Simplify, organize, re-evaluate for 2011
Posted on November 30, 2010 by bob in Financial, MoneyWise
The approach of a new year brings the expectation of changes that can improve our lives. Not least among the possible adjustments are those which deal, directly or indirectly, with finances. Consider three key words which have clusters of specific options connected to them: simplify, organize and re-evaluate. If you implement one or two ideas from each of these three clusters, you may find financial management to be both easier and more rewarding over time, not just this year, but for many years to come.
Simplify: Steps toward simplification should reduce the time and mental energy required to carry out a task, without significantly impairing the quality of the results.
For instance, if you track your expenditures using a system with 30 expense categories, simplifying to a system with 10 is much easier but still provides you with useful feedback about where your money is going. Reducing to a system with 3 categories, however, means that the feedback you get will not be very useful.
Consider reducing the number of bank, investment, and credit card accounts that you maintain. For instance, a widow I helped several years ago had investments in more than 15 accounts. She is now served equally well, perhaps better, with two.
Another possibility is to put your utilities on budget billing and have the monthly payment debited directly from your checking account. With budget billing you pay a more stable amount each month based on your average usage throughout the year. Over time you neither overpay nor underpay your actual usage, but monthly fluctuations are minimal. Paying by direct debit means that you do not have to write a check, buy stamps, or use on-line banking to save you both time and money.
Organize: What records should you keep and how should you store them? You can get some good material on organizing personal records from the U.S. government at the “free information” website, www.pueblo.gsa.gov.
Personally I use a combination of an alpha “expando” file, three-ring binders, and file folders. One benefit of knowing what to keep is that you can get rid of everything else. Just make sure that you shred or otherwise destroy anything that an identity thief would benefit from.
Compiling information for your family in the event of a death or disability is a great way to save time and reduce frustration for others later on. Such a data packet can anticipate lots of questions. One resource to guide you through the process is Get It Together, available at www.nolo.com.
Re-evaluate: It pays, both financially and in peace of mind, to recheck certain assumptions and relationships from time to time. As Ronald Reagan said, “Trust, but verify.” Are you getting the most for your premium dollar on your auto and homeowners coverage? Are there better credit card choices available than the one(s) you are using? Do you need to replace your washing machine hoses and water heater to avoid a leak or other problem in the near future? Is there a better bank account than the one you are using?
In each of the three areas – simplification, organization and re-evaluation – there are likely many other opportunities to improve the management of your financial situation. Just take a few quiet minutes to think through your daily, weekly and monthly routine with a pad and pen, and you may come up with several worth considering.
My final counsel this month is that you prioritize. Do not try to act on every good idea that comes to mind. Doing so will lead to both failure and frustration. It is better to do less well than more badly. Choose the ideas that seem best to you and then pursue them wholeheartedly. You will likely find yourself re-energized and feeling better about yourself as the year progresses.
Alan Wallace
Alan Wallace, CFA, ChFC, CLU is a Senior FInancial Advisor for Ronald Blue & Co.’s Montgomery office, 334-270-5960, alan.wallace@ronblue.com.
