Written by: Katie Fischer, CFP
It’s been over four years since Marie Kondo’s book, The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing became a best seller in the US, and we may never look at clutter the same again. That’s especially true now that the book has inspired the Netflix hit show “Tidying Up With Marie Kondo,” bringing Kondo’s minimalist methods to millions of viewers nationwide. Even if you haven’t applied the KonMari method to your own home, you probably know someone who has! At the crux of her method of tidying up everything from your wardrobe to your kitchen cupboards to your bookshelves is a simple question: “Does it spark joy?” If it does, it stays. If it doesn’t, it goes. Simple.
And as a Certified Financial Planner™, I can’t help but urge you to apply the KonMari method to one more (and arguably one of the most important) areas of your life: your finances!
To get started, here’s my 3-step guide to simplifying your finances and, yes, sparking joy, with a little inspiration from Marie Kondo:
Step 1: Pile it up!
According to Marie Kondo, the first step in tidying up your wardrobe is to toss every piece of clothing you own into one big pile. You then pick the pieces up one by one and decide what really sparks joy… and what doesn’t. Once you’ve sorted out what stays and goes in your closet, you move on to other categories—kitchen items, books, jewelry, and even all that junk in your garage.
To do the same thing for your finances, start by piling it up! Take every financial statement you have, including bank accounts, investment accounts (401ks, IRAs, Roth IRAs, 529 accounts, annuities), credit cards, loan statements, mortgage statements, and insurance policies. If it has dollars attached to it, it goes in the pile. (If you bank electronically, make this the one time you print out every online statement so you can get a visual of what’s going on in your non-digital world.) Like every KonMari pile, it may look pretty overwhelming! And if you’re like most people I know, you may be pretty surprised by how messy your financial life has gotten. Don’t worry. Tidying up this mess is easier than it looks, and I promise it can bring you even greater joy than even the most gorgeously organized closet.
Step 2: Divide and conquer!
Now that everything is on the table (literally!), it’s time to divide what’s there into three stacks: banking, savings (including investments and insurance policies), and debt. Now look at each one and see if it’s as simple as it can be.
• Does every bank account you have serve a unique purpose? If not, consider consolidating into fewer accounts that are easier to track and manage. If you have multiple savings accounts for multiple purposes, many banks offer apps to help you earmark money for individual expenses all within a single account. Apps like YNAB (which stands for ‘You Need a Budget’!) and Mvelopes make this easier than ever.
• Do you have any old “forgotten” accounts that aren’t being managed well (if at all)?What about that old 401(k) from that job you left a decade ago? Do you have outdated or unused accounts, or old, forgotten bonds that matured years ago? Rolling them over into a single IRA will not only spark joy by giving you one larger balance, but it also allows you to grow your assets more efficiently using a single investment strategy.
• Are you maximizing the value of every credit card? If you have multiple credit card accounts, what are you using them for and why? Many credit cards today have attractive rewards programs, but they only do their job well if you use them strategically to maximize the rewards. Simplifying your credit life can help you earn rewards for the things that matter most to you, and also make it easier to budget and pay your bills each month.
Step 3: Decide what sparks joy!
Now that you have the big picture in view, you can see what you’re earning, what you’re saving, and what you’re spending. Here’s where taking the KonMari approach to your finances can really help bring more joy to your life!
• Start by exploring what you’re spending and why, and then identify the things that truly spark joy. Look at each credit and debit card statement and ask yourself if the purchase was worth the cost. (If you use cash often, write down your purchases for a month and add that to the mix.) Are those $15-$20 work lunches really sparking joy, or would you be happier brown-bagging it and taking a walk or reading during your lunch break? Do those three sweaters you bought on sale really make you smile when you wear them, or would you be happier buying one higher-quality item that really sparks joy? On a grander scale, look beyond those unnecessary expenses to the bigger things in your life (and your budget). Are you paying maintenance and insurance on an extra car or truck you don’t really need? Is that large mortgage giving you a great return on your investment, or might you be happier downsizing to a smaller home with less to manage?
• Next, look at how the money you save might bring joy in other areas. Are you sacrificing your larger goals for the things that matter less? As cliché as it sounds, those $5 lattes really do add up fast, and every dollar you spend on things that aren’t bringing joy to your life is taking away from the budget to do the things that really matter. Did you find yourself turning down an invitation to a great concert with a friend because your budget was tapped out? Would you love to take that dream vacation, but never seem to save enough to make it happen? Is paying off your mortgage before retirement something that would reduce stress and improve your quality of life in your later years?
I guess there’s a reason Marie Kondo seems to be taking the world by storm. I’m not sure if folding every shirt I own the “Marie Kondo way” would spark joy for me (I’ve yet to try it, but maybe I will soon!), but I do know that taking a simpler, more mindful approach to financial planning can change lives. Start using the KonMari approach to your finances today and you just may find yourself feeling a lot more joy in the years to come.
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