Why You Need A Financial Detox
vemuda.com - The whole purpose of a financial cleanse is to reset your finances if you seem to be spending out of control, sort out your necessary expenses from those that are not, and grow your savings.
We've all heard of a health detox where one steers clear of certain foods for a certain length of time and only eats specific ones to clear toxins from their body.
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Similarly, a financial detox is all about abstaining from particular spending habits and attitudes. It's useful when you want to eliminate some of the unhealthy portions of your finances.
Financial detoxing is about critically looking at your own financial decisions and deciding what you can live with and what you can live without. But it's not always as easy as it sounds. To break the cycle of overspending, it takes a lot of planning and willpower.
So for the financial cleanse to work, it has to be both healthy and realistic. Does the thought of not spending money for a whole week terrify you? Of course, this doesn't include the basic necessities.
In this case, we're referring to all those impulse purchases. And if your answer is yes, that would be a good reason you need a financial detox. And it doesn't have to be the standard thirty days detox. Whatever is comfortable with you is fine. However, it's advised you do it for a few days.
So, where should you start? Well, going through a financial detox means giving your wallet some breathing space. It means hitting the reset button on all your spending habits and being more intentional with your view of money and how you relate to it.
Based on where you are financially and the kind of goals you are hoping to achieve with time, you can approach this process in so many ways.
Some methods are simple enough while others are rather a bit extreme, depending on how much you'd like to save and the kind of habits you wish to break.
While going on a financial cleanse won't make you an overnight millionaire, it will surely be the start of a life-changing habit. And once you have this, maybe the realization that you have the ability to do something, can inspire you to go for a long term change.
So before going into the details of why you need a financial detox, here are some guidelines on what to do.
1. Clear out the junk
So the first thing to do is, get rid of all the junk. This means removing anything from your life that tempts you to spend aimlessly. The whole point of this is to shock your system a bit so that you can start clean, and move forward with a more controlled spending lifestyle.
2. Go on a financial fast
This means setting a period of time within which you will only spend what you need, and not what you want. But before you rule this out as; impossible, start small.
Maybe a week or two. And during this time, track your purchases and only buy the essentials. But just because you're starting it out small, doesn't mean you make the process all nice and slow.
Sometimes you need to do something that will shock your system, like not spending on anything that isn't a basic need. There are some things that you might think are needs but aren't. So don't let yourself out of the hook. Be aggressive with the decisions you make.
3. Leave the credit cards and stick to cash
This step might be particularly hard for those who use their credit cards to pay for everything, and pay for it at the end of the month. But as convenient as it might be, we are more likely to spend more money when we swipe our cards, than when we pay in cash.
This is good because you're more conscious of your purchases and how much you're spending. In addition, actually seeing your pile of cash dwindle and shrink, puts you're spending into perspective, and helps you pull back on mindless shopping and spending.
Only take with you the amount that you need. This will prevent you from buying any unnecessary items, and you won't end up with food you don't need if, for example, you're going to the grocery store.
It makes the process of spending a lot more visual, and you'll discover that it's a little harder to part with your hard-earned cash than swiping a card.
4. Increase your monthly savings
Once you follow through with these steps, it's safe to say that you'll be left with more cash than you had initially. And at this point, it would be wise to put that money into a savings account.
If you haven't already set up an automatic payment system to your savings account, do so, so that money can enter the savings account every time you're paid.
If you've already done this, make it your goal to save as much as you can, even if it's just five percent. You'll hardly realise that it's gone, especially if the transfer is automatic.
5. Handle your debts
With little to no savings, and piles of debt, we're not exactly setting ourselves up for success. There are mortgages, personal loans, student loans.
Together with all the other debts we've accumulated over time, it becomes overwhelming. That's why most of the time, people do nothing about it.
And nobody's asking you to clear your debts immediately, especially because, it's likely you don't have the money either. But you need to get a grip on your debt.
This means knowing how much you owe, your monthly payments and the interest rates. It might sound simple enough, but we don't always check our debts.
Keeping this in mind, you can try and contact customer services for your accounts and find out whether you can get a lower rate. And if this doesn't work out, you could always try the traditional methods of paying off debt like the snowball and avalanche methods.
Whenever you get the chance, payoff as much of your debt as you can, so that you can do something more productive, such as opening a savings account.
6. Decide what to give up
It's a little too ambitious to stop spending all together, but cutting off something from your life is quite doable. Whether it's the daily food deliveries, or money spent on clothes you never wear, or all the books that are cluttering your home.
Look at your financial statements and choose which category you're willing to give up. It might be tough, but worth it in the end.
7. Wait it out
Instead of buying that cute jacket on impulse, force yourself to wait for a certain period of time before making up your mind.
After a while, you might find that you don't need that jacket as much as you thought you did. So you not only have less clutter but extra cash as well.
8. Look back on your spending
At the end of the month, take a look at your spending and identify what your biggest spend was, and the small ones as well. Huge purchases are for sure draining your pockets, but the small purchases that accumulate are usually the main culprits.
Many of us are guilty of spending unconsciously, meaning, we aren't mindful of where our money goes.
So back to the original question. Why do you need a financial detox?
1. It makes you more intentional with money
Taking a financial detox helps you become more conscious about what you spend your money on. This is because a lot of planning is involved ahead of time.
So many times we swipe our cards and give money to cashiers without taking time to ask ourselves whether we really need whatever we're getting.
If you want your detox to be a success, you're going to have to stop and be intentional about what you're going to buy in order to prepare for it.
You can't just dive into a financial detox head first. You need to plan. And the more you take part in these detoxes, you create a habit where you take calculated steps with your money, and this helps you make better financial decisions as time goes by.
2. It helps you to identify unnecessary budget items
A financial detox helps to put your spending habits into perspective. You're forced to look through your budget and identify items that you either don't use anymore, or have just forgotten about. Because if we're being honest with ourselves, we all have these kinds of expenses that are draining our accounts.
There are items in our houses like clothes and shoes that we don't wear, kitchen appliances that we don't use, electronic gadgets, and the likes.
But it could also be in the form of services like a subscription to a magazine, your gym membership or a free trial for something you completely forgot about but have to pay membership for.
3. It helps you to ask the right financial questions
We have this amazing ability to convince ourselves that we know what we need, and what we simply can't live without. But during a financial detox, when you're going to need to cut things back to the bare essentials, you're going to have to ask yourself some hard questions.
Do I really need this item? Will buying it in any way improve or complicate my life? Can I survive without it? If you really internalise this and are truly honest with yourself, the answer might just about take you by surprise.
4. It increases your savings
By spending less during the week or the month, you're saving more for the future. And for those who want to become more financially secure, a financial detox does exactly that.
Just like any intermittent fasting where you cut out a few meals, you build up a calorie reserve that can either be used to lose weight or allow you to eat a more flexible diet.
In the case of a financial detox, you save more money for the future, or you become more flexible in the way you spend money while at the same time living below your means.
5. You feel less controlled by money
Many of us are dependent and can even say controlled by money and the need to spend. A financial cleanse tears you way from this kind of dependence.
By breaking the consumerist cycle of spending and the need to always have more, you're more sensitized to the control that money can have on you. And you're able to take a step back and take back control.
When you realise that you don't really need all the things you buy, you begin to feel empowered to live a simple life. And it's even considered to be a healthier one.
Doing a financial cleanse once in a while is beneficial to your financial success. The whole purpose of it is to reset your finances if you seem to be spending out of control, sort out your necessary expenses from those that are not and growing your savings.
So as you implement some of these guidelines, rest assured that your financial life will be so much better than it was before.
Well, thank you guys so much for watching today’s post. I hope you’ve enjoyed and found value while readiing it. With that said, have a good day, and I'll see you all in the next one.