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Tidying Up Your Financial Life – Carl Richards

From buying a home to paying for college, our financial decisions seem more complex, and it often seems as if things are far beyond our control. It leads to a feeling of anxiety. Plus, we’re so busy making money, trying to make ends meet, that it seems all but impossible to manage it in any meaningful way. Who has the time to track a monthly budget?

Sounds chaotic, right? It’s moments like these, when we’re overwhelmed and unsure of what to do next, that we should remember the musician Brian Eno’s wise words:

“When in doubt, tidy up.”

I think Ron Lieber’s “Financial Tuneup” offers a perfect example of this tidying-up advice:

“To be a modern American consumer is to be plagued by a never-ending, guilt-inducing stream of undone tasks,” he writes. “Knocking these things off can get rid of the low-grade anxiety that results from the under-optimization of your financial life. But the real appeal is green cash money. If you could just cross a bunch of items off your list, there might be four figures in annual savings awaiting you.”

Curious how to tidy up your financial chaos? I suggest doing these three things:

1. Realize that the universe doesn’t like order.

We may like order, but the universe doesn’t, as Adam Frank, a professor of physics and astronomy at the University of Rochester, writes in a September piece on NPR’s website: “Physicists discovered that universe’s inevitable slide from order to chaos is the forward movement of time. They even have a name for it: entropy. And entropy’s cosmic increase is demanded by the new piece of physics they discovered: the (hallowed) second law of thermodynamics.

The forward march of chaos — from your newly tidied desk to the eventual mess it will return to — that is the second law of thermodynamics and the forward movement of time.”

Since we can’t fight the second law of thermodynamics, it seems wise for us to reset our expectations. Making the bed once doesn’t mean it will never need to be made again. Yes, we can add order to our lives, but like a garden, it will need regular tending or the weeds will choke out the good stuff. By understanding that chaos is a part of things, we can take some steps to counter its worst effects.

2. Throw away some stuff.

I love throwing away things. It’s very satisfying. For our purposes here, focus on old or irrelevant financial documents. Clear out the drawers, and I promise you’ll feel lighter afterward.

Then there’s the current stuff. Don’t even open credit card offers. Shred them and eliminate the decision fatigue of deciding whether to apply. Open your bills once. Pay them. Then shred them, too. Don’t let piles of stuff accumulate that you then have to go back through six months later.

3. Automate as much as possible.

Ron mentioned it in his Tuneup, but I want to highlight it again. We should automate all the good financial decisions available to us. If we have an extra $500 we want to move to savings each month, automate it. If we can set up a low-fee, diversified 401(k), do so, then leave it alone.

The goal with automation isn’t to take the smart thinking out of financial decisions, but instead to cut back on the wasted thinking. For instance, we can even automate some of our thinking. Before we go to the grocery store, prepare a list of exactly what’s needed. It makes it much easier to resist those impulse buys if they aren’t on the list.

Do the same thing with extended warranties and other add-ons that get offered at checkout. Decide in advance, then we don’t have to think about it. Just think about what we can do with all that mental RAM we’ve freed up.

Yes, the universe loves chaos, but there’s no reason that we can’t tame our little corner of it for a time. In fact, it’s those moments of order that will help us get through the next busy day and the next big financial decision. Keep that in mind the next time life feels out of control, and “when in doubt, tidy up.” I think you’ll like the results.


This commentary appeared November 11 on NYTimes.com.

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The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

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Carl Richards is the creator of the weekly Sketch Guy column in The New York Times and is a columnist for Morningstar Advisor. Carl has also been featured in The Wall Street Journal, Financial Planning, Marketplace Money, The Leonard Lopate Show, Oprah.com and Forbes.com. His simple but meaningful sketches served as the foundation for his first book, “The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money.”

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