I’ve been quite effusive about Simple since I first signed up. There are two particular features of Simple that make it incredibly powerful as a financial planning tool: Goals and Safe-to-Spend.
Simple allows you to create goals for any expense you’re planning. It works like this. You name your goal, set an amount you’d like to save and then decide whether you want to save it now or save it over time until a specific date. This is where Safe-to-Spend comes in, because any money that is put into that goal is no longer available in your Safe-to-Spend total. If you choose to save over time, Simple will gradually move money from Safe-to-Spend and into the goal.
The psychological power of this setup can’t be overstated. I know that I can see my actual balance and I may have plenty of money in my account, but if that Safe-to-Spend total is low then it’s hard to spend anymore. Not only would I feel like I’m spending money I don’t have, but I could see in my goals the things that I’m taking money away from if I spend beyond my Safe-to-Spend. Effectively it’s a digital version of Dave Ramsey’s envelope system.
Also in the Goals section of the website, there’s this fantastic little popover that shows you how much money will be put in Goals until your next paycheck. In my opinion, this information is tremendously underemphasized.
So how do I use Simple? First off you have to get around one painful fact. Simple doesn’t have recurring goals. You can’t say a goal occurs once a month or year and have a goal automatically created. So let’s break down what different types of goals I have.
Yearly Bills
Evernote, Dropbox, Fastmail, and the list goes on. If I can get a cheaper bill by going yearly, I usually do it. Once a year I create a goal for these items. Easy to maintain. And you’re never surprised by a big unexpected expense. You’ve been saving all year, and that big expense is just a blip.
Monthly Bills
I started out trying to maintain the monthly things by actually creating a goal each month. But that takes a lot of work and can get a little confusing within a given pay period. So it’s better to handle these yearly as well. Many monthly bills, like rent, cable, internet, or mobile phone, have the same cost every month. With these you can calculate a total for the year and create a goal. Then by the time each bill rolls around, you should have just the right amount to pay it from the goal.
Others, like utilities, are variable. For the variable bills it helps if you have a year’s worth of bills to look through, then you can estimate what a year is going to cost and get pretty close. What’s important is that you have a decently close number, and your goal will prevent that monthly bill from making a dent in your Safe-to-Spend.
Budgeting
Another type of goal I create is a yearly budget for certain categories. So I create a goal once a year for things like groceries, gas, tithing, and fun with my wife. Again, you’re looking for solid estimates here, not exact totals. If you have to make some adjustments throughout the year that’s okay. It forces you to really think about your spending on these things and be aware of it.
One off expenses
You can create goals for other expected or desired expenses. I have goals for my wife’s birthday, our anniversary, and Christmas. I can save all year for these things and not be caught off guard when they come around. If you are thinking you want to upgrade to a new phone next year, you can start saving now. This is how I make buying phones off contract a reasonable reality. Instead of a sudden major expense, or paying my carrier more every month to make that phone cheaper up front, I pay myself a little every day until iPhone launch day comes.
A cushion
When you start really using goals, you end up with a nice chunk of money in them that isn’t in your Safe-to-Spend. What’s nice is it gives you this cushion of immediately available money. If an unexpected expense does come in, you can pull some money out of a few goals and adjust your expectations. Maybe spend less at Christmas. Or cancel/reduce a service. Or just take the money out of the goal and know you’ll be able to compensate gradually. Instead of taking on credit card debt, you take on self debt. It’s so much nicer to know exactly what you’re sacrificing rather than blindly spending out of a single pool of money. (Unless you have an actual pool of money, then you just do you)
Simple has been a huge boon to my financial management. Bills and large expenses are easy to plan for and track and my stress levels are greatly reduced. I don’t have to plan and save in a spreadsheet, Simple does it for me. One might say it makes managing your finances… Simple?