Seeking Financial Simplicity

Aug 30, 2016 • Written by Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®

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Effectiveness Simplicity

Take steps to reduce the stress of managing your money.

With today’s economic challenges, it’s not surprising that a growing number of people say they are feeling stressed about their personal finances. In fact, four out of five Americans say they feel anxiety due to money, according to a recent survey by the American Psychological Association.

But there is good news: While you can’t control the direction of the economy, taking a few steps can help you simplify your financial life, and that can make it easier to reach your goals and give you peace of mind.

Put your savings on autopilot

If you already take part in your workplace savings plan, you know how easy it is to save when the money is taken directly out of your paycheck. Just set up your contribution level, and each time you get paid, some money goes directly into your retirement account.

You can use the same types of automatic solutions to move toward other goals. For most people, retirement savings should be a top financial priority.  So, to help you increase your retirement savings rate, some plans offer an annual increase program (AIP).  An AIP can automatically increase your contribution rate each year, helping you gradually approach the target you select.

You can also automate savings for other goals. For instance, set up your direct deposit to send some of your pay directly to a Roth IRA or 529 college savings plan to fund your child’s education.  Or, use automatic transfers from your bank account to move a set amount of money into a brokerage account to get ready to make a down payment on a new home.  Using direct deposit or an automatic transfer is a simple way to move toward your goals.

Reduce financial clutter: Consolidate accounts

If you’re like a lot of people, over the years you may have built up a whole collection of bank, retirement, brokerage, and credit card accounts. All the paperwork, fees, and statements can add up to unnecessary costs and headaches.  You may be able to simplify your financial life by streamlining your accounts.

If you have old workplace savings accounts with previous employers, you most likely can consolidate them together in a rollover IRA. If you consolidate most of your financial accounts with a single institution, you may be able to save on fees and make it easier to know where you stand.

Lets the pros sweat the details

Making investment decisions can be one of the most stressful parts of personal finance. If you lack either the interest or the inclination to make the day-to-day decisions about your money, you can turn to professionals to handle the job.  Many workplace savings plans offer lifecycle investment options or some version of a managed account.  Although they work differently, both are designed to provide simple strategies to the challenges of saving for retirement.

A lifecycle option is designed to be a single-fund strategy for retirement saving. You choose a fund with the target date that most closely matches the year in which you want to retire, and the manager gradually changes the investment mix as you approach your retirement date.

When you choose a managed account, professional investment managers will select an investment mix for your workplace savings plan account using your plan’s eligible investment options. You may be able to complete an investor profile questionnaire. Then the investment managers will make active decisions about the individual workplace savings account based on financial trends, market conditions, and time horizon.

Let the bills pay themselves

You can also simplify your monthly bills. Virtually all companies, from mortgage lenders to utility companies to credit card issuers, offer an automatic bill payment option.  When the bill comes due, the payment is automatically deducted from your bank account.  Once you set it up, all you have to do is review your statements at the end of the month to make sure everything is in order.

Automatic bill payment frees you from the hassle of writing checks each month, but even better, it also greatly reduces the chances of late fees and blemishes on your credit score. A bonus: You also reduce your risk of identity theft because, contrary to popular belief, your personal information is more likely to be lifted from your mailbox than stolen online.

If you aren’t comfortable with the idea of automatic payment, you can keep more control over when you pay by taking advantage of electronic bill payment programs at your bank or at other financial institutions. Electronic bill payments allow you to handle all your bill paying in a single place.  You set up your accounts with your bank or another financial institution, and can receive an e-mail alert whenever a payment is due; all you have to do is point, click, and pay.

Make technology work for you

While streamlining your accounts may help, you probably can’t consolidate everything. Thankfully, there are a number of tools that help you monitor all your accounts in a single view.  Software, such as Quicken, lets you manage your bank accounts, credit cards, mortgages, loans, investments, and even frequent-flier accounts to give you an aggregated snapshot of where you stand.

Make a plan for prosperity

One way to cut down on the stress of worrying about your money is to make a plan. Even the most basic planning can have a profound impact on the amount of money you ultimately save.  For example, a study by a professor at Dartmouth College and a professor at the University of Pennsylvania found that, of the oldest baby boomers, those who did a lot of retirement planning had more than double the net worth of those who had done hardly any planning.

While the study shows that planning can pay off, the process doesn’t have to be intimidating. Even basic planning can work.  Having a little bit of structure to help save for your goals is much more effective than not having anything in place.

Planning pays off partly because it gives you the facts you need to work with, and partly because it can kick-start your savings. Putting a plan in writing – or even just thinking about it – makes it much more likely that you’ll take action.  The payoff goes beyond the immediate goal of helping you save more – it can actually make you happier.  That’s because the very act of planning helps you feel more in control, which in turn helps mitigate anxiety.  And these days, gaining more control of your money – and being less stressed by it – is a welcome feeling indeed.

Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®

Paul Staib, Certified Financial Planner (CFP®), RICP®, is an independent Flat Fee-Only financial planner. Staib Financial Planning, LLC provides comprehensive financial planning, retirement planning, and investment management services to help clients in all financial situations achieve their personal financial goals. Staib Financial Planning, LLC serves clients as a fiduciary and never earns a commission of any kind. Our offices are located in the south Denver metro area, enabling us to conveniently serve clients in Highlands Ranch, Littleton, Lone Tree, Aurora, Parker, Denver Tech Center, Centennial, Castle Pines and surrounding communities. We also offer our services virtually.

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