10 ways to simplify your life in 2008

By Liz Pulliam Weston

It's not your imagination. Managing your money is getting harder.

You have to make a lot more decisions than folks did a generation or two ago.

Instead of one health plan, you may need to choose from half a dozen -- if you can afford coverage at all. Instead of an employer-provided traditional pension, you have to manage your own 401(k) and figure out not only how much to save but how to invest.

Instead of a single credit card with a relatively low rate -- all that was available to most households in the 1970s -- you probably have a wallet full of options, all with different rates, terms and due dates to monitor.

• Talk back: What are your financial goals for 2008?

Fortunately, technology is riding to the rescue. Used properly, it can help you stay on top of your money with minimal effort. These tips from my latest book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," should help you streamline your financial life:

Simplify and de-clutter

Use direct deposit. This should be a no-brainer, but about a quarter of the people who are eligible for direct deposit of their paychecks don't sign up. Perhaps it's an irrational fear of electronic transactions holding them back, but they should get over it. Direct deposit is easier, faster and safer than running around with a live check in your wallet.

Get true overdraft protection. Real overdraft protection links your checking account to a savings account, line of credit or credit card. Money is drawn from one of these sources if you write a check or initiate a debit card transaction for more than you have in your account. The annual cost is reasonable -- $20 to $50 is typical -- and you may pay another small fee anytime you use the overdraft.

What you don't want is "courtesy overdraft" or "bounce protection" that many banks and credit unions automatically offer their customers. That "service" can cost you $30 to $40 every time you make an over-limit transaction, and those fees can add up quickly. One reader racked up more than $200 in bounce fees buying songs for her MP3 player; each 99-cent tune triggered a $30 fee. Read "Never pay another bounced-check fee" for more details on how your bank profits from bounce protection.

Consolidate your accounts. Clutter isn't limited to the tangible stuff in your home. You also can create financial clutter when you have accounts all over the place. Too many accounts make it harder to adequately monitor your money, and you may pay more account fees than if you were able to maintain higher balances in fewer accounts.

For example, you could:

• Roll 401(k)s from previous employers into your current plan or into an individual retirement account (IRA).

• Combine IRAs as long as they're the same kind and they're all yours. You can't combine yours with a spouse's, for example, or combine regular IRAs with Roth IRAs -- at least not without serious financial consequences.

• Combine taxable brokerage accounts. If you have different goals for the various accounts you have now, you could consider maintaining separate accounts but at least consolidating them with the same brokerage house.

• Trim your credit cards. The more cards you use, the more due dates and interest rates you're forced to monitor. If you pay off your balances in full, consider carrying just one card in your wallet, with another at home as a backup. If you're carrying credit card debt, consider leaving all your cards at home. Don't close accounts, since that could hurt your credit scores, but stop using them until you've retired your debt.

Consider two checking accounts. Consolidation isn't always best. If you have trouble figuring out how much money you can spend and how much needs to be reserved for bills, consider the two-account system adopted by several people who post on the Your Money message board.

These folks typically have their paychecks deposited to a checking account at a brick-and-mortar bank -- often one that offers free checking if you use direct deposit. They have a second checking account they use to pay bills. If they can't get the second account free from their bank, or their bank doesn't have free online bill pay, they use an online bank, such as ING Direct, that offers fee-free checking and bill-pay services.

Next, they total all their bills for the year, using the previous year's bills as a guide, and divide the result by the number of paychecks they get each year. They set up automatic transfers so that this sum is whisked every payday to the second account.

Some go further by setting up automatic payments for most or all of their bills. Others prefer to control when bills get paid using the online bill-pay system that comes with their second account.

This two-account system takes a little effort to set up and monitor, but done right you'll eliminate uncertainty about whether you can cover your bills. What's left in the first account is the cash that's available for spending on clothes, eating out, etc.

Continued: A schedule for success

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