How to Simplify Your Management of Money

Over the past few months I’ve noticed my money management system has become more complex than ever before. Organization can eventually lead to gross levels of complexity which of course I want to reduce.

But how should one simplify their management of money? Can it really be done? Join me for a moment let’s discuss how we can cut down on small management tasks that consume so much of our day.

How Money Management Becomes Complicated

Remember the time when you didn’t manage your money? It was the time when you lived paycheck to paycheck, hoped that the credit card company would raise your limit, and swiped your cards so fast the plastic nearly melted from overuse. “Budget” wasn’t in your vocabulary. You didn’t care about retirement – you cared about the here and now! Remember that?

Then something changed. Perhaps you got married and thought that you better be on the same page with your spouse about money. Maybe you went through bankruptcy and declared that you’d never declare it again. You were tired of having no money and of always being stressed out!

So you got serious. Perhaps you cut up your credit cards and signed up for a cash back debit card instead. You might have found Dave Ramsey and started on his 7 Baby Steps. Everything changed.

But then, over the years, your budget seemed a grow a dozen new categories. You found yourself moving 13 cents of interest from one bank account to another so that you could properly mark it as “income” in your budget. Tedious little money management tasks started taking up huge chunks of time, and you realized something had to be done.

Perhaps parts of that was your story. Parts of it were mine.

The problem with money management is that – like any type of management spanned out over long periods of time – it eventually grows into a system that is overwhelmingly burdensome. All of our organizational and budget fixes develop into some kind of monster we never intended to create.

How do we turn the clock back to the time when we could keep things simple?

How to Keep Money Management Simple

Everything should be made as simple as possible, but no simpler. – Albert Einstein

Here are some ideas on what you can do to streamline your money management. They’re not for everyone, but some of these have helped my wife and I in our quest for a simplified system:

1. Combine and reduce the number of categories in your budget.

Over time I find that budget categories multiply. For example, you might two Fun Money categories: one for spending cash and the other for spending with your debit card. You might instead choose to pay just with cash for these transactions. Or perhaps you have Groceries and Eating Out categories that you could combine into one category: Food.

Make your categories as simple as possible, but no simpler . . . .

If you have the opposite problem and don’t have enough budget categories, check out my Budget Category Brainstormer – a printable worksheet with over 80 budget categories and spaces for your own!

2. Don’t jump through big financial hoops to get small rewards.

I’ve actually asked one of my banks to stop paying me interest. Why? Again, that 13 cents is quite pesky and takes up more of my time moving it to the proper account and reconciling it in my system than it’s worth. If it was 13 dollars, I might change my mind on that. But to maintain the integrity of how I manage my money, dropping the small amount of interest in this case was justifiable.

Instead, find rewards that are worth your time. PerkStreet Financial, for example, nets us an extra $300+ every year. That’s worth switching banks, so we did.

3. Do a weekly review of your finances.

Instead of signing into your bank’s website every night to reconcile your transactions, you might find it more convenient to reconcile your transactions weekly. This seems to be frequent enough to catch any transactions you may have forgotten to subtract from your budget, but not so much as to cause you to become obsessed with making sure everything is accurate.

I do, however, recommend logging into your bank account every few days to scan your transactions for anything that might be suspicious. The last thing you want to do is find out someone has fraudulently used your debit card a week after it happened.

Also, the weekly review is a great time to check any investments you might have. How are they performing? Be careful to make frequent changes though, you don’t want to try and time the market. Think long term.

4. Rethink everything at least once a year.

The start of a new year is a good time to review your entire money management system to make sure that you haven’t made it more complicated than it should be. Rethink what you’re doing at least once a year and you’ll surely find ways to keep the complexity down.

What do you do to keep the management of money simple while still maintaining a solid budget? Leave a comment below!

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  1. Marianne

    Our budgeting strategy is very fluid in that I’m always making small changes and corrections (for the better I hope). One of the better changes I made was consolidating all of our variable spending- other than mine and my husband’s ‘allowances’. This means that groceries and gas for our vehicles come out of the same account as lightbulbs or other sundry items we need from time to time. I have accounts for other items like clothing or home and car maintenance- those things we save up for over time separately.

  2. Sun

    A few thoughts:

    1) Forego credit cards that have rotational bonuses. Yes, Chase Freedom 2012 Q2 card is great for groceries, but what about the rest of the year? Consider getting a 2% cash back card and forget about it.

    2) My wife and I monitor our budget using Mint. We simplify our categories by having a catch all misc. category after specific categories we want to track like Restaurant and Groceries. It makes managing our expenses more efficiently.

    3) Automate, automate, automate. My wife and I are given allowances from our joint every month. This is a transfer that is scheduled. Our PerkStreet receives a transfer from our other joint for the perks, plus to not spend more than we’ve scheduled for. No overdraft. If the account goes to 0, we can not spend any more. We have to discuss if we want to change scheduled amount or transfer more in. We have scheduled transfers for savings, etc, etc. Once you automate you can set-it and forget-it.

  3. Mac Hildebrand

    I love how you’re championing simplified budgets. It seems like some people hit a point where they start bragging about the complexities of their budget when the whole point is for simple organization. I withdraw a large amount of cash at the beginning of each month for my food expenses and simple necessities spending to make the categories as simple as possible. This was a great positive reinforcement and encouragement for me!

  4. TB

    Honestly, my wife handles it all. She’s aboslutely amazing with money. My only job is to do what she says. “Don’t put any money on the Visa this month.” No problem. “Don’t put more than $50 on the MasterCard this month” No problem. “This cash must last you two weeks.” No problem. “Put this check in the mail.” You got it. Since she’s taken on the financial managemetn burden for us, I have no problem following all rules she makes, afterall, she knows what’s going on!

    • AC

      @TB – That sounds like an easy solution to your finances, but even if your wife is great with money, you should know more about your finances than that. What if something happened to your wife? What would happen with your finances? I speak from experience as my father-in-law handled all finances (not very well I should add) and when he developed lung cancer and died, it took me about 3 months to unravel all the finances for my mother-in-law. She had no clue about any of it. Just a thought.

  5. Susan Cooper

    All good advice to follow. Money management is really within everyone’s grasp. What it takes is discipline. That is the one thing that is short supply in most, if not all, cases.

  6. Very good post. Yes, “Think long term” is very appropriately said. I found many times that, people plan for short term investment opportunities only. This probably doesn’t help much since it is not it takes time to understand something before you can get benefits from it.

  7. Darrell

    It’s too easy to let the number of accounts spiral out of control. When that was the case with us we decided to close one account every other month, if it meant consolidating checking accounts, closing gas station charge cards or paying off small balances we were almost able to keep to that schedule.