8 Ways to Simplify your Finances

When it comes to reducing stress in our life, it's obvious that food alone is just one piece of the puzzle. Finances can be a major source of stress for many, so today we give your wallet some love with this special guest post from Christine Nguyen, blogger and creator of The Wallet Diet. In today's post, Christine breaks down some ideas to help Simply Nourish your finances.

A SPECIAL GUEST POST BY CHRISTINE NGUYEN OF THE WALLET DIET

The more you simplify something, the less stressful it becomes. This can be applied across any area of your life, including money.

Budgeting, saving, and investing are not as complicated as you might think. It's completely possible to keep up with your financial demands without having to track your spending on an Excel spreadsheet or hire a financial planner. All you need to do is simplify things as much as you can so that money becomes something that you're able to understand and control. No matter what your financial situation is, these 8 tips will help you make your money more manageable.

1. Take a snapshot of your finances

Make a list of:

  • your monthly take home pay after taxes

  • your cost of living expenses (rent/mortgage, groceries, utilities, etc.)

  • all your outstanding debts plus the interest rate for each

  • what you have squirreled away in your savings

  • what you have tied up in investments

Laying it all out in front of you gives you a better idea of what you have to work with and where you're at financially. It forces you to review these numbers in detail instead of taking in paycheques and paying bills blindly. To be a conscious spender, you need to consciously know what's going on with your money.

2. Focus on one goal at a time

Debt payments, down payment, vacation...focusing on too many goals all at once can make you feel like you’re not getting anywhere. Start with one goal and aggressively attack it before you move on to the next. Choosing the goal that will make the biggest impact in the short term (say, paying off your credit cards to avoid that 18% interest) is the best place to start.

3. Use cash only and track your spending

You might not reap any reward points but using cash means you pay everything up front so you always know how much cash you have on you at all times. Putting everything on a credit card makes it too easy to spend what you don't have and rack up debt. 

Use a tracker to help you help you keep track of your spending. There are a ton of tracking apps out there but my personal favourite is Wally (http://wally.me/). Every time you make a transaction, take a few seconds to enter how much you spent and which category (dining out, personal care, entertainment, etc.). You can see which areas you'll need to cut back on and be more conscious of your spending in that category. 

4. Pay all your bills on payday

We all count the days until payday so make this your "bill payment day" too. When you get paid, take a few minutes to pay off all your bills no matter when they're due (just make sure you don't miss a payment when you first start). It'll be hard to miss a due date this way plus you'll have enough money in your account to pay everything because you haven't spent money from your paycheque yet.

Another option is to automate your bills so that the amount you owe is automatically deducted from your banking account. Choose whichever option works best for you.

5. Use a budget retainer

Budgeting is tough when you have a slew of different budgets to keep track of. Using the budget retainer method, what you have to spend on discretionary items is whatever is left after you pay your expenses and yourself via savings. Once you pay off your expenses (rent/mortgage, bills, car payments) and set aside cash for your short and long-term savings, the amount left is what you have to spend on everything else for the rest of the month. It's only one number you need to keep track of and you'll know exactly how much you have left every time you look at your bank account.

6. Consolidate your debt

If you have multiple sources of debt, consolidate them all into one debt so that it results in only one debt payment that you have to make each month. Most debt consolidation loans have lower interest rates so you don't get hit with as much interest during your repayment period.  

7. Have an emergency fund

This cash reserve is set aside for exactly what it sounds like – emergencies. It's a non-negotiable because you should always anticipate them! You never know when your car will break down, when Rover might need an unexpected trip to the vet, or you're laid off from your job. These types of emergencies can be costly so it's good to have at least 3 months worth of your net income to tap into (and avoid accumulating debt). 

8. Change your money mindset

 Alter how you look at money. Changing your money mindset means knowing that wealth has nothing to do with how much money you make or how much you have but what you can afford. You determine how much power money has over you because you choose what you spend that money on. You become a conscious consumer, buying only the things you need and actually have the money for.

 It's possible to have a healthy relationship with money if you see it as a finite resource like time. If you make efficient use of it, money can become an ally not an enemy. It can allow you to travel the world, retire early, or anything else you can dream of if you know how to use it wisely.

Simplifying your finances involves creating new habits that will eventually become second nature. Keep them up and you'll get your financial life together sooner than you think!


Christine writes at TheWalletDiet.coma lifestyle blog on personal finance, travel, and minimalism. She paid off $35,000 in student debt while renting in Toronto and travelling the world. Connect with her on Twitter @TheWalletDiet.