As per Japanese writer Marie Kondo, decluttering your home is the same as decluttering your life. The idea is to banish from your world anything that “does not give you joy” and it apparently has a multiplying effect on your life overall. If only de-cluttering expenses was as simple. Because, lets face it, most expenses do give us “joy” or are essential, else, we probably may not make them. Or would we?
Over the past couple of months, I have outlined ways to streamline investing by taking things a step at a time and breaking everything down. A similar approach can work to figure out what to do with our almost constantly burgeoning expenses. If you think about it, its not that different than decluttering your house one cupboard at a time.
It all about creating an expense hierarchy. Divide all expenses into staple expenses, life expenses, emergency expenses, lifestyle expenses, large one-off expenses and luxury expenses.
Staple expenses would basically be rent, essential groceries and whatever other mandatory expenses you need to make each month such as school fees, daily medications. These expenses can include obligations toward investments made and therefore will include any EMI’s payble. Life expenses are things like cosmetics you use, daily wear clothes, etc. Emergency expenses are in the form of a certain amount kept aside for medical and other unforeseen expenses. One-off expenses should ideally be made using this buffer. Lifestyle expenses are ones that pamper so they take the form of better brands of products used, clothes worn etc. Luxury expenses such as holidays are self-explanatory.
The crucial aspect of the above exercise is to realise that your expenses are nothing but a depiction of your life. By that I mean your life’s priorities. For example, when looking at fixed top-priority expenses (staples), we need to be careful to classify fixed as those that truly cannot be compromised upon. And this is specific to each family and what they deem as top-priority expenses. For some, a top school, despite the financial burden, could be non-negotiable, whereas for others, a tier two school with less pressure on the family may work. It’s about personal priorities.
It’s also about realistically knowing how much a dinar can buy really. So, it does require that the conversation on decluttering is a family discussion. The things to think about are, where are you today in terms of the money you have, the financial obligations you have, the financial obligations you hope to have and of course your financial security for the future.
As an explanation, if you have a loan on a car or a home etc. you have a fixed obligation. If you hope to have children to send to college there is the financial obligation that you hope to have. Where you are, what you absolutely must do and where you want to go will break down expenses and help you to reclassify and declutter them.
To declutter expenses, the room for negotiation is in the lifestyle and luxury zone. Rather than looking for the “joy”, look for the “stress”. If an expense gives you that feeling of guilt at the bottom of your stomach, it’s probably one that you know you can live without. I am not saying you should live without it but realise that that’s the first sign of a negotiable expense. No one feels guilty about spending on medicines for instance.
Yet, medicines bring no joy and we all need joy in our lives. So unless you absolutely cannot afford to, in decluttering expenses, do not assume that all that pampers is unnecessary. Spring cleaning after all is all about ushering spring and all the good that it brings. Remember to budget for a few flowers just for you to look at and enjoy guilt free.