How to “Marie Kondo” your finances

If just reading this has you feeling overwhelmed by the prospect of tackling your finances, know that you’re not alone. Financial anxiety is common: According to the 2022 TD Wealth Survey, money is a top stressor for more than 85% of Canadians. Surging inflation and the rising cost of living are keeping people up at night. 

Decluttering your finances can help you feel more in control of your situation. Make today your starting point to gain greater awareness about your money behaviours and where they’ve taken you in terms of your financial health. 

Building wealth takes patience and organization—and it starts with decluttering and simplifying your finances. Here are four steps to spring cleaning your finances and getting back on track.

1. Create an inventory 

Start by creating a file of your financial information. This could include:

• A list of regularly scheduled payments and when they are due, such as:
  • mortgage/rent payments
  • loan payments (lines of credit, credit card bills, auto loans, student loans, personal loans)
  • insurance premiums
  • utilities payments
  • mobile phone bills
  • property tax

• Legal documents such as wills, powers of attorney, contracts and property deeds
• Insurance policies and beneficiaries
• Tax records (for at least the past six years)
• A list of assets such as property, cars, boats, jewellery, sports gear, etc.
• A list of bank accounts, investment accounts (RRSP, TFSA, FHSA, etc.), pensions and safety deposit boxes, plus details of how to access them
• A list of debts and liabilities

2. Develop a system to organize information 

Your organization system can be old-school—printing off documents and filing them in separate folders, with categories such as:

• Home expenses (mortgage paperwork, lease agreement, home insurance, utility documents)
• Loans (lines of credit, credit card documents and statements)
• Auto documents (financial agreements, car insurance, maintenance records)
• Saving and investments (monthly statements, etc.)

You can also organize your documents digitally using Google Drive or a Google Doc (or similar tools), linking out to the relevant documents. 

3. Establish a budget

Now that you have both an inventory of what you owe and access to your spending info, you can get a clearer picture of your spending. Budgeting is about understanding how you are using your money so you can take a disciplined approach to managing your finances and achieving your financial goals.

Creating a budget doesn’t mean you have to stop spending money or start micromanaging your cash flow. It’s an awareness exercise. Review your budget and your spending each week and ask yourself: “Does this spending align with what’s important to me or my family?’” Once you know what you value, you can cut out what you don’t—and start remaking your financial future

Thankfully, there are plenty of apps that can make budgeting easier, such as Mint or You Need A Budget, which consolidates the activity across all of your accounts and gives you real-time updates on your spending, savings and investments.

4. Make a plan to achieve your financial goals

A huge part of simplifying your finances is knowing where you’re headed. Now that you’ve organized your finances, hopefully it’s easier to see the path forward. 

What are your financial goals? Write them down, including details about costs and timelines. Putting things in writing can be a very powerful motivator. 

Pay down debt as quickly as you can. With interest rates rising, future debt will get more expensive. Compound interest (interest charged on interest) also hurts your finances. If you carry credit card debt, create a plan to pay it off faster—for example, by switching to a lower-interest card. If your mortgage renewal is coming up, consider your options for a lower-rate plan, maybe even switching providers. If you don’t have debt, set up regular investment contributions, even if they’re modest at first. 

Financial spring cleaning is all about setting yourself up for success. Roll up your sleeves and get started.

More about financial planning:

• How to talk to your partner about money
• 5 personal finance books for a fresh start
• How does an executor pay estate expenses during the probate process?
• How financial advisors can help at different life stages

About Elke Rubach

Elke Rubach is the president and founder of Rubach Wealth, Holistic Family Advisors, a wealth management firm in Toronto that provides comprehensive financial planning for business owners, established professionals and their families.

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