Like most people, I often forget what’s in my closet. I think I’m someone with a small wardrobe, until every spring, I take stock of all that I’ve bought over the years — whether it’s my favourite worn-in grey sweater from Grade 11 that I can’t bear to part with, or my growing crop top collection — and there’s always something that surprises me.
Which is exactly the point of this annual wardrobe edit: Taking inventory and getting rid of what I don’t want anymore (spoiler: the sweater stays) helps me avoid buying clothes that end up unworn or hidden in my closet so that I can be more intentional about my spending.
A financial edit can do the same for your wallet. Unlike a restrictive budget, a financial edit — where we figure out where our money has been spent and how we ideally want to allocate it moving forward — gives us crucial information that leads to better money management. And I promise it’s way more fun than decluttering your dresser drawers!
Here's how you can edit your finances likes you would your wardrobe.
Reflect on where your money is actually going
Similar to going through your closet and taking stock of what you own, the first step to editing your finances is figuring out where your money is going. Grab a vanilla latte and put on your favourite Spotify playlist, you’re going to need a few hours.
First, download your past three months of bank statements and highlight in different colours where your money went. Specifically, group and calculate how much you spent on variable expenses like UberEats (takeout), groceries (food), your Sephora orders (retail/shopping), etc. Then, divide by three to get an average of your spending in each category month over month.
What I’ve noticed when my clients go through this process is that they’re often aware of how much their fixed expenses are (expenses that are predictable and recurring each month like rent and utilities), but don’t know how much they actually spend on extras. In the same way a closet edit forces you to realize that you own three black blazers and don’t need to buy that one on sale at Zara, having awareness and visibility into how we spend provides clarity and lays the foundation to help us understand where we can save more.
Label how you feel about your spending and spend in alignment with what you enjoy
Becoming more intentional with your wardrobe means finding pieces that are versatile, comfortable, and make you feel confident so that you can get the most use out of them. The same ethos applies to your general spending. The stale financial advice around not buying coffees or new clothes ingrains the narrative of shame around spending, and that money shouldn't be enjoyed. Instead, we can avoid impulse spending on things that don’t add value to our lives, and buy things we love (without feeling guilty!).
Here’s how: Now that you know what your variable expenses are, the next step is to label how you feel about what you spent on them. For example, maybe seeing that you spent $150 on takeout sushi last month is disappointing. Or, maybe you feel good about shelling out that much on spicy tuna rolls because you value convenience and you don’t like to prep dinner. Write down how you feel.
Doing this exercise with every line on your variable expenses helps you understand your lifestyle and what you enjoy purchasing versus not. The categories you feel joy about spending — whether that’s sushi or or your meal prep delivery service or Charlotte Tilbury’s newest drop — is an indicator to keep spending money on those purchases (within reason, of course). But, for the purchases you feel regret, frustration, or shock around — those are the categories that you want to explore reducing.
It’s about finding balance and using your hard-earned money for what you love versus seeing it wasted on random stuff.
Create an intentional action plan for your money
Once you have clarity into what spending makes you happy, it’s time to create a plan to avoid spending in those categories you want to reduce.
How do you do this? Baby steps. I recommend cutting expenses by 25% in those categories you don’t feel good about and re-directing that money to a financial goal like debt repayment or savings. I want the reduction in spending to be realistic, which is why I never recommend cutting that spending out altogether. (It just doesn’t work.) To make this even easier, automatically set that money aside towards your credit card debt or savings account.
You can also try identifying your spending triggers and patterns that lead you to make these regretful purchases in the first place. For example, if you’re aware that on Friday nights you’re tired after a long work week and you typically impulse buy takeout, then there’s two options: One, make your Friday dinner super easy to throw together. Or, assign Friday as your weekly takeout night; now it’s an intentional purchase so there’s zero guilt.
Or, if you struggle with reducing your spending on clothes, pause and reflect before you add that sweater dress to the cart — how often will you wear it? For example, an Aritzia Superpuff might seem pricey, but be something you’ll wear every day in the winter, so you’re going to get more wear out of it versus another off-the-shoulder top. If you won’t wear it often and you don’t need it now, that’s a purchase you can hold off on (keeping more money in your bank account).
Do a financial edit every season
Most people go through their closets spring, summer, fall, and winter. I recommend doing a full financial edit every three to four months as well. There can be a change in lifestyle, income, or circumstances that will influence how we spend our money and we want to re-adjust our finances accordingly.
Maybe you have to return to commuting to work once you’re vaccinated. Now you have to pay for transportation, sure, but you also might find yourself at risk for overspending at an after-work happy hour with your co-workers. Plan ahead and understand how much you ideally want to spend on these extras — remember we want to try to cut back in other areas if expenses increase in another.
Intentionality with our spending means we’re in control
When our homes and closets get cluttered and full, we feel less in control as our space can feel overwhelming. It’s the same with overspending, the more money flies out of our bank accounts, the more it can feel like we can’t stop it. A financial edit helps us feel grounded, so that we can avoid feeling stuck in a loop not knowing where our money's been going and feeling frustrated about how to fix it.
Parween Mander is a millennial money coach based out of Vancouver, a trauma of money facilitator, and the founder of the Wealthy Wolfe, a digital financial coaching platform for women of colour from immigrant upbringings specifically.