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Recently, I realized that too much optimization of our finances created complexity that I did not want anymore. Optimization of finances is about balance.
Until recently, we were optimizing for the best price. Now, we are trying to simplify our finances in a few ways. In this article, I will discuss what we are planning to do.
Optimization is all about balance
Sometimes, it is essential to realize that optimization for the best price often has a downside. Basic optimization is generally good. But when you overoptimize for prices, you give up something else.
For instance, if you have three different payment cards, you introduce complexity to each payment. You have to consider which card you want to use for each expense. And you have to carry them with you in your wallet.
Of course, it is not the end of the world. But you have to ask yourself whether it is worth it. Sometimes, it is, and sometimes it is not. There is no right or wrong answer.
Another example is when comparing prices. If you buy something online, you can compare every website to find the best price. It would yield the best price but at the cost of your time. Or you could use a good website with good prices and use that one. That does not mean you should be dumb about your expenses. But you should consider that the cheapest is not always worth finding.
The last example would be when shopping for plane tickets. You could spend a lot of time finding the absolute cheapest tickets. And you could even take tickets to different places first to find the best itinerary instead of a direct flight. However, you would spend time twice to buy the tickets and once in transfer between airports.
It could be entirely worth it if you can do what you want. But you may want to keep more comfort and save time.
I am finding more and more that I prefer time over money. I do not compare services that much anymore. For instance, when I shop online, I use Galaxus by default. They do not always have the best prices but they have good average prices. And they have everything, so I save time.
Simplifying our credit cards
So far, I have used what I consider to be the optimal credit card strategy:
- Swisscard Amex for maximum cashback on domestic purchases
- Cumulus Mastercard when Amex is not accepted
- Neon for paying in foreign currencies
I still believe this is a great credit card strategy. However, it means I always have three cards in my wallet. And it especially means that even in Switzerland, I must think about which card I should use.
I want to make that simpler. For that, I will stop using the Swisscard American Express. If the Amex card was accepted everywhere, I would only use this card, but I do not want to carry two credit cards.
I accumulated about 50 CHF of cashback with this card last year. Moving these expenses to the Cumulus will mean losing about 33 CHF. This difference is not significant enough to warrant having two cards for me.
I was even thinking about stopping using a credit card at all. However, I would only have a debit card, and many things still require credit cards.
In the meantime, Cembra introduced the new Certo One. I will move from the Cumulus Mastercard to the Certo One as my only card.
It does not mean I do not recommend the Swisscard Cashback Amex anymore. If you want to be optimal and use it enough, it is still the best credit card available in Switzerland. But when we put the pros and cons in the balance, it was not worth it anymore.
Centralizing our insurance policies
Optimally, you want to find the cheapest insurance provider that meets your needs. However, we have so many different insurance policies:
- Base health insurance
- Complementary health insurance
- Legal protection insurance
- Building insurance
- Household and Personal Liability
- Car insurance
Currently, we use different providers: Assura and Helsana for health, Generali for legal protection, and Helvetia for other insurance.
If we have a claim, we need to deal with too many different companies. I currently do not want to deal with that. So, I am planning to consolidate with fewer providers.
This year, I have canceled all our complementary health insurance policies from Helsana and will move them to Assura. It may not be the cheapest, but I wanted a single provider and am satisfied with Assura as the base insurance. As a bonus, we will save money compared to Helsana.
I will also move my legal protection insurance to Helvetia in the future. I cannot cancel it but I should be able to in 2024. Again, it may not be the cheapest, but I prefer having one less provider than the cheapest.
So, we are balancing the ease of dealing with insurance providers with the monthly price. We could save a little more money by keeping things separate. But we decided it was not worth it.
Reducing our online accounts
When I started my financial journey, I tested many things. For instance, I still have several P2P accounts, such as Mintos. And I also have some crowd-investing accounts like Crowdestor.
Since I no longer plan to invest in these services, I will start closing these old P2P accounts. Unfortunately, it is not as simple as it sounds since this means liquidating some of the loans I still have. And it also means that I have to wait until some of the loans and projects are unblocked.
It will likely take me over a year to close all these accounts. Once this is done, I will also be able to close my Revolut. I am keeping it since I will use it to receive money from my P2P accounts.
Another account I plan to get rid of is my Zak account. I opened it when writing my Zak review and have not used it since.
Keeping all these accounts means I have to keep track of them in my net worth, and I also have to keep them secure and change passwords from time to time. So, I should try to close them.
I have outlined so far how we chose to simplify our financial life. But there are other ways for you if you want to.
One thing I would recommend to everybody is going paperless. Once you are paperless, it is so much simpler to find documents! And it is also a great way to reduce the clutter at home.
You could also reduce the number of expenses you have by cutting down some monthly subscriptions. Doing that will save you money and make paying bills easier.
Some people would also recommend automating your finances to make it simpler. It may make sense, but it is not always a great idea. The problem is that when expenses are automated, people start to forget about them. And when you forget about expenses, you do not consider optimizing expenses.
It is why I recommend not automating your personal finances. But many people will disagree, so you have to choose what works best for you in the end!
These last few months, I have been thinking about how we could simplify our financial life. In some cases, we can optimize for both price and simplicity, but usually, when you optimize for the best price, you give up something, which often complicates your life.
For instance, having three payment cards in my wallet may be optimal for my finances but it forces me to think about which to use for each payment, which is not what I want anymore.
It is all a matter of balance. Sometimes, the best price or returns is the way to go, but not always. Sometimes, optimizing for time or simplicity makes more sense.
I do not recommend stupid expenses. I still think people should optimize their finances. But there comes the point where more optimization is not always the best solution.
What do you think? How do you plan to optimize your life?
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