One Simple Step to Simplify Your Finances – Emergency Fund

emergency fund

In my second edition of One Simple Step to Simplify Your Finances mini-series I discussed how consolidating can help you simplify.

Hope you have taken action and have begun to consolidate your accounts.

Now it’s time for the next simple tip to help you get your finances under control.

Are you financially prepared for your next unexpected expense?

How do you pay for those unexpected expenses?

A key necessity to living a simplified financial life is to be prepared for the unexpected.  We have all incurred those unexpected expenses which are many times out of our control such as:
  • You have a urgent medial treatment not 100% covered by insurance
  • Your car is damaged in accident
  • Your furnace or air condition needs to be replaced
  • Your company downsizes and you must find a new job

However if you prepare yourself you can minimize the stress and financial damage you incur if you establish an…

Emergency Fund

 

If you have an emergency fund in place you would not have to wonder where you will find the money to cover those unexpected expenses. You would simply go to your emergency fund to cover the expense rather than wonder how and where you will cover these expenses.  It’s much easier to save money for these expenses then not save and cause unnecessary stress.

Why Do I Need an Emergency Fund?

No additional debt
Having an emergency fund enables you to avoid taking on additional debt to cover unexpected expenses.  If you do not have an emergency fund in place, you are likely to turn to your credit cards or personal line of credit such as a home equity line of credit to pay your unexpected expense. It’s possible you may even delay paying one of your other bills to cover this expense.

By using debt to cover an expense it only increases the cost of the unexpected expense.  Once you have used credit to pay the expense you have only delayed payment.  You will still need to determine how you will pay off this additional new debt.  This once unexpected debt can set you back financially for several months or years depending on the cost of the expense and your ability to pay it back.

Financial safety net
Having an emergency fund is similar to having a safety net in place to catch you when those unexpected expenses occur.

With an emergency fund you have money set a side to pay for those unexpected expenses.  This allows you to simply pay for the expense without impacting your monthly budget which could create a financial hardship for you and your family.  Having an emergency fund can act as a financial bridge if you’re unable to work unexpectedly for an extended period of time without pay or suddenly lose your job.  Your emergency fund can cover your monthly expenses until you are back at work or have found new employment.

Less worries
Having an emergency fund in place and adequately funded you do not have to stress yourself out worrying where you’re going to find the funds to pay for unexpected expenses or how your going to pay your monthly expenses if you lose your job or unable to work.

Where Do I Keep the Money?

Since you do not know when an unexpected expense will occur, these funds must remain very liquid and easily accessible.  You should not put the money into any investment which could lose money.  That kind of defeats the purpose of an emergency fund.  You should hold the money in a saving account or money market account which you can access when needed.

How Much Do I Need?

The amount needed in your emergency fund is always up for debate.  You probably have heard you should keep $1,000, 6 months of expenses, or 6 months of income.  I believe it depends on your personal situation.  Everyone’s financial situation is different so you need to build your emergency fund that works for you and provides you the financial peace of mind you need.  Here are a few things to consider:

Your income stream is it consistent or does it fluctuate?

Your insurance deductibles?

Your current debt outstanding?

These questions can help guide you.

How Do I Fund It?

The best way to fund your emergency fund is to automate the process.  This way you do not forget to do it.  Once you set up the automated transfer you will continue to build it every month.

The above benefits are why it’s important to have an emergency fund in order to simplify your finances.

Now you must take action by funding your emergency fund. Start by establishing a monthly automatic deduction from your primary account to another account if you do not already have an emergency fund.  If you do have an emergency fund make sure it is adequately funded.

  Are you ready to begin simplifying now?

If so, sign up for my newsletter and you will receive a weekly email to help you simplify as well as receive a free eBook which provides you 9 simple steps so you can simplify your finances with in 30 days. Sign up now by entering your name and email address below.

Til next week take one step at a time.

Next week I will provide another simple tip for you to implement.  So stay tune and sign up for newsletter so you don’t miss any of these tips.

 

One Simple Step to Simplify Your Finances – Consolidate

Consolidate

In my first edition of One Simple Step to Simplify Your Finances mini-series I discussed how automating can help you simplify.

Hope you have taken action and have begun to automate your savings.

Now it’s time for the next simple tip to help you get your finances under control.

How many investments accounts do you have?

How many bank accounts do you have?

Having your money spread around across multiple accounts can be challenging to keep track as well as time consuming. Having multiple accounts means your money is spread out which can result in you losing track of your money. This can lead to financial mismanage and result in you not saving enough, causing overdraft fees, unnecessary account fees as well as possibly leading you to spend more. If you find yourself in this situation it’s time to simplify your financial accounts.

You can simplify the manage of your accounts by simply…

Consolidating

 

Why consolidate? I am managing my money just fine even with multiple accounts and providers.  You may be just fine but if you want to simplify things consolidating has its benefits.

Here are several benefits to consolidating your financial accounts:

 Consolidated Statements

When you keep your bank account or investment account with one financial institution its easier to see all of your money when in one statement versus having multiple statements to keep track of each month.  Even if you have more than one account with the bank or investment firm of your choice you can request a consolidated statement to see everything on one statement.

Less Paper

When you have multiple providers you may be inundated with statements as well as tax documentation during tax time. Consolidating reduces the number of statements and tax forms you will receive each year which makes it easier to manage.  You will spend less time tracking down year end tax forms or even remember which tax documents you should have received.  Less statement means less mail you have to sort out.

Less Time

When you have less accounts to keep track of it is easier to monitor your accounts.  It makes it less stressful as well as you spend less time keeping track of every account.

Less Passwords

Having a single bank relationship means less sites and passwords you have to keep track of. We can all use less passwords to remember.

Less Fees

Having a significant relationship with one bank or financial firm can help lower fees, receive better rates and open the door to better services.  With financial firms you maybe able to lower your commissions as well as receive personalized investment advice or service.  By consolidating your banking accounts with one bank you maybe able to obtain favorable relationship benefits such as waiving month deposit account fees and receive favorable terms and interest rates for loans.

Easier to Track

It is easier to track and manage your investments when they are in one location, as opposed to several. This makes it easier to track investment performance and determine your overall asset allocation.  When your money is scattered among numerous various account with a number of firms, it can be challenging to know exactly what assets you hold.  It also makes it more difficult to determine your asset allocation and if you need to re-balance your funds.

Helps Others Help You

There maybe a time when someone else has to help you with your finances.  It maybe a friend or family member.  It will be easier for them to help manage your finances if your accounts are consolidated and all funds can easily accessibled with one or two providers.

As you can see managing your money is much easier once you consolidate your financial accounts.

Review your existing bank and investment accounts.  How many deposit accounts, investment accounts and retirement accounts do you actually have?

But before you begin to consolidate determine what the purpose of each account is for.  When you consolidate review the benefits you receive from each institution and reason for each account to determine where you should consolidate the accounts to.  You don’t want to consolidate and later decide you should have use a different bank or financial providers.

Think through the process before you execute on it. Start with reviewing your bank account which are usually easier to move then an investment account.

Are you ready to begin simplifying now?  If so, sign up for my newsletter and you will receive a weekly email to help you simplify as well as receive a free ebook which provides you 9 simple steps so you can simplify your finances with in 30 days. Sign up now by entering your name and email address below.

Til next week take one step at a time.

Next week I will provide another simple tip for you to implement.  So stay tune and sign up for newsletter so you don’t miss any of these tips.

 

 

 

One Easy Step to Simplify Your Finances – Automate

automate

Are you still trying to simplify your finances?

Are you trying to determine where to begin to simplify?

Well you have come to the right place to begin your journey to learn how to simplify your finances.

One of the things I consistently say is take one step at a time in order to simplify.  It’s so true.   If you want to simplify your finances, personal life or anything at all it is always easier to focus on one thing instead of trying to do many things.  Trying to do many things at the same time often leads to overwhelm and you end up not accomplishing what you set out to accomplish.

So this month I am going to provide you with a short mini-series. Each week I will provide one step you can take to begin simplifying your finances.  I am only going to provide one only tip each week so you can focus on that one thing instead of overwhelming you with multiple tasks.  Once you take action and implement the first step, you can then move on the the next simple tip. By the end of the month, I hope after you take action and implement these simple tips you will be on your way to simplifying your finances.

Our time is limited and with our time we usually do not want to spend it deal with our finances.  One thing that can significantly improve your personal finance as well as simplify them is to:

Automate

 

Automation is one of the easiest ways to simplify your finances.  It is an essential tool for your to keep your personal finances under control as well as will save you time and money.

There are several things you can automate to help with managing your finances.  You can automate:

Your bill payment

Your savings

Your investments

Your banking

Those are several things you can automate to help you simplify your finances but as I promised I will only focus on one topic to make it simple.  This week I will focus on automating your saving.  I believe automating your saving is one of the keys to growing your wealth as well as providing you a financial peace of mind.

Not only is automation important part of your finances but its one of the easiest things you can implement to see quick results.

One place to begin automating your savings is retirement. We all want to retire one day.  I hope.  At least that’s what I want to do.  In order to build your retirement nest egg, you must save money.  The earlier you begin to save the quicker you can possibly retire.  Here is a great story about Jeremy and how he saved which enabled him to retire early. So why not automate it and maximize your retirement savings.

Retirement saving is one of the easiest ways to save money.  It is so easy because the money is taken directly from your pay check.  You don’t have to set up transfers from your checking account instead you simply establish the account with your employer.

It’s usually an easy process to establish and usually done when you set up your benefits with your employer.  All you have to do is establish a retirement account and determine the percentage of your income that you want to save each year. The rest will be done for you.

I suggest you maximize your annual contribution. But I know everyone is not able to contribute the maximum which is $17,500 for 2015.  If you break it down by 12 months that’s $1,458 per month of savings.  If you are not able to contribute the maximum amount to your retirement plan, at least contribute enough to receive your employer match.

Many employers provide their employees with incentives to save in their retirement account.  The employer may match a percentage of the amount the employee contributes to their plan .  It’s just another employee perk.  So you should contribute enough to receive the employer match its free money so take it. Start there and then gradually increase your contribute until you are contributing the maximum.

As you can see this one simple step can help you simplify your finances by providing for retirement and providing you free money.

If you are not contributing to your 401k plan now is the time to begin.  If you are contributing but not maximizing your contributions consider increasing your percentage each year until you are contributing the maximum amount.

That’s just one example of ways to automate your savings.  There are several other ways to automate saving but as I promised I will keep this post to one action step each week to keep it simple.

Are you ready to begin simplifying now?  If so, sign up for my newsletter and you will receive a weekly email to help you simplify as well as receive a free ebook which provides you 9 simple steps so you can simplify your finances with in 30 days. Sign up now by entering your name and email address below.

Til next week take one step at a time.

Next week I will provide another simple tip for you to implement.  So stay tune and sign up for newsletter so you don’t miss any of these tips.

 

 

5 Valentine’s Gifts You Probably Did Not Consider Giving But Will Help Simplify Your Finances

Simple Financial Lifestyle 5 Valentine Gifts

 

Do you know what you are giving your loved ones for Valentine’s Day?  You have probably noticed Valentine’s Day  displays in stores reminding you that it’s is only a few days away.  So don’t forget.  This time of the year we show our love for our loved ones and will most likely purchase them gifts such as candy, flowers, card  or go out for a romantic dinner.

As you are thinking about your loved ones this weekend for Valentine’s Day, why not do something for them that they may not appreciate at this time but will when the time comes.

You are probably wondering what I am talking about.

I am talk about the day you die.

It will happen one day to all of us and it’s not a day that anyone looks forward to or is prepared for.  Since its 100% guaranteed to happen why not be prepared for when it happens instead of  not being prepared for it.

It’s one of the things no one likes talking about and many times are not prepared for.  But it is something everyone will face until a miracle drug is found that will make us younger and live longer.

Upon your death your family is left behind to handle the emotion of losing you which takes a toll.  In addition to that your family has to manage your remaining assets, lose income, and figuring out where all assets are held if no one else was involved in the financial aspect of your life. This will only add more stress to your family.

I have not discovered an easy way to handle the emotional stress of losing a loved one but there are ways to simplify managing your financial affairs once you are not there to manage them.

So instead of buying your loved more flowers, candy, cards, or whatever you decide they want for valentine’s day consider giving them these 5 gifts.

These gifts will not have immediate gratification now but they will appreciate you for it when the times comes.

Put a Will in Place

You may be saying to yourself why do I need a will I am not rich. Wills are not just for individuals who are wealthy. A will is a document which directs where your remaining assets will be distributed. If you don’t have a will your respective state will decide who receives your assets.

Why not make it easy on your loves as well as prevent family arguments over your possessions. You decide in your will who receives your possessions instead of your State or family members. Doing this will be a great gift to your loved ones.

Have Life Insurance in Place

Give your loved ones the gift of life insurance. You may ask why life insurance. Ask yourself this question – If I died today, would my family be placed in a financial burden? If the answer is no well you may not need life insurance. But for many, the answer would be yes. So instead of leaving your family with a financial burden upon your death consider purchasing life insurance.

Having life insurance will help cover any funeral costs, medical bills, or debts. It would also help replace your income which was lost upon your debt. Life will continue on for your loved ones so they will still have to pay monthly expenses, the mortgage or rent, and outstanding debts, and perhaps even continue saving for college and retirement.

It will always be difficult when you lose a loved one, but you don’t want to compound the emotional struggles by add financial difficulties. Life insurance helps make sure that the people you care about will be provided for financially, even if you’re not there to care for them yourself.

Review and Update Beneficiaries

You probably designated your beneficiary when you first established your IRA, 401K, or Life Insurance.  When was the last time you reviewed your designated beneficiaries  It may have been several years since you established those account.  Your life has possibly changed  since then.  You may have children now, maybe married, or possibly divorced.

You don’t want to pass away and  have designated someone other than your wife or children as beneficiary.  It could lead to a very challenging situation for those you leave behind.

Taking some time to review your beneficiaries will prevent those uncomfortable moments amongst family members.

Consolidate Accounts

One of the biggest challenges when a loved one passes away is finding where all of their assets are held.  If you have multiple accounts with multiple providers it makes gathering and finding these assets difficult.  Instead of having assets held in various place, consider consolidating your accounts.  Your family will love you for this.  As mentioned its difficult enough for your family without you but the time and effort finding these accounts would be another burden on them.

Consolidating accounts will enable you  to:
•    Reduce the number of statements you receive
•    Easier to keep track of your accounts
•    Better handle on your assets
•    Reduce fees

Tell Them About Assets

Make an effort to tell another family member about your assets. Whoever will handle your finances upon your death should know where to find documents such as your will, account statements, life insurance, retirement statements and banking account statements. If you use online banking make sure that individual has your passwords for all of your online access. Make a list of all your accounts and account numbers. Take the time to update this list whenever you open or close an account. Also make them aware of all of your income sources, assets, and debts so they can step in an manage your finances immediately. Knowing this information puts them in a better position.

This is just as important as knowing the location of the documents and what assets you have. Make sure they know the name and contact information for your accountant, attorney, and investment advisor as well as bank representative. Any other person who has knowledge of your finances. By knowing these individuals your family will be able to reach out to them for help if needed.

Preparing your loved ones for the day you are not there is important. You or they may not see the benefit now but it will be a huge benefit when that day does occur. It will happen unexpectedly so now is the time to get things in order.

Which of these gifts will you give your loved one for Valentine’s Day?