Lesson 3: Simplifying the Flow of Money

The purpose of simplifying is to identify what is of importance and value to us, to keep those things, and to get rid of the rest.

Assets are anything that increase in value, provides something valuable such as money, joy, security and happiness, strengthens and empowers you, moves you closer to your goals, motivates you, improves your health and wellbeing.

Liabilities are obligations, decrease in value, reduces something valuable such as money, joy, security and happiness, provides negative stress, moves away from your goals, creates anxiety or stress, decreases health and wellbeing.

#Truth: Assets give to us, liabilities take away.

We can categorise everything in our lives from our relationships, material objectives, past times, commitments, expenses, belongings and goals as either an asset or liability.

The aim is to try and eliminate the liabilities as much as possible and replace them with assets. So we’re aiming to reduce the things, experiences, thoughts, belongings and people that take away from our wealth, health, happiness, and wellbeing and focus on the things that add to them.

By simplifying our financial situation, we can often reduce stress.

Here are some top tips:

• Empty your purse or wallet and take out all the bankcards, credit cards, store cards, rewards cards. How many of these account and cards are used? Take stock and throw out rewards or membership cards that are infrequently or never used.
• Try to do all your banking with a single provider, have a single health insurance policy for your family, and consolidate your superannuation accounts into a single super fund. Take out your home and car insurance policies with a single provider. Having stuff everywhere is hard to keep track of and increases the amount of paperwork you receive and need to manage.
• Combine finances/accounts with your partner if comfortable doing so.
• Automate accounts and payments by taking advantage of online bill paying services and direct debit.
• Go paperless by opting for e-bills and online payment options.
• Cancel subscriptions – reduce the number of plans or subscription services. It can often be easy to forget about all the small things and amounts that we’ve signed up for, never use or get little value from. Time to plug these spending leaks.
• Stop signing contracts – phone contracts, leases, gym memberships and look at alternative options, pay upfront, pay as you use.
• Try to batch pay bills. The idea is to schedule all bills for the same day of the week/fortnight of month. Often we can arrange with our bill providers to pay on a certain day that makes it easier to plan our spending and manage our repayments.
• Simplify our sources of income – while it sounds great to have multiple income streams, pursuing too many options at one time can impact them all. If you’re working full-time, trying to sell items on eBay, launching a blog and doing some cash jobs for your next door neighbor, perhaps it’s time to stop and focus your time and energy on just one of these side jobs. It’s likely you’ll have more success by being more focused.
• Use a record/document management system to keep our financial records tidy and in some sense of order.

De-Cluttering Financial Records

Our financial lives are often cluttered with physical clutter like papers and statements as well as our mental clutter or our thoughts and beliefs. All this clutter can make it difficult to keep track of and manage our wealth along our journey to abundance.

Regularly cleaning out and de-cluttering can provide both clarity and a sense of relief.

Keeping track of our personal financial documents and having a method for tracking and recording our information is a simple process but often one that many of us fail to do very well.

The method we choose to use is completely up to us and will depend on what we’re most comfortable in using. Options can include storing info electronically, using financial software, or going paper based with folders and filing cabinets. Even a combo of all these options can work as long as we have a method or process.

Paper based storage

Have a central location for all statements, tax papers, receipts and other financial documents. Instead of keeping your records in random places throughout your home, keep them all together.

Clearly label and sort everything. The better organised the quicker it is to identify and grab them when needed. File everything immediately.

Don’t hang on to receipts and paperwork planning on filing them “later.” Instead, file everything immediately upon receipt – it makes the process simpler and less time consuming.

Electronic

Using our computer to keep electronic copies of all our records will make organization, storage and maintenance much easier. It also saves time and space. Just make sure you create regular data backups and store them somewhere safe and secure. In addition to scanning, you can also opt to receive electronic statements from your various creditors and financial institutions.

The trick is to organize electronic records the same way we would paper records. Keep electronic scans and statements in a central location on the computer organized by year and clearly labelled.

Should it stay or should it go?

Most of us have a mountain of financial paperwork stored somewhere in our homes which makes the possibility of a move from paper based to electronically stored seem daunting and time consuming. But what’s surprising to know is that a lot of the paperwork we hang on to can actually be recycled or shredded. Some documents, including our credit card and bank statements, receipts and other tax related documents; we need to keep for at least five years after we’ve received an assessment.

The trick is to have a process. By de-cluttering and creating a system for managing our documents we have more clarity on what we have and where it is and we can keep better track of it, manage it more appropriately and review it to ensure it continues to meet our needs.

Move on to Lesson 4