Have you ever watched the show Hoarders? Maybe you haven't had the desire to actually sit through a cringe-worthy episode, but your television screen may have been momentarily littered with someone else's belongings while channel surfing.
The thing is, these people's homes are so littered with stuff that even the smallest and most basic tasks seem next to impossible. Going to sleep at night entails finding a safe pathway through the 7 foot-high piles and clearing the bed of debris. Cooking dinner generally can no longer be done (except sometimes through a microwave), so each meal feels monumentally difficult to prepare. Forget about keeping track of important documents, even ones threatening to declare the person's home uninhabitable from the city government where they live.
Your home, while cluttered from time to time, most likely will never reach critical mass like these people are dealing with.
But let me ask you this: how is your financial house looking? Is everything accessible, easy to manage, and easy to see…or does it look more like it belongs in an episode of Suze Orman: Hoarders?
The reason why I ask is because of something called "Cognitive Overload". This phrase describes what hoarders, people in financial messes, and people spending 10+ hours straight on the internet feel: bombarded with too much stuff and information so that nothing is actually absorbed. In other words, it's a state of complete overwhelm.
If you're dealing with cognitive overload when it comes to your finances, I've got some tips for how to get over the feeling of overwhelm and into the realm of purposeful action.
Declutter Your Financial House
It's time that you declutter your financial house. By doing so, you will see much more clearly what needs work, what needs to be changed, and what is working well. Start by doing the following:
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Take an Account Inventory: If you're like me, then you tend to collect accounts. Perhaps you got a sign-on bonus for one savings account, but already own three others. Or maybe you left your 401(k) at your last job. Take the time to first list out all of the accounts that you own, and then to choose which accounts to keep and which to lose. If you are earning more interest in one account, then keep that one but get rid of the other savings accounts. Try to keep all of your retirement accounts under one brokerage firm. Close down duplicates and get clear on what you have.
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Set Up a Filing Cabinet: There are a lot of paper trails when it comes to finances. Yet some of the paperwork (not all) is extremely important to not only keep, but to be able to access. Not to mention that when you know you can access it quickly and easily, you won't build mental obstacles around doing some normal financial tasks. Purchase yourself a filing cabinet and label the following folders as a place to catch things like quarterly statements: retirement accounts, beneficiaries, insurance policies, business checking/savings, taxes, credit cards, debt, etc.
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Shred, Shred, Shred: After you complete the steps above, there should be a sizable amount of paperwork that is just fluff hanging around. Get rid of it by first shredding, then by recycling it.
These steps will force you to locate important financial documents, put them in order, and stay on top of them.
Get Very Clear on Your Goals
Once you can see things a bit more clearly, your financial goals may start popping out at you in a way they never have before (clarity is key!). Depending on how messy your finances were before the decluttering phase, you may have very specific goals such as: update/add beneficiaries, roll over 401(k), etc. Or you may be beyond that (the more you declutter in the step above, the more you can focus on your overall financial health) such as get out of debt, save money towards a trip, open a retirement account, etc.
In order to avoid cognitive overload, you need to choose the 2-3 goals max to work on. All the others can still be goals, but you won't tackle them until you get through with these first few.
Stay Focused by Setting Up a Collection System
Now it's time to figure out how to actually achieve these goals without suffering from cognitive overload. You will likely need to research things, ask people questions, make phone calls. And during this time you will get bombarded with other articles you run across and other things to do that have nothing to do with your goals (we live in the crazy internet age, after all).
Instead of reading through things that will only overload your system with information that has nothing to do with the task on hand (but may be important later…which is why you're having trouble walking away), put the article/paper/thing in a collection system. This could be as simple as organizing folders on your "favorites" in your internet browser by categories, opening up several more folders within your filing system, or collecting ideas in a Word document on your computer. It doesn't matter how you collect things that you think might be important later, what actually matters is that you have a system that puts you at ease because you can find these extraneous things later, allowing you to stay focused on your task at hand.
Feeling a bit more like you can move forward with your finances without suffering from cognitive overload? What purposeful action will you be working on first?
Amanda Grossman is guest blogger for ReadyForZero and a professional freelance writer who specializes in personal finance topics. She also runs FrugalConfessions.com.
