Most probably you know and you’ve heard about Marie Kondo from a few years ago because of her book Life Changing Magic Of Tidying Up The Japanese Art Of Decluttering And Organizing and you’ve probably watched the latest Marie Kondo’s new Netflix Show, Tidying Up. People have been obsessed about it, and they are trying their hands on decluttering and organizing every part of their homes. I did too! But what if we apply Kondo’s basic rules in decluttering and organizing our finances and money matters?
A cluttered financial situation clutters your mind. An organized financial plan and money in proper order, give you the confidence that you’re in control of your finances and your life.
If you are wondering how to get started on your journey to tidying up your money and finances life, I will be sharing with you how we tackled our own family finances.
Revamp Your Budget Plan
I love excel sheets! But if you prefer writing on your notebook, take your pick. The idea is to list all the money that is coming in. If you are an employee with a steady paycheck, list your monthly income. If you are a freelancer or entrepreneur that doesn’t have a set income per month, get the average of your last 3 months’ earning. Next, list all your monthly expenses: both the fixed expenses and variable expenses. Be brutally honest with yourself about categorizing your expenses, so you can make appropriate plans and adjustments.
Fixed Expenses (Necessities): Fixed costs are incurred regularly, and they tend to show little fluctuation from period to period.
- rent / mortgage
- utility bills (electricity, water, internet)
- health and life insurance
- loan payments — if you have any
- education funds
- retirement funds
- emergency funds — feel free to remove this if you already have yours set-up (about 3 – 6 months’ worth of your expenses)
- investment funds — this is a set amount that we invest per month
Variable Expenses: It’s also called variable costs, they are expenses that changes depending on your use of products or services; they are somewhat unpredictable.
- car and or house maintenance
- personal allowances — we each have allowances per month that we can use for our personal needs like clothing, personal care and other discretionary expenses (personal wants)
- groceries / food
- travel funds
- FUN funds — entertainment funds that includes dining out and our pasyal dates
When you restructure your budget plan, you might be able to identify some areas that you can cut off your budget allocation. These can usually be found in our variable expenses. And once you’ve made your budget, stick to it to ensure that you reach your financial goal. Keeping track of every expense —no matter how small— is essential to good budgeting and tidying up your finances.
Control Your Spending
One way to control your spending is by doing a financial fast. The definition of a “fast” is to abstain from something all together for a set period of time. I was able to do this with my “addiction” to stocking up on skincare when they are on sale. I noticed that I keep on buying despite having a fully-stocked skincare products. To embark on a financial fast journey, you have to cut down at least one item from your discretionary expenses, except for the absolute necessities. By doing this, you’ll find a remarkable level of control over your spending.
Your financial fast will reprogram you to ask these questions before buying:
- Do I really need it?
- Is there an alternative?
- Can I get it at a sale price?
- What else can I do with my money if I don’t buy this item?
- Is it better to save my money now for something else later?
The idea is to think a little harder before spending your money, and no more automatic spending.
Celebrate Financial Wins
If you have spent time and effort re-working your budget, curbing your spending habit and sticking to your budget plan — you might notice that you have eliminated unnecessary expenses. That means more money to go to your savings! Nothing compares to feeling a sense of accomplishment. And you might want to celebrate that you’ve hit your set milestones. But nope, I’m not talking about celebrating by splurging. It’s counter-productive. You can celebrate quality time with your loved ones, maybe with a simple yet satisfying meal to honor the occasion!
And, like the lessons we’ve learned from Marie Kondo, tidying up our finances is more than just organizing, it’s life-changing. And it is a marathon more than a sprint. In order to go to the finish line, we have to go through the process continuously.
Financial success is about building good habits that you stick with for a lifetime.