I have an uncanny knack of complicating things. I often equate complexity with sophistication. Anything worthwhile has to be complex. How can something that is so sophisticated be so simple? There has to be something more than what meets my eyes. What am I missing here?
I am a software developer by profession and my urge for complexity only adds to my natural instincts. As developers we love complexity in our design and our code base. It makes us feel good about ourselves. We love solving complex problems (in reality we just move the complexity from one place to another). How else do you explain spaghetti code or over-architected systems, we end up with; all in the name of scalability and extensibility?
So when I learned about all the tools and techniques in personal finance, you can guess what I was itching to do. You see, simplicity stood no chance in my personal finance.
Today, I will share with you, all the “complexities” I managed to introduce into my personal finances. None of them were required. They were not part of the requirements. They did not simplify my finances. I learned the hard way, how useless they were and had to ditch them all.
1. Budgeting – Death by category
I remember the first time I wrote our
- Farmers market
It’s obvious my wife couldn’t care less where we actually shopped for grocery, as long as we were within the budget for that category. But I had to do it. I had to track that last dollar and classify it under the “right” category, else all hell would break loose.
If you find yourself getting all worked up about all the subcategories within a given category, do me a favor and stop! Just go with some broad categories and forget the rest. For the love of god, don’t do it.
2. More credit cards == More Tracking
Before I got really obsessed about becoming debt free and handling my finances better, I carried 8 different credit cards. I had the whole rainbow of cards and more. Each one of them had a “special place in my heart” and was filed carefully in my wallet. Each card had a mission to accomplish. It had to work extra hard to earn me rewards points and help me improve my credit score. How cute!
I had the following credit cards to my name:
- Discovered IT Card – My grocery shopping card
- Bank Of America Cash Rewards Card – My bill pay card
- Bank Of America Better Balance Card – Build my credit score card
- Bank Of America Travel Rewards Card – My airline miles earner card
- American Express Card – Spend by category with the most points card
- Amazon Card – Make Amazon rich card
- Fidelity Rewards Card – Earn 2% flat cash back card
- Chase Freedom Card – Anything but freedom card
I was so caught up playing the “anything to increase my credit score” game that I didn’t realize I was actually playing the “borrow-spend-repay” game and making those credit card companies rich!
I started listening to Dave Ramsey and quickly realized what a mess I had gotten myself into. Not only was I spending more than I needed to but I was simply complicating my finances as well. It was simply a nightmare to track all of these cards and their payment due dates. They had reached a point of diminishing returns. They were causing more harm than good.
I might not have felt the pain spending the money using all the different credit cards, but I sure did while paying them off. So don’t play with the credit cards!
Ooh! that Amazon card was the hardest to chop! I hear they are made of metal. Smart!!
Full Disclosure: I have retained only 1 credit card and that fella comes out only on special occasions.
3. Opening Too Many Bank Accounts
Another mistake I did while managing my paycheck and savings goals, was to open too many bank accounts. At one point, I was splitting my paycheck between 2 large national banks and 1 credit union.
I was enticed into opening my 2nd checking account with a large bank, with an opening bonus. Come on! Who does that? The credit union offered me a lower interest rate to refi my auto loan. How could I say no? I bent over backward and accepted their offer.
The sh*t hit the roof when I had opened (hold your breath) 7 accounts (online savings accounts) with Discover Bank and 7 with Marcus Bank to manage different micro savings goals. I had more accounts open than I had money deposited in some of those accounts!
I had taken the “different-accounts-for-different-goals” too far. At one point discover bank
After the dopamine rush finally receded and some sanity restored, I closed all of those unnecessary accounts and now I just have 3 accounts – 1 joint checking account and 2 online savings accounts.
I have tried to do the same with my investment accounts as well. I will write about my (mis)adventures opening investment accounts some other day.
All of this to say, keep it simple! I hope this helps you too. For the love of god, keep things simple and enjoy your life instead of spending time tracking where you spent the last dollar.
Simplicity is the ultimate sophistication. ~ Leonardo da Vinci