Think your spending habits have gotten out of control? Are you having a hard time funding your savings account? Tired of living paycheck to paycheck? Gaining financial security and independence is a goal that we all have, but doing so is often easier said than done. One of the best ways to get yourself back on track is to undergo a financial cleanse.
The purpose of a financial cleanse is to enhance your financial awareness through mindful spending, debt reduction, and better financial decisions. Achieving financial security starts with the commitment to want to be better with your money.
Here’s what you need to know (and do!) in order to start a financial cleanse.
1. Determine Your Income
Chances are you know how much your yearly salary is, but do you know your actual post-tax income each paycheck? If you’re like most people, you use online or mobile banking, which means you’re not looking at a paper check every two weeks before depositing it at the bank.
With direct deposit and other automated financial services, it’s easy to lose touch of the amount of income that you have and to know where it’s going. The first step in a financial cleanse is to determine your income.
Make a list of all of your bank accounts, including checking and savings, as well as any others such as a retirement account or CD. Knowing how much money you make throughout the month gives you the first piece of information you need in order to create a budget.
2. Track Your Expenses
Once you’ve determined how much money you’re bringing in each paycheck, the next step is to track your expenses. Expenses include anything that costs money, such as:
Having a clear picture of how much money you have coming in versus going out will give you the foundation you need to pinpoint problematic spending behaviors. For instance, seeing that you spend $200 a week eating out may cause you to rethink cooking at home.
Tracking your expenses also helps with figuring out where you can save. For example, maybe you’re spending $100 on cable services and $50 for internet services. You may be able to save money by bundling them with the same provider. Tracking your expenses also enables you to see areas where you can cut spending.
3. Set Financial Goals
A cleanse is only beneficial if you have an ultimate goal to achieve. What is your end goal after completing the cleanse?
When developing your financial goals, be sure to make them measurable and detailed. It’s much better to say, “I want to pay off my credit card in a year” versus “I want to pay off debt.” This way you give yourself a timeline, which allows you to set smaller goals along the way so that you can track your progress.
With financial goals, you can have something tangible to work towards. As you meet a financial goal, reward yourself, and then create a new one that will improve your financial standing.
4. Go Green
No matter if your goal is to save money or to pay off debt, going green will be one of the best things you ever do for yourself, even if it’s just temporary. We live in a world run by plastic, and it’s all too easy to swipe a debit or credit card without actually thinking of about the purchase we’re making.
During your financial cleanse, switch to using cash. This not only makes it much easier to set a daily or weekly budget, but it’s also really eye-opening to see just how quickly your funds will decrease. By using just cash, you may think twice about eating out for lunch each day or spending money on frivolous purchases.
5. Work with a Financial Advisor
During a financial cleanse, it never hurts to seek professional financial health. even after creating a budget and setting goals, you may want further advice on improving your financial situation. In this case, you’ll want to reach out to a financial advisor. You can find the best financial advisor in Miami on Carefulcents.com.
There are also tons of mobile and online apps that you can use to make your cleanse even more successful. Consider apps such as Mint, Pocket Guard, or Acorns to keep track of your money and spending when you’re on the go.
A financial cleanse is a great way to pinpoint problematic financial behavior so that you can improve your financial standing. From tracking your income to creating a budget to using cash, there are many ways that you can detox from bad financial decisions, all while working towards your goals of financial independence.