Don't be a Victim of Money Clutter

I used to think that my creative, various, hidden stashes of paper money and coins, whether in actual labeled envelopes or put away in places like old purses, were the money clutter I needed in order to help me feel safe; to relax knowing I had cash on hand and to feel savvy about having cash on hand.

Then I read an article that defined money clutter in a very different way and gave me things to think about. Liz Weston, CFP, of Nerdwallet.com interviewed a couple of professional money people about what they consider money clutter to be. Here is what they had to say.

“Professional organizers might define household clutter as a pile of unmade decisions. Money clutter is much the same. Credit cards you no longer use but haven’t closed, the retirement account you left behind three jobs ago and the financial paperwork you keep but no long need.”

“Money clutter can include broken systems that should be mended, such as a bill payment routine that leads to overdrafts or late fees.”

There are ways in which you can become more friendly and hard core decisive when it comes to money clutter. Let’s look at some of those ways and help you declutter some bad habits along the way.

1-      Consolidate accounts. According to Sheila Padden, president of the Alliance of Comprehensive Planners, “The more money accounts you have to monitor, juggle, or think about the easier it is to make mistakes and the more stress you take on. Lots of moving parts are more likely to break down.” Consider combining workplace retirement accounts. An old 401K from one job might be transferrable to the new 401k plan at your new job or consider rolling it into a Roth IRA at the new job. One more account you might want to think about is your major credit card account. If you have more than one credit card in use, discuss your options with your credit card provider. Let them know that you want to combine accounts and close unused credit cards. Crazy that closing an account might drop your credit score a bit, but it helps to manage fewer cards and that leads to fewer headaches. The trick with closing credit card accounts is to make sure NOT to close those accounts if you are applying or about to apply for a mortgage or an auto loan.

2-      Budgeting Apps: “Budgeting apps allow you to link your bank accounts, credit cards and investment accounts so you can view all your transactions in one place. Find out if your bank, credit union or brokerage firm offers similar features. Using tools takes time to set up and get used to but once you are connected you will be able to manage your money more efficiently”, says Pamela Ladd, Senior manager of personal financial planning at the Association of International Certified Professional Accountants.

3-      Automate your bill pay: According to Ms. Ladd, “Automating your bill pay can help you avoid late fees that damage your credit score. The easy accounts to automate are car loan payment, mortgage or rent payments, insurance payments.” “The best place to start automating your bill pay is to pay yourself first. As soon as your paycheck gets deposited into your account, automatically set up a saving withdrawal from that deposit to go into your savings account. The amount is up to you. Try to use that account as an emergency account or a vacation account or a house renovation account or whatever pleasurable endeavor you choose.”

4-      Reduce paper clutter: Digital files might not be for you. They mostly are not for me. However, according to Pamela Ladd, “Most financial and utilities encourage paperless billing and statement mailing. Over time, two dollars here, three dollars there on fees for mailing the information to you, can add up and going paperless turns out to be a financial win for your wallet. Less mail in your physical mailbox, less paperwork that you need to shred, less clutter on the kitchen counter.”

5-      Consider hiring financial help: This could come by way of a bookkeeper, a professional organizer or taking financial classes to help educate yourself on taking control of your entire money life. Sheila Padden, who we met back at item 1, is a public accountant, went back to school and became a certified financial planner once she realized she couldn’t successfully advise her clients properly about avoiding money clutter.” There are people like tax professionals, financial advisors, financial planners, financial coaches, bookkeepers, accountants, etc. all specializing in their unique niche to help you gain control of your money clutter. The best advice here, use a unique professional to help you get started or stay money organized.”

Do you feel in control of your money or does your money represent clutter and chaos?