Spring Clean Your Finances With These 5 Expert Tips

In the spirit of Marie Kondo: Do your finances spark joy? If not, it’s time to get organized.

Spring is a perfect time for fresh starts. That’s why over 77 percent of people use the season to declutter their homes—tossing papers, donating clothes, and organizing their remaining belongings.

But houses aren’t the only thing that might need a deep clean—finances may, too.

Recently, a new method of home organization has won over devotees across the country and around the world. The KonMari Method, developed by Marie Kondo and popularized through her Netflix show “Tidying Up with Marie Kondo,” encourages the pursuit of happier, cleaner, and more mindful lives through a careful purging of items that no longer bring the owner joy.

Were you one of the many inspired to give their homes a thorough scrub? Ready to do the same with your money? Here are five expert tips to help you declutter your finances.

Tip #1 Know Your Financial Standing

The first step in cleaning up your finances is to get an overview of where you stand. So, much like organizing your home, take all of your finances and lay them out. Instead of a mountain of clothes, this might be financial papers, digital receipts, and monthly bills.

According to financial planner Tess Zigo, “[s]pring cleaning starts with understanding your cash flow.”

Tess Zigo, Certified Financial Planner

Why? Because cash is king. The cash flow is a window into all your income versus expenses and as you do this exercise you can collect all documents relating to your personal finances and put the “puzzle together.” Paper or electronic, it doesn’t matter.

I am a big proponent of New Year’s resolutions, and so every year I sit my reluctant husband down and we go through last year’s spending to make sure we understand where our money is going. Right now I am really into Marie Kondo’s organizational show where she helps families organize their belongings and really review every item/possession to make sure you only keep things that bring you joy.* I’ve implemented that into my family’s budget review process and with clients’ budgets also, so when we review our spend for the prior year we analyze the highest spend categories first to make sure it aligns with our family’s goals and values. In order to make the process fun and simple, since we are busy parents of two toddlers and don’t have all the time in the world to spend tracking receipts and expenses, we use a tool that links to our credit cards so it puts together an annual summary for us and categorizes our expenses. This makes it easy and quick so we have no excuse not to do it!

So for example, looking at our last year’s spending our biggest categories:

  • Education for our kids which comprises 20 percent of our gross income. This is in perfect harmony with our values, since we believe education helps build a solid foundation for our children’s future so they are comfortable in social settings and develop a passion for learning. Nobody knows what the future holds, and what the jobs of tomorrow will look like but I’m pretty sure that if you are comfortable interacting with others and love learning new skills you will be able to adapt to whatever that future looks like.
  • Food expenses account for 10 percent of our gross, and this is a necessity of life because eating healthy, organic, mostly whole foods is good for our family. We are always conscious of how much we eat out and try to limit ourselves not only to save money but knowing what we put into our meals we feel is better for our health too.
  • I have a lot of clients who have health issues and weight issues, which go hand in hand oftentimes. As part of financial planning I recognize the need to invest in our health and try to eat well to maintain a healthy weight, reduce health conditions in the future which would cost more in the long run and we both agree that we want to be around for our grandkids one day.
  • Shelter is another 20 percent. This includes our mortgage and utilities. This is really a basic necessity, but it’s one category that really trips up a lot of my clients. A good “benchmark” for your mortgage is no more than 28% of your gross income. I find that the higher this number gets, the closer you become to being “house poor/living paycheck to paycheck” which just limits your overall options because the more you spend on a home, the higher your utilities, typically, the higher the furnishing cost and so on, which just means less money available to spend on other things you enjoy—so less money to eat out, less money to save for future goals and needs, and so on.
  • Auto and transport is another big category for us: My husband enjoys having a new car, so we are always stuck with a car payment and typically the gas guzzler he picks requires a lot of money spent on gas. This is something we talk about and discuss, but ultimately if it brings you joy and it doesn’t affect your finances significantly I say live your life, because ultimately you have to strike a balance between your future needs and being happy today! Otherwise, what is the point of life anyway?
  • Saving is on auto pilot for us, and this is a combination of 401(k) contributions and Roth contributions to max out our retirement savings since we have a goal of reaching “financial independence” at age 55 and not have to work past that point. Knowing how much I love my work with my clients, I don’t plan to actually retire and quit at 55. It’s just an important milestone for us because it would be a great privilege to go to work for the pure joy of doing what we love but knowing financially we don’t have to make a living.
  • And lastly, all the other miscellaneous stuff that adds up, including travel which is what we live for and we enjoy exploring different parts of the world together and exposing our children to different cultures, languages, and different lifestyles around the world. We value these experiences as a family much more than material possessions, and this is a constant struggle to make sure we don’t spend a lot of money on the newest iPad, and other advertised consumerist possessions and instead take a trip somewhere as a family.

So what are my tips for spring cleaning?

You guessed it! In order to make a change, you need to know where you stand today. So, pick a tool that helps you figure out how 2018 went for you financially. There is a whole lineup of apps that help you budget, so pick any one and just go for it! I’ve used Mint and currently use eMoney and love both, but eMoney is smarter and lets you save categories.

Once you categorize your spending for 2018 you can see how much you spent versus your income and this will give you a picture of all your expense: consumer debt, credit cards, taxes, retirement contributions, and living expense. You should also pull an annual credit report to make sure you aren’t missing any open accounts and should know your credit score which affects more than loans (including your home and auto insurance premiums).

This is the hardest part of spring cleaning. Knowing your current standing and financial standing helps you plan ahead so you can decide on what is most important and start taking small steps in that direction.

Tip #2 Create a Financial Plan

We spoke with Drew Parker, the creator of The Complete Retirement Planner, about the importance of creating a comprehensive financial plan that details your goals for the coming years. Similar to the sorting of belongings, this requires you to review the individual components of your finances and create a plan that’s tailored to your unique circumstances.

Drew Parker, creator of The Complete Retirement Planner

The most critical step in getting your finances in order is to create a comprehensive, completely individualized (no generic assumptions) financial plan showing year-by-year results.

Seeing exactly where you stand in black and white, along with a thorough forecast of what your financial future looks like year by year is eye-opening.

A financial plan helps you to establish realistic goals, understand the steps you can take to achieve those goals, and enables you to track your progress.

It’s important to note that a financial plan is very different than a budgeting/saving app. This is a detailed long-range planning tool that accounts for all of your personal variables, year by year, including a budget that varies over time (life is not static), tax liability, debt as a percentage of your income, retirement savings goals, a plan for savings withdrawals during retirement, Social Security income based on your claiming age, and much more. It helps you to make more informed decisions by clearly illustrating how your current behavior directly affects your long-term results and by allowing you to quickly model what-if scenarios. Having this detailed information at your finger-tips eliminates guessing, keeps you organized, and can be updated each year (think financial spring cleaning) in less than an hour. Your financial well-being is too important to rely on guessing or generic benchmarks and assumptions that don’t apply to you. Create a financial plan using only your personal information to know exactly where you stand, and where you are likely to end up.

Taking control of your financial destiny will help you to sleep better—and Marie Kondo would be proud!

Shelby Ring, CEO at Ruby Riot Creatives

Shelby Ring, CEO at Ruby Riot Creatives, suggested taking a deep dive into your bank accounts to create a solid monthly expense plan.

Take a deep dive into your bank accounts. It is terrifying—yes—but knowledge and clarity is POWER! Set up a spreadsheet with all of your recurring business or personal expenses every month. A key thing is to look through your credit card charges and bank transactions, rather than relying on email receipts or bills. You would be amazed at the number of auto recurring services we pay for without even realizing it! So taking a fine-tooth comb and brushing through your statements is a really powerful move for getting clear on how much money you have going out every month.

Take the same step for accounting for money coming in. You might be surprised! Getting clear on your true metrics for what you’re working with is the key to taking back your power and seeing the full picture of where your money is going and how to make your money work for you.

 

Tip #3 Part Ways with Paperwork

In some sense, financial paperwork is an easier category to get organized. It exists materially—as paper, if you print it out—and tidying it up consists of the relatively simple task of tossing what you don’t need and straightening out what you do. Create a pile. Sort into ‘keep’ or ‘discard.’ Then organize.

Deborah Sweeney, CEO of MyCorportation.com

Deborah Sweeney, CEO of MyCorportation.com, suggested organizing the physical remnants of your personal finances. If you have a huge pile of paperwork, bills, and receipts that are out of hand, you’ll need her tips.

Begin organizing any and all paperwork now. If you just filed your taxes, set them aside in a space ideally with past returns and their information. Create a space for receipts as well.

Do not let any of this paperwork get buried. Buy a special container or filing cabinet strictly for all personal finance paperwork that you can safely store and organize it in.

Color code, if necessary! You may organize your personal financial documents by certain color coded tabs on their files.

If you are storing certain personal financial matters via email or through the cloud, use specific labels (as opposed to vague ones) to make it easy to find everything.

 

Tip #4 Tackle Bills and Debts

We talked to Alissa Todd, a financial advisor at the Wealth Consulting Group about organizing bills and debts. It’s crucial to know where your money is coming from and where it’s going before creating a repayment strategy. This step will help to ensure that everything you organized will remain organized going forward. Creating systems that work for you is your best weapon against falling back into financial messiness.

Alissa Todd, Wealth Consulting Group

Money can be a major source of stress but only if you let it! Here are three ways to declutter your financial house and gain control of your money so that you can live the life you love.

  1. Understand your expenses. Take inventory of all your bills, which generally fall into three categories:Fixed: Require the same amount of payment on a consistent basis. Some examples include rent or mortgage, insurance, gym membership, Netflix, or Spotify, etc.Variable: Vary from week to week or month to month. You still have these expenses consistently but the cost varies. Some examples include groceries, utility bills, dining out costs, and gas.Periodic: Can be fixed or varying amounts that don’t occur on a regular basis. Some examples include car maintenance costs, taxes, gifts, clothing, and concerts.
  2. Use the budget you created earlier with these different types of expenses to hone in on any outstanding bills, such as credit card debt, student loans, mortgage payments, etc. Know which ones should be paid when. Then, allocate extra money to the bills with the highest interest payments in order to pay those off first. Hint: it’s most likely your credit cards.
  3. Make a plan for paying off debt. To pay down debt, you must first have a very clear picture of your overall debt situation. Write a list of each type of debt (credit card, student loans, etc), amount owed, interest rate, length of the term, payment due date. Decide whether you will use the avalanche or snowball method. Take action by making additional payments to the debt that you have decided to pay off first while paying the minimum on your other debts. Celebrate every accomplishment and win in your debt reduction journey!

Tip #5 Treat Yourself and Your Finances With Love

Perhaps our favorite trait that Marie Kondo embodies is her kindness and patience throughout the entire cleaning process. Honestly, cleaning is stressful. It’s time-consuming, energy-depleting, and maybe even emotionally draining. So treat your finances, but most importantly yourself, with love.

Shelby Ring, CEO at Ruby Riot Creatives

Another great tip worth mentioning is adding positive affirmations through this process. Having a mantra affirming why you are looking at things you are afraid of or feel powerless about can be really motivating and get you through discouragement. Money is working for me, money is attracted to me! I can’t help but attract prosperity and great money into my life! Write something that resonates with you and repeat it through the process of getting clear on your financial health.

Bottom Line

Spring cleaning isn’t just a good idea for your home—it’s good for your money, too. So toss old mindsets, documents, and debt, and dust off your finances with these five tips:

  1. Take stock of your financial standing.
  2. Create a short-term budget and long-term financial plan.
  3. Declutter physical documents, files, and papers.
  4. Make a plan to tackle bills and debt.
  5. Use an uplifting motto to stay motivated.

Remember, your finances should bring you joy. Hopefully, with these expert tips, they will!

Contributors

Drew ParkerDrew Parker is a former Business Financial Planner and Financial Manager for a $4B company, with extensive experience in building financial planning tools. In 2017, he created The Complete Retirement Planner (TCRP) to help the 74 percent of households who have no written financial plan, and who are unsure of how to create one. TCRP makes it easy for anyone to create a comprehensive and completely individualized (no assumptions) year-by-year financial plan, with advanced educational and technical features not found anywhere else. Parker also enjoys writing a blog about personal financial planning and has been quoted in articles by U.S. News & World Report, Kiplinger’s, GlassDoor.com, and Quicken Loans.
Shelby RingShelby Ring is the chief cat herder at Ruby Riot Creatives; a digital marketing firm based out of Charleston, South Carolina, that specializes in video production, photography, and SEO content and branding strategy. When Shelby’s not filming or coaching clients, you might find her teaching Buti yoga, stuffing her face with oysters, or chronicling her recent personal travels on her passion project blog, Travels With Shelby.
Deborah SweeneyDeborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services.
Alissa ToddAlissa Todd is a Wealth Advisor at The Wealth Consulting Group where her team helps clients simplify their financial life and use money to live a life they love. Todd learns what is most important to you and then creates an implementable action plan to help you pursue financial independence so that you can live your life by design, not default. She also shares weekly money tips on her YouTube channel. Alissa grew up in Europe prior to moving to California in 2008. Growing up in a bilingual household of English and Japanese, Alissa stays involved in the community by being a board member of the Japanese American Citizens League San Diego chapter. Outside of work, you can catch her on one of many hikes in San Diego or practicing yoga.
Tess Zigo studied finance and accounting at Northern Illinois University and spent several years working in treasury management. Over that period, Zigo developed a passion for personal finance and investing, but quickly learned that she loved people more than spreadsheets. She decided to get in front of real people dealing with the same real money issues that she struggled with—balancing the need to enjoy life today, while also being responsible for the future. As a mother of two toddlers and a business owner, she understands the challenges her clients face with the never-ending demands on their time and energy. When she is not meeting with clients, you can find her traveling, hosting casual dinner parties with friends, or simply building legos with her little loves and spouse. Find her on LinkedIn.

This article is meant to be general, and it is not investment or financial advice or a recommendation of any kind. Please consult your financial advisor before making financial decisions. For more detailed information, contact Tess Zigo, a Financial Advisor with Waddell & Reed, Inc. at 6308641068. Investing involves risk and the potential to lose principal. Waddell & Reed, Inc. Member FINRA/SIPC.

*Waddell & Reed is not affiliated with Marie Kondo.


What’s your technique for a spring finances clean? Tell us over on Twitter at @OppUniversity.