I’ve been writing about personal finance virtually every day for almost 10 years. During that time, I’ve tried countless personal finance and frugality strategies and read an absurd number of personal finance books and articles. After all of that, one might expect that I have some pretty complex strategies for managing my own finances.
The truth, however, is held in the title of this website. After all of these years and all of these tactics I’ve tried, I still find it best to just keep it Simple.
In fact, here are 12 strategies I still use in my personal finance management that really, really help with keeping things as simple as possible. These strategies have stood the test of time as I’ve been using most of them for many years now.
There are likely ways that I could eke out a few more cents or a few more dollars by using a much more complex system of keeping track of spending or managing my money in different accounts, but these strategies make up for it in simplicity. They make intuitive sense to me, take up very little of my time, and the money is right where I need it when I need it.
Hopefully, you’ll find some use from these strategies, too.
Strategy #1: I Have a Cash Emergency Fund
We currently keep an amount in our savings account equal to about eight months of living expenses. There are several reasons why we do this.
First of all, it provides support in emergency situations. Sometimes unexpected – and undesired – things happen. A car breaks down. A contract doesn’t work out. Someone has to fly to Idaho for a funeral. A child needs a musical instrument. You get the picture. Cash solves these problems like nothing else. You can just pay for these things and not worry about them.
I don’t keep my emergency fund in the stock market because I want the balance to be safe and very quickly accessible. In a savings account at a local bank, I can get cash quickly out of an ATM. It’s insured up to $250,000 thanks to the FDIC and the balance never drops, it only goes up thanks to the interest (albeit slowly).
I don’t use credit cards as an emergency fund because the credit cards themselves may be part of the emergency. If I lose my wallet, for example, credit cards won’t help. If I’m suffering from identity theft, a credit card likely won’t help. If my issuing bank decides to close my account at an inopportune moment, a credit card likely won’t help. I just don’t trust credit cards in emergencies and that doesn’t even take into account the issue with credit card balances and credit card interest.
Basically, we maintain a “perpetually funding” emergency fund, meaning we keep contributing to it even when the balance is fairly high so that it will still be high after an emergency. This is handled by an automatic monthly transfer from our checking account into our local savings account.
In the end, we have an emergency fund that we don’t even have to think about. It’s just there for us when we need it and it essentially fills itself without a second thought from us. That’s about as simple as can be.
Strategy #2: I Keep a Healthy Buffer in My Checking Account
We keep a healthy minimum balance in our checking account at all times – $1,000, to be precise. We essentially ignore that last $1,000 and subtract $1,000 from the number any time we look at our current balance. So, if our receipt shows a balance of $3,000, we think of it as a balance of $2,000 instead and pretend the last $1,000 doesn’t exist.
Why? Because of that $1,000, we never have to worry about overdrafts, ever. If we need to write a check, we don’t have to look at our account balance first. We write the check. If we need to use our debit card, we don’t have to look at our account balance first. We use the debit card.
If it turns out that we’re doing this due to a major emergency of some kind, we’ll take money out of our emergency fund and transfer it right into checking, which we can do in about two minutes at the bank down the street. Quite often, though, we never have to make that transfer because our buffer is more than enough to handle it if we were to accidentally get a little low.
This buffer is vital for other elements of our simplification process, too.
Strategy #3: I Automate Most of My Bills (Ideally, All of Them)
Almost all of our bills are paid automatically using our bank’s online banking system. Most of the places to which we send bills report our account balances to our bank, our bank sends us notification emails, and then just before the due date, the bank automatically pays the bill for us out of checking.
The notification emails are nice. I can quickly tell if the bill is out of line or not and if it isn’t I don’t worry too much about it. If it turns out that the bill is really high, I can go online and look at the billing statement and figure out what the problem is and I usually have two weeks or so to do it before the bill is automatically paid. This virtually never happens, though.
Since we bring in substantially more money than we spend (“spend less than you earn” is an underlying rule behind all of these strategies), I can be pretty confident each month that there will be no problem paying any of the bills with the amount in our checking account. If I’m worried at all that it could be close, then I know that we have that checking account buffer to rely on, the one mentioned in Strategy #2. And if I’m ever worried about exceeding that, we have automatic overdraft protection set up so that it will tap our savings account if we ever hit zero in our checking account.
All of these things are things we just had to set up once and then walk away from. Nowadays, outside of a monthly bill review, I rarely even think about paying bills at all. I just read the notifications as they come in and unless they’re strange, the bill is paid without a second thought.
Strategy #4: I Automate All of My Investments
The easiest way to think of this is that we treat our investments just like any other bill, as described above in Strategy #3. Putting money into our Roth IRAs and our taxable investments is fully automated, with cash coming out every week.
Because we do this, we never have to think about investing at all except for when we review our investments once every few months. There are often periods where months go by without me looking at any aspect of how we invest.
Why? We’re almost entirely invested for the long term. The truth is that we don’t care whether the balance goes up or down a little bit each day. We don’t even care that much about losing streaks in the stock market, aside from a bit of morbid but detached curiosity.
Our investment plans were set a long time ago and are reviewed annually. The actual week-in-week-out activity related to our investments is entirely automated and we never have to think about it at all. It’s just another bill, and our bills are all automated.
Strategy #5: I Withdraw My Spending Money at the Start of Each Month
Each month, I literally withdraw a certain amount for free spending each month. I take some of it out in cash and transfer a little more into PayPal for small online purchases.
This is the money I use for “fun” things, like eating out for lunch or buying a new board game at the local hobby store. For purchases where I need to use a card (the only thing I do significantly in this category is buy Kindle books), I actually use a card linked to my PayPal account.
When my PayPal account is empty and I don’t have any cash in my pocket, I just don’t buy any more fun stuff. I eat inexpensive things at home and wait on any hobby or entertainment purchases until the next month.
Doing this makes “budgeting” for fun things very easy. I know what my spending limitations are regarding entertainment and hobby and individual dining expenses. It’s very clear and tangible – it’s just the cash I have in my hand or in my PayPal account. That’s it. It’s very hard to go “over” budget, but sometimes I do go “under” budget which just gives me more for the next month.
Strategy #6: I Avoid All Investments That Aren’t Immediately Clear to Me
Virtually all of our retirement and taxable investments are held in very simple investments that I clearly understand – in other words, in broad-based index funds.
The majority of our holdings are in the Vanguard Total Stock Market Index, which is a fund that basically holds a small portion of every publicly traded stock in the United States with very low expenses. In other words, our primary investments are in American industry as a whole, not in specific businesses, and that investment is done with a very, very low overhead.
I understand this investment. I understand why we’re invested in it. I understand – as well as anyone does – the risks involved with it.
To us, it’s the right balance of risk and low cost to meet our needs. It’s something that we understand clearly, something that makes sense to us, and something that matches what we want from an investment.
We don’t have a dime of our money in anything that we don’t understand well enough to both explain in one sentence and explain in fifteen minutes, depending on the level of detail.
Strategy #7: I Start a ‘Tax Envelope’ on January 1 and Close It Next April
Each January, I take out a big manila envelope and, on the front of it, I write “Taxes” and, next to that, the current year. We keep that envelope in our filing cabinet at home.
Throughout the year, whenever we do something that’s probably going to be tax-deductible, such as a charitable gift or child care for work or research materials for my work, we put a receipt for that expense into our tax envelope.
That way, at the end of the year, all I have to do is pull out that envelope when preparing our taxes and everything that’s tax deductible is right there in that envelope, ready to go.
When taxes are filed, I make a copy of the tax forms (in PDF format) on a DVD and save it in that envelope. I add any other tax forms – like 1099s and W-2s – to that envelope. I then close it up and file it away.
It’s such an easy process. I don’t worry about tax deductions, nor do I worry about finding old tax documents in future years. It’s all right there.
Strategy #8: I Use Just One Credit Card for Almost All Purchases and Pay It Off in Full
For our day-to-day expenses, like food and gasoline and household supplies, I pay for everything with a single credit card (we’ve changed it on occasion, but we stick with the one-card system). That credit card has the best bonus program that we can find in terms of matching up with how we spend money.
At the end of the month, we pay off that credit card in full. Since we have pretty good control over our spending and only use this card for things we agree on, the balance is never really surprising. It’s just expenses at the gas station, at the local grocery store, at the local department stores, and maybe two or three charges for a family event. That level of spending doesn’t come anywhere near levels that could be problematic for our checking account, so paying the balance in full is never a problem.
In fact, our credit card bill comes in automatically to our bank, as described above in Strategy #3, and is paid automatically, too. I know roughly what the balance should be each month, so I don’t really worry about it very much. I usually read through the statement quickly once a month, just to make sure there aren’t any unauthorized expenses, but that’s the extent of my concern when it comes to credit card bills.
A credit card is just a tool to make buying groceries and household supplies and the occasional additional odd item very easy, and along the way we earn some benefits from using the card. Often, this takes the form of free hotel stays during our family’s summer vacation.
Strategy #9: I Talk To My Wife About Money All the Time
When my wife and I first combined our banking accounts, we found ourselves regularly doing things that interfered with what the other person was doing. This caused us to overdraft a few times and come very close to overdrafting at other times, a situation that wasn’t good for either one of us.
We also didn’t really have any coherent investment plans and weren’t saving in concert for any of our big shared goals.
The biggest reason for that was a lack of communication. We never really talked about money very much, so when we did, it usually ended up being a big argument that left us both feeling bad and caused damage to our relationship.
Now, we talk about money all the time, almost to a comical level. We share virtually every expense with each other aside from money spent out of our personal “fun money.” We talk about goals constantly, like whether we should buy a new house or stay in the one we’re in or whether retiring early is the best goal or we should have other things in mind.
Because of that, we both feel as though we’re on the same page on virtually everything financial in our lives. We don’t have money fights any more, and that’s probably the most simplifying thing on this entire list as it makes our relationship that much simpler.
Strategy #10: I Buy Lots of Bulk Goods
Whenever we buy staples – nonperishable food and household items that we use very regularly – we almost always buy them in bulk, meaning that we buy them in the largest quantity available, even if the initial price is higher.
Why do we do that? There are several reasons, but those reasons boil down to two main categories.
First of all, bulk purchases often have the lowest “cost per use” of any option; you’re just buying a lot of uses at once. A gigantic package of toilet paper, for example, might have the highest price on the shelf in the store, but when you look at it per roll or per use, the price actually ends up being the lowest. We basically ignore sticker price and focus on the price per unit. This saves us money.
Second, buying in bulk means fewer trips to the store. Since we can typically survive months on our purchases of many bulk items, we simply don’t have to run to the store that often for things like toilet paper or trash bags. We have those things in abundance. This enables us to stretch out our grocery store visits and we have very few “emergency runs” to the store. We have the things we need to get through until our next regularly planned store visit. This saves us time and money.
We spend less time making grocery lists. We spend less time in the store. We save money to boot. That’s the beauty of doing things in a financially simple way.
Strategy #11: I Process All Mail as a Batch Once a Week
We get mail every day. Rather than really worrying about it very much, I just leaf through it and put it in a basket in our house, pulling out just the magazines and anything else that looks interesting. I don’t worry about the bills or the potential junk mail or anything like that.
Once every week – or sometimes once every two weeks – I’ll pull out all of the mail and go through it in one big batch, tossing all of the junk and handling anything that’s actually important all at once. This usually means paying a bill or two that isn’t automated or responding to a letter or two.
Between those mail processing sessions, I just don’t really worry about the mail. There’s nothing that comes in that can’t wait a few days, so it waits a few days. Mail sits in our basket between processing sessions because, by processing all of the mail at once, it gets done way faster and more efficiently than if I did it every day.
Mail really isn’t all that urgent when you get right down to it. It might be important, but it doesn’t really have any burning urgency. It can wait a few days, and by waiting a few days, it becomes much simpler to deal with because I can do it all in a batch.
Strategy #12: I Keep an Allowance Balance on the Calendar
We use an allowance system with our children to help them learn about money management. Each week, they receive a small amount by default and have the capacity to earn more if they do exceptionally well at a task or take on extra tasks.
Our method for recording all of this is to use our wall calendar. Whenever our children earn money, we note it on the calendar on the day they earned it by writing their first initial, their new allowance balance, and a parent initial. Whenever they choose to spend some of their allowance or want some of it for “pocket money,” we note the new lower allowance balance in the same way.
That way, whenever they want to make a purchase, we go to the calendar and look back at the previous balance to see if they have enough.
We used to have a cash-based system, but that actually made for more work for us and caused more problems with the kids, believe it or not. This system makes it feel more like they have an “account” where they can check the balance when they want to and that makes things a lot simpler for mom and dad, too.
All of these strategies really have one thing in common: They make things simpler. There’s less time invested in financial management. There’s less confusion. There’s less conflict. Virtually nothing important is lost or forgotten.
It’s simple, which is just how I like it.