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How to simplify your financial life.

Using the Homer's Odyssey as a metaphor, not to do like Ulysses with the sirens.

This month, I have asked to Enrico de Crescenzo, who has been working in Finance for almost 2 decades now (and still likes it, ah!) to help me with the April post about money.
I wanted to write something meaningful about the topic but honestly, I am a mess when it comes to finances.
Probably, being an Aquarium doesn’t help either.
Moreover, I am sure that giving you more helpful guidance would be a better choice.

After asking Enrico to share his bits, I thought it would be a good idea to have some posts done by people who are more knowledgeable than me on certain subjects.
Besides, it’s always nice to meet new faces and certainly, this is the spirit behind a virtual and wandering cup of coffee on the net, right?
I hope you will enjoy reading.
Chiara

How to simplify your financial life: sort of.

To be fair, the title of this post should have been “How to (sort of) simplify your financial life”.
Why? I will explain immediately.
Nowadays our financial life has become pretty difficult to manage: monthly payments (rent, bills, credit card, grocery, etc.), plausible and less plausible goals (dream holiday, anyone?), a mortgage, a student loan still chasing you, some plans for retirement, tax planning, you choose.

Therefore, this one can’t be a “one size fits all” recipe: mainly a change of perspective about the above list of financial tasks we have to face on a regular basis. The biggest advice I can give is, using the Homer’s Odyssey as a metaphor, not to do like Ulysses with the sirens, then do not listen to all the huge information you can find on the internet, it would be overwhelming and time consuming. In contrast, do like his crew, put some beeswax in your ears and focus on your real long-term goals. And on this post, of course.

How to simplify your financial life: banks, payments and savings.

As long as you’re not Warren Buffett or Bill Gates, you shouldn’t need more than one bank relationship. The suggestion to simplify, given the large offer today although banks are always going to give you some headache, is having one bank offering an online service where you could open a current account for the everyday movement, a saving account and perhaps the chance to make small investments and long-term savings.

Most of the online services can even set up sub-accounts, automatic routines like every end of month payments or transfer to your saving accounts, they provide you with a dashboard to check your movements on a regular basis and so on and so forth. Usually they offer you even a debit card and a credit card. Speaking of the latter, although it could be tempting having more than one, try not to… especially the revolving ones with the diabolical compound rate method can bring you a lot of troubles.

Actually, setting some automatic payments would give you the chance to follow a simple magic rule “Save First, Spend Later”: in fact, once you receive your hypothetical $100 salary you could already allocate what you would like to put in your savings account ($10), your “dream holiday” account ($10), your rent and monthly grocery ($30), etc. Anything else sitting in there after the allocation (in this very simple example $40) would be available for you. In practice, this is the principle of budgeting and it won’t make you risk going negative and in debt.

How to simplify your financial life: debt, speaking of the devil.

Remember, as the American poet Robert Frost smartly said, “a bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain”.
So, unless you’re a solo entrepreneur and your parents, friends, acquaintances can’t help you in your fantastic endeavor, try not to get too much in debt. Perhaps you’re still burdened with your student loan or you have a mortgage.
Then, still following above rule, allocate regularly to pay your debt and try to get rid of it as soon as possible. Being debt-free it’s a great feeling of freedom and allows you to dream bigger.
I still remember the big celebration my parents made when they paid the last installment of the apartment mortgage.

How to simplify your financial life: saving short term.

Back to savings, in the short term you’d better check the source of your expenses. For instance, are you paying the gym subscription and you always end up running at the public track field? Cancel the subscription. Are you topping up your phone $20 a month because of all the calls you make to your best buddy? Go to the mobile shop and find a smarter solution, you might end up saving all of that. Or should you have many credit cards, as said above, start canceling most of them, ideally keep just one.

How to simplify your financial life: saving part long term.

Savings every day gives you more room to breathe, but how about the saving account or the investment account? Depending on your risk aversion or appetite, you might consider allocating that part of your monthly savings to the former or the latter. Looking at a longer time horizon could make you think to the next goal you’d like to achieve: holiday, new guitar, new car, a house, the college for your children.. Everyone will know inside what is worth saving for.

How to simplify your financial life: retirement.

Last but not least.
When you’re 20 something you don’t even think it, but once you become a parent and you get past your 20s perhaps it is time to look into this too. Employers often offer a pension fund plan, unfortunately though, given the very low-interest rates, it might not be enough.
The suggestion here is once again to check the offer the bank you have a relationship with. Whether it’s a retirement savings account, a life insurance or vested benefits account, anything could give a little boost to your really long term goals.

In summary, having most of your financial relationships with one institution would make you spare some time, hopefully some money and have better control of your finances.

I wish this can be of any help and it will reduce your headaches about banking, while you can watch your money flow happily through your set-up processes towards your life goals.
Enrico

Enrico de Crescenzo is an ACCA member and Certified Professional Accountant and Auditor.
He lives in Zürich, Switzerland, with his family.
Enrico works in Group Investment Accounting and Reporting and offers strategic financial analysis and reporting for executives looking for powerful data-driven insights.  
Enrico teaches PowerBI at Meet Up events in the city.

Linkedin
https://www.linkedin.com/in/enricodecrescenzo/

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About the author
Hi, I’m Chiara, Italian mom living in Zürich and loving it. I like to write about coffee, how it is and how to pair it with, where to drink it and, the most important factor of all, with whom to enjoy it.

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