Three Ways to Help Simplify Your Finances Over time, finances tend to get complicated, especially when you’re juggling multiple goals and accounts.
Simplifying your finances requires a bit of effort up front, but making just a few changes may help free up more time to focus on your financial priorities.
Make Saving Automatic
Saving for a goal is simpler when money is set aside automatically. For example, you may be able to regularly and automatically deposit a portion of your paycheck into a retirement account through your employer. Your contribution level may also increase automatically each year, if your plan offers this feature. Employers may also allow you to split your direct deposit into multiple accounts, enabling you to build up a college fund or an emergency fund, or direct money to an investment account.
Another way to make saving for multiple goals easier is to set up recurring transfers between your savings, checking, or other financial accounts. You decide on the frequency and timing of those transfers, and you can quickly make necessary adjustments.
Consolidate Retirement Funds
If you’ve had a few jobs, you might have several retirement accounts, such as IRAs and 401(k) or 403(b) plans, with current and past employers. Consolidating them in one place may help make it easier to monitor and manage your retirement savings and distributions, and prevent you (or your beneficiaries) from forgetting about older or lower-balance accounts. Not all accounts can be combined, and there may be tax consequences, so discuss your options with your financial and/or tax professionals.
Take a Credit-Card Inventory
Credit cards are convenient, but managing multiple credit-card accounts can be time-consuming and costly. Losing track of balances and due dates may lead to increased interest charges or late payments. You could also miss out on some of the rewards and benefits your cards offer. If you’ve accumulated a few credit cards, review interest rates, terms, credit limits, and benefits that may have changed since you got the cards. Ordering a copy of your credit report can help you quickly see all of your open credit-card accounts — there may be some you’ve forgotten about. Visit annualcreditreport.com to get a free credit report from each of the three major credit reporting agencies (Experian, Equifax, and TransUnion).
Once you know what you have, you can decide which cards to use and put the rest aside. Because it’s possible that your credit score might take a temporary hit, it may not always be a good idea to close accounts you’re not using unless you have a compelling reason, such as a high annual fee or exposure to fraud.
The person you name as a trusted contact must be at least 18 years old. You’ll want to choose someone who can handle the responsibility and will always act in your best interest — this might be a family member, close friend, attorney, or third-party professional. You may also name more than one trusted contact.
Understandably, you might be concerned that the person you name could make transactions in your account, but that’s not the case. Your trusted contact will not be able to access your account or make financial decisions on your behalf (unless you previously authorized that person to do so). You are simply giving the financial firm permission to contact the person you have named.
Here are some examples of times when a financial firm might need to reach out to your trusted contact:
- To confirm current contact information when you can’t be reached
- If financial exploitation or fraud is suspected
- To validate your health status if the firm suspects you’re sick or showing signs of cognitive decline
- To identify any legal guardian, executor, trustee, or holder of a power of attorney on your account
A firm may only share reasonable types of information with your trusted contact. U.S. broker-dealers are required to provide a written disclosure that includes details about when information might be shared. Ask your financial firm or professional if you have any questions about the trusted contact agreement.
To help protect investors against financial fraud or exploitation, the Financial Industry Regulatory Authority (FINRA) requires that investment firms make a reasonable effort to obtain trusted contact information.
You may add, remove, or change your trusted contact at any time, and you need to keep your contact’s information up-to-date.
Be sure to notify the person you have chosen and make sure he or she is comfortable with the role and prepared to help if necessary.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Investing is subject to risks including loss of principal invested. Past performance is not a guarantee of future results. No strategy can assure a profit nor protect against loss.