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Simplify Your Finances

Simplify Your Finances By Taking 5 Easy Steps

Finances are already complicated, there is no need to add unnecessary stress to your life by getting tangled up in all the different facets of personal finance. I want to help you simplify your finances by taking 5 easy steps. I assure you, it’s okay to go against the grain – it’s likely the correct path.

As doctors, we are fortunate because we already have the toughest part of the equation figured out, the income side. Then there is the spending and savings/investments and finally all the little tidbits like credit scores, debt management and keeping up with financial news – I also call this last part, the fear of the unknown.

In this post I would like to help you create a step-by-step plan so that you can simplify your finances. You can shed a ton of unwanted financial weight, automate the majority of your financial moves and stop worrying about things like identity theft. Start focusing only on earning and income and spending it, everything in between can be automated or outsourced.

Step 1: Consolidate Your Accounts

There is no need for you to have multiple accounts performing the same task, accomplishing the same goal. If your net worth is obscenely high then yes, by having your money in various institutions you take advantage of the FDIC protection for each account.

Back to basics, you only need the following:

  • 1 checking account
  • 1 savings account
  • 1 credit card
  • 1 private brokerage account
  • 1 retirement account

The first 2 on the list are easy, choose a bank that you have easy access to, one that is easy to communicate with and open a checking and savings account. Many of you obviously have this already, but you might have 2 savings account, 3 credit cards and that one account in the other State you lived in which you haven’t had a chance to close.

Go on an account-closing spree. Close all your unneeded accounts. This might be really hard to do because of all the noise that’s out there regarding closing credit cards and how it might affect your credit history. Believe me, it’s bogus.

Closing credit cards. I have closed and opened so many credit cards and never had a credit score problem by closing a card with a “long history”. My credit score starts with an 8, so obviously I’m doing fine even though I’m going against common advice.

You’re not saving anything with rewards credit cards.

When you close a card which you’ve had for over a decade then sure, your credit score will drop at first, but remember the credit history of that account stays on your report for another decade. The account may say “closed” but it will still show your many years of timely payments and positive reporting history.

Who is not gonna lend me money when I have zero debt, no delinquencies and a high income? I don’t care if your credit score is 600, the underwriter is going to look at a lot more things than just your score. They might use it as an excuse to charge you a higher rate, but you can solve that by going to a credit union or shopping for other lenders.

Brokerage accounts. Keep it simple, have one trading account where you invest your after-tax dollars. Whether you like to stay in bonds, whether you’re an index fund investor or you prefer day-trading stocks – keep one account at one brokerage house.

In this brokerage account you will have your various investments and the “settlement fund” where your transfers are kept until you’re ready to invest them. A settlement fund is a fancy word for a savings account.

Your retirement accounts. Most of you probably only need 1 account, the one that your employer is funneling your retirement money into. If you are with Charles Schwab, who I vehemently dislike, or Fidelity or Vanguard, that’s where you can keep all your money. This way, you keep all your investments under one roof.

You might need a 2nd account in case you also have some old IRA’s that you are carrying over from previous jobs. You can roll these over into your employer’s 401k, 403b or whatever 4xx account.

Often times the fees are a bit higher in these 4xx accounts so it might better to open a separate IRA account with that same brokerage house. Everything will still be accessible with one username/password, dramatically simplifying your financial life.


Step 2: Consolidate Debt

I know that your financial adviser or your CPA, or some finance guru you follow online, is telling you that you should try to extend this one debt for this reason, keep that debt for another reason and not consolidate debt-x with debt-y for another reason.

I say fuck it. If you have a shitload of credit cards then apply for a private loan from SunTrust or Lending Club to have one single payment. It’s less of a headache and a much more likely way to be debt free sooner. I have used both in the past. SunTrust has physician-specific loans they offer for personal loans and Lending Club has a really easy to use interface.

If you have several different student loans and just haven’t gotten around to consolidating them, or are still considering maybe working at a group that might offer you debt-repayment, then either take the next step to change employers or just get it done. With lenders like SoFi, it’s not hard to get the process started.

The advantage of consolidating debt. Peace of mind! Period. That’s one of the most liberating emotions. It’s not just the commas and zeros on the debt statement but it’s also having to make payment to multiple people. It’s that feeling that too many hands are reaching into your pocket.

There was a time when I had 7 credit cards for a total balance of around $45k. I had 2 mortgages from 2 different banks on the same property. I had 3 different student loan accounts.

I started by paying off the smallest balance credit card, but it just took forever. I finally took out a $34k consolidation debt from Lending Club and attacked that, focusing my payoff power on just one account versus several.

I did the same consolidation for my mortgage and student loan. It’s slightly tedious, there are so many steps involved in completing applications but this is the time to do it, when the economy is artificially prosperous, where there is more cash available from investors than actual investments.


Step 3: Take charge of your credit

Put a hold/freeze on your credit reports and make it a habit to check your credit reports before the start of a new calendar year. Be the person who is cleaning up their finances while everyone else is buying plastic crap to wrap and give to each other.

The biggest gift you can give to your family and humanity is to have the kind of life that is so easy and pleasurable to live, you’ll have nothing but love to give to others.

The 2 biggest fears humanity seems to have is the uncertainty of our mortality and the uncertainty of resources, finances specifically. Take charge of your finances, it doesn’t have to be as hard as the financial community makes it seem.

I have a post brewing about how to put a freeze on your credit report to prevent someone from stealing your identity. It has a lot of benefits, one of them being that you will stop applying for more loans. There is often a $10 fee for freezing/unfreezing but it’s one of the few fees that I find worth spending on.

Monitor your own credit report, for free. Fuck the credit reporting agencies, never go on their site and don’t order anything through them, they are some of the biggest scoundrels of them all. The only site I use is Annual Credit Report but I used others in the past which I was happy with.

Don’t pay a dime for this! You have the legal right to have a full copy of your credit report every 12 months according to the Federal Trade Commission. The FTC apparently sanctions the above website so I think you’re safe using it.

In my most recent credit-monitoring I found that the city of San Diego had put some shitty little tiny tax lien on my account, I couldn’t figure out why but it wasn’t worth my time to investigate it. But at least I caught it.

Pay attention to wording and dispute anything you don’t like. I’ve gotten a bit more bold with time. I now welcome IRS letters that tell me I owe $X from my tax return from 3 years ago, they are usually wrong and so I’m happy to point it out.

Compare your credit report, pay attention to the wording and if you see anything that’s off you can go on the specific credit reporting agency’s website and write a dispute letter, for free.

Hire a credit repair company. I don’t care what others say about the futility of  credit repair companies – I’m living proof that they are incredibly worth their money. Sure, you can do everything they do yourself but then again you can rebuild your own engine on your car. I know, I’ve rebuilt my engine multiple times.

Hire the right company to repair your credit.


Step 4: Set it, And Forget It

As the infomercial says “Set it and forget it”. It’s true, set your minimum investment amount and stop worrying about your whether you are doing your part to save for your future.

When I was saving for my retirement, I would have a certain amount sent from my checking account to my brokerage account every 2 weeks. This way I knew that I was doing something positive for my future, saving and investing for my retirement.

The money would automatically get invested into whichever fund I wanted, and it would even automatically take care of balancing my investments based on my asset allocation.

I can always send more money to my investment accounts, obviously, but at least I’m not constantly thinking about needing to do that. Get certain tasks automated, free up your mind so you can spend less time thinking and more time enjoying and smiling.


Step 5: dump all your work on A Financial Adviser

First, fire your current financial adviser. I say this assuming that you hired this person back in the day, back when you didn’t know much about personal finance. Or perhaps this person found you and not the other way around.

How to choose the right financial advisor. 

Are you too shy to fire your adviser? A friend of mine texted me out of the blue and told me “Mo, stop writing all that shit on your site and do something useful, help me fire my financial adviser!”. Hilarious.

We got on a conference call that very same day and we respectfully fired her adviser. The adviser started going off, giving her a guilt trip which we halted quite instantly by pointing out the shit that this fool wasn’t doing for her.

Put your FA to work. For me, a financial adviser should be a person that I can call up, text or email the second I want to make a financial decision. I shouldn’t feel hesitant to do so, I shouldn’t feel like they are hard to get a hold of or that they have their own agenda.

I don’t want someone who can sell me things. If they are able to profit by selling me insurance or any other investment vehicle then they aren’t for me. I’m not saying they are bad, it’s just not the kind of adviser I want.

I want my financial adviser to have complete control over my investments, over my accounts and I want them, not me, to worry about my investments. I’m here to earn the money and figure out fun ways to spend it – they are there to make sure:

  • I keep as much of it as possible
  • I invest it soundly
  • I don’t make major financial mistakes
  • To inform me of worthwhile financial news

Let’s Review

Step 1:
Close as many accounts as possible, including credit cards.
Put as much as possible under one roof.
Try to think of it as having “fewer usernames and passwords”.

Step 2:
Consolidate your debt.
Pay off as much of your debt as possible.

Step 3:
Monitor your own credit reports.
Freeze access to your credit to prevent identify theft.

Step 4:
Automate your investments.
Automate loan payments.

Step 5:
Hire a financial adviser to do as much of the work above as possible.
Focus on earning money and spending – everything in between is your FA’s job.

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