Just like your clothes, your budget needs to be tidied up periodically.
As a financial planner, I like having an organized budget. So, when I saw the show Tidying Up with Marie Kondo, it became my new guilty pleasure. I started wondering how her tidying concepts could apply to our finances.
Marie Kondo is a superstar in the world of organizing who has completely revolutionized the art of decluttering with her trademarked “KonMari Method”.
Her philosophy is simple: hold on to things that are dear to your heart while getting rid of those that no longer spark any joy.
As I binge-watched her transform messes into neatness, I started cleaning my closet. And cabinets. And my husband’s clothes.
As I saw the slow but methodical transformation of my own house, I began thinking how to transform budgeting with the KonMari concepts.
Family Teamwork
For each show, I noticed how the entire family was involved in the cleanup. Each person became responsible for tidying their own items and finding things that gave them joy. The same rule should apply to your budget.
On the show, Kondo begins each episode discussing the importance of answering the question: why do I want to do this in the first place? That is, ‘what is the underlying emotional reason for wanting to have a more organized home (or in our case, a more organized budget)?
If you don’t know your “why,” you will probably never start. Even if you do begin, you’ll quit before realizing any meaningful results.
Also, without knowing the “why,” family members have a difficult time getting excited.
Everyone has to commit to the budgeting process. It doesn’t work if Mom is on board, but Dad isn’t. You have to work as a team.
Budget Your Ideal Lifestyle
Do you like scrambling to pay for unexpected expenses? Or making loan payments every month? Maybe you would rather spend time at the park, travel, or focus on your special hobby.
In her book “The Life Changing Magic of Tidying Up”, Kondo wrote: “The question of what you want to own is actually the question of how you want to live your life.”
Spend some time talking with your family about your values and your future. Is your ideal lifestyle reflected in your spending and money habits? If not, think about how you can align your finances with your ideal lifestyle.
Start with the vision of what your best life would look like. This will help you shift your mindset and shape the criteria for what brings joy to your world. Then, you can create a budget that supports that vision.
Budget By Category
We all have mental buckets or other means of categorizing our finances. You will want to address each of the three major categories individually: Cash Flow, Risk/Insurance, Investments.
Focus on one category at a time. As a result, you’ll create an overarching picture of your current financial state.
Follow the Right Order
As a continuation of the previous idea, when you make the decision to declutter your budget, make sure to do it slowly and follow the right order. Just like tidying has a specific order, so does budgeting. We begin with your Cash Flow.
Income:
Are you making the most of your income potential? Do you take advantage of all your work benefits? Are you considering a side job? Are your savings and investments earning the most they can for you? These items are all part of your income.
Giving:
Whether you give to your church or another organization, decide what type of organizations you want to support and allocate that money first. In addition to making us feel good, studies show that giving is good for our health, promotes social connections and cooperation.
Savings:
I’m firmly convinced that regardless of stock market returns, saving on a consistent basis is the surest means of having money to meet your future goals. Allocate your savings before you spend so you’ll have money for a rainy day.
Debt:
Before you can truly experience joy, you must get rid of the things that hold you back. That means paying off your debt. It may take some time – no one gets into debt overnight, so you can’t get out of it overnight either. Set up a payment schedule and focus on getting loans and credit cards off of your books.
Fixed Expenses:
This is one of the most challenging areas of our budgets. Fixed expenses are difficult to change as we think we need them all. Ask yourself: Does this big house spark joy for us? Or does it feel like a weight to maintain it? Can we sell the car and buy a less expensive one? Addressing your fixed expenses may involve lifestyle changes, which is why everyone needs to be working together toward your family’s shared values.
Variable Expenses:
Now, you are ready to tackle the items that we often think of as budget busters: groceries and food, movies and entertainment, clothing, memberships and kid expenses. Examine each category and ask yourself: Does this item bring our family joy? Do we want to carry it into the future? Does this support our values? What would happen if we didn’t spend in this category?
By tackling one category at a time, you prevent budget overwhelm and allow yourself the time to see if your new budgeting strategies are actually working.
Does Your Budget Spark Joy?
Once my closet was neat and organized, I was able to keep it that way for a year! I like the way it looks and it’s so much easier to put things away. Clothes don’t get lost, and it makes me smile. Now, I have moved on to books (we have a lot!) and the boy’s rooms.
Look at your new budget. If you can smile, you have done it right. Continued budget maintenance will help move your family towards your ideal lifestyle.
Just as Marie Kondo’s tidying method is life-changing for the families she helps, addressing your cash flow (aka budget) can be transformative for your family.
Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com