How (and Why) to Apply the KISS Principle to Your Finances

In Personal Finance, as in life, some of the best advice is to just Keep It Simple Stupid.


The History of KISS

The KISS Principle, Keep It Simple Stupid, originated in the 1960s at the aerospace company Lockheed. Kelly Johnson, the engineer credited with the designs of the stealth SR-71 Blackbird, coined the phrase.

Johnson explained that everything they made needed to be simple enough to be repaired in the field with basic mechanical training and simple tools. Anything more complex would expose service-members to unnecessary risk.

In Personal Finance, I like to apply the KISS Principle in two ways: 1) Managing your money should be easy; and, 2) Never buy a financial product you don’t understand.


Managing Your Money Should Be Easy

Being the Chief Financial Officer (CFO) of a huge multinational conglomerate is a pretty complicated job.

However, being the CFO of your own finances should not be complicated. If you have a hard time keeping track of all of the moving parts of your personal financial life, then maybe it’s time to remove some of those parts.

Do you have more than one checking account? More than one savings account? How many cards are in your wallet? Are any of those accounts unnecessary?


Side note: Ally recently upgraded their online savings accounts so that you can divide your deposits by goal within each account. Instead of having a different savings account for each savings goal, you only need one. I know that lots of banks offer this now, so it may be worth checking into whether you have access to a tool like this at your bank.


If you have unnecessary clutter taking up space in your financial life, it may be time to Marie Kondo your wallet! Close some accounts and simplify!

And, don’t forget about the Undetailed Budget. I have found that most budgeting tools add so much complexity and so many categories that they are impossible to track. With my Undetailed Budget, I only need to know four numbers: Income, Recurring Expenses, Personal Spending, and Saving.

Personal Finance is not rocket science. It is not super complicated.

Find a way to spend less than you make. Keep your credit under control. Save & invest for your future. That’s it. If you find that you are spinning around spending time just trying to make sense of all the complexity, then it’s time to KISS that complexity goodbye.


Never Buy a Financial Product You Don’t Understand

As a rule, I never buy a financial product I don’t understand. But, I’m a huge finance nerd and spend a ton of time researching Personal Finance. As a result, there are very few financial products that I don’t understand.

However, all that research has led me to a conclusion that may be valuable to you: Generally, the more complex a financial product is, the more profit is built in for someone else.

Things I have never purchased: annuities, whole life insurance, options contracts, rent-to-own arrangements, or timeshares. I have researched these products and I understand how they work. But, there are easier, less expensive, and less complex ways to do each of these things.

I have also bought things in the past that I don’t buy anymore. They are either too expensive, too risky, or too complicated! I used to buy extended warranties, individual stocks, car leases, and so much more. Not any more!

Your checking, savings, and CD accounts should be simple and avoiding fees at your bank should be easy. You shouldn’t have to buy your own money.

Also, when it comes to investing, KISS is part of why I have exactly five investments. I don’t have any individual stocks. And, I rebalance regularly.

Before you buy or invest in something, make sure you understand it. And, if understanding it would require a PhD in Finance, then you probably shouldn’t buy it. It’s that simple.


Final Thoughts

When you take control of your finances it can be like a cloud lifting to let the sun in. If you are overwhelmed by juggling an overly complicated financial lifestyle then it can be nearly impossible to see what is actually happening.

By juggling so many pieces and parts you are making it harder to see your situation clearly.

By reducing unnecessary complexity you will get visibility into exactly where your money comes from, where it goes, and how to tweak your situation to make it better.

Keep It Simple Stupid.


I hope this has been helpful! I welcome your comments with your thoughts and questions. And, don’t forget to subscribe to the newsletter to get notified whenever a new article is posted.


2 Replies to “How (and Why) to Apply the KISS Principle to Your Finances”

    1. Good point! Especially after the Tax Cuts and Jobs Act of 2017 increased the standard deduction to $12k for Single filers and $24k for Married filers. As a result, the vast majority of taxpayers should have a super simple tax return.

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