You’ve probably seen or at least heard about the show “Tidying Up with Marie Kondo” which aims to help people clear the clutter from their homes.
Marie asks participants to assess each item and determine whether it “sparks joy” for them anymore. If it doesn’t, it goes to a charity or to the trash. By clearing the clutter in one’s life, Marie says it not only creates a better home environment, but it has beneficial effects on one’s mood, thought processes, and abilities.
The same exercise can be applied to your finances. Is your spending out of control? Do you have little to no idea how much you spend on food, clothes, or entertainment per year? Do you hate looking at your account balance because you’re afraid of what you’ll see? Then you may want to tidy up your finances. Here are a few ways to help you get started:
Create a budget.
Start by adding up all the monthly expenses you MUST pay for – rent/mortgage, utilities, gas/transportation, groceries, credit card bills, out-of-pocket health expenses, and insurance. Deduct that from your monthly take-home pay. What’s left is what you can either save or spend on non-essentials. Nerdwallet has an online budget sheet here you can use to make these calculations. There are also many free apps, like Everydollar.com and Mint.com, to help you stay on budget.
Get rid of credit cards with high interest rates.
Their huge interest charges make them harder to pay off. For instance, say you bought a coat for $400 (on sale!) on a credit card with 16.99% interest. If you only pay $25 each month, that coat will end up costing you $456 because of the interest. The more expenses you put on that card, the higher your interest charges will go. Apply for credit cards with low interest and transfer the balances on these high-interest cards to the low-interest cards. Pay more than the minimum or the entire amount whenever possible.
Control impulsive shopping.
Yes, that new [fill in your latest obsession] may “spark joy” at this moment, but is it really worth the financial stress it may create? Postpone the purchase for 24 hours and see if you still must have it.
Save for big-ticket items.
Instead of using credit cards for expensive items, plan ahead and save for them. Getting into a savings habit will help you live within your means and avoid the stress of deepening debt.