How Do You Declutter Your Finances?
In an effort to diversify against risk, could our finances be getting too cluttered?
For example, Financial Panther, a personal finance blogger, has over 10 to 15 high-interest savings accounts just for his emergency fund alone.
“Don’t put all your eggs in one basket,” the saying goes.
If you put all your eggs in one basket and something happens to the basket, you lose all your eggs.
If we apply that to our finances, it means diversify your savings accounts, stocks, and mutual fund investments so if an investment goes out of business for whatever reason, you aren’t screwed.
It also means diversifying where you keep your cash, stocks, and mutual funds in case the bank or brokerage company goes bankrupt.
While I understand the mental assurity with keeping your finances spread across many baskets, the clutter and mental strain of keeping track of them can start to become a burden.
The “Don’t Put All Your Eggs In One Basket” Issue
Spreading your investments across many places leads to cluttering of your finances.
This increases the time needed to review and check up on all of them.
It also increases the time taken to file taxes and the tax complexity at year end when you have to file all those 1099 Tax Forms.
This is where you can start to declutter your finances.
Put All Your Eggs In One Basket: The Benefits of Decluttered Finances
There’s another saying:
“Those who achieve a high level of wealth put most of their eggs into one basket. Then they watch that basket very carefully.”
And now I’m starting to understand why the wealthy do that.
As someone who used to have investments spread across Wealthfront, Vanguard, Robinhood, Ally Bank, Lending Club, Livestock Wealth, and E*trade, I can attest it gets a little cluttered.
And I wasted a lot of time going back and forth between all of them to constantly check up my investments.
Now, I’m down to Vanguard, Fidelity, and Ally Bank for all of my investments toward FIRE.
Life is a lot simpler and easier to look at my finances.
It also helps reduce time spent looking over finances because there’s less places to look at.
Not to mention it helps reduce time spent doing taxes and the complexity of filing taxes.
The Criteria I Use For Decluttering My Finances
“Which website should I transfer my investments to?” you ask.
Before you declutter your finances, here’s a mental checklist to analyze:
- Ease of use on the platform?
- Any fees?
- Safety of website, potential for hacking?
- Do they have a mobile app feature?
- Perhaps any other benefits such as “Invite a friend, get X reward!”
Using these criteria, that’s why I transferred all of my stocks from E*Trade to Robinhood.
Then Robinhood to Fidelity.
It’s also why I didn’t transfer all of my Fidelity stocks to Vanguard, because Vanguard was too bulky and not friendly for stock trading.
Being Careful Not To Incur Tax Liabilities When You Declutter Your Finances
When you declutter your finances be careful not to get hit with tax liabilities.
If you have stocks spread across two brokerages and you try to consolidate your stocks, DON’T sell out of the stocks from one brokerage to transfer the money to the other.
Most brokerages are now offering free stock transfers.
You can roll the stocks from one brokerage into the brokerage you like more.
For example, I tried to roll all the stocks in my Fidelity account to Vanguard until I realized Vanguard was crap with stock trading.
So I canceled the transfer but it took a lot of trouble-shooting.
Don’t make the same mistake I did.
I then transferred all of my Robinhood stocks to Fidelity in case Robinhood gets hacked again or goes bust.
I figured Fidelity makes more sense because a lot of Fortune 500 companies have their employees 401k money in Fidelity.
So if billions of 401k money is in Fidelity, my money must be safe too, right?
Conclusion: Can You Declutter Your Finances?
Yes, we can apply minimalism to declutter our finances.
By doing so, we free up our time from not having to look in a lot places to see our financial details.
And if time is money, we freed up time to make more money.
Making more money means we can invest more money toward reaching FIRE faster.
It all starts with decluttering our finances.