Three Steps to Simplify Your Financial Life

Try making a mental list of all your financial accounts: bank accounts, credit cards, loans, investments... and it can quickly feel overwhelming. If you’d like to take greater control of your financial life, here are a few suggestions.

1. Get organized: Make financial planning and budgeting a priority. Make a list of your current assets and debts, so you know exactly what financial shape you’re in. Then review your short- and long-term financial goals and calculate the amount of money you’ll need for each. Next, create a detailed budget and stick to it. A budget may reveal opportunities to cut spending and free up money you can save or invest. The American Savings Education Council (www.asec.org) offers a number of online tools and worksheets to help get you started.

2. Get automated: Invest a fixed amount on a regular basis through a systematic investment program. This strategy, which you may already be taking advantage of through your employer-sponsored retirement plan, is known as dollar-cost averaging. In addition to saving you time, it could save you money. You’ll purchase fewer shares when prices rise and more shares when prices fall. Over the long run, the average cost you pay for the shares may be less than the average price. Keep in mind that dollar-cost averaging does not ensure a profit or protect against loss in declining markets. Since dollar-cost averaging involves making continuous investments regardless of share price fluctuations, you should consider your ability and willingness to continue making purchases through periods of low or falling price levels and markets.

3. Go electronic: Pay bills online or set up automatic bank drafts. Bill payment services offered by banks and other financial institutions can save time and avoid mail delays. They typically allow you to set up recurring payments for ongoing bills and schedule payments for up to a year in advance. In addition, your telephone and utility companies may offer the option to pay your monthly bill through automatic draft from your bank account, which can be a great convenience. Just be sure to keep enough money in your account to cover the debits, and continue to review your monthly bills carefully to check for any errors.