Marie Kondo your finances with these four golden rules

Marie Kondo’s first golden rule is: commit yourself to tidying up! There’s no quick fix; you need to be willing to put in the time and effort. The same applies to financial planning, according to Nicole: “You need to understand how useful and necessary financial planning is to get started. I often ask people what they need to enjoy life. I call it ‘eating, drinking and being merry’. So groceries, but also things that spark joy, like going out for a drink and going on holiday. This amount forms the basis for your financial planning. It tells you how much you have left over to save each month, but also how much income you’ll need during retirement to live comfortably. In most cases, how much pension income you are actually building up is very different. Only then does the penny drop and are people motivated to take their financial planning seriously.”

According to Kondo, tidying up is only a means to achieve your ultimate goal: your ideal lifestyle. Visualise the kind of house you want to live in and how you want to live in it; then the reasons why you want to tidy up become clear. Your ideal lifestyle is also the starting point for your financial planning. Think about how you want to live: from your work to your home life and retirement. Nicole advocates setting clear goals: “It’s only when your goals are clear that you can start thinking about the next steps in your financial planning. Maybe you’re dreaming of a holiday home, longing to take a sabbatical, wondering how to pay for your children’s tuition fees or how you can retire sooner? Think carefully about what you want, when and how much money you need to make it happen. Luckily, ABN AMRO has a tool you can use to quickly calculate how much your future goals will cost. For your pension, ABN AMRO’s pension check is a good starting point, as it helps you understand how much pension you have already accrued, the expected amount upon retirement and your options to top it up. Also have a think about what might change in the future. Maybe there’ll be a new addition to your family and you’ll work less, and therefore earn less. It’s important to set out your needs and speculate on any changes to be realistic about your plan.”

Another one of Kondo’s mantras is to tidy by category, not by location. This way, you know exactly how much stuff you have and can stay on top of it all. Nicole also recommends saving by goal: “A lot of people put all their savings in one account. But if you throw all your money into one pot, the chances of achieving your goals are very small because you don’t have that overview. So boost your chances of success by creating a separate pot for each goal. Then decide on how to put that money to work for each goal. If you want to go travelling in a few years, for instance, investing isn’t a sensible option. The risk of the stock market dropping in the short term is too great, so it’s better to put the money in a savings account. But if you want to save for your children’s tuition fees in 15 years’ time or retire in 30 years, you can take more risk and invest your savings.”

Once you’ve tidied your home using the KonMari method, Kondo says it’s easy to keep it that way. And that also applies to your financial planning, according to Nicole. “Once you have a solid foundation, it’s easy to make adjustments. Reviewing your financial plan every few years is crucial. What has changed in your life? Have you had children or started earning more? Don’t forget about your mortgage. Many people now have a great deal of equity on their homes. Mortgage lenders calculate the interest rate on the basis of the property value when you take out a mortgage. If your house is worth a lot more now, your mortgage lender runs less risk and can sometimes lower your interest rate.”

Get ready to Marie Kondo your financial planning. First of all, be prepared to put the time and effort into it. Then set clear goals and make a pot and savings plan for each goal. Once you have that foundation, it’ll be easy to make adjustments in the future. If you need help with your financial planning or understanding your finances, make a no-strings-attached appointment with one of our Preferred Banking advisers now and start sparking joy.