Are you overwhelmed by daily routine and feeling stuck sometimes? Are you wondering what you can do to get your life more in order especially financially?
As a mother of two, the biggest challenge for me is to get all agenda lined up and taken care of especially when we don’t have the luxury to run things simultaneously. Because we are on our own to take care of ourselves and children we are raising, everything we do is in a linear fashion. If we wash dishes, we can’t give kids a bath at the same time, if we are working, we can’t cook a meal at the same time. competing priorities and availability to multitasking is constant struggle. If we are behind for one task, things can get messy very quickly. Laundry is not done, house is not cleaned, homework is not done, next thing we might find out that our finance can be a mess as well.
So what is that step that helped me to be in check and successful in managing all the priorities?
That step is SIMPLIFICATION. it is the foremost recipe for our success. When you simplify, you gain stronger control to your life. Simplification impacts you and your family both physically and mentally which in turn influence our ability to prioritize and manage our lives. You can simply your life from material and financial perspectives.
Material simplification refers to less cluster arrangement in life. The more items you own, the more you spend your time to organize and maintain, the less you have control over your life and finance. The complication of overwhelming material possession can bring increasing stress, worry and even exhaustion. It takes away your freedom and obligates you to spend less time with family. The guilt resulting from it then gives you anxiety, losing purpose and even depression. It is a circle that you are meant to be losing. Material obsession can be draining too. At the end of the day, there is always another item, another upgrade, another furniture, another cloth that you need, which makes your feel inadequate no matter what you own.
Now imagine you view material as a way standing in your freedom. The thought of getting rid of the obsession is breathtaking. Instead, putting your focus on your physical health and quality time spent with your loved ones, go to work out, have a walk with your kids, jumping on the trampoline… Overtime you will see the benefit on the other end of not overloading material possessions is far more satisfying.
Financial simplification refers to the portfolio you are including in your finance.
Portfolio can be complicated if you don’t clean up and watch it. Securities, 401K, IRA, Roth IRA, savings, checking accounts, house payments, car payments, credit cards… The more you get into, the less control and tracking you are able to do.
First, cut down the number of securities on your investment. Too many securities don’t make your portfolio less risk. Given the limited investment you can make, diversification of your portfolio is not sufficient enough to be on par with market. Depending on your goal, if you want to keep up with the market, get an index fund, if you want to diversify in large cap, find a mutual fund. Even Warren Buffet only has 15 securities on is multi-billion portfolio.
I have discussed this topic in the past. I really think that you can beat the market by choosing your stocks. I only own 3-5 stocks at a time to make sure I watch their behavior closely to learn the trend and fundamental factors.
Second, look at your portfolio from category perspective and balance the diversity at total wealth level. My 401K through my job is managed through funds. Because of the conservative approach in my 401K, I am willing to take higher risk in my securities on the side.
Third, consolidate your credit cards, bank accounts and loans. I come from a culture of “Cash is King”. So when I just arrived at America, I surprisingly found out how easily people could get a loan for anything, house, car, furniture, medicals etc. Then you even have installments on plastic surgery, computers, cell phones… just about anything. There are many credit cards and banks who want to have you as part of their business. I could not help but thinking why?
By breaking up a lump payment into installments make it sound more affordable and manageable. However, it is the most misconception that we can build upon ourselves. By financing any purchase, you are paying for high interest rates. You might want to say, I got my financing at interest free. Just remember, you are paying interest no matter what the commercial says. If you pay cash, you can always get a better deal. Losing that negotiation ability because of financing you need and merchants provide is the interest you are paying.
Consolidate all your credit cards into one and all your bank accounts into one. Having one single credit card allows you to have a peace of mind. You will have better visibility to your spend and be able to manage payment more timely. it is a strong alarm when your one credit card balance is high comparing to lower balance on several credit cards. You will be more alert to the change of the balance. One credit card can help you to be alert on your spend. You will be surprised by big spend and motivate yourself to be in balance
Consolidate your bank accounts will give you more power to negotiate less fees. it is one banking relationship that you need to manage and your bank will want to work with you to keep you as a customer. I am not a big fan of saving accounts. Many people views saving accounts as an emergency accounts set aside for unexpected events. I think it is waste of money. Investing in security is just as liquid as saving accounts. Instead of leaving a high balance in the bank with no interest, why not invest and still can get the money out of it anytime you would like to. What is the chance of using emergency fund anyway?
For existing debt, consolidate them and negotiate them into a single lower interest rate loan. If your principal is larger, which is the result of consolidation, your have better bargain power in getting a lower interest rates
Last, get rid of paper statements. Electronic statement is easy to download and help to track category spend. Are you buying too many clothing or are you overspending on small decoration items that are overflowing your house? Electronic statement can show you how you spend money in a quick and easy way.
Each time when people ask me how I could possibly manage a full time job and two kids, my straight answer is, simplify. It gives me a purpose and prioritize my spend and time that bring in the most value to my life and creates a striking balance to my mentality. I encourage you to try it.