Tips from the pros: Sorting your financial clutter

By Marianne Curphey

Published: 11 June 2012

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Many of us have good intentions when it comes to sorting out our finances. Yet, when paperwork -- and debt balances -- begin to mount, financial clutter can become so overwhelming that it feels easier to ignore it.

So we asked two experts -- Leo Babauta, writer of Zen Habits (a blog that focuses on finding simplicity within chaos),  and Simonne Gnessen, money coach and life planner at Wise Monkey Financial Coaching -- to give us their top tips on sorting out your financial affairs once and for all.

Turn distasteful tasks into habits
The trick to conquering financial chores regularly is tying them to habits that are already part of your routine, Babauta says.

Say you want to track your spending on an organised list. Babauta recommends tying the task of writing down your expenses to a "trigger that's already in your regular routine" -- checking your email, for example. In other words, every time you check your email, write down the purchases you've made so far that day.

"If you can consistently repeat this trigger-habit sequence over and over, the habit will form," Babauta says.

Until it does, use positive reinforcement in the form of small rewards to help it along. And don't start in on another new habit until the first one has stuck.

"Money habits can be complicated, as can eating habits," Babauta says. "There are many little habits we've formed over the years, and we need to replace the bad money habits with good ones, one at a time. Doing more than one at a time is very difficult and more likely to result in failure."

Tackle the most important pieces of paperwork first
When it comes to attacking financial clutter, it's important to strategise. Taking the time to alphabetise your files but forgetting to pay bills, for example, will cost you money.

 "If you do have mountains of paper then it can be difficult to get started, but it is important to make sure that essential bills are paid," Gnessen says. "If you forget to pay urgent bills like a parking fine within 14 days then it can double to £100."

Minimise the heavy lifting
The fewer small daily financial tasks you have, the less bogged down you'll feel.

"I believe in automating finances," Babauta says. "All my income is automatically deposited, all my bills are automatically paid, and my savings are automatically paid [into]. In fact savings is my first and most important bill to pay."

Another way to make financial chores less onerous is to avoid letting them pile up.

"Do it little and often-- as soon as a bill or piece of paperwork comes in," Gnessen says. "That way you keep on top of it."

The "don't let it pile up" rule applies to paperwork itself, too. Many people save too many important documents.

"You don't have to keep everything forever," Gnessen says. "Self-employed people need to keep statements for a minimum of six years and employees for 22 months from the end of the tax year."

Reducing the money tasks and paperwork weighing on your mind has another benefit -- it can save you money. If you're not overwhelmed, you can concentrate on things further down your to-do list -- like shopping for deals or weeding out expenses that are no longer necessary.

"I found that one of my clients had been paying for mobile phone insurance by direct debit for a phone they no longer owned, and it had cost them £1,400," Gnessen says. "Other clients had payments into policies that they had forgotten existed."

Clarify what you want to achieve - and make it as appealing as possible
"I must spend less" is not an appealing goal, says Babauta.

"Having concrete goals, such as getting out of debt in order to save  for a house deposit, or starting a savings plan so you can give up your job and go travelling are more inspirational goals," he says.

Yet if you have mountains of paperwork to file, the idea of having a neat, uncluttered living space might not be appealing enough to help you through the unpleasant task itself.

"If you have a lot of clutter, then try to make it as enjoyable as possible to sort it out," Gnessen says. "Listen to music, ask a friend over to help you, promise yourself a reward when it is all done."

Sometimes, conquering your clutter can be the ultimate reward.

 "Just by tidying up and clearing out the clutter you will find that you have more room to be creative," Gnessen says.

See related: Credit counsellors share consumers' biggest credit card mistakes, Thrifty bloggers share easy ways to get frugal