Financial Steps for 2011: Simplifying Investments

With Thanksgiving (and soon Christmas) approaching, it’s a good time to take stock of financial efforts this past year and plan for next year.  For next year, I am planning a number of steps to simplify savings and investments.  After several years of practicing, I think a number of tools that I use for budgeting and financial planning are not needed as much:

–Stop tracking each item of expenditure — This is a big deal, as tracking each expense really helped me to see where my dollars were being spent. However, after doing this for 2 years, I am getting rather sick of accounting for each expense. I also feel that I have enough discipline to keep expenses in line despite not tracking.

–Stop tracking individual investments as often — Although similar to the above, the main aim of tracking investments less often is to avoid getting into the mindset of a day-trader.  My investment strategies that have worked out the best have been a long-term strategy, regular automated monthly withdrawals, and shifts in the long-term asset allocation only when market conditions shift drastically, say once every 3 years.  Hopefully, both of these measures will leave me more time for other things.

–Limit reading of the financial press — Although I enjoy reading financial news, I find that much of what is printed (especially analysis of the market) tends to promote doom and gloom when markets are down and euphoria when markets are trending upward.  Obviously, this is the opposite of a sound investment strategy.

–Consolidate accounts if it makes sense – In the last couple of years, I have consolidated a number of financial institutions that I use. This keeps the paper work under control, especially during tax time.  Also, with Vanguard and other institutions lowering the threshold for their low fee mutual funds, consolidated accounts help to take advantage of discounted fees and lower maintenance costs.  One of my challenges that might limit consolidating further is the tax consequences of selling investments.

shared at this week’s Carnival of Personal Finance