Many of our lives have become a series of hectic activities. We run households, raise children, manage relationships, develop careers, build businesses and keep financial pressures away.
Technology strives to provide us with time saving devices, convenience food or exercise regimes that can be completed in a matter of minutes. However true solutions to order and content are so much simpler.
Simply speaking, most of us are unable to simplify our lives and eliminate the frantic challenges of modern living. We don’t often talk about simplicity and we certainly don’t often connect it with our financial life. However, the truth is that personal finance is simple and simplicity is the key to financial success.
Yet, talking about simplifying our financial lives is a lot easier than taking action. To help you get started, here are a few ways to simplify your finances and stay on top of your money.
These tips are so simple, that we can underestimate their significance – it has been aptly said beauty is simplicity; so that being in control of your money doesn’t have to be a challenge. Without further ado, let’s get started….
10 Simple Ways to Simplify Your Finances
1. Track your spending to identify your financial values and priorities
One of the easiest ways to save money and simplify your finances is to track your spending. The uncomfortable truth is that many of us waste money on things that are not in alignment with our values.
Once you start paying attention to your spending, you’ll gradually start to uncover where your priorities lie! Or, it’ll highlight something else… where you’ve been wasting money…
Just because you’ve been spending money on something, doesn’t automatically make it a priority. So, it’s really important to identify your financial priorities and assess whether your spending is in alignment.
Once you know what your true values and priorities are and focus on them, you will be rewarded with a sense of calm.
2. Establish financial order
Nature is beautifully ordered – the tides, the seasons, the lavish growth in spring is in fact nature’s system of growth. We too are designed to be organised.
No one thrives in chaos. Getting your finances organised is the one of the most powerful ways to financial success.
A great way to get organised is by putting your financial paperwork in one place. So, take some time to sort out your financial paperwork. Set up a filing system for your unpaid bills and important financial documents.
When life is organised, you have a sense of wellbeing about it – it gives you a personal sense of happiness. It just feels right and it works right and that is a really good WHY to establish order.
3. Focus on one financial goal at a time.
If you are struggling to reach your goals, committing to one specific goal at a time will help you to move forward.
I know it’s hard, but if you want to make progress, you have to commit to one financial goal at a time.
The goal you choose will depend on your situation, but for most people, the recommendation is to start by creating a basic emergency fund, of perhaps £1,000.
This will help you get you over the financial hump of unexpected costs, such as your car breaking down or your laptop dying, which might otherwise mess up your well-laid plans.
It’s easy to get carried away with all the possibilities, but know that the time will come for all the other exciting things you want to achieve.
For now, focus on one thing at a time, and by doing so you will achieve your other goals much faster.If you are struggling to reach your goals, committing to one specific goal at a time will help you to move forward.Click To Tweet
Related: Financial Goals in Order of Priority
4. Create a simple action plan for your money
Whether you want to buy your own property, travel around the world, build wealth or simply have some savings in the bank, the first step is to set clear, achievable financial goals.
Use these to create a financial plan and then put it into action. Set aside time regularly to examine your finances and make sure you stay on track.
Your plan for getting out of debt and being more financially secure could look like this:
- Save an emergency fund of £2,400 by setting aside £200 per month
- Pay off at least £X of debt per month/pay off all debt by [date]
- Start investing £X per month in a stock and shares, or in an ISA or pension
This is just an example, and your own situation and plans might look completely different. But the idea is that when you have a plan in place, you can figure out how long each step will take, and budget accordingly.
Related: How to Set Powerful Financial Goals
5. Create a consistent saving plan through automatic savings
We all have bills to pay and there are times where there’s too much month and not enough money. However, if you pay yourself before your other obligations, you’ll soon find it’s easy to manage on slightly less while you build up a nest egg.
A great way to pay yourself first is through automatic savings. Set up a standing order to put 10 to 15 per cent of your income in a savings account as soon as you get paid and it will change your life. Then you can forget about it while it accrues interest for you. Trust me you won’t miss that money.
You can start gradually by putting 5% towards savings then increase it when you get a pay rise and watch your dreams come.
6. Simplify your budget.
Make sure every pound has a purpose, before you know you’ll reach financial independence. When you create a monthly budget or money plan, you’re giving your money a purpose. You’re telling your money where to go rather than wondering where it went.
Use a budget tool or personal finance apps to simplify your budget. There are hundreds of budgeting apps out there. It can be hard to choose the best one that fits your needs, particularly if you’re a technophobe or simply overwhelmed by the choice.
When you create a plan for your money, you’re giving your money a purpose.Click To Tweet
7. Simplify your investing
Learning how to invest can seem puzzling and complicated, but investing your spare change and in index funds can simplify the whole act of investing.
Generally speaking, there are two approaches to investing: actively managed and passively managed funds.
But which is best?
Research has consistently shown that less than 12% of actively-managed funds ever beat the market in any given period and a significantly smaller percentage consistently beat the market.
So, what does this mean?
If you want to be a successful investor you have to keep an eye on fees and invest in passively managed or low-cost index funds.
The best approach to investing is to invest regularly, preferably monthly, even if it is just £20 or £50.
By setting up a direct debit to your investment account, you will get into the habit of investing regularly and you will be surprised how quickly that money adds up.
If you haven’t started investing yet, try Moneybox. Moneybox automatically invests that ‘spare change’ you don’t think about.
It’s designed to ease you into investing in small amounts by rounding up small purchases to an amount set by you and puts the excess into a stocks and shares ISA. And believe me, the odd 35p here and there can really add up.
By answering a few questions about your investment goals these investing platforms will do the rest, matching you to a portfolio that suits you. The only thing you have to do is provide the cash to invest – simple!The best approach to investing is to invest regularly, preferably monthly, even if it is just £20 or £50.Click To Tweet
8. Live below your means
Why? So you can save and invest the rest. The simple formula for financial independence is: spend less than you earn and invest the difference.
When it comes to sorting out your finances, it’s not how much money you make that’s important, but how much money you keep.
Learn to live under your means. Be really honest when you list out your living expenses. Is there anywhere you can save money or cut costs? A Netflix subscription is cheaper than going to the cinema regularly, for example.
If you really can’t cut your outgoings any further then look into how you can earn more so you have money to save and invest.The simple formula for financial independence is: spend less than you earn and invest the difference.Click To Tweet
9. Use credit wisely
Stay away from credit card debt and use debt for appreciating assets (family home, education) only. You can have a credit card but you should never ever have a credit card debt.
If you are not paying off your credit card balance monthly, you are doing it completely wrong. Ditch the credit cards and your bank balance will thank you for it!
A simple strategy for getting out of debt is the snowball method of debt elimination. Research by the Harvard Business Review established the snowball method as the most effective way to pay off your debt.
Psychologically speaking, the snowball method of debt elimination is by far my favourite method of debt elimination. It gave me a great sense of satisfaction from the outset and the motivation to continue and pay off my debts faster.
Mathematically, the best way to make the most of your money is to focus on paying down debts with the highest interest rates first. But if we were to focus on maths, many of us wouldn’t be in debt in the first instance.
If you’re struggling with debt or feel like you don’t know what to do to get out of it, get my eBook on How to Get out of Debt and Stay out and let me show you the exact steps I took to get out of £32k worth of debt in 2 years.If you are not paying off your credit card balance monthly, you are doing it completely wrong.Click To Tweet
10. Have a rainy-day fund
Unfortunately, things will go bad at some point. Emergency fund needs to be simple and accessible because when things go wonky you are going to need some cash.
Remember cash is king. Emergency fund is not only for emergencies it can also be for great opportunities when they come by.
How much cash in emergency fund should you have in savings?
Your goal should be somewhere between 3-6 months of your living expenses should you lose your job. If you are much specialised in your role you might need 6-9 month of living expense as it might take longer to get a new job.
If you don’t have an emergency fund, you won’t be able to cope in an emergency. That’s why it’s so important to make saving a regular habit – today!
Whilst you’re at it, find a high interest account and make that money work for you. You can learn how to build an emergency fund you can be proud of here.
And just in case you are thinking you don’t need an emergency fund, here are 25 reasons to have an emergency fund.Emergency fund needs to be accessible because when things go wonky you are going to need some cash.Click To Tweet
11. Become a conscious spender
Beware of little expenses as they all add up over time. Mindless spending is one of the reasons many of us never achieve our goals, it muddles our finances and it could be the very thing hindering your financial progress.
Being a mindful spender means buying less and wanting less. Just by being more aware of your outgoings, you will be leaving less of a footprint on the earth which is directly related to simplicity.Just by being more aware of your outgoings, you will be leaving less of a footprint on the earth Click To Tweet
12. Free up time to do what you love
Find ways to free up time to do the things you love to do. That means eliminating the stuff you don’t like, and making room for what you want to do.
Doing what you love can reduce the urge to spend money to feel good, stop mindless spending and most importantly ensures you are using your money more purposely.
Finally, Be Grateful
What are you grateful for today? Take a few moments daily to review all the reasons you’re a wealthy person today.
Being thankful; consistently and regularly trains your brain to be positive and solution oriented. And a grateful heart attracts good things. Write in a gratitude journal daily and start creating a sense of harmony naturally.
By following these simple tips, you be on your way towards the financial freedom you dream of, and can avoid slowing yourself down by financial overwhelm and complexities.
Ready to simplify your finances? I help women simplify their financial life so they can achieve their money goals 2x-5x faster and flourish. Schedule your FREE 20 minutes consultation with me here and let’s make that happen.
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