When most people think about financial clutter they think about the piles of paperwork that come with financial accounts. So we read blogs and books and websites about how many years of statements to keep, whether we should digitize or laminate our tax returns, whether we should go out and buy fireproof safes to keep all of it secure. We don't think about the source of the clutter.
Have you considered reducing the number of accounts you have? I really mean 'accounts' -- not just credit cards.
Add up the number of financial accounts you have: savings accounts, checking accounts, money market accounts, IRAs, TSPs, 401ks, 529 plans, CDs, mutual funds, stock purchases, bonds, etc., and of course loans and credit cards. How many are there?
Why reduce the number of accounts you have?
Reducing the accounts automatically reduces the amount of statements you receive. It makes it easier to keep your statements straight and you're less likely to make mistakes that will land you with fees when you know where your money is.
It's also easier to quickly add up your assets when you need to. And boy, does it make the taxes easier come April 15th.
Large purchases are another reason to cut down financial clutter. My husband and I just bought a condo. If you're going to be in the market to purchase a home anytime soon, you should know that you will need to provide two months' documentation for every single financial account you plan to use for the purchase. That can be an awful lot of statements. We had nearly 20 accounts (and only four of them were credit cards). That's 40 statements. Forty.
Additionally, when you can see more of your money in one place you avoid the 'silo' effect. Keeping your money in 'silos' (eg. one savings account for the house, one money market account for the kids' college, one for the Disney trip next year, one for the Europe trip, etc.) means that you may not have much in any one account. Banks often give better interest and return offers when you can invest a larger amount of money at one time.
Don't suddenly get rid of all of your accounts, though.
Talk with a trusted friend, family member, or financial advisor before closing a number of accounts. Closing certain kinds of accounts can affect your credit rating. Not to mention, it's a lot to deal with all at once.
If you're making a large purchase where you will need to prove the sources of your cash, you don't want to close accounts just yet. You might be asked to provide not just statements for those accounts, but documentation that you closed them.
My 'virtual' decluttered item for today is three financial accounts (all with the same bank): two CDs and a savings account. We need them to pay for the condo and we won't be reopening them. But alas, they're not tangible, so I won't be adding them to my 365-item tally.
Have you decluttered your financial world? What's worked? What's been a mistake?