4 Ways to Simplify Finances Where Possible
As I write this I am in the process of looking at apartments for my next move. Meanwhile, I’m also considering moving into a condominium or single family house. This is a tough decision as I have too many unanswered questions about my immediate future.
I can’t waste time; my lease is up at the end of June and I have to give my landlord sixty days’ notice to vacate today. Over the past few weeks, I’ve been investigating my mortgage options through LendingTree. In fact, immediately after I entered my information, the emails and calls began with offers. There is a lot of information that I haven’t had to deal with before, so I’m taking it slowly.
If I decide to buy I will likely need extra time, which would mean extending my lease on a month-to-month basis. My wonderful landlord charges an extra $300 per month for this flexibility. Obviously, I’m not excited about this option.
While going through all the mortgage options, which are complicated by design to ensure fees can be added to every visible and invisible corner of the process, I decided that I should simplify my finances. While I can’t control the complexity of mortgage applications, property taxes, and dealing with escrow, there are things within my control to simplify.
Here is how I plan to simplify my finances over the past few months.
Reduce the number of bank accounts.
I have a checking and savings account at Wachovia. It’s free, and they provide physical checks. They also have great customer service. I have a bunch of savings accounts and one account at ING Direct. The “Electric Orange” checking account is slowly becoming the one I use the most. I’ve switched my salary direct deposit to this account. I also have accounts at HSBC Direct and a number of other high-yield savings accounts.
I’m going to make a change along the same lines of Jonathan’s current set-up. My goal: One high-yield savings instead of the 15 or so accounts I now try to manage and one checking account.
Reduce the number of brokerages.
I recently mentioned that thanks to Vanguard‘s new easy-fee-avoidance policy, I plan on transferring my retirement accounts from TIAA-Cref. I also have non-retirement accounts at Scottrade and ShareBuilder, about $4,000 in one and about $200 in the other (mainly from free bonus money). There are no fees on these accounts, so I’ll only move them if there are no termination fees.
My company’s 401(k) is managed by the company I work for, so I cannot combine the account with any others.
My goal: One brokerage for my non-401(k) retirement plans, and possibly one brokerage for my non-retirement investments. Another option would be to liquidate my non-retirement accounts with the market high and put the money into savings. If not, change the investments to match what I feel would be good for me. Rather than the mutual fund I have invested at Scottrade, switch to an index mutual fund. Rather than the sector ETF and the two stocks I have at ShareBuilder, switch to a broader market ETF.
Reduce my open credit cards.
The last time I checked my credit report, I noticed I still had a number of open credit cards. It’s been a very long time since I’ve used anything other than my main card, which has been at times either a Citi Upromise Mastercard or Citi Platinum Dividend Select. I’ll keep my longest open card with a good history and I’ll close all the others.
My goal: Only two or three open credit cards.
Optimize my records retention.
When I get paper financial statements, they usually go in a file: the “to file” file. Eventually, I get around to filing the statements into the proper folder, but this takes a while. I need to get in the habit of digitizing everything. I have a scanner that is hardly used.
Rather than keeping so much paper I need to do three things. First, connect my scanner so I can digitize all my important documents. Second, buy a shredder so I can properly dispose of any sensitive papers. Third, dispose of old statements that I no longer need to keep. As a bonus, the fourth thing I need to do is regularly back up my computer files on an external hard drive or two.
Goal: Eliminate the paper clutter and messy files by organizing all documents electronically.
The above changes are all within my control. If I can simplify these aspects of my financial life, which have gone out of hand since starting this blog and opening new accounts whenever a new bonus or higher interest rate is offered, those aspects I can’t control, such as dealing with mortgages, won’t drive me insane.
Article comments
For reducing brokerage, bank, credit, and mortgage accounts, I managed to get everything tied through Bank of America — you won’t regret simplifying your life like you are; it is a lot harder to fall behind on my finances now.
not that i have direct experience with it, but i understand buying a house/condo can take a long time (often unforseen) even if you know which one you might buy.
maybe take the year lease and IF you get a place, just the end/lease steep fee would apply? might be better than the sure bet of $300 addtl per month for a still mysterious situation….
just suggesting going with the ‘known’ vs the ‘unknown’ (known being you need to live somewhere now) and not pay more than you might have to hopefully.
my apt bldg has similar sucky rules and fees. but apt. has a nice view, *sigh.*
good luck!
Blain (and dong): My landlord isn’t a “he,” it’s a national corporation. Many apartments go unrented for several months at a time. I understand the risk and the need to discourage month-to-month habitation, but other apartment complexes in the area charge $50, not $300.
The $300 a month extra is pretty steep, but you have to think it is necessary. I means look at what happens if you decide to leave in like a horribly not opportune month? He may be stuck on that apartment un-rented for a while when he could have had another 1 year + term already signed earlier.
My former landlord charged around $250 a month for month-to-month leasing. It’s not unheard of.
Don’t forget that the WaMu savings account needs to be linked to a WaMu checking account to get the 5% rate.
I would keep those unused credit cards, as they do help your FICO score. Just lock them in a safe.
On the housing matter, I feel like the landlord is trying to gouge you for an extra $300. He should certainly charge extra for month to month, but $300 is alot. What you don’t want to do obviously is rush into buying a place. Good luck with the decision – not an easy one ever.
I agree–if you really don’t think just shredding the extra credit cards is enough, wait till after you get your mortgage, okay? Credit score has everything to do with the rate you’ll get. We always liked Sovereign Bank out of Yardley, PA — all of our mortgages are through them. It’s a small private office and they’re honest people.
Also, once you digitize, toss copies of your important docs onto a USB flash drive for emergencies.
Why oh why would you close unused credit cards? Reducing your available lines of credit hurts your FICO scores. Especially if they’re old cards—reducing the average age of your cards is not desirable.
If you’re concerned about having too many cards to keep track of, why don’t you ask your creditors to consolidate your lines of credit into just one card per issuer? Then you’ll keep your total available amount of credit, you’ll have the same low utilization, and there will be fewer cards for you to keep track of.
I should think that you would want to keep your FICO score as high as humanly possible with a mortgage around the corner.
Hi Flexo,
Getting your finances smoothed out is a great step toward buying a house, or making any major financial transaction. It will make everything a lot easier to track now, and especially at tax time (no more sorting through 15 different 1099s!)
Before you go through your financial papers to determine what you need to keep or throw away, check out my recent post titled How Long Should You Keep Financial Documents?: link
I just wrote about it yesterday 🙂
And don’t forget to buy a shredder! It’s one of the best $15 investments you can make! Or, you can spend a little more and get the deluxe version that shreds paper, credit cards, and compact disks. 🙂