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Financial Tidying Up: Getting your financial house in order.

There’s a popular series airing right now on Netflix called Tidying Up with Marie Kondo.  The series is based on Marie’s best-selling book titled The Life-Changing Magic of Tidying Up.  You might be thinking to yourself why we are writing about tidying up on a blog focused on helping doctors become debt-free millionaires, but believe us there’s a connection to getting organized and getting out of debt.  Let’s explore these connections in this week’s blog post.

One of Scott’s passions is helping organizations get faster and better at what they love to do for their customers, and a foundational steps in the process he teaches centers on getting organized.  Maybe you can relate if you’ve ever worked or are currently working in a messy environment.  How efficient and effective can one be working in a messy workspace, not to mention what will your patients, clients, or customers think when they walk into an organization that is dirty and has stuff piled up all over the place.

If you’re like us your first impression might be these people are slobs, and if they can’t even keep an office clean how are they going to help me with a far more serious problem?  They might be great at what they do, but first impressions can be incredibly powerful in getting clients, customers, and patients to return.

Another reason to get organized that Marie Kondo emphasizes is the joy one has living and working in a clutter-free environment.  Try this little experiment to see how it affects you.  Take a bunch of books, papers, anything for that matter, and stack it up behind you at your desk or any place you spend time in at home or work.  Then continue working or just hanging out if you’re at home for a while and see if the clutter starts to bother you.  If you’re like most people you will begin to feel uncomfortable with all this stuff stacked up around you, and probably feel even worse if someone comes into your workspace or home and sees the mess you’ve created.  Clean up the mess and see how it changes how you feel.  Do you feel better in the clean organized environment or the messy one?

When we’re organized we tend to have less anxiety and experience more joy in our lives.  This leads to how this all connects with your finances.  If your finances are a mess, and by mess we don’t mean you’re up to your earlobes in debt, but that you are disorganized and can’t quickly summarize the current state of your finances (i.e. debts owed, balances, budget spent for the month, cash in bank accounts, investment balances, etc.), you may want to read on for some advice on how to get better organized.

The 5S’s of getting organized.

There are five steps, each starting with an “S”, to getting and staying organized.  They include:

  1. Sort
  2. Set in Order
  3. Shine
  4. Standardize
  5. Sustain

The first S is Sorting through all your financial documents.  This includes both hard and electronic copies.  Using Marie’s method you pile everything up in one big stack and sort through it all.  As you sort your documents and files you’re going to determine what you should keep, what should be discarded, and what should be archived.

The things you keep are the information you’re likely to need in the near future.  This could be your latest statements for bills that need to be paid, current month’s budget, your 90 day goals, etc.  Next, what remains are going to be things you want to archive either electronically or in hard copy.  These could be bank statements, investment statements, paid bills, etc.  Finally, what remains is likely documents and files you may no longer need paper or electronic copies of.  These could include any records you have in electronic format that are archived online really old utility bills, etc.

The second S is Set in Order or having a place for everything and making sure everything is in its place.  This is an especially critical step in making sure wherever you store your documents it’s secure and fire-proof if they are in paper format.  It’s also critical in case something were to happen to you that your loved ones know where these documents are and how they could access them, if needed.  This could also include storage of your account passwords for your spouse and / or whomever you have established in your estate plan as the one responsible for such things.

Perhaps the easiest of the S’s is Shine that is focused on just polishing what you have now organized.  This could be as simple as purchasing a lock box for your documents, purchasing a safe, getting a safety deposit box to store documents, or creating a folder(s) in the cloud to store electronic documents.  When you’re done with this step you should have something that really makes your financial documents and your process feel polished and worthy of putting a bow on.

The last two S’s are focused on keeping the tidiness going into the future.  Standardizing is as simple as setting up a schedule to review your documents and files on a routine basis each quarter, year, etc. to make sure what may have piled up since the initial cleanup took place can be sorted, set in order, and shined again.

Sustaining, the final S, can be the most difficult of the S’s, but it’s also the most important.  Sustaining your financial orderliness might include using a checklist each month to make sure you are completing essential tasks to keep organized and have your finger on the pulse of your current financial situation.  These may include scheduling budget meetings with your spouse, reviewing goals and progress toward them, tracking debt paydown rates and celebrating achieving key milestones in your debt-free journey, and / or using an app such as Personal Capital to monitor your investments and bank balances.   

When you know you’re finances are nice and tidy.

We would suggest you’ll know you’re finances are good and tidy when you can state the answers to most of the following questions in a matter of minutes.

What is the balance of your checking account?

What is the balance of your savings account?

How much total debt do you currently have?

What are your largest debts?

How much debt have you paid off?

How much longer will it take you to become debt-free?

How much is in your investments? 

With what institution(s) is / are your investment(s) located?

What are you budgeted expenses for this month?

How well are you in keeping on budget this month?

Who do you have your life insurance with?  How much are you insured for?

Who do you have your long term disability insurance with?  How much are you insured for?

When you can answer most, if not all, of these questions we would argue you have your financial house in order, and a house that is in good order is one that is under control and will soon be a house that is debt-free.

We’d love to hear from you in our new Facebook group on how you’ve organized your financial life.  What tidying tactics have worked for you?  How do you keep the pulse of your financial situation?



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