You’ve probably heard about going on a “cleanse,” usually referring to a dietary fad, but you can also participate in a financial cleanse (both involve increasing your greens, but a financial cleanse can be a bit more fun). This article from Money Under 30 likens a financial cleanse to a dietary cleanse in that the idea is to cut out the unnecessary, encourage good habits in the future, and can, at times, be a bit painful.
If you’ve been feeling bogged down by your budget or financial life in general, a financial cleanse is a great way to clear out the negativity and get motivated to reach your financial goals, whatever those may be.
Set a Goal. Speaking of financial goals, it’s a good idea to write down these goals before you roll up your sleeves and dig in. What are your short term financial goals? (Examples- pay off balance on loan, reduce credit card debt by 50% by the end of the year, saving for vacation, etc). What about long term goals? (Examples- setting up a retirement account, purchasing a home, etc). When you’re writing these goals down, try to make them SMART (specific, measurable, achievable, relevant, and time-bound). In other words, give yourself a goal that is important to you, is realistic, and has a clear deadline- for example “Save $1000 toward vacation by July 15th” (if it’s realistic for you to budget this amount).
Once you have your goals set up, you’re ready to get started.
Hide Those Credit Cards. During your “cleanse,” there’s a no credit card rule. The goal is to spend only what you currently have during this time to increase your own awareness on your unnecessary spending. If you have a tough time without your credit card, consider taking them out of your wallet and leaving them at a safe hiding place at home.
Check Your Credit Report. While we’re on the topic of credit cards, when was the last time you checked your credit report? If it’s been awhile, there’s no time like the present. Knowing is half the battle, so if you’re blindly trying to pay down a balance without looking at your score, interest rate, etc, you’ll probably have a harder time getting ahead. Take a look at your credit score (and keep in mind these tips on re-vamping said score), as well as our tips on lowering your interest rates.
Cut Down on Spending. But how? Only spend on things that are necessary. “Necessary” can mean different things to different people, but generally, this includes monthly bills (rent, utilities, car/transportation, gym, etc), groceries (although it is recommended that you create a shopping list of needs rather than a box of cookies “just because), medical expenses (for you, loved one, pets)- those types of things. “Necessary” does not include that pair of shoes that’s on sale or a “necessary” night out- during the cleanse, it’s best to table these items. Don’t worry- it’s only temporary and you can reintroduce these things at your own discretion later. (If you feel like a bigger challenge, many personal finance bloggers have one week or one month ‘no spending’ challenges which takes this idea even further.)
This is probably the hard part of a financial cleanse, where you’ll consider cutting corners or making an exception “just this one time!” This is a completely voluntary exercise, relying solely on your own willpower. Stay strong!
Track Your Spending Habits. During the cleanse this may not be as telling as when you’re less restricted about spending, but think of this almost like a “food journal” that some people use while dieting. Keep track of how much you’re spending on necessities (this may encourage you to seek better deals or reconsider certain services). Another thing to keep track of is every time you fight the urge to make an “unnecessary” purchase, as this could indicate where you can be more mindful in the future. For instance, if you find you’re constantly resisting the urge to dine out, you could probably save some money month to month by limiting the amount you dine out to once a week.
Reintroduction. Once you complete the cleanse, there’s a period of “reintroduction” afterwards. As you transition from a specific, restricted diet to a more normal, sustainable diet, you don’t want to shock your system or negate all your hard work by going on a wild junk food binge. Similar to it’s food counterpart, with a financial cleanse, you want to avoid going on an epic spending spree once you hit your deadline (whether it’s a few weeks or a few months). Start by reintroducing those things you really missed, like a dinner out with a friend. If you can, continue to leave credit cards at home for a bit to see if you can get used living without them for awhile.
The goal of a financial cleanse is not to set you up for an extremely frugal lifestyle, but is more of a mental reset in how you view your money and spending. Hopefully, once complete, you’ll have greater self-awareness about what you need vs. what you buy impulsively, and have a better grasp on your financial goals.