One day she woke up and decided to simplify everything! . . .
For those of you who have been to my office, the image above should look familiar. It is an image of a Woman with the statement,” “One day she woke up and decided to simplify everything!” This painting by Marylou Falstreau, www.mfalstreau.com is part of her "Women and the Hourglass" series, and is among my favorites.
I have this picture on my wall because so often clients come into my office and desperately say,” I Just Want To Simplify My Finances!” So they can definitely relate to this painting. Simplifying and organizing your life can make a world of difference. You think clearer, find things easier and just plain feel better about your life and your surroundings.
Although I often talk about the benefits of cleaning out closets, I can’t help my clients simplify EVERYTHING in their life. But here are some tips I give clients to at least simplify their finances.
If you have old 401(k) accounts from jobs you have left, it may be best to roll them over into an IRA account.
2. Consolidate your accounts
Having investments spread out at different financial institutions makes it more difficult to manage. Consider consolidating your accounts into one financial institution.
3. Rebalance your retirement account. Once a year, you should review your portfolio and see if it needs rebalancing. One rule of thumb is to rebalance when your target equity to fixed income ratio strays more than 10%.
4. Get rid of investments with excessive costs. Check the annual expenses for all your mutual funds. If any charge more than 1% of assets per year, seek out lower-cost replacements.
5. Create a budget
Look back at everything you’ve spent for the past month — or the past year. Once you figure out where your money is going, you can decide whether to cut some spending in order to save more or pay off debt. If you need help see my blog 6 Things Every Woman Needs to Know About Saving & Budgeting
6. Review your monthly bills
Get rid of what you don’t need or want anymore. Review your Internet, phone, cable, Netflix, magazine subscriptions, and memberships and other bills to see if you’re paying for services you no longer use. In many cases, if you call the provider you can get the rates being offered to new customers.
7. Clean Up Your Credit
If you’re carrying a balance, make paying it off your top priority, especially if you’re at or over 30 percent of your credit limit. Also, if you’re paying a high-interest rate, consider consolidating to an account with a lower rate. Don't close any credit card accounts, this could hurt your credit score. Just pay them off and don't use them anymore.
8. Solve the Mystery Investments
You receive your monthly or annual statement for a financial product, and you are not really sure what it is or what it is suppose to do for you. Is it an annuity? Is it insurance? Is it a mutual fund? Is it all three? Call up the number on your statement and get clarity on what you have. Weigh the pros and cons of transferring it to another type of investment if it is not what you want or need anymore. Don't like what you find out? Look at my blog for 5 signs it might be time to move your investments.
Those are my tips for simplifying your finances. But while you are at it – Don’t forget to organize your closet!
Angela Dorsey is the founder and financial advisor at Dorsey Wealth Management, a fee-only financial planning firm based in Torrance, California, helping women prepare for retirement. Angela earned a BS in computer science from Loyola Marymount University, an MBA from UCLA Anderson School of Management, and spent 20 years as a Senior Compensation Specialist in large corporations before becoming a CERTIFIED FINANCIAL PLANNER™ professional and a Registered Investment Advisor (RIA). That background gave her the tools to couple with her passion for empowering women to make the best financial decisions possible. Angela lives in Torrance, California, with her husband. She enjoys spending time at the beach or surrounded by nature. To learn more about Angela, connect with her on LinkedIn.