With a sign up bonus here and a positive referral there, it can be easy to amass a small army of financial accounts. But if you start simplifying and closing the accounts you don't use often, the benefits can be substantial. (See also: Simplify Budgeting With Personal Money)
One way to start improving your finances is to look at your habits, but if you have too many accounts, it can be hard to figure out your exact situation. When you have fewer accounts, it's much easier to keep track of the history of your spending and investing habits.
Sometimes, the IRS expects you to come up with ancient documents. It's best that you have the documents ready (unless you like paying for penalties you might be able to avoid otherwise), and it's easier to access them when you have fewer accounts.
You likely have a small bit of cash in every one of your accounts. And it's likely that more accounts you have, the more cash you have earning you nothing. I know even the best online savings accounts are earning you only 1% right now, but that certainly beats the 0% that other accounts might be giving you.
Whether it's looking through statements, trying to remember your password for an account you haven't checked for ages, or simply keeping track of it all, money management can take time out of your precious day. That's time away from productive work, time away from family, and time away for your leisure activities.
The fewer accounts you have, the more cash you can put towards each one. This means potentially spending less on overdraft fees. Even if you don't have more money in the accounts, just having simpler finances will reduce the chances that you'll forget about little details like moving money around to cover bills and incurring late fees.
When you have more time, less stress, and more money, you will likely be more motivated to actually start planning for your financial future. Of course, it helps that you now have fewer accounts that you need to take into consideration, too, but that's just the icing on the cake.
How many accounts do you have?
I have four accounts, if you don't include student loan accounts:
1. Joint checking account
2. Fun money account
3. ING Savings Account (several sub-accounts, but I don't count them because I can check them all at the same time)
4. Mileage rewards credit card that we pay off every month.
Simplifying our accounts has definitely made my life easier, as the primary budget person in my family.
I have to disagree. There's not one institution that does the best job offering the best interest rates, credit card rewards, brokerage fees, etc. To get the best, you have to shop around.
To manage everything though, automate all payments, savings and investments so to come out of one account. Then you can see where everything is coming in and where it's going.
Thanks for the great post. I have been using mint for about a year and it does incredible job at helping me keep track of my expenses. You will be blown out to see how much money you spend on things you wouldn't even consider. Another thing is I will never open a bank account or a visa card with fees. This is against common sense. I am giving my money to banks so why would I pay for the fees?!
