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Simplify Your Financial Life
By Saghir A. Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities.)
When you’re trying to focus on what is important in life financially and otherwise - clutter is your enemy. The more accounts, monthly statements, and investments you have, the harder it is to see the big picture of your finances. Complexity makes it easier to lose track of your money.
It creates more paperwork at tax time, and it sows greater confusion for your older self and your loved ones. Plus, those multiple accounts may be costing you unnecessary fees. With all the IRAs, bank accounts, and credit cards you’ve accumulated over the years, financial clutter may have crept up on you. Here’s how-and how much to trim it back.
Trim back to two credit cards: One is for day-to-day use and you really need one. The second card is for storing somewhere safe at home so you don’t get stuck if you lose the first one. That backup card should be from a different issue than the company that offers your primary card, suggests consumer advocate and a radio host Clark Howard in case one or the other lowers your credit limit or even cancels your card. Why not more than two cards? The more you have, the harder it is to track your spending.
How: Simply go online or call the issuers to cancel cards you Rarely use. If you have any automated payments charged to these cards, such as for phone or cable services, switch the automated payments to a card you plan to keep. Then cut your old cards into confetti before tossing them.
However, a sillogical as this may sound, whittle down the number of credit scores. This is typically only temporary, though the impact may linger if you have large balances on your remaining cards. You can estimate the impact of closing an account by using a score simulator on a free credit-monitoring website such as Credit Karma or NerdWallet.
Trim back Bank and Credit Union Accounts to one or two institutions
Why: it makes sense to have a local brick-and-mortar bank for in-person deposits and withdrawals. But any money you park there will probably give you very little interest. That’s why your second bank is an online bank that will likely pay a better interest rate. Though you may not want to close other accounts because you think you’ll need them someday, it's more likely that they’ll sit there earning no interest, eventually forgotten, and maybe even eaten away by monthly maintenance fees.
How: Aswith credit cards, you may have given a company, such as your cellphone provider, permission to debit your account, so make any necessary changes before closing it. Have the financial institution send you a check for your balance. And to avoid any unpleasant surprising monthly fees, ask for confirmation that the account has been closed. If you end up with two accounts, link them so you can send money back and forth relatively quickly.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds, or any other investment. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
