How to simplify your personal finances

Guest Post: How to simplify your finances

Beau Humphreys Opens in new window is a personal finance coach, writer, and podcast host. After overcoming a gambling addiction, Beau became a personal finance coach and helps Canadians simplify their finances and manage their money for the future. He’s a registered retirement consultant and is all about automating your investments and savings so you don’t have to worry. Beau is always on the search for companies that use technology to modernize traditional ways of doing business.

As a Personal Finance Coach, it is my job to help you organize and simplify your personal finances so that you are free to spend time on the things you actually enjoy. No one wants to be worried about their finances all the time.

With that in mind, here are a few key ways to simplify your personal finances:

Track your income and expenses

At first this might sound like a way to make everything more complicated, but trust me, tracking makes everything simpler. There are many different ways to track what you make and spend.

You can do it manually with spreadsheet software, use your bank’s built-in tracking tools (if they have those), or a third-party secure online tracking website. Whatever your preferred method, tracking your income and expenses will make it easier for you to make spending and saving decisions.

Keep an emergency fund

I’m talking at least three months (ideally six) of living expenses saved up before you even think of locking away your money in investments. I’m sure you’ve heard it all before, but the reason I emphasize the emergency fund so much is because I know the dangers of getting into debt. I recommend keeping your emergency fund in a high interest savings account to get the best interest rate while keeping your money accessible.

You make one financial mistake or lose your job for a period of time, and the next thing you know, you’re up to your ears in credit card debt with no income to make the payments.

An emergency fund is also freedom; Freedom to leave your job to go back to school, or pursue other interests. It’s saving money for “future you.”

Make a financial plan

You don’t have to have $500,000 in investments to get a free financial plan anymore. There are a few companies out there that offer them for free, with no obligation to buy anything. It’s important for all Canadians to take advantage of this service.

Why is a financial plan important? Because it is the only way to know whether you are saving enough to reach your goals. Or you might find out that you aren’t saving enough. Either way, without a plan, you are just guessing, and do you want your retirement or financial independence planning to be based on a guess?

Invest your money in a simple, low-maintenance way

Once you have a solid emergency fund and a financial plan to point you in the right direction, you can decide what to do with the excess income you have.

There are great simple options online now. Whether it be low-cost index funds from your bank, or a balanced portfolio of exchange-traded funds (ETFs) via an online robo-advisor, the key is to make sure you are paying low fees and taking on the amount of risk that is right for you.

Get your insurance online

Insurance is often the last thing on everyone’s mind, but the truth is:

  • Everybody needs some kind of insurance.
  • If you rent, you need tenant insurance.
  • If you own, you need property insurance.
  • If you have a car, you need car insurance.
  • If you have kids, you need life insurance.

See where I’m going with this?

The good news is that it’s way easier to get insurance online these days, especially home and auto insurance. Just a few clicks and a few answers and you’re done.

If you already have home and auto insurance, keep in mind that there are many options out there and you don’t have to stick with your existing policy. It often pays to shop around. It’s also easier than most people think it to switch insurance companies.

Awareness is most important

The key to simplifying your financial life is awareness.

Taking out your credit card and mindlessly buying a new TV (that you don't really need), when you may or may not have that kind of money in the bank, is risky business.

If you track your spending and live within your means, you will be ready for anything.

Beau Humphreys is a paid spokesperson for Sonnet.