Wealth

How To Tidy Up Your Finances

By Julia Dilecce on 29/05/2019Article 6 Minute Read

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What do you get when you apply the mindset of minimalism and the acts of decluttering to your spending? A clear budget with more meaningful expenses. In this blog post, our Content Marketing Manager, Julia Rose Dilecce writes about the steps you can act on today to tidy up your finances with this quick step-by-step checklist.

If you’re wondering if this post is going to rip off Marie Kondo’s Tidying Up, you’re only half right. For those of you who are unaware, Marie Kondo is a Japanese organizing consultant who went viral at the start of 2019. Her life-changing decluttering methods showcased in her book and Netflix series landed just in time for everyone’s #NewYearNewMe 2019 resolutions. But what’s the premise of her transformative method? It’s simple. You ask of each item you encounter as you tidy, does this spark joy?

So now that everyone’s clothes, books, komono (misc.), and sentimental items are organized, have you thought about how decluttering could translate to your finances? Imagine how you’d feel knowing you’re backing each of your financial decisions with meaning.

Just like the clarity you experience when you organize your house or your workspace, you can start feeling lighter about your finances with these simple steps.

Shift your perspective: Is this worth my freedom?

Money can’t necessarily buy you happiness, but it can give you access to freedom. It allows us to spend our time doing whatever we desire. The freedom to travel. The freedom to experience your hopes and your dreams. The freedom to…you get it.

A popular podcast turned lifestyle called, The Minimalists shares their approach to simplifying spending. They suggest you question your every single purchase using one question—is this worth my freedom?

As you go through your budget and try to eliminate expenses, you’ll need to keep this approach in mind. Is it worth sacrificing my freedom? Asking this simple question will help you become more mindful when you’re shopping, but it will also help you evaluate what’s necessary and what isn’t a necessary line item in your budget.

Manifest your goal

Second, you need to believe in your vision. If you don’t have a vision, don’t worry. You can get to that with the right amount of focus, but it is important to know what it is you’re thriving for long-term. So do make it a priority to set a vision for yourself.

Why is it important to visualize what your financial destination will look like? Because we’re human, and the more we can visualize a goal or a dream, the stronger our motivation becomes.

Whether you’re motivated to open your own business before 45 or retire on your cottage at age 60, visualizing that goal will make you more likely to make the changes in your day-to-day life necessary to achieve your long-term goal. It becomes easier to stay disciplined and spend more responsibly because there’s meaning behind why you’re managing your finances this closely in the first place.

So here’s your gentle reminder to stay committed and don’t be afraid to dream! Just be practical in your goal setting. The more “real” you make your goal, the more likely you are to put in the energy today to make it a reality in your future.

Create expense categories

It might sound overly simplistic, but the easiest way to keep your expenses on the right track and maintain a healthy budget is to ensure you’re spending less than you’re earning. But, as simple as that may sound, Canadians are still among the leaders of household debt.

Based on a report using Statistics Canada data, the total debt repayments outpaced the growth of disposable income in the last three months of 2018. The same research showed that household debt reached an average of $1.79 for every dollar of disposable income in the same time period. Yikes.

To help you get a sense of your spending, you can create categories to help you understand where you’re currently spending and why. Don’t forget to set aside a category for debt repayment. As an example, you can break down your list based on these categories to start:

Categories

  •  Home
  • Grocery
  • Debt Repayment (notice how this is its own category!)
  • Retirement Savings
  • Additional Savings/Emergency Fund
  • Entertainment

Start in order

Next, you’ll want to identify your individual expenses based on your categories. What you think you’re spending money on can be a different story than where you’re actually spending your money.

If you use online banking tools, many banks and financial institutions provide clients with advanced reporting. Exporting a file from your regular banking accounts and credit card statements will easily allow you to see a realistic snapshot of where you’re spending your dollars.

The final word

Most of these checklist items will put you on the path to conserving more of your money and creating more wealth. The reality is, there are many smart ways to save for your future that allow you to make the most of your money and your time. And despite most do-it-yourself options available to you online, there may be a tremendous value (and cost savings!) involved in looking to an expert for additional money coaching. Experts can include financial planners and advisors who may be a great resource for you to use to help you maximize your financial potential.

Remember to keep your new approach in mind when you’re having trouble eliminating expenses. Ask yourself, is this really worth my freedom? Or, is it worth sacrificing my freedom over this expense?

Hopefully that question alone will help you gain perspective on what’s really an absolute expense, and what’s getting in the way of achieving your dream—even faster.

Julia Rose Dilecce is the Managing Editor of Nest Wealth’s blog, News from The Nest. Julia has over 5+ years of financial services marketing with a focus on wealth and wellness. She is a lover of words, nature and personal and professional development. For News from The Nest submissions or suggestions, write to [email protected].