How To Organize Your Finances
It is a waste of time, energy, paper, and usually money to have a lot of credit cards, bank accounts, brokerage accounts, or insurance policies. Here are some tips to help you organize your finances to reduce stress and save money.
Combine and close accounts so that you have a single checking account and a single savings account. If you have a money market account at your bank, then you won’t have a need to ever buy a money market mutual fund. If you’ve got the fund, you don’t need the account at your bank. I suppose someone could rationalize having two brokerage accounts: one discount online broker for active trading, and one full-service broker for info and advise; but I can’t imagine any reason to have more than two bank accounts.
Owning more than one life insurance policy (not counting the one you get at work) is only useful if you plan on dying more than once. Cash out the extras and combine them into one.
What is the correct number of mutual funds? Who knows? One of the reasons we buy mutual funds is so that we won’t have to buy a lot of stocks, yet mutual funds are so popular and are now being actively traded. If you have more than seven or eight funds, do some serious evaluating. You definitely will not need more than one S&P Index fund or one money market fund. You may want one each of a bond fund, small cap stock fund and an international fund. Throw a couple of sector funds in there like a tech fund and a utilities fund and you’ll be set.
By limiting the number of funds and accounts you own, you’ll free up time to research ideal investments. You’ll also make the task of regular reviews less daunting.
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