How to ?KonMari? your finances
Netflix star Marie Kondo?s organization method can help you better manage your money
Writes trendy stories about credit cards.
Julia Lorenz-Olson counts herself among the millions of devotees of Japanese organizing consultant Marie Kondo, author of the 2014 bestseller “The Life-Changing Magic of Tidying Up” and star of the hit Netflix series “Tidying Up with Marie Kondo.”
Lorenz-Olson has read Kondo’s 2014 book and watched her Netflix show. And she’s a big believer in Kondo’s KonMari Method of decluttering, which encourages people to cherish the things that spark joy in their lives and get rid of the rest.
“I have literally done her method on every part of my home,” Lorenz-Olson said. “I’ve held everything I own in my own hands and asked myself if I really treasure it.”
As co-founder of Austin, Texas-based financial advisory firm The Art of Finance, Lorenz-Olson thinks you can apply the KonMari Method of organizing to your personal finances, too. Other personal finance experts also see a lot of value in embracing the method when dealing with monetary matters.
“Obviously, there are going to be things like paying the light bill that don’t really inspire a ton of joy that need to stay in your life,” said Lorenz-Olson, who co-stars in the PBS digital series “Two Cents” with her husband, Philip, a certified financial planner.
“But for the most part,” she added, “people overstuff their budgets with some things they may love for a while but then grow apart from. In personal finance, the simpler you can make things, the better the decisions you tend to make.”
With that philosophy in mind, here are five tips for decluttering your financial life – including your wallet – and perhaps sparking some financial joy along the way.
5 tips to 'KonMari' your finances
1. Minimize your financial 'mess' by adopting a budget.
A 2016 survey by U.S. Bank found 41 percent of Americans followed a budget. This means 59 percent of Americans at that time weren’t using any sort of budgeting tool.
“Creating a monthly budget and seeing how you perform against those expectations each month are equivalent to the large heap of clothes Marie’s clients find themselves marveling at after putting all their clothes in one big pile,” Kirshenbaum said.
“A budget allows you to match up your expectations with reality,” she added. “Once you have an idea where you’re struggling, it’s easier to focus on what needs improvement.”
Establishing a budget can be as simple as tracking income and expenses in a spreadsheet or turning to a financial app to do the job. Whatever method you choose, experts stress the importance of setting up a household budget.
Derek Hagen, a certified financial planner and financial coach in Minnetonka, Minnesota, said Kondo’s credo about visualizing the life you want should pertain to our relationship with money. A budget can aid in that visualization.
2. Be easy on yourself.
Kondo endorses a gentle approach to decluttering and organizing your home. Kirshenbaum believes you should do the same when decluttering and organizing your finances.
Just as a decluttering project on Kondo’s Netflix series might take several weeks to finish, so, too, might tidying up your finances, Kirshenbaum said. In other words, practice some patience.
“It can take several months to make new budget habits and spending habits stick,” she said, “so it’s important to give the process the time you need to feel comfortable.”
And while you might doubt that you can bring joy to your finances, it’s actually quite possible. Maybe you can wipe out all $5,500 of your credit card debt in a few months and bump up your credit score by 30 points at the same time.
“Finances don’t have to be scary and something you dread,” Kirshenbaum said. “I’ve seen financially stressed clients have a complete change in their attitude about their finances. It’s all about mindset and understanding.”
Hagen echoes Kirshenbaum’s sentiments.
“Marie Kondo comes from a place of understanding and compassion, and leaves shame and blame behind. Likewise, with our finances, especially if we are a part of a couple, it’s important to come to money conversations in the same way – compassion and understanding with no shame and no blame,” Hagen said.
“Everyone is a little weird when it comes to money,” he added, “and we often stress out when talking about it because we are afraid of these negative emotions.”
3. Purge the paper.
Kondo urges people to eliminate paper clutter, such as old bills and bank statements, unless you truly need them.
And if you sift through the piles of old bills, bank statements and other financial paperwork, you might be surprised what you’ll discover. Michelle Cortes-Harkins, a financial planner and wealth management adviser in Providence, Rhode Island, said she’s had clients come across paper money, uncashed checks and stock certificates amid a blizzard of documents.
Financial literacy expert Tony Steuer, author of “Get Ready! A Step-by-Step Planner for Maintaining Your Financial First Aid Kit,” offers these keep-or-toss recommendations for common documents:
- Bank records: Keep statements and canceled checks for six years.
- Car title, registration and repair records: Keep until six months after you sell it.
- Home purchase documents: Keep for at least six years after you sell it.
- Pay stubs: Keep for six years.
- Credit card statements and documents: If used for tax purposes, keep for six years. Otherwise, shred statements and receipts after reconciling statements.
- Student loan records: Keep indefinitely as proof of payoff once you’re done making payments.
- Rental agreements: Keep for up to six years after an agreement is terminated.
- Health insurance policies and documents: Keep until coverage ends or is canceled.
4. Designate a place for financial documents.
Kondo believes everything in your home belongs in its own designated space. Consumer expert Andrea Woroch said that should be the case with important financial paperwork.
Udemy.com instructor and venture capitalist Chris Haroun suggests following a three-step process to ensure your paper documents are in order:
- Buy a document folder.
- Categorize the documents by using the tabs in the folder and labeling each one (“Monthly Bank Statements,” for instance).
- Stick a document organizer – a list of all the paperwork – on the outside of the folder.
“Many people have … financial difficulties because they are incredibly disorganized when it comes to their financial document filing system – or lack thereof,” Haroun said.
If you maintain only electronic versions of documents, you should print them out when you receive them or note where they’re stored on your computer, he said.
Woroch discourages stashing financial documents, especially unpaid bills, in a kitchen drawer or some other place where you’ll forget them. Doing so could, for instance, cause you to miss a credit card payment, potentially triggering a late fee and perhaps even harming your credit score, she said.
She believes in organizing your financial matters online so you can reduce reliance on paper and activate autopay features to avoid missing bill payments.
See related: How to slay your credit card debt with "small wins"
5. Declutter your wallet.
Many Americans may be following Kondo’s advice and tidying up their homes. But Jason Gaughan, a credit card executive at Bank of America, believes a lot of us are neglecting our wallets when it comes to decluttering.
According to a Bank of America survey, 52 percent of credit card holders use several cards to earn rewards in different categories, such as dining, travel and gas. Overall, the average American cardholder keeps 3.7 credit cards in his or her wallet.
In light of those statistics, perhaps it’s time to give your wallet a makeover. That could mean canceling cards you don’t need or just leaving them in a drawer at home. But beware that canceling a card could lower your credit score by increasing your overall credit utilization, depending on how you use your cards.
“Evaluating the credit cards weighing down your wallet is a simple, yet effective, way to streamline your finances and find one card that fits all of your spending needs,” Gaughan said.
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