We’ve all heard of diets designed to cleanse the body. They promise to get rid of toxins and jump start weight loss. Well, how about a financial cleanse? Whether your spending is out of control or you just need a little nudge in the right direction, we can all use a financial cleanse from time to time.
A financial cleanse can help us re-examine our financial habits and make sure we stay the course towards financial independence. Even if you feel like you’re doing everything right, it doesn’t hurt to do a cleanse to see if you can perform even better. If you’re new to the world of personal finance, then a financial cleanse is the perfect thing to get you started on the road to financial freedom.
Course Correct Early On
At the first sign of your finances being out of wack, take charge. It’s easier to make changes early on rather than wait until the problem gets out of hand. It’s easier to lose 5 pounds than 20, right? Maybe you notice that you’re consistently going over budget month after month. Perhaps you find that you’re spending too much on groceries. Once you detect these problems, it’s time to take charge and course correct.
Try no spend days to challenge yourself and rein in your spending. Other than your fixed expenses such as mortgage, utilities, and insurance, try to have as many days as possible where you don’t engage in discretionary spending. Say goodbye to store-bought coffee. Skip the lunches out. Do whatever you need to do to stop the excess spending. The idea is to curb your spending so that you can get yourself back on track.
Load Up on Nutrition
When you’re on a financial cleanse, skip the junk and load up on nutrition. Forget get-rich quick schemes or people who promise to wipe out your debt quickly. Consider the long list of debt relief and credit repair scams published by the Federal Trade Commission. If something sounds too good to be true, it probably is.
When you’re on a diet, you don’t want to take diet pills or subsist on cabbage soup. You may be able to lose weight quickly, but you’ll also do major damage to your body. Similarly, when you’re on a financial cleanse, avoid the shortcuts. Load up on nutrition by educating yourself. Listen to podcasts, read some books, or visit financial blogs. Develop a good financial foundation so you won’t find yourself in trouble again in the future.
Cut the Fat
Many of us are very good at justifying our spending habits. We lie to ourselves about why we need yet another pair of shoes when we have 20 pairs at home. Perhaps we make up reasons for why we need a new car when the current one drives just fine. Regardless of what lies or excuses we make up, we need to be honest and face down our spending.
Review your spending for the last month. Was every line item truly necessary, are the expenses actually needs or wants? Is it possible to cut cable and switch to Netflix? Perhaps you can cut out TV watching completely. When we go on diets, we know that we should minimize fat and sugar intake because they’re bad for us. Likewise, on a financial cleanse, we should try to eliminate unnecessary spending. This means to avoid spending out of boredom and avoid spending to impress others. You know what’s bad for you. Stop making excuses and stop your unnecessary spending.
Track Your Spending
Much like people who keep track of their caloric intake when dieting, it’s extremely helpful to keep track of your spending while you’re on a financial cleanse. You can see exactly where your money’s going and it helps you visualize any money drains. We may be more likely to remember big purchases while it may be the small purchases that add up and drain our budget.
Think about it. When you spend $1,000 on a TV, that purchase is going to stick in your mind. When you make 2-3 trips to Starbucks everyday and pay $5 each time, you’re less likely to remember those transactions. By tracking your spending, you can easily see the areas you need to make improvements and cutbacks. Tracking your spending can help you see patterns and alert you to habits you may not have been aware of. You may see that you have a habit of visiting the bakery after stressful meetings. By tracking your spending, you can put an end to mindless spending.
Limit Your Intake
Those trying to lose weight know that you need to expend more calories than you take in. When it comes to doing a financial cleanse and saving money, you need to save more than you spend. One good way to do that is to take inventory of what you have on hand so you don’t have to buy unneeded items. This will allow you to use up things you already have.
For example, I have a weakness for office supplies. I just love pretty note pads and pens. Whenever I’m at Target, I take a walk down the aisles with the office supplies. I can’t help myself. Oftentimes, I’m tempted to bring home a notebook with a beautiful cover design. It’s only $10, I think to myself. But, I stop because I remember that I already have a stack of unused notebooks at home…
This is also helpful when it comes to personal hygiene and grooming products. I have a strict rule for not buying shampoo, conditioner, etc unless my current bottle is at least half empty. Stockpiling when products are on sale is a good way to save money but it becomes wasteful when you buy at a faster pace than you can use up the items.
Taking stock of what you have on hand is especially useful for organizing your freezer and pantry. I keep a notepad posted the fridge to keep track of the food I have on hand. When I need dinner ideas, I can easily see what I have on hand. It also helps me avoid buying duplicate items which leads to food waste.
Make Incremental Changes
No matter what steps you take in your financial cleanse, make sure that the changes you make will be long lasting. Maintaining your weight loss is perhaps more difficult than losing the weight. Likewise, with a financial cleanse, take baby steps so that you can hold on to your good habits.
Remember, you don’t have to try to impress anyone so there’s no need to take drastic steps. When you starve yourself, yeah, you can lose 10 pounds in a week but that will be hard to keep up. When you make changes to your finances, make incremental changes so the effects will stay with you. It can be very satisfying to cut your grocery budget from $500 to $50 a month, but that kind of change is difficult to sustain. Make small changes that you know you can maintain.
Would you perform a financial cleanse? If so, is there anything you’d do differently?