After the holidays, we’re all trying to cut back: on calories, spending, and other indulgences that make the holidays (arguably) the best time of the year. You know how juice cleanses shock your system into a total reboot? You can do that for your money as well.
Below is how to do a full financial detox in order to reset your money habits for the year. January is a great time to start, but really, you can do this detox at any point you feel it’s time to make your money a primary focus in your life.
Day #1 – Assess your Spending and Saving Habits
Many cleanses require you to track your food intake for a few days prior to the cleanse and notice any differences in the way you feel or note any particular reactions to food.
Does red meat make you extra sleepy? Does dairy break you out? You can’t notice these subtle changes without paying attention first.
Your money works in the same way. Before we “restrict” spending or significantly change a behavior, we have to first know what it is that is making us feel not-so-great in the first place.
To get a true sense of your financial picture, pull credit card statements, log into your online banking, and check the balances on your savings accounts.
Looking at your financials, you want to find out three big things.
- How much you spend each month divided into two categories: your living expenses, and what you spend on your lifestyle.
- How much you owe on any credit cards or loans (excluding your mortgage).
- How much you have in savings.
Take it one step further and download an app, such as Turbo, which will automatically sync with your accounts to give you these numbers at-a-glance.
Step #2 – Check Off the Basics
Consider this step akin to those days leading up to a juice cleanse where you eat very light in preparation for what’s ahead.
- Do you know your credit score? (If not, find out.)
- Does your employer offer a 401k match? Are you meeting it? (If not, have them automatically take the percentage to match out of your paycheck and watch your savings grow.)
- Do you have an emergency fund? (If not, see instructions for Day 3)
Day #3 – Set Your Detox Goal
For the rest of the days in the financial detox, you’re going to restrict your spending in order to meet your goal based on information you found out in Day 2. Here’s how I would go about it.
- If you don’t have at least $1,000 saved – I would make this the detox goal.
- If you already have a small emergency fund (again, at least $1,000) I would make paying off or making a dent in any credit card payments the priority.
Day #4 – Convert to Cash
Go back to your notes from Day 1 and look at how much you’re spending on living expenses. How do you pay these bills? If they’re on autopay or you write checks, that’s fine, but for everything else, try doing an all-cash diet for a month.
There’s powerful science behind why an all-cash diet helps to reign in overspending, plus it will help you visualize where your money is going.
By default, people are more intentional with cash than when swiping a debit card.
Tell yourself that once the cash is gone – it’s gone. Hold yourself to that or this detox won’t work!
Day #5 – Prepare for a “No Spend Challenge”
On Day 5, you’ll want to prepare for the hard work ahead, as you’re going to attempt a No-Spend Challenge. Ideally, we do this for a month (I like February because it’s short. Ha!) but if you’re feeling like that might be too big of a step, cut the time in half and try it for two weeks.
A No Spend Challenge is exactly what it sounds like – you’re trying not to spend any money for a specified length of time.
While this is impossible because you’re a human and you have bills and need food to live, we’re talking about cutting out all the extras: going out, shopping online, things that are classified as “wants” instead of true “needs.” This is the day you’ll want to prepare to go without those little indulgences you’re accustomed to throughout the week. Below are just a few tasks to do on Day 5 so that once you kick off the challenge, you can stick with it:
- Meal planning for the week ahead.
- Buying groceries so you can save money and eat at home.
- Fill your car up with gas.
- Preparing to make coffee at home, give yourself a manicure at home, or prep lunches for work, etc.
Following Day 5 you’ll want to kick off your no spend challenge. It’s important to try and stick to it as much as you can, not only to save money so you can meet the detox goal you set in Day 3 but so you can reset your spending habits.
I’ve done many no spend challenges over the years, and trust me when I say that nothing resets your spending than restricting all “extra” expenses.
You’ll start seeing all sorts of things: how many times a week you eat out, or how much you spend on Amazon. Once we’re aware of these behaviors we can cut back and “detox” whenever it’s necessary to meet financial goals.