3645: 11 Ways to Simplify Your Financial Life by Bob Lotich with Becoming Minimalist on Financial Simplicity

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[00:00:56] This is Optimal Finance Daily. 11 Ways to Simplify Your Financial Life by Bob Loddick with becomingminimalist.com. And I'm your narrator, Justin, here reading to you every day to help you save more, earn more, and invest the rest. So with that, let's get right to it as we optimize your life.

[00:01:20] 11 Ways to Simplify Your Financial Life by Bob Loddick with becomingminimalist.com. I began my journey into minimalism a little over a year ago and soon began experiencing the benefits of having less and living a simpler life. Running a personal finance blog, I began to ask myself, how can I apply these principles to my money?

[00:01:44] I don't know about you, but I have found that in my life, my finances are entirely too involved. And too often, I feel that they are controlling me. Those aren't ridiculous conclusions, considering how complicated finance has become on all levels, as well as the rapid pace of change that it throws at us. But here are 11 ways to simplify your financial life and put greater control back in your hands.

[00:02:12] Number one, consolidate bank accounts and retirement accounts. Most people can get by just fine with one checking account and one savings account. If you have more, consolidate your various accounts into a single checking account and one savings account. You'll simplify your banking without resulting in any loss in service level. The same is true of retirement accounts.

[00:02:38] If you have several due to having previous jobs with 401k plans, simplify your life by rolling those plans over to a self-directed IRA account. Not only will this reduce paperwork, but it will also eliminate account fees and make it much easier to manage your retirement assets. Number two, get rid of as much paperwork as you can. Having multiple accounts for various financial pursuits

[00:03:05] can lead to piles of paperwork building up around your home. You may not even take the time to read through them, but the existence of large amounts of paperwork can be stressful all by itself. Get rid of any paperwork that isn't absolutely necessary and shift account statements and notifications to online. If you're reducing the number of financial accounts that you have, the amount of correspondence will drop anyway.

[00:03:33] Number three, cut back to just one credit card. If you have a passion for rewards and zero interest rate promotions, you may have built up an impressive inventory of credit cards. But once the rewards and zero interest are gone, the cards have little value. Keep them open for credit scoring purposes, but focus your credit card use on a single card. Choose the one that offers the best benefits and put the rest away.

[00:04:03] It's much simpler to manage your spending and handle payments with a single credit card than with five or ten. Number four, become debt-free. Debt doesn't just cost you money, it also makes life more complicated. Not only do you have to spend more time paying bills, but multiple debts are serious sources of stress. Think of it this way. Each debt that you eliminate takes out one complication in your life.

[00:04:33] One of the very best ways to simplify your financial life is to get out of debt. It won't happen overnight, but just establishing a plan to make it happen can go a long way towards simplifying your life. Number five, invest in funds rather than individual stocks. Investing in individual stocks can be fun and rewarding, but it's also messy.

[00:04:58] You have to research, purchase, track, and sell each stock in your portfolio. If you have dozens, it can be the equivalent of a part-time job. You can avoid all of that hassle by investing in either mutual funds or exchange-traded funds. Index funds are particularly attractive since very few actively managed funds ever outperform the market.

[00:05:24] Funds are also much simpler when it comes time to file your tax return. Individual stocks require a lot of tax-related documentation, and that can also raise the cost of tax preparation. Number six, pay cash whenever possible. Yes, it sounds old school, but it does have its advantages. It avoids getting receipts and tracking expenses after the fact, the way you do with both debit and credit cards.

[00:05:52] With cash, you can make your purchase and move on. Use your credit card on larger purchases that may require buyer protection or a potential refund situation. Then simplify your financial life by making your smaller purchases in cash. Number seven, cut out any services you don't need or regularly use. You probably pay for subscriptions and services that you hardly use.

[00:06:20] By eliminating them, you will simplify your life and remove yet another payment from your budget. The fewer payments you need to make, the simpler your finances will be. Number eight, cut down on your goals. It's important to have goals established to achieve important milestones in life. But you probably can't successfully manage more than one or two goals at one time.

[00:06:46] In fact, multiple goals can spread your efforts in too many directions and cause needless confusion. Pick the one or two goals that are most important to you right now, pursue them with a vengeance, and let the other goals go for another time. Your chance of succeeding in any one goal will then increase dramatically. Number nine, rent a home rather than owning.

[00:07:12] There's a world of documentation supporting the emotional and long-term financial benefits of home ownership. But owning your own home comes with a long list of expenses and responsibilities that you wouldn't have if you rented. For example, you wouldn't need to be concerned about repairs, maintenance, or HOA special assessments. Your landlord would be responsible for those. Generally speaking, renting reduces you to just a monthly rent payment

[00:07:41] and a small number of utilities. Anything beyond that will not be your concern. That will simplify both your finances and your life. Number 10, do more of what brings in the most income. This applies most directly to the self-employed and to commissioned salespeople, but it does have relevance to salaried employees as well. The idea is to focus most of your efforts and time on the work activities

[00:08:10] that are likely to generate the most income. Reduce the amount of time you spend on administrative functions by either offloading or subbing them out to someone else. For salaried employees, this could be concentrating effort on activities that are likely to produce a larger bonus or put you in a better position to be promoted. This single change in strategy can both increase your income

[00:08:36] and simplify the income earning process of your life. And number 11, turn off your TV and go easy on the internet. Information is good, to a point. But after that, it turns into noise and promotes mental clutter. The experts on TV and the internet are there to relentlessly inform you that you need to do this or to stop doing that or to buy here or to invest there.

[00:09:06] It's an advice merry-go-round in which the specific advice always changes, but the flow never ends. Confusion is never a sound position from which to simplify your financial life. Limit the amount of information you take in, restricting it only to the most trusted sources. Then tune out the rest. Implementing just a few of these changes can go a long way towards simplifying your financial life.

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[00:11:32] and points it at your money, which isn't something we hear about as often when it comes to minimalism. And the theme running through all 11 of these is really about reducing friction. The fewer accounts, cards, bills, and subscriptions you have to keep track of, the less your money runs your life. The ones that stood out to me were the first couple. Consolidating accounts and cutting down on paperwork. I can relate to that.

[00:12:02] For years, I tracked all my spending in a spreadsheet, which worked, but it took effort. And eventually I moved to more automated apps, mostly because they pull everything into one place for me. And that's really the same thing he's getting at. The less scattered everything is, the easier it is to actually stay on top of it. Now you don't have to do all 11. A few of these, like renting versus owning, are big personal decisions with a lot of factors,

[00:12:32] and it's a big debate online. In fact, I'm sure you'll be hearing me narrate some articles about this. So I wouldn't treat this as a checklist to complete. It's more of a menu. Pick the one or two that would take the most weight off your plate and start there. For me, going paperless and consolidating accounts would probably be the easiest wins. And if you're looking for the best credit cards, I'm planning to share great ones in my weekly newsletter. If you're not already on that,

[00:13:01] come by oldpodcast.com to join for free. And if you do, you'll get a digital copy of our Optimal Living Daily Workbook and even have a chance to get it shipped to you for free if you're in the US, and as long as we have some available. So again, to be on the weekly newsletter, just come by oldpodcast.com. But that should do it for today. Have a great rest of your day. Thank you for being here, and I'll see you tomorrow where your optimal life awaits. Thank you.