Finding the perfect Feng Shui for your financial world.
You probably don’t know this, but the first week of August is National Simplify Your Life Week. In the broad scheme of all of these national celebrations that most people don’t know exist, we think this one is worth marking in because getting organized can make a big impact on your life and your stress level – particularly when it comes to your money.
So with that in mind, we’ve developed five ways to reduce financial clutter in your life so you can get organized and be more effective in everyday money management. Taking steps to follow these three tips this week will help boost your financial stability so it’s easier to avoid issues, overcome challenges and reach your goals.
Tip No. 1: Close spending leaks
Spending leaks are spots in your budget where you’re overspending and spewing out cash at a rate that’s not good for maintaining financial stability. When you build a budget, you set spending targets for recurring monthly costs like groceries, gas, personal care and entertainment. When you have a spending leak, money is flowing out of your budget too fast on a particular expense – in other words, you’re not meeting the target you set.
What you can do: Take time this week to review your transactions for the last few months and compare your actual spending to what you have set in your budget. Identify the spending leaks and take action to close them. For instance, if you see you’re overspending on food, you may be taking too many lunches out or eating out with the family too much.
Of course, if you don’t have a budget, now is the perfect time to build one. A budget definitely simplifies your life when it comes to daily money management!
Tip No 2: Check your debt
Debt usually has the highest potential for cluttering your financial world with unwanted challenges, and credit card debt is usually the biggest culprit. Since credit cards are revolving debts, the balances fluctuate as you make charges and pay off debt. The more something varies, the harder it is to compartmentalize as you organize your world. As a result, just a few extra charges or one big purchase can cause debt-related disruption in your financial outlook.
What you can do: Check some key debt ratios in your finances to make sure you have a good handle on your debt. Start with your debt-to-income ratio to compare your monthly debt payments to your income level – if debt is in its place in your budget, your ratio should be 36% or less. If it’s not, the first place you should look for the uncontrolled debt is on your credit cards. Add up your monthly credit card minimum payments and divide by your monthly income to get your credit card debt ratio – it should be 10% or less. If it’s not, then you’re definitely going to want to look into the next tip.
Tip No. 3: Consolidate to simplify bill payment
Paying bills can be an exercise in organization, particularly if you have a large number of obligations. Between a mortgage or rent payments, a few car payments, student loans you’re probably paying back, utilities, mobile plans, and a few credit cards, it can be difficult to keep up and stay solvent as you cover everything. Juggling all of those bills can get complicated – and it’s even worse if money is tight because you have too much unsecured debt as mentioned above.
What you can do: Debt consolidation is the process where you combine multiple debts into a single monthly payment. The main goals are to reduce the interest rates applied to the debts and reduce your monthly payments, but a secondary effect is that you simplify your bill payment schedule. Instead of multiple credit card payments to make, you only have one bill to worry about paying each month. It just makes things easier to manage.
If you have too much debt – or debt spread out over too many cards – look into options for debt consolidation. You can improve the rates and terms that apply to your debt as you make it easier to manage. Additionally, if you have several federal student loans you’re paying, you can use student loan consolidation to do the same thing with those obligations.
Need a little help?
The three tips above can definitely help you brush up on your financial organization so you can take action to simplify your life this week, but if you’re still feeling stressed over a lack of financial stability, we can help. Call Consolidated Credit today at or complete an online application to request a free debt and budget analysis from a certified credit counselor.