Tidying Your Financial Life the Konmari Way

The Konmari method of tidying has truly swept the nation in the last few years with Marie Kondo’s books, The Life-Changing Magic of Tidying and the Spark of Joy, selling more than 11 million copies in 40 countries. Ms. Kondo is seen as not just an organizational coach, but a lifestyle coach who works with people who are tired of the clutter in their homes.

As a financial planner and certified trust financial advisor (CTFA), I spend much of my work day urging people to tidy their financial lives to help them reach their life goals. As you can imagine, I don’t always spark joy with these conversations and I’m always trying to find new ways to energize people to take control of their finances.

I’ve listened to friends say Konmari changed their life and I saw photos of their newly immaculate closets and cupboards. I started thinking about how I could apply this popular method to help people improve their financial lives and bring joy to their legacy planning.

According to Marie Kondo there are six basic rules of tidying, I will make it even easier to clean up your money matters the Konmari way with just five steps.

1.      Commit yourself to tidying up: The first step is to realize a financial plan will provide you with a roadmap towards achieving financial bliss. A recent survey found that 78% of people with financial plans pay their bills on time and save each month vs. only 38% of people without a plan doing so. The same survey states that 68% of people who plan have an emergency fund while only 26% of non-planners are financially stable enough to cover an unexpected cost. These numbers are big enough to motivate even the most financially phobic individuals to start cleaning up their financial life. However, only 31% of financial decision makers in families say they have created a comprehensive financial plan either on their own or with professional help, according to a “2012 Household Financial Planning Survey” conducted by the Certified Financial Planner Board of Standards. 

2.      Imagine your ideal lifestyle: Close your eyes for a moment. What do you want your life to look like in five years? Maybe you are thinking about more rest, more relaxation, more travel, more family time. Now think about the next 10 years and 20 years? Do you have a couple of goals set in your mind? Having goals to work towards inspires you to keep working through hard organizational tasks and sets you on a course towards making your goals a reality. I urge you to write your goals down and keep them in your wallet to remind you of the ideal lifestyle you are working towards.

3.      Finish discarding first: As Marie Kondo says “One characteristic of people who never seem to finish tidying up is that they attempt to store everything without getting rid of anything.” As an example, maybe you have a cupboard or junk drawer where you shove items to be dealt with later? This applies to your finances, too. For example, perhaps you have a 401k from a job 20 years ago, a 401k from your last job 10 years ago and a 401k from your current employer, why not combine them all?  Consolidate accounts where possible to cut back on complications, fees, and paper statements.

You can further cut down on paper clutter by setting up online accounts and getting passwords/login details set with all your financial institutions. Consider using a password manager to help you keep track of all of your online account information. Keeper Password Manager & Digital Vault, Dashlane, and Sticky Password Premium are just a few of the highly rated online password providers who can help you choose strong passwords and securely store them for future use without a password book or spreadsheet. 

Once you have your online accounts set up, you can start shredding! A quick online search for shredding events near you will help you find a free community event to shred to your heart’s content. However, a word of caution - be sure to keep some items in their original format. Documents such as Social Security cards, medical records, birth certificates, current passports, active insurance policies, marriage certificates, separation or divorce records, adoption and custody papers, diplomas and transcripts should not be shredded.

4.      Tidy by category, not by locationGather every bit of information you have about your financial assets and liabilities in one place, regardless of the institution where they are held. Analyze and evaluate your current financial status by assets and then assess your liabilities. Gather data on what you are spending and your current cash flow situation. Read through your estate planning documents and assess whether they are meeting your objectives. Or start working on your estate planning documents if you haven’t already done so – it’s never too early to start planning your legacy, but as we all know, it can be too late!

Finally, double check beneficiary information on your retirement plans and then on your insurance policies and update as needed. In the 2013 US Supreme Court case Hillman vs. Maretta, the Court ruled in favor of a man’s ex-wife over his widow as the beneficiary of a life insurance policy worth more than $124,000. As evidenced here, beneficiary forms can trump wills in court. Overlooking changing these is the most common and costly mistake people make in planning their estates.

5.      Ask yourself if it 'sparks joy': Although it hurts my financial planning heart to say it, very few financial documents and records spark joy. However, once you have a clear roadmap of where you are and where you need to go, you can move forward towards the goals that will spark your joy. As Paul Samuelson, the first American to win the Nobel Prize in Economics said, “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”

If you aren’t already planning a gambling trip to Las Vegas or investing all your assets in lottery tickets as your financial plan of the future, I hope you are inspired to “Konmari” your financial life through these five steps: Commit yourself to tidying up, imagine your ideal lifestyle, finish discarding first, tidy by location and ask yourself if your financial components spark joy.  I have one final gem to finish. Never forget Will Rogers’ folding advice: “The quickest way to double your money is to fold it over and put it back in your pocket.”

Allen Trust Company / Allen Capital Management can help you with questions regarding financial planning. If you are one of our clients, or would like to be, please contact us at (503) 292-1041 or via email at allison@allentrust.com.

Allison Grebe Lee