Clean Up Your Finances By Setting A Limit Of 20 Accounts

Consumers are worried about their family's financial security. A 2023 pulse check by Forbes Advisor found that 75% of respondents reported they were either “very concerned” or “somewhat concerned.” To reduce your anxiety, one of the most important money habits I teach as a financial coach tis to curate your finances into no more than 20 accounts.

One reason why most people get overwhelmed with money management is they have simply too many accounts. So, when they try to overlay multiple goals over a disorganized list, it quickly can get messy and confusing quickly. Here are four steps to get your finances streamlined.

Gather Your Accounts In One Online Platform

Your net worth is calculated by taking the monetary value of everything that you own and subtracting out the monetary value of everything that you owe, including credit card debt, car loans, mortgages, student loans and other forms of debt.

Before tackling any financial goal — whether it’s paying down debt, saving or investing — it’s important to understand each account you own fits into your overall financial well-being as measured by your net worth.

I recommend tracking all of your finances in one online system such as:

• Monarch Money (What I use personally for a nominal monthly fee)
• Empower (A free tool in the U.S. but be prepared for a sales pitch every now and then for your investments)
• PocketSmith (A tool if you’re based in Europe)

You may also find a net worth tracker is included in the dashboard of one of the banks you already do business with. These tools reduce the busywork of updating manual spreadsheets.

It may be a pain to find your usernames and passwords, but curating your accounts will help you see each one’s relative impact on your finances. For example, $5,000 worth of credit card debt is more impactful to someone whose net worth is $50,000 versus $500,000.

Organize Your Accounts Into 5 Financial Categories

As you bring your accounts into one platform, organize them into these five financial categories (these systems will often already do this for you):

• Cash and cash equivalents, including checking, savings, certificates of deposit, money market accounts and similar accounts;
• Investments including retirement accounts, employer sponsored accounts, brokerage accounts, and smaller investor apps such as Robinhood;
• Property, including any items that could be liquidated for cash such as vehicles, real estate, art or other items of value that you consider to be part of your wealth;
• Credit cards, including ones that you may not actively use but are still open; and
• Loans, including student loans, personal loans, car loans, mortgages, medical debt and tax debt — any debts you owe other than credit cards.

The first three categories are assets that will help you build your wealth and add to your overall net worth. The last two categories are liabilities that will detract from your overall net worth.

By organizing all of your accounts in this way, you see the holistic picture of where all your money is. As you build better money habits, you can shift your attention and focus to the first three rather than the last two.

Give Every Account A Unique Name And Distinct Purpose

Curating is different than collecting, and most people collect money accounts. Curation of your finances means you:

• Take special care and consideration of each item;
• Have a level of discernment beyond surface level;
• Have an intellectual curiosity about how to find the best ones;
• Enjoy the process of accumulating them; and
• Know which and when to let go.

Then edit the name of each account to reflect its purpose, and how you feel about it. Names of your accounts should reflect your attitude and whether you want them to stay or go. Be creative, clever or just plain honest about what the accounts do for your wealth building journey. Have fun with the names so that looking at your finances is more joy and less drudgery.

Close And Consolidate To Fewer Than 20 Accounts

Giving each account a unique name helps you figure out if you have multiple ones performing the same purpose, or any that don’t have a concrete purpose. Question why you have more than four accounts in any particular category.

For example, having more than one checking account is, more often than not, highly unnecessary and a missed opportunity to earn more interest. I also often encounter people who have multiple savings accounts without any particular goal in stashing that cash or a blanket just-in-case scenario. Start by curating down to:

• One checking account for daily expenses;
• One savings account for emergency fund;
• One savings account for long-term savings goal; and
• A business checking account (if you own a business).

Advanced investors may have more than four investment accounts, but start organizing such as:

• Rolling over old retirement accounts into your one for simplicity or consolidating into one individual retirement account;
• Reviewing the expense ratios and fees of your investment accounts;
• Closing brokerage accounts if you’re not maximizing tax-advantaged accounts to their limits; and
• Recovering forgotten investment accounts.

Think of each of your financial accounts as a separate handbag. Having multiple checking, savings, investment accounts and credit cards is like carrying around an armful of handbags around town with just a little bit of money in each. It’s not efficient and it feels a little silly — though it would be nice if they were all luxury.

Just like carrying all those bags can weigh you down, having more accounts to manage than you really need can weigh you down financially and emotionally. Slowing down and reducing the number of accounts you manage on a daily basis to fewer than 20 will significantly boost your financial progress.

By Bernadette Joy, Contributor