A financial cleanse might have a lot of similarities with the financial resolution you put together at the start of the year. This has been a tradition for a lot of people to help them plan out the goals they want to achieve for the new year. The problem is that not a lot of those who put together a new year’s resolution get to finish them.
Moreso, a good number of them start to put their list aside in the first few months for a number of reasons. For some, it is just too difficult because they do not have much commitment to the list they made. Others choose to forego their list because they had to make some drastic life decisions that inevitably altered their goals as well.
However, one concept that differentiates a financial cleanse from a financial resolution is that the cleanse can be a part of the overall resolution. You may choose to put a hold on other parts of your financial resolution and it would not have an effect on the cleanse that you are trying to accomplish at the start of the year.
This means that you can still go through that cleanse to help you manage your finances better. It can be a goal to make sure that you monitor your income better or to help you control your spending at the start of the year. If you are all set to go through a cleanse with your finances, here are a few great places to start with.
Cut out the bad things
A good place to start when you want to go through a financial cleanse at the start of the year is to identify and cut off items that are detrimental to your finances. This can be actual expenses you can do away with or even the attitude you have when managing your money. The first step is identifying these items you need to leave behind as you face the new year.
It would be a good idea to take a look at your budget to start with particularly your expenses to understand where your money is going. There are items you cannot take away such as the ones allocated for basic needs. However, you might be able to find creative ways to lower them down to help you save money.
Apart from actual expense items, you might also want to take a look at the reasons why you were in debt in the first palace. That credit card debt did not become too much all on its own. Do you have a problem keeping your charges because you have an impulsive buying behavior? You need to keep your spending in check and cut out impulsive buying from your finances.
Take out temptations in your financial cleanse
Going through a financial cleanse can also include identifying your temptations and addressing them before they ruin your finances. That impulsive buying behavior will result in an unmanageable credit card statement at the end of the month. You need to get ahead of this and make sure you identify the root cause of this problem.
Is your impulsive buying behavior caused by trying hard to keep up with the people around you? You notice that your neighbor seems to always have the latest SUV model in their garage and you go and take out a car loan to get a new one as well. Are you trying to use your credit card for retail therapy because you always feel down and out?
Once you identify the root cause, you can start working on it to help you control it. If you are an impulsive buyer because you use for retail therapy, be aggressive in looking for an alternative outlet. There are a number of activities you can do such as exercise or taking up a sport. You can also focus on your hobby and figure out how you can turn it into an income-positive hobby.
Create a diary for your expenses
One thing you can do when you are having a financial cleanse at the start of the year is to create a list or a diary of your expenses. This will help you understand your spending better and pick out the ones you have to cleanse out of your finances. This can be quite challenging but you need this to help you understand your finances better.
One way to go about it is to have a pen and paper handy with you all the time. This will allow you to list down all your expenses regardless of the amount. You can also use your smartphone and use that to list down your spending. It is also possible that technology can help you stay on top of your expenses and use mobile apps to monitor your spending in real-time.
The more detailed the list you have, the better. You might think that a small purchase does not affect your finances all that much. However, a detailed list will show you just how much that affects your income. You could be buying coffee three times a day and eating out five days a week and it can come up to a significant amount at the end. Once you pinpoint these expenses, find a way to lower them down or how to take them out altogether.
Separate your needs from wants
It is also important that as you weed out the unimportant expenses in your finances, you start separating needs and wants. Having a detailed list is a great start to help you with this part of your financial cleanse. There are a lot of areas you might have a hard time with as you try to differentiate one from the other because of several factors.
Take food for example where it might be challenging to separate the times where you have to eat out and the times when you want to order take out. You might be eating out with clients as part of your job and having to order take out because you have to work late. It is because of these things why it makes it challenging to separate needs from wants.
You can start with simple areas such as your vehicle where you can opt to take public transportation or even a bike if your office is near. With food, you can opt to be creative and do meal preparations at home to lower down the need to order take out. NYPost shares that Americans spend an average of $70,000 on delivery and takeout in their lifetime. If you can separate your wants from your needs, you can save a lot of money from
Put in good financial habits
Once you go through a cleanse for your finances, you will be able to identify areas or habits which are creating more harm than good. As you take them out of the equation, it would be a good idea to try and replace them with habits or spending that can help you in the long run. It could take some time getting used to but it can be very beneficial down the road.
You can channel your impulsive buying behavior with physical activity to help you get your mind off your purchase. It can also help you become healthier and be able to stay away from easily getting sick. If you have a hobby, you can put a little more effort into it and try to find a way to earn a little extra money on the side with your hobby.
A financial cleanse can help you start the new year on a high note and give you the chance to manage your finances better.