20 Ways to Drastically Simplify Your Financial Life - Life's Little Pleasures and Struggles

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Are you looking for ways to simplify your financial life? Unfortunately, most people’s finances are too complicated which is not good. It impacts on other areas of their lives, too. If your financial life is complicated and messy, it leads to procrastination and a lot of stress. When you take steps to simplify your finances, you are likely to reduce costs, save more money, and increase your financial security, independence, and peace of mind.

Here are 20 tips for how to simplify your financial life and take back control of your finances so you can spend more time and energy on things that truly matter!

1. Track your expenses

Before you do anything to simplify your financial life, you first need to take a careful look at your finances. Many people are deluded into thinking that they’re aware of where their money is going. But the reality is often the opposite.

That’s why, you need to find out where your money is going, how you are spending your hard-earned money, whether you are over spending, and where you can cut back and save some money to meet your important financial goals to reduce stress and simplify your life.

You might need to adjust your spending habits to meet a financial goal such as getting rid of debt, building an emergency fund, or saving for retirement.

2. Be smart with your spending

Once you track all your expenses, be smart with your spending. Don’t buy anything that will put you in debt or create further financial complexity by not having enough money. From now on, before you buy something new, take some time to think about whether they will really improve your quality of life, or they will just cause you stress and eventually add clutter to your home and your mind.

Spending less can simply your financial life significantly.

3. Get on a budget

If you think you can simplify your financial life without creating a well-defined, sustainable budget, then you are going in the wrong direction.

Budgeting is the most effective way to get your financial life in order, track your spending, plan your future, and maintain a simple financial lifestyle. Even a basic budget can be the difference between achieving your financial goals, and wondering where all your money went.

4. Live within your means and don’t keep up with the Joneses

This is one of the most important steps you can take in order to live a financially stress-free, simple life. Financial stress comes about when your lifestyle doesn’t match up with your income. You begin to finance your expenses using some form of debt, like high-interest credit card, a personal loan, or a home equity line of credit. Some of you might even tap into your long-term savings or retirement funds to pay your current bills.

Without living within your means and without making the most of what you have, you can’t really simplify your financial life. Be content with what you have, and focus on what is truly important and meaningful.

Once you create a sustainable budget, stick to it. Spend less and save more. Embrace frugal living if necessary. When you will learn to live and manage well within your means, your life will get so much simpler and easier.

Also, don’t bother what other people may think. Don’t even try to impress them. Remember that just because someone appears to have it all, doesn’t always mean they are able to afford it. If you could peer inside the Joneses’ homes and bank accounts, you might not always get an enviable picture.

Do what gives you long term pleasures and what is right for your family. While making financial decisions, you have to do what is right for you and not be influenced by the many temptations that surround us. Don’t make your life harder trying to impress others whose approval or envy doesn’t matter at all. Make the best of your situation, and focus on what truly matters to you.

5. Focus on one goal at a time

The average person seems to always be juggling paying down debt, building an emergency fund, saving for retirement, coming up with a down-payment for a new home, college, weddings, kids, vacations, and the list goes on. Instead, try focusing fully on one goal at a time because it’s hard to successfully manage more than one or two goals at one time.

If you are attacking debt, attack debt. If you are saving for a down-payment, start stockpiling. Simplify, focus, and prioritize. Pick the one or two goals that are most important to you right now. Build on your momentum. Once you knock out one, plow through the next.

6. Buy less house or relocate

If your housing expense is a source of financial stress, consider downsizing or relocating to a less expensive neighborhood or town. Taking a similar or better job in a less expensive area is another solution to get ahead financially. If your total housing expense, which includes your rent or mortgage, insurance, property taxes, maintenance, and utilities, is 40 percent or more of your total income, you are likely under financial stress.

One of the biggest problems with leveraging credit to purchase a home is the temptation to buy so much more house than we need. Remember, bigger home means higher maintenance, insurance, and mortgage. Don’t forget you will need more crap to fill it up, too.

7. Buy a smaller, used car

Transportations are another expensive category to cut, to live within your means. Buying a smaller, pre-owned/used vehicle is much better for your financial health than buying a new one. Less upkeep and usually more efficient, too. Also, you will lose 5,000 to 8000 dollars as soon as you drive off the lot when you buy a brand new vehicle.

8. Become debt-free:

Debt can be a major financial stressor for anyone, and it can easily complicate your life because it comes at an emotional and physical cost.

Debt means more payments. And the more payments you have to make, the more complicated your financial situation will be. Look for things you can cut out of your budget and put that money toward paying off your debt. You will eventually have something that you value more than those extras that you cut back on: your financial freedom and peace of mind.

Even if you don’t have the extra money to reduce the debt balances faster, you can significantly cut your interest expenses. Consider options such as refinancing, doing a balance transfer at 0% interest, consolidating your debts, or changing payment plans on student loans to make debt more manageable.

If you really want to simplify your financial life, I highly encourage you to not only get out of debt, but stay out of debt. It might be a difficult task, but it’s so worth it in the end!

Related post: 15 Possible Reasons Why You Are In Debt

9. Build an emergency fund:

If you are prepared for financial emergencies, everything in life feels a little simpler. So, once you pay off your debt, build an emergency fund. An emergency fund is a savings account meant to cover unexpected expenses and financial emergencies. Having an emergency fund will simplify your life to a large extent. When you know that you have a cushion to fall back on in case of an emergency, a lot of your stress will go away, you will sleep better at night, and enjoy great peace of mind.

Ideally, you should have enough to cover at least 3 to 6 months worth of living expenses, but any amount is better than not having anything at all. Having even $1,000 saved can get you out of many financial scrapes. Start putting something away now, and build your fund over time. You may also consider selling any unused items around the house to build up that cash as quickly as you can.

10. Create an additional source of income

Financial complexity usually results from either earning less money or spending more than your income or the combination of both. If you made a few hundred, or even a few thousand dollars extra each month, would it reduce the complexity and stress in your financial life and make things easier?

In order to meet some of your important financial goals and simplify your financial life, you might need to create an additional source of income. With a modest boost to your income, you can save more money for the things that matter to you or you can use the money to pay off debt and be stress-free.

There is no shortage of side hustle options to earn some extra money. Consider starting one that fits into your lifestyle.

11. Simplify your income sources

Having multiple streams of income sounds great, but pursuing too many options at one time can actually make life harder. Personally, I prefer having one primary and one secondary source at any one time.

If you are working a demanding full-time job, trying to be a virtual assistant, running a blog, and delivering pizzas or mowing lawns on the weekend can be so overwhelming. Choose one of these side hustles that supports your lifestyle, and focus on that. You will simplify your financial life and most likely achieve more success in that.

12. Automate your payments and savings

Technology can simplify your financial life. There are many ways to automate saving, investing and paying bills. If you have your financial priorities defined, such as saving for retirement, building emergency savings, saving for your kids’ college education, or buying a home, making your savings automatic can simplify your financial life and reduce your stress level.

Automate as many of these transactions as possible so they happen without you having to think about it.

Also, at times life can be hectic and overwhelming. This causes you to forget things from time to time. Setting up automatic bill pay can help alleviate the stress of remembering to pay bills on time, and avoid costly penalties for missed/late payments.

But you also have to make sure you have the money in bank. By careful planning and sticking with a budget, you can see your savings grow while reducing your stress.

13. Consolidate your accounts

You truly don’t need 2 savings, 4 checking, and 3 separate retirement accounts to manage your money. It’s no wonder people get lost tracking their finances! Only choose to keep one of each. Most people have too many accounts and too many investments. Often, they purchased mutual funds and opened accounts over the years for good reasons but didn’t monitor them. Now, they have multiple accounts and funds. Not only are their finances unnecessarily complicated, but they are missing opportunities to reduce or eliminate fees. Some people have switched jobs several times and have retirement accounts at different former employers.

I’m a big advocate of consolidating accounts at one or two firms. It makes decisions and executing them easier and often reduces fees.

14. Pay in advance for regular services

For any service you pay monthly, check to see if you are able to pay in advance. Often times you can pay for 3, 6, or 12 months in advance. This not only is simpler in terms of paying less often, but almost always results in a discount.

15. Have adequate insurance

Insurance benefits individuals, businesses, and organizations in more ways than one. No matter what type of insurance plan you have, the goal is to provide you with protection and preserve your assets. If and when disaster strikes, you will be able to mitigate your risk and receive proper security.

Invest the time upfront to understand your insurance coverage. Know at least the very basics of your policy and how it works. Stop making excuses and buy health insurance. Life, home, auto, long-term disability, make sure you cover your basics. When life happens and the time comes to use it, your life will be 1000 times more simple.

16. Invest in mutual or/and index fund instead of individual stocks

If you want to simplify your finances, investing in mutual and index funds is a better idea. Because it has been proven time and time again that if you want to build wealth, you need to diversify your investments, and then contribute to them consistently for a long period of time. Seriously, it’s that simple.

So, instead of investing in individual stocks, and trying to buy low and sell high, just invest in mutual funds with a solid track record, or index funds with low expense ratios. Investing in individual stocks can be fun and exciting at times, but that comes with its share of stress. You have to do research, purchase, track, and sell each stock in your portfolio. If you have dozens, it can feel like a stressful part-time job!

17. Follow the one in one out policy

Once you have simplified your consumption habits, it’s important to take measures to maintain them. Adopting this policy will help control your spending, encourage you to borrow (if possible) before you buy, and shift your focus from possessions onto experiences.

So, if you purchase a new shirt, you need to get rid of one shirt you already own. It’s a useful rule of thumb if you are trying to control your consumption habits. If you buy a new purse, donate an old one. If you need to buy a new tool that you will use occasionally or seasonally, see if you can borrow that from someone instead of buying.

18. Cancel any subscriptions or services you don’t need or use

One of the easiest things you can do to simplify your financial life is to reduce your monthly expenditure. Many people pay for subscriptions and services that they hardly use. If you are one if them, cut those out. By eliminating them, you will simplify your life and remove yet another payment from your budget. The fewer payments you need to make, the simpler your finances will be.

19. Focus on the positive:

One of the easiest ways to simplify your life is to be thankful for all of the amazing opportunities and experiences in your life. Focus on what’s going right in your life instead of dwelling on what’s wrong with your finances.

Think about your blessings and practice gratitude. Maintain a positive mindset. Your mindset can play a significant part towards simplifying your financial life. Notice the brighter sides, make peace with your problems, face your struggles with courage and positivity, and decide to learn from your challenges.

20. Seek help

Finally, seek help from others if you feel your finance is out of your control. Talking to a financially intellectual or wise friend, a family member, a colleague, or a financial advisor can help you see options and solutions to your financial problems that you might be overlooking. At times, just sharing the issue with others can bring you relief. The solution might be as simple as chatting with someone else who is better with finances than you about your financial situation.

Asking for help when you are in need is one of the smartest choices you can make in order to simplify and reduce your stress.

Parting words:

If you want to improve your financial life, one of the best things you can do is simplify it. Our financial life can get complicated easily, but implementing any of these simple actions can help you feel more in control of your situation. Don’t let financial complexity consume most of your life. By regularly taking some small action steps you can simplify your financial life and attain stability, slowly but surely.

Simplifying your finances will also improve your quality of life. You will be able to enjoy life more when you have to worry less about money.