If Your Finances Feel 'Complex,' It's Probably a Bad Sign

Think about the various bank accounts, credit cards, loans and retirement funds that make up your personal finances. What words spring to mind to describe them?

If you said "complex," chances are you're finances aren't in great shape.

Chase Blueprint teamed up with the Aite Group to take a look at how Americans finances' are faring five years after the financial collapse. Their survey found an interesting indicator for an individual's financial health: The more "complex" you consider your finances, the more likely it is that your finances are in rough shape.

According to the survey, just 14 percent of people whose finances have improved since the recession say that their finances are "very complex"; among those whose finances have stayed about the same since the recession, just 12 percent described their finances in those terms. So if you feel like you've been keeping your finances simple, chances are your money situation has been stable or improving over the last few years.

But if your finances have gone downhill, it's a different story: "Among consumers whose financial health has declined, however, about three in 10 consider their financial life to be 'very complex,'" the study finds.

Is Complexity a Cause, or an Effect?

As with all surveys of this sort, it's tempting to draw a simple correlation -- for instance, that you need to reduce complexity in your financial life if you want your money situation to improve. So how do we define complexity?

Chase's Tom O'Donnell says that those who said their financial lives were complex have some things in common.

"They are borrowing from a number of different sources, have multiple financial products, and are paying multiple fees," he says. "There are lots of factors in their financial lives that they are trying to deal with."

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But if complexity is a matter of paying a lot of fees and having a bunch of loans, then perhaps we have it backwards. After all, taking out a lot of loans may be a sign that you're in dire financial straits to begin with, and if you're paying a lot of bank fees, it could be because you're constantly overdrafting, bouncing checks or paying your credit card bills late. So maybe it isn't that complexity causes financial difficulties, but that financial troubles cause complexity.

"The borrowing behavior that drives the perception [of complexity] is driven by fact that person needs to borrow," agrees Aite analyst Ron Shevlin. Still, he points out that the study was focused on how people perceive the complexity of their finances, so not everyone who described their financial life as complex was actually dealing with a confusing array of financial products. Even if you've only got a few accounts to manage, you might see that as a complex situation if you simply don't have a good grasp on basic personal finance.

So it's partly a matter of financial literacy, and the study does indeed find that those who consider themselves financially illiterate did indeed see their financial health deteriorate in the last few years. Still, Shevlin doesn't think that simply educating people is going to close the literacy gap. It's also a matter of getting over your anxiety about money and engaging with your finances, a process that can be helped along by using personal finance management tools.

"It isn't so much literacy driving perceptions of complexity, it's the extent to which people are engaged with management of their financial lives," he says. "We need to get people more involved, and get them to believe that their financial lives aren't that complex."

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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