In the UK, the clocks have gone forward and the season of Spring has begun. It’s time for a financial Spring clean. And why not take some celebrity tidying-up tips from Japanese “organising consultant” Marie Kondo? “Tidy your space, transform your life.” Says Kondo on the website for her KonMari brand. She’s talking about household items, like clothes, books and furniture. But her principles apply to personal finances too!
“First, put your hands on everything you own, ask yourself if it sparks joy, and if it doesn’t, thank it for its service and get rid of it. Second, once only your most joy-giving belongings remain, put every item in a place where it’s visible, accessible, and easy to grab and then put back.” And that’s it – a great summary of Kondo’s New York Times best seller The Life-Changing Magic of Tidying up by style blog One Kings Lane. Can you begin to see how the Kondo clean-up method for the home might work (with a little adjustment) for personal finances? Just follow the same two basic steps:
STEP 1: REVIEW & OPTIMISE: Assess your entire financial picture and get rid of anything that no longer makes any sense (or “sparks joy” as Kondo puts it).
STEP 2: MAINTAIN & REVIEW: Now you’ve got your financial machine lean and clean, keep it under regular review. Enjoy your new-found sense of clarity and financial flexibility! A great place to start with Step 1 (Review & Optimise) is to tackle any outstanding debt, particularly credit card debt. There’s no point in having healthy investments and great financial habits if debt interest is eating away at your financial situation from the inside. You will also want to review any investments you have, and particularly your pension arrangements. As an expat in particular, powerful ways to make the best of your money can open up; but only if you are prepared to be ruthless about changing your old ways! You just need somebody to point you in the right direction and ensure you fully understand every risk that comes your way. If you are a Brit living in the UK and thinking of transferring your pension, it is actually a UK government requirement that you take professional financial advice “if you have what’s called ‘safeguarded benefits’ – in particular if you’re in a defined benefit pension scheme or have a guaranteed annuity rate – and your benefits are worth £30,000 or more.” (moneyadviceservice.org.uk) Whatever your plans, if you are serious about giving your finances a brush-up – get an IFA! An Independent Financial Advisor (IFA) is ideally suited as a qualified professional to guide you through reviewing, optimising and maintaining your overall financial picture. This is what IFAs do for a living, so you can expect exactly the rigorous approach to cleaning out your financial cupboards that Marie Kondo recommends for the home:
Kondo Top Tip 1: Tackle the Big Picture Kondo’s first rule is to tidy by category rather than location. If you’re tidying up the home, that means tidy all your clothes at once (for example) rather than tidy up room by room. In the world of personal finance, this means not getting bogged down in local detail. This means holistic personal finance (in which Holborn IFAs specialise). As an absolute priority, you must look at your finances as a holistic whole; at how the pieces link up. Decide what life goals you want to support with your finances, and make sure your whole machine is working together in the right direction.
Kondo Top Tip 2: Purging feels Great Kondo treats tidying up the home as a spiritual experience of cleansing and revitalisation. She lights a candle and says a prayer before purging a property of junk. Maybe that’s not for you when it comes to detoxing your financial situation. But it’s certainly true that an honest cull of toxic financial obligations and investments can make you feel a lot better than you expect to when you first face up to them. It’s OK to fear change. But only change can lead to better things! So talk to an IFA and be prepared to shine a light onto a brighter financial future.
Kondo Top Tip 3: Rediscover your Style Ever positive, Kondo points out that sorting out your clothes leads you to rediscover all sorts of style successes that you had in the past (and style failures too, no doubt!). In the world of personal finance, the lesson here is positive too: once you have given your finances the once-over, you will be able to see “what is what” in your life generally; maybe gain a whole new clarity and resolution about your life goals. Your finances are your future, after all!