It's back to school time, and before you know it, the holidays will be in full swing (seriously - Halloween candy is already in stores). The last thing you want to be worrying about are your finances. Good thing that in just two steps, you can be well on your way to getting back to the holiday party.
The first step is to automate your regular financial transactions. These fall into three main areas:
- Income - make sure all income is direct deposited into your main checking account or other financial account. Even though many banks let you deposit checks with your phone, it's still a pain, still something you have to remember to do, and still means you can misplace the check in the mountain of junk that comes into your house.
- Expenses - my mother still writes checks every month and pays for postage to send in her bills. Don't be my mother. Use the bill pay feature of your main checking account to schedule your monthly bills and set them up to go out every month. You can even do this with expenses that vary because you can change the amount of a transaction before it leaves your account. Alternatively, many companies you pay bills to will provide a free service to auto-debit your account every month. It's just harder to manage and you are more likely to forget that money is leaving your account. Another option is to have the provider charge your credit card monthly, and you can earn points or miles this way. I use all three options for various monthly expenses. Just don't be tricked into paying for any of these services. There are always free options.
- Savings - If you're automating where your income goes, you can usually split it out so that part goes into a retirement account, part into savings or emergency fund, and part into your checking. You can also use regular transfers between accounts to accomplish this, but I find it's mentally easier to accomplish if you never see it where you can spend it.
Now that you're patting yourself on the back for automating, check and see if there are areas you can eliminate. These typically fall into 4 main categories:
- Old Retirement Accounts - I wrote a blog post a while back about leaving your 401(k) behind when you switch jobs, but sometimes it helps to consolidate your retirement accounts. It's easier to achieve proper diversification with fewer accounts, it's less paperwork to keep track of, and you might be surprised how much they add up to!
- Old Checkings or Savings accounts - maybe you opened up an account to get the free $100 or you switched banks to get free ATMs. You probably only need one checking account and one or two savings accounts. Each one should have a purpose. Close any that you aren't using.
- Old Credit Cards - get a copy of your credit report and see how many cards show up on there. You might be surprised that you still have that Kohl's account you signed up for to get 15% off. Opinions vary on how many credit cards you should have, but again make sure each one has a purpose. Have one for everyday purchases that you pay off every month. Don't go willy nilly canceling accounts as that can actually hurt your credit score. However, if you have balances on several, think about if consolidating them or paying them off makes sense.
- Paper - make it a goal that as little financial-related paper comes into your house as possible. Get access to your accounts, statements, and bills online. Use a password managment program like LastPass to manage your passwords and make it less likely that someone will steal your identity because you use "Password1" for all your accounts.
There you go! Hope this helps and as always, reach out if you have questions or need individual advice for your particular situation.