Why do a financial fast after the holidays
Author: Kimberly Rotter
Source: The Motley Fool
Overdoing it during the holiday season is normal (for a lot of us, anyway). It feels great to enjoy the food, shop for gifts, attend parties, buy outfits, visit with loved ones, and create a festive atmosphere at home. Those experiences are wonderful because we don't get to have them all the time. And it's a good thing we don't, because they're almost all expenses that would be outside your regular budget.
The problem is the financial hangover that comes later. Some of us will wake up in January with expensive credit card debt that we didn't have a few weeks ago. Some will wake up with a smaller savings account balance. And some will wake up with regret or even shame. Yuck all around.
A financial fast can clear your money mind so you can reflect on your spending patterns and create a satisfying plan for the coming year.
What is a financial fast?
A financial fast is when you avoid spending money on any nonessential expense for a period of time. Three weeks is a good amount of time, because it takes at least that long to develop new habits. There is no limit on how long you can extend your fast.
During your fast, you'll avoid buying anything other than true essentials. Not everyone's needs are the same. Consider these:
- Housing
- Minimum debt payments
- Transportation (for necessary travel like work, grocery shopping, and doctor's appointments)
- Insurance premiums (don't let your policies lapse, but this is a good time to review your coverage to make sure you aren't paying for more than you need)
- Groceries (stretch the budget as much as you can)
- Utilities (adjust the thermostat to bring costs down)
- Child care (so you can work)
- Healthcare (prescriptions, and dentist and doctor visits, but not for elective care)
Everything else is a want, including restaurant meals, streaming subscriptions, and upgraded data service on your cellphone. Gifts for others are also wants, even if you're invited to a birthday party.
Why do a financial fast?
A financial fast is great for getting a handle on your spending so that you can put more of your money where you want it. The world we live in looks like this:
- Spending money is easy.
- Merchants make buying fun and exciting.
- There's a big gap of time between making a purchase with a credit card and paying for it, so it's harder to associate each thing we buy with the parting of dollars from our bank accounts.
The world we want to live in looks like this:
- You have enough money to cover your needs, plus some left over.
- You choose to save for the things that are important to you.
- You know where your money goes.
- You understand how costly debt is and you're ready to leave yours behind.
If you want your money situation to be calm and purposeful, a financial fast might help.
As a culture, we spend a lot on the holidays. We live a little more extravagantly and shower our love on others in the form of gifts. It can be a time of big spending, so January is a great time to come down for a landing.
How do you do a financial fast?
Choose your days: Choose a 21-day period in between special occasions. (Hint: you've got plenty of time between New Year's and Valentine's Day.)
Make it harder to spend: Delete your credit card info from shopping sites. Leave your cards at home and use cash instead. (Paying with cash has been shown to make people spend less.) If you have to use plastic, use a debit card.
Consider cancelling: Whether to cancel optional recurring expenses like a gym membership and a streaming service is up to you and depends on how drastically you want to cut expenses. If you can live without it for a short time without a financial penalty (like a cancellation fee), think about dropping any expenses that could show up in these three weeks.
Buy groceries and make all your meals: Avoid buying pre-made meals at the grocery store because those are essentially the same as getting takeout, and usually cost more than making the same meals yourself.
Review your spending every day: Congratulate yourself if you make it through the day without any unnecessary spending. If you bought something you wanted (rather than needed), don't beat yourself up. For some of us, spending is a habit that takes time to change.
Reflect: As you go through the fast, look back at the items you wanted to spend money on but didn't. Those might be things you can live without more often in the future in order to create more cash flow for what's important to you.
Completing a financial fast is going to feel really good. You might feel as if you have a lot of money or be surprised at how much you've been spending. This is a great time to create a budget (or revise the one you had) and give every dollar a job that helps you reach your financial goals.
This article was written by Kimberly Rotter from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
