5 Tips to Simplify Your Financial Life

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The first week in August every year is National Simplify Your Life Week. Here at Guiding Wealth, you know we’re big fans of simplicity (it’s one of our cardinal values), so we thought we’d share a few tips on how to simplify your financial life in honor of this “holiday.”

Money Doesn’t Have to Be Complicated

First and foremost, we want to address the idea that money is complicated. It can feel that way, especially when everything feels disjointed or you don’t know where your money is going. But once you get a holistic view of your money — the trees in your forest — it becomes much easier to work with it and to make it work for you.

If you have a belief that money is complicated, or you feel clueless about how money works, hopefully the tips below will help you feel more in control and more educated on your finances. Plus, they should make your life easier!

Simplification Tip #1: Consolidate funds

A common misconception among our clients is that having a vast number of accounts means they’re diversifying their money. Unfortunately, that’s not true. Having too many accounts can actually complicate things in the long run, and even limit your returns because you’re just investing in the same places with different accounts. 

To simplify your accounts, talk to your financial planner about how you can consolidate funds. You may be able to shift money from savings accounts, combine mutual fund balances, or migrate your funds to an entirely new fund that’s right for you. While this step isn’t right for everyone, it does help to identify all of your accounts and balances, so you know where everything is in one simplified location.

Simplification Tip #2: Transfer old 401(k)s

Many of us have 401(k)s from previous employers that aren’t really doing much for us. Instead of leaving them in those old accounts, talk to your financial planner to see if transferring those balances to a new 401(k) or other account would be right for you. This reduces the number of accounts you need to manage, and reduces the risk that you forget about money you’ve got sitting in a legacy account (it happens all the time!).

Simplification Tip #3: Make sure your beneficiaries are up to date

One component that gets overlooked in finances is beneficiaries. Whether you have insurance policies, retirement accounts, or estate plans in general, make sure your beneficiaries up to date. Divorces, new children, or the death of a spouse can all be reasons to update your policies, as can changed wishes for your legacy. Updating beneficiaries regularly can simplify the process for your loved ones in the event of a tragedy, so don’t skip this one!

Simplification Tip #4: Get everything in one place

As you look through your account information, locate old 401(k)s, and update your beneficiaries, odds are you’re realizing that all of your financial paperwork and information is scattered about. Some of it may be in old file boxes under the stairs, while others are in your home office, and others are strictly online. It can be really overwhelming to have to jump from place to place to find the information you need, which is why we created the Personal Records Organizer.

We want to eliminate the guesswork and give you a single source of truth for all your personal and financial paperwork. With the Personal Records Organizer, you can collect:

  • Personal information

  • Accounts and property

  • Professional information

  • Insurance information 

  • Legacy information

  • Passwords and digital logins

This resource is one of our clients’ favorites, because it helps them simplify their finances, but also prepare for big transitions like retirement. Once you’ve got all of your records in a row, you’ll have a cohesive and organized area for all your documents — and your simplification process will be streamlined! 

Simplification Tip #5: Start now

Just like that pile of clothes you’ve been meaning to take to the donation center, it can be tempting to leave your financial decluttering for “another day.” By taking small actions every week and month, you can move yourself forward. While consolidating funds or collecting all your information won’t likely happen in a single day, it helps to focus on your commitment to simplify. 

Set aside time to go through your paperwork, to fill out your Personal Records Organizer, and to chat with your financial planner about how to streamline your accounts and setups. In most cases, this won’t take as long as you’d think — and it benefits everyone. When you organize your financial life, it relieves stress on you, your partner, and even your family. 

After following these steps, we really think you’ll feel calmer, more confident in your finances, and more prepared. If you use the Personal Records Organizer, your spouse and/or family will also have the information they need should something happen to you, or to help you as you age. They can execute on your wishes without the added stress of searching for paperwork.

Don’t let the week pass you by; start simplifying your finances today. Who knows, you might even be motivated enough to finally drop off those donations, too.

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