Declutter Your Finances in Three Easy Steps

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Do you often feel stuck about your money situation? Do you feel like you are living paycheck to paycheck and can never get ahead? You are not alone. According to a study by the Center for Financial Services Innovation, nearly half of Americans say their expenses are equal to or greater than their income. The purpose of this post is to help you make changes with your money mindset and provide you with some strategies and tools to help you accomplish your money goals faster. More importantly, we will be focusing on three easy steps to help you declutter your finances.

Where did this concept of decluttering your finances come from?

You may have heard me talk about how my husband and I came up with our own way to declutter our finances. While sitting down to work with our budget, we realized that our spending priorities were a little off. We knew we wanted to retire early, yet we weren’t saving aggressively. In fact, we were spending on things that really didn’t matter to us. When we created a budget, we found over $500 a month of completely wasteful items right away!!!

As we worked on this budget, we began to realize that we were using a strategy much like you would use to clear out the clutter from your house. When you clean out a closet, you decide which items can be thrown out, which can be donated or recycled and which can be kept. We used this same method to categorize our financial budget items. Watch this video and then read more to learn how to declutter your finances.

The ABC Budget Worksheet was born to help you declutter your finances

We called this method the ABC Budget. Each item on our bills and expenses list was placed in the A, B, or C category. Anything in the “A” category was allowed or acceptable. Items in the “B” category were there because they provided us a better life. The “C” category meant the items could be cut or cancelled. Head over to this post for a description about the ABC Budget Worksheet and a more detailed explanation of what types of expenses go in each category.

How to Declutter Your Finances

Once all of the items are listed on a budget and then categorized as A,B, or C, then it’s time to declutter your finances. We created worksheets that you can print out. You can sign up here to receive your own free ABC Budget and ABC Declutter Worksheet.

With these worksheets, you basically work through deciding what to eliminate right away from the C category. These are items that tend to be wasteful spending items anyway. They could be things you signed up for with a monthly charge and forgot about. Or they might be subscriptions you no longer use. Cutting these wasteful items from your budget right away could save you hundreds of dollars a month!

Next you want to look over the A,B, and C categories and decide what needs to be or could be reduced. Maybe you can increase your deductible on your insurance to lower the premium. Or maybe you can downsize your living situation. The possibilities are endless and each situation is unique so it’s best to take your time, sit down with your family and get creative about what you can reduce from all three ABC categories.

Declutter your finances and choose what’s most important to you

This declutter process helps you choose what you value over what no longer serves you. By holding onto things that no longer serve you, you are tying up your hard earned money. This money could go towards things that are a higher priority for you (say like building an investment account!)

Quick note: if you want to learn more about the ABC Budget Worksheet, you can head over to this post, ABC Budget Worksheet- Use it to Declutter Your Spending.

Three Easy Steps to Declutter Your Finances

Below are three easy steps to help you clean up your spending habits. Take some time with each of these steps to help you fully declutter your finances:

1. Cut Back Wasteful Spending:

Gain clarity on what you really want in your life. You might be spending money on things that never get used such as subscriptions and memberships. This money could go towards a savings or investment account instead each month. Check out this article for ways to invest.

2. Get Organized:

When you categorize your finances, you are creating a clear snapshot of your spending. This makes it easier to adjust your spending habits if something unexpected comes up in life. One way to get more organized is to use a financial program like Quicken or Personal Capital or use the ABC Monthly Spending Plan.

3. See If You Are Spending Too Much:

Creating a budget allows you to see in one clear picture if you are spending more than you are making. If you are going negative each month or relying on credit cards to get by, then having a budget is essential. You might realize that you need to make some bigger cuts to your expenses, or you could come up with some side hustles to make extra money.

Related Articles on Side Hustles:

Benefits When You Declutter Your Finances

There are so many benefits when you finally declutter your finances. Here are some of the reasons why you would want to prioritize your spending habits and start fresh by cleaning out your budget.

1. Control your debts:

Did you know the average US household carries over $15,000 in credit card debt and over $32,000 in student loan debt (according to NerdWallet). Having a budget can help you pay off these debts quicker because you can create a plan and track your progress.

2. Helps you stick to your goals:

Having a budget helps you stick with your financial goals. There are many different financial goals such as being able to buy a home, go on vacations, have an emergency fund, payoff debt, have investments, and even retire. With a budget, you can make sure you spend money on the right things and those things support your progress.

3. Better communication with your significant other

My husband and I both agree that our talks about money bring us closer together because it builds trust between the both of us. We both were in prior relationships where money was not discussed and it caused a lot of problems. You can avoid a lot of conflicts by having simple once a week talks about money and how to deal with certain expenses. I even recommend sharing money talks with kids to introduce them to the concept of bills. Encourage them to take part in money challenges and to come up with creative ways to make a little extra cash. Here’s a great post about side hustle ideas to make extra money.

4. Figure out how much you can afford for loans

If you are wanting to buy a home or car, you will most likely need to take out a loan. By budgeting, you can get a sense of how much you can afford for a monthly payment. Buying a home could actually be a great way to invest your money. In this post, I go over exactly how to figure out how much you can afford to buy a home.

5. Gives you a heads up when you might be overspending

It’s never fun to find out you don’t have enough money at the end of the month to cover expenses. By keeping a monthly budget, you can see where you are overspending and put a stop to it more quickly.

I hope you found this article on decluttering your finances helpful. If you are wanting to improve your financial situation, I highly recommend you take a few minutes out of every month to declutter your finances. Sign up for our free 7 Day Master Your Money course where you will have all of our worksheets and printables emailed to you. This is a great way to start to gain greater control over your money and even learn how to create more income possibilities for yourself.

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