Tidying Up Your Finances

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Recently I finished watching Tidying Up with Marie Kondo on Netflix. It’s a show that helps people organize their home. Marie helps people get rid of clutter, unwanted items, and learn to keep items which “spark joy” into their lives in an organized and structured manner.

After just the first couple of episodes, I was motivated to tackle my own closet. As a result, I removed almost 50 articles of clothing to either throw away or donate.

It felt liberating. Just like Marie prescribed, I held each article of clothing and asked myself, does this spark joy, plain and simple. In many cases, it didn’t and so the decision became easy.

So I wondered how can I apply the concept of tidying up to my finances and a few things came to mind which may apply to you as well.

Consolidate Your Accounts

When you have several accounts to manage, they generally take up more time. If you have several credit cards, you have to make sure each one is paid and current.

If you have several bank accounts, you may need to make sure each one maintains the minimum balance.

If you have several investment accounts, you may need to make sure each one is properly allocated (and then even look at it from a macro level to make sure it fits your investment profile when taking your other investment accounts in to consideration). Sounds confusing right? Well it doesn’t need to be.

If you’ve changed jobs like many people have and temporarily moved funds into an IRA, you may be able to move those funds into your new employers 401k plan. Ofcourse one benefit is simplicity and the monitoring of one less account. However, there are possibly other things to consider such as investment options, withdrawal limitation, and fees.

Additionally, rolling over my 401k into my new employer was a priority for me every time I changed jobs. I didn’t want to be lazy in completing the paperwork. The more you have in your account, the harder it can work for you.

Remove Excess, Obtain Focus

Once you’ve consolidated your accounts, you can put time your newfound time into optimizing your income.

In the past, my wife and I had close to 10 credit cards, but it was too much work to keep track of each one and so we decided to remove (i.e. close out) these excess cards and only use the ones with the best benefits.

For example, if you enjoy using your credit card to obtain points, consider having only one or two credit cards with a strong points’ system. This can streamline your expense processing using limited credit cards. Moreover, you’ll be earning more credit card points while reducing the risk of missing payments.

I use the Pentagon Federal Platinum Rewards Card for gas and many other purchases. It offers 5 times the points on gas purchases and the spread on other items like groceries at 3X and everything at 1X works well for me. I’ve already cashed out on points a couple of times for movie tickets!  It’s feels even more like a reward because given ticket prices, I would hardly ever pay out of pocked to go to the movies.

Rebalance Investments To Streamline

In order to rebalance my after-tax account a bit, I did some selling. This was to realize some gains and some losses (for tax-loss harvesting purposes as well). It allowed me to use more free money into funds that essentially charge less in fees.

And from a tidying up standpoint, I have fewer holdings but larger quantities in those existing holdings so going forward it should be a bit easier to manage the overall account since I’ll be tracking fewer investment holdings.

Reconciling Provides Opportunity

Apart from making sure balances are what they should be, reconciling your accounts can also help you achieve efficiencies.

For example, this past January almost $20 was taken out of my account for an annual fee on a safe deposit box I have at the bank. I was 99% sure this safe deposit box is empty. So the following weekend, I made the 5 minute drive to the bank, closed out the box and was refunded the fee, since the bank bills in advance for the year.

Reconciling your accounts is a way of making sure things stay tidy. Once you’ve gotten the hang of it takes less and less time to perform reconciliations. Here are some simple spreadsheets that I use which may be able to help you too.

Starting Off Can Be Slow

Within the first half of the Tidying Up episodes, people would lay all of their belongings out (e.g., in a pile on the bed). Then they would go through each item, one by one to see if they want to keep it or not.

The process was slow and it showed people up late at night working through their belongings. But they usually said it’s worth it to have peace of mind once it’s all tidied up.

Tidying up your personal finances can be a slow process too. You may need to lay down all your credit cards and a pair of scissors to see which ones you want to destroy. You may need to dig up old investment statements to see where some money may be hidden. I’ve done both things in the past.

An instant step to get stated could even be cleaning out your wallet. Do you have receipts you don’t need anymore? Do you have temporary or expired cards? Do you have a restaurant card you went to two years ago with one punch, and after nine more punches you can get a free meal? If you have any of those, consider getting rid of them.

As with tidying up, the same end goal can be applied to your personal finances. The end goal of simplifying so you can have peace of mind, have a better sense of the accounts you have and the purpose they serve in your life.

Join The Discussion:

  1. How many credit cards do you possess and actually use?
  2. How long does it take for you to maintain your finances weekly? Monthly?
  3. How have you tidied up your Finances?

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