The #1 Reason To Simplify Your Finances (And What I’m Doing About It This Year)

As a husband and Dad of three, there's one big reason that's driving me to simplify. That's to avoid passing on complicated finances to my family if something were to happen to me. It's not the only reason to simplify your finances. Simplifying also lessens account maintenance and frees time to do things that matter. My latest article on U.S. News & World Report recommends tips to simplify your finances in retirement. Retirement isn’t the only time to simplify.

Anytime is a good time to simplify.

But I’m a bad role model for simplifying finances because I’m on the far side of the spectrum with multiple personal investment accounts and bank accounts. Plus extra accounts for my rental property and side business.

Recent events remind me that my financial life has become more complicated than I want it to be.

I completed my taxes last week and that always puts me in a simplification mood. Then a good friend faced a very difficult medical situation that required him to get his arrangements in order just in case he didn’t make it. He’s OK now, but scary stuff.

We’re also in the middle of setting up our estate planning documents so this stuff is front and center.

Like most couples, one of us handles the finances (guess which one?). If something terrible were to happen to me, the family would be fine with our current assets and life insurance policies.

However, sorting through all the financial accounts would be a major headache for my wife that would last for years.

So I’m dedicating this year to simplifying our finances. The end result will be a one-page doomsday printed sheet of paper for Mrs. RBD telling her where everything is, how to get it, and what to do with it.

The #1 Reason To Simplify Your Finances

The #1 reason that’s driving me to simplify this year is the thought of me dying and leaving my family with overly complicated finances. My quest to create multiple income streams has made it all difficult for Mrs. RBD to follow.

Breaking it down to one sheet of paper complete with instructions seems like a reasonable goal for simplification.

Up until now, my doomsday instructions to Mrs. RBD was to log into our Personal Capital account to see where all the money is and go from there.

All of our account information for everything in our names is available in one view (that’s why I love Personal Capital and recommend it).

She could use it see it everything we own, but that’s not a plan. Mrs. RBD deserves a better system than here’s everything, go figure it out.

Estate Planning Priorities

We’ve procrastinated setting up the basics of our wills and estate plan. As a husband, Dad, and money nerd, I’m ashamed this isn’t complete yet. We met with an attorney a while back but didn’t follow through with the paperwork.

The first step was to write down all the accounts and make sure they are joint and/or have each other listed as the beneficiaries. We never took that first step. This month, we are.

One of the many awesome benefits of my new job is a group legal policy. It’s like an insurance policy for legal stuff.

The policy costs me about $7 per paycheck. Estate planning services will be 100% covered by the legal plan. The normal costs for comprehensive estate services (wills, trust, directives etc.) is well north of $1,000 in our area.

We did procure life insurance policies in the first year of our marriage before having kids. This involved several quotes, questions, and blood work.

With the cheapest rates going to the healthiest candidates, I exercised non-stop for about a month and crushed my blood scores to get the cheapest available rates!

Some life insurances companies like Haven Life don’t require a medical exam for certain candidates and quotes are fast and free. If you’re married, and most definitely if you have kids, a basic term life insurance is a must-have.

The rule of thumb is to get 8-10 times your annual salary in coverage.

My new employer provides some additional coverage and I can purchase even more life insurance for a good price without another medical exam. I jumped on that deal for an additional 3 times my salary in coverage.

So my wife and kids are protected with cash if something awful happens to me. Our current assets will be there too, but they are scattered around and not-so-straightforward, especially considering withdrawal strategies and tax implications of asset sales.

All of Our Accounts

Alright, so I’m about to slap down all of the accounts we use for banking, equity investing, and alternative investments. I try to keep things under one roof (i.e. one login or company) when I can but the number of accounts has grown over the years.

For banking, I do a decent job of staying consolidated under primary companies.

But in the investing space, I can do better. Transferring stocks can be a pain. But if the task of transferring shares sucks for me, it would suck ten times worse for my wife if I’m not here to explain it.

OK, here’s the goods. Seeing these in one list makes me want to double down on simplification (go horizontal to view on a mobile device).

Bank Accounts Alternative Investments Brokerages
Wells Fargo
-Joint Checking
-Business Checking
-Condo Rental Checking
-Primary Mortgage
-Condo Mortgage
-HELOC
Capital One
-Car Savings
-Joint Savings
-Condo Savings
-Rainy day
Chase (rewards cards)
-Sapphire Card
-Business Card
Amex SPG Rewards
Fundrise
PeerStreet
RealtyShares
LendingClub
Brokerages
Fidelity
-RBD IRA
-RBD Roth
-Mrs. RBD IRA
-Mrs. RBD Roth
403(b)
Vanguard – IRA (old 401k)
TD Ameritrade
M1 Finance
Computershare
-BAC
-CVX
-KO
-WTR
Virginia 529
Motif Investing (IPOs)

The plan to simplify is to consolidate accounts or funds/shares under existing primary accounts and eliminate less frequently used accounts.

What I’m Doing in 2018 to Simplify our Finances

Back in 2014, I embarked on a similar project, combining and simplifying our finances after Mrs. RBD’s stopped working. We did make some progress, but since 2015 things have turned more complicated.

I personally don’t think it’s that complicated. However, I’m now viewing this from the perspective of Mrs. RBD who is not into personal finance or investing.

So how can I simplify things enough for her understand while still continue to invest and build multiple passive income streams on various platforms? My plan of attack is to transfer the obvious accounts first, then make tougher decisions later on.

Here’s the immediate plan.

1. Transfer DRIP Stocks Out of Computershare to TD Ameritrade

Computershare is a stock transfer agent, not an online broker. DRIP (dividend reinvestment plans) investing via transfer agents is how I started investing in 1995. It’s no longer practical since trading fees are now cheap and you can accomplish a DRIP-like strategy at most brokerages now.

Each stock owned at Computershare is a separate account and requires a separate 1099-DIV at tax time. Transferring all four stocks into TD Ameritrade will make collecting and reinvesting dividends easier.

Way back in 2014, I transferred my Verizon DRIP shares out of Computershare into my TD Ameritrade account. I followed that with Emerson Electric (EMR), Clorox (CLX), Proctor & Gamble (PG), and CSX (out of Broadridge).

But I never touched Chevron (CVX) and Coca-Cola (KO) because I have 20 + years of cost basis reporting to transfer as well. This will be a pain for me, but way worse if Mrs. RBD ever had to deal DRIP cost basis reporting.

My Bank of America (BAC) and Aqua America (WTR) shares are also at Computershare.

2. Decrease Real Estate Crowdfunding Platform Participation

Last year, I opened three accounts with the top real estate crowdfunding platforms. I love this investment class, and all three platforms are great. But two of them are a better fit for me.

Fundrise is still the easiest platform to invest on because any U.S.-based investor can start with just $500. For that much, you are instantly diversified across nearly 40 high-quality residential and commercial properties. Tax time is straightforward and the returns are excellent (7%-11%). Plus there’s liquidity. So I’m sticking with Fundrise. Read my full Fundrise review here.

PeerStreet has emerged as perhaps my favorite platform for its ease of use and transparency. For a $1,000 minimum investment, you can invest in individual debt deals automatically based on your preferences. Deals are shorter-term (3-month to 2-years) so your money isn’t tied up for long. Deals are backed by the property making your investments less risky.

Unfortunately, many investors are excluded from the platform because you must be accredited. Read my full PeerStreet review here.

RealtyShares was the first real estate crowdfunding platform I invested on and two of my deals are still live. I’m happy with the returns and the platform, but in the name of simplification, I’m not making any new investments. Deal minimums are high for me at $5,000, and the lower minimum deals are hard to get into. There are longer investment horizons and less liquidity.

Though I still think the platform is unique and well-suited for higher net worth investors, I’m going to let my current investments mature and cash out. Read my RealtyShares review here.

3. Cash Out of Peer to Peer Lending

This is a tough one. Since last summer, I’ve been withdrawing cash from my LendingClub account and using the proceeds for other purposes. I’m approaching five years of investing on the platform and think it’s a good way to generate passive income.

However, a few things have turned me off.

First of all, the founder/CEO was ousted under duress for complicated reasons. Since then, there’s been a lack of product innovation. Returns have significantly decreased while the economy has strengthened.

Taxes become more complicated with LendingClub investments. The interest gained from lending to borrowers is easy to report. But deducting losses is arduous. On top of all that, the money is illiquid unless you sell at a bargain price on a third-party site.

I’m still a believer in the LendingClub loan products and the investing platform and will continue to own the stock. It’s one of only a handful of speculative holdings in my portfolio.

But it’s a place I can simplify by winding down my investments. However, it will take another four years for all the notes to mature. What to do with this asset class will be complicated to explain on a one-page instruction sheet.

4. Cut Back on Virginia 529 Fund Selections

We’ve invested $300 dollars per month per kid into the Virginia 529 plan since each was born. That’s $900 per month total. To diversify, I’ve always invested $100 in each of three different funds for each kid. Because of the inefficient way the state plan is configured, each fund is considered a separate account.

That means nine separate $100 withdrawals from my bank account each month (I complain more about it here).

From now on, instead of investing in so many different funds, I’m putting all the new money into the total market index fund available. That will require only three withdrawals all into the same fund. To diversify, I’m going to reallocate the existing balances among other funds.

5. Other Possibilities

Those four action items above are on the list for 2018. I’m committed to them. The set of ideas are possibilities for this year and in the future. These are tougher decisions, but I may get more serious and move forward with them.

Sell the condo

Last year, I seriously explored selling my condo rental. This is the most significant simplification action I can take. For now, my tenants and I are both happy and we’ll continue our relationship until they vacate.

Removing the property from my life would free up $100k+ of equity and eliminate two accounts and a mortgage. Selling would simplify my taxes and end my landlording responsibilities.

Close Motif Investing Account

I’ve been a Motif Investing customer for a while now, but the investment platform never appealed to me as much as M1 Finance does and Loyal3 did.

I continue to keep the Motif Investing account open for IPO investing opportunities. Since I run another website about IPO investing, the account keeps me abreast of investment opportunities. I’ve also profited nicely from IPOs over the years and expect to keep investing in selected offerings.

Transfer EVERYTHING to One Brokerage

After the first four simplification moves, I’ll still have four separate brokerage accounts. Seems like a lot, but I use them all. If I want to get very serious about simplification, I should put it all under one roof. That’s a big move and I’m not prepared to do it yet.

As I mentioned last week, I transferred my old crappy 401(k) into a traditional IRA at Vanguard, even though most of my accounts are with Fidelity. Why did I intentionally complicate things by doing this?

Well, I was expecting to work for a different employer who uses Vanguard as their 401(k) administrator. Long story, but I ended up finding a better gig. Vanguard is highly respected and very low-cost so and I wanted to try it. The balance is a sizable amount, so it will be at the top of the list when I pass the one-pager to Mrs. RBD. My initial impression is Vanguard is a bit clunky and outdated. But the funds are top notch.

I could also transfer my TD Ameritrade and M1 Finance holdings to Fidelity. I’ve had a TD Ameritrade account for about two decades. I’m not eager to leave as I’ve been mostly happy. But I could easily (I assume) transfer all holdings to a taxable account at Fidelity, bringing all my primary dividend investing and retirement accounts under that roof.

Trading fees are cheaper. But I fear the cost basis would not transfer accurately giving me a headache. I’d need assurances the transfer would go smoothly.

My M1 Finance is brand new and I intend to use it as my dollar cost averaging account to slowly accumulate shares and reinvest dividends. It’s 100% free to buy and sell. I’m rather enthusiastic about the platform and want to continue to grow assets there as well.

Conclusion

As a money nerd and blogger trying to keep things interesting, I enjoy investing on multiple account platforms. Habits don’t fade quickly. I’ll do my best to simplify, but investing is my hobby, and I like different options.

Even though I’m simplifying this year, I still may try some new investment platforms. I love investing and we’re in a golden age of fintech innovation. Platforms such as StreetShares and Wunder Capital are both of interest to me. By investing in new platforms myself, I can also help readers determine if they are right for them.

Closing some old accounts could make room for new accounts. But I’m going be more stringent in my selection going forward.

The changes laid out above aren’t huge, but the majority of our assets will be with fewer institutions. Doing this should make things more straightforward to populate a one-page doomsday letter for Mrs. RBD. The positive side effects when you simplify your finances are fewer accounts to track, easier taxes, and more free time.

Long LC, EMR, BAC, CVX, CSX, KO, PG, CLX, VZ, WTR
Photo by Lum3n.com via Pexels 

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15 Responses to The #1 Reason To Simplify Your Finances (And What I’m Doing About It This Year)

  1. Oldster March 22, 2018 at 10:55 am #

    Excellent treatment of a complicated topic, RBD. It is funny how easy it is, over time, to complicate your financial life. Each decision and each account seems to make sense in the moment. Then ten years passes and suddenly you are Berkshire Hathawayesque in your holdings and accounts. Simplification is a great idea, but can be tricky to implement. Use caution and go slowly.

    On the issue of the complications to Mrs. RBD should you meet an untimely demise, I suggest a detailed letter outlining each step she’ll need to take and advice on how things should be handled. That, together with a list of account names/numbers/passwords (kept in a safe or safe deposit box) should help guide her in the hopefully unlikely case of your unexpected departure.

    Great post, RBD. Keep ’em coming.

    • Retire Before Dad March 22, 2018 at 11:10 am #

      Good points, Oldster. It’s almost like going into debt. Very easy to take on more debt, but much harder to climb out. Though diversifying is much bettering than going into debt! I think some narrative about what to do will be part of the page. May need a small font size 🙂
      -RBD

  2. Smile If You Dare March 22, 2018 at 11:37 am #

    RBD,
    Congrats on the desire for simplification. And even more on following through.

    One point. Moving from Computershare to TD Ameritrade is simplifying your dividend reporting. True. But many discount brokerages, TD Ameritrade among them, have very heavy fees is you want to do something other than trade. For example, suppose you wanted to transfer your account from TD Ameritrade to another broker. TD Amertitrade will change you $75.00 to close your account. Suppose you needed to get certificates, you call them up and ask how much to do that, you’ll be surprised at how much they will charge you.

    So simplification is great. Also look at the other side of possibilities.

    • Retire Before Dad March 22, 2018 at 10:10 pm #

      SIYD,
      Since I’ve been with TDA for so long, I’m comfortable with them and know where the fees are. The bigger problem in the past has been getting the cost basis correct. Because if I ever sell, I don’t want to pay more taxes than I have to. I was not aware of the $75 transfer fee, but If I really wanted to leave, that fee wouldn’t bother me too much.
      -RBD

  3. Karl March 22, 2018 at 6:19 pm #

    I’ve thought about this many times as well. One thing I’ve done is identify a financial advisor that we know and trust to assist my wife. He knows and she knows that he’s on deck if something happens to me, and he’ll help her trim things up for a simpler financial life.

    Like you, I manage the finances and don’t find my system one bit complicated. But I’ve also started deliberately closing out extraneous accounts in the effort of simplification for my wife.

    We have wills in place, but we’ll get rolling on a living trust and health directives after tax season is behind me.

    • Retire Before Dad March 22, 2018 at 10:15 pm #

      Karl,
      We do have one or two people we could rely on. But honestly, advisers charge everyone fees. Even the honest ones charge high fees and think it’s fair. Family could also help. But when there’s so much stuff it would be stressful. Just hoping to make things easier to understand and put together some instructions.
      -RBD

  4. makingyourmoneymatter March 22, 2018 at 8:19 pm #

    I have this very same goal for this year. I truly enjoy managing my money, budgeting, investing, etc but after going back to work full-time this year, I’ve realized how much time it took me to keep it all up. That, and I also want to simplify so that if something happened to me, it wouldn’t be a nightmare for my family.

    • Retire Before Dad March 22, 2018 at 10:16 pm #

      I enjoy it too! That’s why I’ve accumulated all these accounts. It’s fun and I consider it a hobby. But I’m at the point I need to retract some and draw a line. This estate planning is a good catalyst. Not to mention, I spend a lot of time doing this, and she would not want to spend that much time on it.
      -RBD

  5. Dividend Gremlin March 23, 2018 at 9:16 am #

    RBD,

    I did a bit of this last year. I moved my Loyal3 shares into my regular taxable account, and when I took a new job I moved my old 401k to a new IRA under the same roof as my taxable and Roth accounts (Capital One Investing soon to be ETrade). Simplification can be a bear though, as accounts can pop up like weeds. Ex: my wife has 2 retirement accounts through her job (its frankly a bit ridiculous) and I have 2 new accounts where my employee stock purchase plan is housed – after my company decided to switch brokerages themselves…

    – Gremlin

  6. Frankie @ Fully Franked Finance March 24, 2018 at 3:55 am #

    I’m Fully on board with keeping things simple. Even though I invest in individual stocks, everything is in one account, and I don’t buy too many. Things can get very messy very quickly if you’re not making an effort to keep it simple, as I found out the hard way many years ago. Everything seems to run smoother when its simple, and its very calming too 🙂

  7. Joe March 26, 2018 at 11:54 am #

    Simplifying your finance is a good move. You can deal with it, but your family probably can’t. That’s the same situation for us too. I simplified a lot of our investment over the last couple of years. All of our equity investment is at Vanguard now. I’m also getting out of P2P lending. I like real estate crowdfunding, though. It has good returns so I’ll stick with it for now.
    Good luck this year.

  8. everydaybenjamin April 1, 2018 at 12:12 pm #

    I feel your pain with the 529, and the multiple transactions all the time. We have two kids, each with six accounts. We’ve done this to a) maximize the state tax deduction and b) diversify a bit. We have automatic contributions each month into one account for each of them to meet the $4k amount, the per account tax deduction limit. Whenever there’s a little extra cash that we decide to funnel into the 529s, we put that manually into some of the other accounts. In reality, we probably only need two accounts per child, as we have yet to contribute anywhere close to $8k per child per year, but having a few extra accounts lying around doesn’t bother me too much.

    On a side note, because of the age difference, we have slightly different allocation for each child, and it’s been interesting to watch the “Aggressive Growth” account outpace the “Moderate Growth” account over the last two years. Both have received equal contributions, but the Aggressive Growth has seen much better returns.

    • Retire Before Dad April 1, 2018 at 12:34 pm #

      The Virginia 529 system is so bad. Yet it still ranks as a top national plan (I think because of the fund selection). But actually using the system is the worst. The multiple account problem is just the start. This has become easier now, but we’re not as diversified. I will have to change this manually in the future or settle for the age-based options eventually.

  9. Femme Frugality April 3, 2018 at 9:56 am #

    This is a great idea. I can see how it would seem simple to the person who is handling the day to day finances, but I can also definitely empathize with the person left behind to handle things if something happens. I think your idea of consolidating it all down to one plan will definitely be helpful, especially at a time when one doesn’t even want to think about finances at all.

    • Retire Before Dad April 3, 2018 at 11:47 am #

      Yeah, I think it makes a lot of sense, especially knowing my wife. Now it’s a matter of doing what needs to be done! Hard to prioritize some of this and I’ve already hit a roadblock.

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