Busyness seems to be a way of life these days. There is much to do and remember as a cascade of information comes at us all day long. Amidst all the daily pressures and demands come the financial flotsam and jetsam of bills, financial statements, reports, privacy notices, and updates in an endless stream. Trying to keep up can be a daunting task. Especially when there’s not much left in the tank at the end of a busy day.
Take Sam for example. Sam was a hard worker, and did his best to make smart financial choices. He created budgets, he saved, he had manageable debt, and lived within his means. Somehow, money still seemed to just disappear. It was difficult to keep up with all the different reports and financial statements coming in from various accounts. From checking statements to quarterly investment reports, there were drawers full of paper. With a full-time career and a family of five, there wasn’t much time to devote to financial planning and recordkeeping. “It was hard to get out of a survival mindset and feel like I was actually managing my financial future. I also wanted to clarify and prioritize my financial goals in a way that would make it easier to take action,” Sam recalled.
So how does one declutter their financial life? With so many personal finance apps and cloud-based software solutions available, it can be easy to jump to a solution. When thinking about how to approach managing finances, however, a good place to begin is to answer these three questions:
1. What can I eliminate?
Identify and close out any duplicate, old/unused or redundant financial accounts. This is an also an important step to simply protect identity. Ask me how I know how easy it is to simply leave an old credit union account open because it’s my alma mater.
Consider eliminating subscriptions that are hardly ever read.
Get rid of accumulated paper statements and receipts by storing and organizing them digitally. An inexpensive desktop scanner will help do the job of getting the paper into a digital filing system, such as Dropbox.
2. What can I automate?
Automate as much of your cash flow as possible. Check out my blog at www.dscottneal.com and download the ebook on cash flow. Much of that system can be automated.
Use your bank’s bill pay feature. If your bank doesn’t do this, find one that does.
On the income side, establish regular, automatic deposits into designated accounts.
On the expense side, set up automatic, scheduled withdrawals for fixed expenses and regular transfers to savings or retirement accounts.
Set automatic notices or alerts. Some financial institutions and our firm’s personal financial website will allow notifications to be set for certain conditions, such as when a balance falls below a certain amount or when a bill is due.
3. What can I delegate?
Consider hiring a personal bookkeeper or even a virtual assistant to help keep you organized. Belay Solutions is a good place to begin your search.
Hire a good tax professional to prepare your tax return. They will usually pay for themselves, especially if the IRS starts to ask questions about your return.
Of course, investment management is one area that can be easily delegated by investing in mutual funds or by hiring an advisor.
Integrating Financial Data
When Sam came in, we took him through our on-boarding process. After helping him sort through his accounts and getting an accurate picture of his financial situation, we set him up with a personal financial website. All of his account balances, asset allocation, and spending data are updated daily. He can now view all of his accounts, set and track budget amounts, track progress on financial goals, and securely organize his important documents—all in one place. He got rid of a lot of paper, automated a lot of things, and delegated much of the work.
Scott Neal is the president of D. Scott Neal, Inc. a fee-only financial planning and investment advisory firm with offices in Lexington and Louisville. You may send him your questions via email to firstname.lastname@example.org