Clearing Financial Clutter, Minimalist Style
By Attorney Ginger B. Kelly, June 6, 2018
Living the minimalist lifestyle has been an ongoing passion of mine for at least the past five years. Working on becoming less cluttered, less driven by my own urges and material wants, is something I strive to do every day. In turn, this leaves more time to become more creative, mindful and wise. This is a process, not a destination.
Minimalism is also a movement. It’s a personal organization life-design and a simpler way of life. Living the simple less cluttered life, financially, tends to make your wallet and your heart more full and happy. A person only needs a few things to find comfort and safety. Likewise, a person only needs a very few tools to keep their financial life under control and comfortable. Many credit cards and savings accounts will not bring more mental calmness and financial security. In fact, a cluttered financial life will limit your options and your productivity.
USE ONE SIMPLE PLAN TO PAY YOURSELF FIRST
First and foremost, pay yourself. Use one long term savings account, if possible. The strategy is to save at least 10% for your long term retirement goals. The minimalist strategy is to have only one 401(k) or one IRA and invest in this. If you want to get fancy, have two accounts. For example, have one annuity and one 401(k) or have two 401(k) accounts, one for each spouse. If you are older, it is not uncommon to have more than one long term savings plan. However, a multiplicity of whole life policies, stocks, savings bonds, mutual funds and 401(k) accounts will not help to drive your financial goals forward. In fact, many accounts drive most folks crazy. Avoid multiple fees, multiple financial institutions, more than one financial adviser and tons of “stuff” to look after. Then, save it and forget about it. Have the money taken out of your pay check, each and every pay period, and you’ll never miss it. Out of sight, out of mind. This really works!
Tip: If you can’t save 10%, start with a minimum like 4%. Increase this figure every year until you reach the goal of 10%. Ask your tax accountant and financial adviser to help you plan a strategy that is realistic and works best for you.
HAVE ONE CHECKING ACCOUNT AND ONE SAVINGS ACCOUNT
Two or more bank accounts do not help clear the mind nor do they add value to your life. Two checking and savings accounts require extra passwords, extra time, extra books, extra statements, extra checks and other not so valuable things, like bank fees and charges. Get rid of all checking and savings accounts but one, unless you own a business. If you own a business have two, one for your business and one for your personal finances.
Also consider having only one savings account and using it. A savings account is an important tool, useful for short term goals, like car repairs and/or down payments, kid’s activities like summer camp, gifts and summer vacations. A good rule of thumb is to save 5% to 10% of your gross income each month for short term goals. That means, if you earn $2,000 per month, you should be stashing away at least $100 to $200 per month into short term savings.
Joint Account Tip: Sometimes it’s a good idea to have designated “jobs” when working together with joint accounts. Find a simple plan and strategy for you, as a couple, and follow that. Be honest with each other and communicate about everything important. If you can’t work together, seek counseling, a trusted priest, pastor or neutral party to help you correct underlying breakdowns, fears and anxieties.
Savings Tip: Saving the equivalent of at least one car payment each month just for transportation is a great rule to follow, whether or not you actually have a car payment. If you aren’t saving anywhere from $100 to $400 per month, simply for transportation, then a $50 bus or mass transit pass may be the better option. For most folks, driving to work is far more important than an expensive mobile phone plan or eating out over and over again.
LIMIT CREDIT CARDS TO ONLY THREE
Get rid of all credit cards and revolving credit accounts but three. Why three? Most people remember and retain information very well in increments of three. Any more than three points, topics or tasks and the waters get muddy. As a bankruptcy attorney I’ve seen a lot of things. Having tons of credit cards seems to be a thing these days. The point here is to not get hung up on the numbers of cards you have, but to shed unnecessary high interest cards and revolving accounts that charge unwanted fees. Caring for balances and payment dates is easy, when there are only three. No is a very empowering word. Set a goal and use the word no to your advantage. When it comes to credit cards, less is best.
Tip: Don’t close credit card accounts in the days, weeks or months before making big purchases, like a home or a vehicle. Closing credit card accounts can actually lower your credit scores for a time. Keep this in mind. After you’ve made that big purchase, then you can begin to close small revolving accounts you don’t need and ones with annual fees and things that do not add value to your financial well-being and peace of mind.
Another tip: Coordinate your credit card payments with your pay period. This makes paying your cards, on time, every time, easier. Then, every pay period, when checking on your bank balance and direct deposit, pay your credit card bills (all at the same time). Having multiple due dates on many credit cards is nothing less than stressful and confusing. Ask your lender how to do this.
As we can see, there are a few financial “things” almost everyone needs to get by in life and plan a successful future. Too many and life gets complicated. Jen, Ray and Mary are great examples of this.
Jen and Ray are a couple who decided to take the minimalist approach and de-clutter their finances. They gave themselves clear goals to de-clutter their finances, with broken-down steps on how they wanted to attain them. Most importantly, they wrote down why they wanted to live more minimally and posted their goals on a calendar. Over the course of just one year, they reduced their credit cards from ten to four. They eliminated six checking accounts to two. They also started a joint savings account and began to save money into Ray’s 401(k). They have saved over $300 in typical, albeit unintentional, yearly overdraft fees and bank charges. Even better, Jen and Ray communicate much better and have far less stress and anxiety.
Mary, in taking her first steps toward getting rid of clutter, wrote down the fact that she didn’t need hundreds or useless items and financial tools to be happy, unique and to feel secure. Part of Mary’s plan was to get rid credit cards and spend less. She eliminated her JC Penny, WallMart and TJMaxx cards and decided to keep her cash-back Discover card and a lower interest Citi Bank card with no annual fee. Mary also decided to have only one checking and one savings. Then, she started to save 10% of her income for a newer car purchase over the next year. In less than eight months, Mary has saved over $100 in extra bank fees and interest charges and tucked away over $1,000 in her savings account. Mary doesn’t go out to eat very often anymore, but that’s OK. She likes to cook. For Mary, creating nice things, like meals, helps her to be a better person, all around.
You’ve heard it before, “everything you do and have in life (material things, relationships etc.) either adds value to your life or drags you down.” (author unknown) There is no third option. Things that add value to your life are things that make you happy, lead you to become more creative, healthier, wiser, and more energetic, develop your talents and so on. The same holds true for your finances.
Please feel free to comment, below. We are open to your tips and ideas for getting rid of financial clutter and eliminating stress.
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ABOUT ME: Attorney Kelly is an attorney in good standing, licensed to practice in both the Federal District and State Courts of Massachusetts and Rhode Island. Her law practice is focused on consumer debt, finance, bankruptcy and District Court matters. Attorney Kelly is experienced in both criminal and civil trial work. On a personal note, Attorney Kelly enjoys writing, gardening, conservation and agriculture.
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