multiple accounts, says the International Institute of Certified Public Accountants. says Pamela Rudd, Senior Manager, Personal Financial Planning.

“I can get a really good snapshot of my finances in one place,” Rudd says.

Automate what you can

By automating bill payments, you can avoid late fees and damage to your credit score from late payments. Start with consistent invoices, such as mortgages and auto loans.

Bills that change monthly can be even more troublesome. Without enough cash, many people worry that an unexpectedly large utility or credit card charge could overdraft their checking account. Padden points out that the “set it once and forget it” mentality may also take hold.

“It’s convenient, but if you don’t see your credit card statement, that’s the downside,” she says.

Padden says that where automation really shines is when it comes to savings. She recommends figuring out how much you need to save for goals like retirement or emergency funds and automating regular contributions.

reduce paper clutter

Rudd admits he was a latecomer to the digital world and didn’t switch to paperless statements and invoices until a few years ago. Now, instead of receiving paper “triggers” in the mail, she uses email reminders to check her monthly statements and bills. Financial institutions typically keep bank statements for her six years or longer, so she doesn’t have to file or shred papers. She finds the change “liberating.”

“It’s less clutter and one less thing to do,” Rudd says.

Most historical documents can be safely scanned or downloaded to your computer, as long as your computer is backed up regularly. You can search online for a list of when to shred existing papers, or ask your tax advisor or financial planner for advice.

Consider Hiring Help

Padden says the urge to do everything yourself is understandable. As a chartered accountant, she felt she should be able to manage her finances, but she eventually realized she lacked enough knowledge to do it well. .

Padden’s response to this revelation was to study and become a Certified Financial Planner and start her own financial planning practice. She encourages others to consider getting the help they need, if possible.

A tax professional will file your return and answer your tax questions. A certified financial counselor or financial coach can help with budgeting, debt management, retirement savings, and more. Financial Her planner supports nearly every aspect of household finances. Hiring support will give you the personalized information you need to make decisions and reduce stress. After all, it’s all about simplifying your financial life.

“You can’t live your most fulfilling and secure life if you feel like you’re constantly being chased,” says Padden.

This column was provided to The Associated Press by personal finance website NerdWallet. NerdWallet Certified Financial Contact Liz Weston, her planner and columnist. [email protected] again @Liz Weston.





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