Smart Money Podcast: ‘How Should I Spring-Clean My Finances?’

Sean Pyles
Liz Weston, CFP®
By Liz Weston, CFP® and  Sean Pyles 
Edited by Kathy Hinson

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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions — in 15 minutes or less.

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This week’s question is from Adriana, who says, "I've been getting really into cleaning and simplifying my life, doing the whole Marie Kondo thing, and now I'm wondering how I can do that with my finances. What do you think is the best way that I can spring-clean and simplify my finances?"

We’ll help you get on track
See your spending breakdown and spot opportunities to save money.

Our take

Spring-cleaning your finances should start with your budget. Review your spending in recent months and compare it with your income. At NerdWallet, we like the 50/30/20 budget, which suggests limiting “must have” expenses — shelter, food, utilities, transportation, insurance and minimum loan payments — to 50% of your after-tax income. That leaves 30% for “wants” — the stuff that can be postponed or cut if necessary — and 20% for savings and extra debt payments. Not only does the 50/30/20 bring more balance to your finances, but it can really help you if you lose a job or your income otherwise drops, since your essential expenses are only half your after-tax pay rather than 70%, 80% or even more.

Next, take stock of your credit and your credit cards. Sign up for NerdWallet’s free credit score, if you haven’t already, so you can monitor your credit, and be sure to check your credit reports at least once a year at Check to see if you can get a better credit card, since rewards programs and interest rates change over time.

Finally, review your investments. What’s the breakdown now of stocks vs. bonds vs. cash? It might be quite different now than what you intended because of all the market volatility. Consider rebalancing or using an automated solution that rebalances for you, such as a robo-advisor or a target-date retirement fund.

Our tips

Do a spending autopsy. Look at where your money is going and decide if any adjustments should be made.

Take stock of your credit cards. If your credit scores are already good, it’s OK to cancel a credit card once in a while to simplify your finances.

Check your investments. Make sure your asset allocation still makes sense and rebalance if necessary, or choose an automated solution that will do it for you.

More about tidying up your finances on NerdWallet:

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, return to the podcast homepage.

Sean Pyles: Welcome to NerdWallet's Smart Money podcast, where we answer your money questions in 15 minutes or less. I'm your host, Sean Pyles.

Liz Weston: And I'm Liz Weston. As always, be sure to send us your money questions. Call or text us at 901-730-6373. That's 901-730-NERD, or email us at [email protected].

Sean: You can also send your voice memos to that email address if that's easier for you. Let's get to this episode's question from Adriana. She says, "I've been getting really into cleaning and simplifying my life, doing the whole Marie Kondo thing, and now I'm wondering how I can do that with my finances. What do you think is the best way that I can spring-clean and simplify my finances?"

Liz: Well, we all know that money sparks joy, and I think, Sean, you did an article about this a while ago, didn't you?

Sean: I did yeah, on the whole Marie Kondo thing specifically, actually. It was pretty popular, especially last spring. It was almost the height of that trend. And now she's selling random things, so she may not be the best guide for you to simplify your life and your money because she's trying to take it away from you. But I will say, there is a benefit to just cleaning things out, getting rid of the things that you don't need and just making sure that your finances are, as we talk about a lot here, reflecting your values and are also just easy to manage. So on this episode of the NerdWallet's SmartMoney podcast, we're going to give you our favorite tips for spring-cleaning and simplifying your finances. And we'll also talk about which parts of your financial life you might want to let collect a little bit of dust.

Liz: Let's get to it.

Sean: To start, there are a lot of different approaches to spring-cleaning or simplifying your finances, but I think it really makes sense to start with a clear understanding of your money. And to me, that means assessing your budget. That's something that a lot of folks say they roughly know, but if you're going to take the approach of looking at your finances, seeing what you do and don't want, your budget is really where it all happens.

Liz: Well, I think everybody needs to be tracking their budget. They don't have to decide what to do with every penny or follow every penny, but you should have a general idea of where your money's going. So I think it's a really good idea to have some kind of app or system for seeing where the money's going. Even if you're not doing that penny-by-penny thing, I really like at least once a year to sit down and do what a friend of mine calls a spending autopsy. So you're looking at where your money has been going and seeing if you want to make adjustments, because where your money goes shows where your values are, and you want your money to be going towards what you really value, not mindless spending. That's where the spending autopsy can really help.

Sean: And fortunately, now that everything is online, you can just log in to all of your accounts, pull up your bank statements, credit card statements over the past year, and just look through it. And you'll probably have an eye-opening moment of how much you're spending on online shopping, all these things that you might just be doing in the moment and not realizing that they're adding up to hundreds of dollars. And then you can assess, "OK, do I want to keep spending my money in that way? Do I not want to?"

But one thing I think would help for folks who don't really have a good gauge on their budget is using something that we've recommended here before, the 50/30/20 budget. Half your income goes towards needs like housing, medicine, things like that, and 30% goes towards wants, and the final 20% is debt and savings. And that's just a really simple way to block out where your money's going, and then if you find that maybe your wants are closer to 40%, you can readjust that a little bit. But I think it's nice just to have some parameters here.

Liz: I think that really helps. And the nice thing about the 50/30/20 budget is it makes sense, basically, regardless of your income. One of the things that always frustrated me was, before this system came about, people would say, "Well, how much should I spend on this? How much should I spend on that?" And the reality was, it really varies. It depends on your situation. When you start doing the 50/30/20 budget, though, you might notice that your must-haves, your needs, are way out of proportion. When we first started doing this, I think ours were like 75% or 80% of our after-tax income. Which explained why it was hard to save money, is because it was getting crowded out. But when you do finally get your spending in those categories, get that in line with the 50/30/20, what you figure out is your life is more balanced. And if anything goes wrong, because you've shrunk your needs to 50% of your after-tax income, you can actually survive financial setbacks a lot easier.

Sean: Right. And I think it's also good to keep in mind that these are guidelines. If you live in a really expensive city, you might realize that your rent alone is 50% of your income, and you might not have a lot of say in that because that's where the jobs are. It's hard to cut that cost, and that's OK. But just readjust the other areas, as well, so you get some harmony, and you get a balance here, but whatever balance works for you.

Liz: Yeah, and I'd say if you were spending 50% of your after-tax pay on rent, that is not sustainable in the long term. So you might have to do that for a short period of time, but if that's going to continue, you might look at other places to live or other jobs. Because if you continue with that, you are not going to have enough money left over to pay off your debt to save for retirement, to do all the things you need to do.

Sean: Yeah, and that is exactly why my boyfriend and I moved to Portland, Oregon, out of San Francisco, because we realized we could keep treading water forever, or we could move somewhere that was more in line with our budgets and our financial goals. So that's something to consider as well.

Liz: Absolutely. I also wanted to put a pitch in here because one of the spring-cleaning tasks I'm going to do is to look through our subscriptions. This is an area that's really, really grown in the last few years. And the last time I did this, I realized we had, like, I think three or four music subscriptions. All this stuff needs to be thorough. Am I getting my full value? Are we getting the full value out of this or could we drop it?

Sean: Similar to that, I think it's worth noting or looking at your budget and finding the things that were maybe a trial period where it was a dollar for three months of one service and then after that, now it's $8, and maybe you just didn't notice. Those things can creep in to your budget, and just snipping those out can free up some extra cash for things that you want to actually spend money on that you value. So once you have your budget sorted out, I think it's just a no-brainer to look through your credit report, because that's something that yes, we say you should just do it every year, but it probably doesn't realistically happen.

You can get it online for free, and just look through it and make sure that everything on there is something that you recognize. If there are any accounts that are not yours, that can be a big red flag, and you can dispute that and get it taken off and investigated. And if it's something that isn't yours, it's probably some fraud, and it might be bringing down your credit score. And so that is a really quick and easy way to get everything on your report to be accurate, and then also bring your score up at the same time.

Liz: Speaking of credit scores, it's a really good idea to be monitoring at least one credit score from a credit bureau, and you want to watch the same score from the same bureau so that you can see changes over time. If your score should suddenly plunge, that lets you know that you need to pull your credit report, see what's going on, see what the problem is. You can also see it increasing over time, hopefully, and that can let you know that you're in a good position if you want to refinance a mortgage or get a car loan, something like that. So we highly recommend that you track at least one credit score for one credit bureau.

Sean: One thing I want to get your thoughts on, Liz, is at the intersection of examining your credit profile and maybe some of the old financial cobwebs that we mentioned earlier. And one thing that I've been trying to address and mull over is what to do with my old credit cards. I have this account I opened in college, and I haven't touched it. I don't even have a physical card for it, but I leave it open just because I want to have that history. I want to have the credit history that goes back a number of years. Do you think that it's worth leaving cards like that open, or is it OK to close them? I've heard a lot of back and forth on this.

Liz: Yeah, and actually we've done a really good job of terrifying people that they can't close accounts. It used to be that people thought erroneously that closing accounts could help their credit. We know that's not true, but that myth persisted. Now, a lot more people know that, generally speaking, you should keep accounts open, but they've gotten the idea that they can never close an account. In reality, you don't want to close accounts if you're going to be in the market for a major loan, or you're trying to improve your credit score, because closing cards does not help. But that doesn't mean you can never close a card. So I do this whole thing every year. This is so geeky, but I actually go through each of my credit cards, and I look at, are they pulling their weight, are they more than offsetting their annual fee? And is there a better card out there now, because the terms and conditions and benefits of these cards change all the time.

So if you have hung on to a card since college, which a lot of us do, that's probably not the best card for you anymore. I would say that there's probably going to be a better deal out there for you. Now, in your case, you haven't had credit all that long. So I might be, especially if it doesn't charge an annual fee, I might be inclined to just keep that open. Maybe use it, maybe put some automatic payment on that and automatically have it paid off, so that it's in constant use, because that helps your score, but you're not carrying debt. You don't need to carry debt to have good credit scores.

Sean: Yeah, that's also a pretty common myth.

Liz: Yes, exactly. So is this card one that you pay an annual fee on?

Sean: No, no. It was the only card I'd get qualified for as a lowly college student. And fortunately, there's no fee. It's just sitting there online basically.

Liz: Well, the age of your accounts is a minor part of your credit scores. So I would think at this point, if you did close it, it wouldn't have a huge impact. But I kept my first card open for quite a while, just thinking it's benefiting me and it's not hurting me. So it's really up to you.

Sean: But on the other hand, I have another card that I got a few years after college, a travel card that does have an annual fee of, I want to say, around $100, and I pretty much completely stopped using that in favor of a cash-back card. I had mentioned that I'm a big fan of those. And I'm thinking that this might finally be the year where I just close that account because I've paid $200 at this point just keeping this account open. And that's sad to think about what can I do with that $200, not to a bank for a card I'm not even using.

Liz: Yes. I would recommend taking a look at all the benefits that the card offers because you might be able to take advantage of those before the next annual fee comes to, if that makes sense. I've looked at a couple of my cards and realized we're going to cancel, and we know that we don't want them anymore, but they have benefits that I can take advantage of before I have to pay that annual fee again. So what I did was, I went on my calendar and I put a note a month before the annual fee would be charged again, made a note to close that card. But in the meantime, I'm using those benefits, so I'm getting at least something back for the annual fees I put in.

Sean: I want to look at that myself. Well, I'm wondering if there are any other key elements of spring-cleaning or simplifying your finances that you think we should convey?

Liz: One has to do with investments. It used to be that part of my spring-cleaning every year was rebalancing my investments. We don't have to do that anymore, thank goodness. Now, with your 401(k), you probably have a life cycle fund, a target-date retirement fund, something that will do all the heavy lifting for you. So if you don't know about rebalancing an asset allocation, basically, asset allocation is how you've got your money divided up between stocks of different types and bonds of different types of cash, and you need to have an asset allocation that supports where you're going.

So given how long you have until your goal, like retirement, and what your risk tolerance is, your asset allocation will reflect that. Because the market changes all the time, those can get way out of whack. You can wind up, if the market's been going great guns like it has been, you can wind up with way too much in stocks. And then when the market drops, as it inevitably does, you take a big hit. So the rebalancing idea was, you're going to be looking at your asset allocation and getting it back to where it should be. Now, all of that can be automated. And I'm a big fan of doing that. If you're really hands-on and want to do the rebalancing and you actually do, then you ...

Sean: It takes a bit of work, yeah.

Liz: It does. And a lot of people just ignore it. And I did. That's the cobbler's children with no shoes situation. I constantly ignored it. So I'm so glad now that it can be automated either through, like I said, a target-date fund. If you use a robo-advisor, those computer algorithms are constantly helping you rebalance, or using a financial planner is another way to do it. But you need to be taking a look at your investments and at least once a year making sure that the asset allocation still makes sense.

Sean: Investments are so easy to set and then completely forget about, but it's really worth checking in and making sure they're balanced properly. So Adriana, I hope this helps you simplify and organize your finances. And now let's get to our takeaway tips.

Liz: First off, do a spending autopsy. Look at your budget, see where your money is going, and see if there's any adjustments that need to be made.

Sean: Next step, take stock of your credit cards. If you find there are some accounts that you haven't used in a couple of years, you might want to cancel those accounts just to simplify your finances.

Liz: Finally, take a look at your investments. Make sure your asset allocation still makes sense, and do some rebalancing if necessary, or choose an automated solution that will do it for you.

Sean: And that is all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call us or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at [email protected]. Also, be sure to visit for more info on this episode and subscribe, rate and review us wherever you're getting this podcasts.

Liz: And here's our brief disclaimer, thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Sean: And with that said, until next time, turn to the Nerds.