Simplifying your finances a bit like clearing out a house

Going cold turkey with your bad financial habits is sometimes the only solution to achieving your financial goals. But deciding what, exactly, you should cull when it comes to spending might require a Marie Kondo approach .

Kondo, author of The Life-Changing Magic of Tidying , has a simple plan for getting rid of clutter. Using her rules , here are six steps to help you "declutter" your finances.

Step 1: Commit to cleaning up

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This is the most important step. Without a firm commitment to address overspending, bad debt or unnecessary expenditure, your desire to achieve better financial health is futile.

Step 2: Visualise the end goal

Money is closely tied to our aspirations. Without it, it's impossible to achieve dreams such as buying our first home or reaching that net-worth goal. However, if you can visualise what you want your finances to look like, you can find the inspiration to carry through on your intentions.

Taking a view each quarter might make your vision more manageable. Think about what you want your budget to look like in three months. Review your progress at the end of the quarter to see how far you've come and make changes where necessary.

Step 3: Dump financial clutter

Kondo says most people tend to clean up instead of discard. With money, this takes the form of paying accounts and keeping them active "just in case". This seldom works and usually leads to a relapse. When you've paid off an account, close it immediately. If you have a revolving loan, pay it up and ask the bank to terminate the service.

Other forms of clutter can be unnecessary spending on items such as magazine subscriptions, ready-made food for lunch or satellite TV. Think about all the little costs, which quickly add up, and how you can reduce them to trim your budget.

It's also important to clean up your files. Once you've paid an account, file the statements in an orderly system or throw them away. If possible, try to get digitised invoices for big-ticket items that may still be under warranty.

Step 4: Clean up by category

Sort your financial clutter into categories, such as credit cards, store accounts and subscriptions, as well as investments, savings accounts and insurance policies.

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Step 5: Follow the right order

Kondo has a specific order for sorting out your clutter: clothes, books, papers, and miscellaneous items such as sentimental items.

You can follow a similar order when cleaning up your finances. It's important to work systematically: debt/credit, savings, investing, insurance and estate planning.

Step 6: Keep what makes you happy

This might seem difficult at first because that credit card allows you to buy shoes, which make you incredibly happy, or a much-needed holiday . But how do you feel when you have to make a payment? Not so great, huh?

Be brutally honest. Ask yourself how much of the "stuff" around you - and how you accumulated it - actually brings you real joy.

Taking a Kondo approach to your finances might be painful at first but as time goes by it will be worth your while. Being honest about where you are and what it will take to achieve financial wellness means getting rid of all forms of financial clutter.

Your prosperous future self will thank you for it.

tsamelad@sundaytimes.co.za