Do you struggle with overspending and have a hard time sticking to a budget? Do you look at your checking account balance at the end of the week and think where did my money go? If so, it might be time for a financial fast.
According to a new poll conducted by Slickdeals, Americans admit to spending $7,429.24 over their budget every year. That equates to overspending over $140 a week! Talk about busting the budget. You might be surprised to learn that three-quarters of Americans say they have a budget, but they clearly don’t stick to it. As a matter of fact, nearly 79% of them don’t stick to it!
On average, the weekly amount that people spend, not including bills like mortgage or rent, utilities, etc., is around $340, or $143 more than the average $197 budgeted. But where is all that money going? There are a number of categories that serve as the biggest obstacles to staying on track with your budget. According to another Slickdeals poll, these are online shopping, grocery shopping, and subscription services. Other big-budget breakers are buying lunch every day, expensive specialty coffee stops, food delivery, and gym memberships.
All of this overspending has contributed to the American debt crisis that has wreaked havoc for years. US consumer debt, as of May 2021, is at $14.9 trillion. That includes mortgages, auto loans, credit cards, and student loans. The average American has nearly $100,000 in debt, an astronomical figure.
If this is you, it’s time to get your spending under control with a financial fast.
What is a Financial Fast?
A financial fast is similar to dieting. Think of it as a money diet or financial cleanse. It is a process to get back on track with your spending habits and routine. Fasting your finances is about creating an extended time for a spending fast where you make a commitment to stop all unnecessary spending and purchasing. This includes online purchases and dining out. It is a commitment you make to get your finances back in shape.
By accurately assessing your spending and eliminating unnecessary spending you can combat your overspending issue. Check for subscriptions you haven’t used in months, start bringing your lunch to work and cancel your gym membership if you haven’t been in the last month. Most of these can be canceled by the push of a button or a quick phone call. Add a to-do item in your planner so you don’t forget to cancel.
There are also ways you can reduce spending in your essential categories as well. For instance, insurance payments. Call around to various insurance companies and shop around for better premiums to save monthly on your monthly bill. For household goods, you could stock up on items when they are at a low sale price for future use.
CHECK OUT OUR COURSE ON PRACTICAL WAYS TO REDUCE YOUR EXPENSES
While assessing your spending is an incredibly important step to get your spending under control, moving into a lifestyle of better spending can be tricky to adjust to. If staying on a budget has been difficult for you, we have an answer for you. A financial fast.
The Rules of a Financial Fast
Welcome back! So, now that you know a little more about the state of overspending and debt in America and what a financial fast is, in this module, we are going to explain the rules involved when completing a financial fast.
Beginning and maintaining a financial fast is going to require discipline, dedication, and focus. It will be no easy task, but the financial control that results will be well worth it. Before we move into the steps, we are going to review the rules involved. These rules will help you complete an effective fast that will hopefully create a shift in your habits and behaviors. There are 4 rules you need to understand and follow.
Rule 1: Your fast needs to last at least 21 days. According to scientific studies, it takes anywhere from 18 to 254 days for people to form a new habit. So, for a financial fast, we have chosen a rounded out three weeks to give you enough time to absorb the benefits of a fast and the transformative effects it can have on your financial habits. Any period shorter will not have the beneficial effects you are looking to achieve. Conversely, spending too much longer on a financial fast may cause unreasonable stress, but the choice is really yours. With that being said, when you are just getting started, beginning your fast at shorter periods might help jump-start or prepare you for a longer-term fast.
Rule 2: Only purchase essentials. The purpose of a financial fast is to eliminate every single bit of spending that is not completely necessary for survival. So, you will be eliminating eating out, online purchases, gifts for others, or your hair appointment. Essentials include food, housing, medication, utilities, and required bills. What this does is train you to change your mindset about spending and leverages the power of delayed gratification.
Rule 3: Keep a spending journal. Maintain a journal of all your spending. You need to see where all your money is going so that you can assess and reassess how you are spending your money and identify if this spending is essential or discretionary. It will also help you better prepare and maintain a budget. Although, you should use this journal for more than just tracking your spending places and figures. This journal can help you identify spending triggers and habits you’d like to change. Make notes about how you feel when you pass by that store you used to frequent or how you feel when you don’t get to buy that latte or new shirt you see in the window. Spending is oftentimes emotionally linked. So, understanding how you feel during this process will be very important to overcoming your bad habit and reaching your fasting goals.
Rule 4: Do not use your credit card. For one, when you use your credit card, you are spending money you do not have. You are borrowing money and adding to your debt. Second, using a credit card gives you a false sense of security because you do not see the balance in your checking account decrease. Simply use your debit card or, better yet, use cash. You will become much more conscious of your spending when you see it removed from your wallet or bank account.
Sticking to these rules is imperative. Adherence will make for a more effective financial fasting experience. These rules might seem challenging, but these rules need to be followed when committing to a financial fast.
The Steps to Begin Your Financial Fast
Welcome back! Now that you know what the rules of a financial fast are, in this module, we are going to walk you through the steps you need to take to start your financial fast.
Step 1: Set your financial goals. Much like creating a budget, the first step is setting your financial goals. Maintaining focus on your goal as you move through this process will help you reach the finish line and beyond. When considering what your financial goals will be you need to consider what is most important to you. Ask yourself, where do I want to be one year from now financially? Am I saving enough for retirement? When do I want to retire? Have I saved enough money to cover six months worth of expenses if I lose my job? When do I plan on buying my first home? Setting a strong financial goal that aligns with your core beliefs will help you maintain focus. We suggest setting one major goal to start. For instance, paying off a certain debt or creating your emergency fund.
Step 2: Determine the length of time. As we mentioned earlier, you want to make sure you choose at least 21 days for an effective fast. However, to some that have never attempted a fast, 21 days may be overly ambitious to attain. So, start with a week, maybe each month. Then the next month, add to that week, maybe a week and a half or two weeks. Eventually, you will change your spending habits to where the fast will not seem like you are fasting from spending anything. With that being said, make sure you choose a time period and stick to it. Do not end it early.
Step 3. Create a plan. This is where you will be doing a good bit of homework. The objective here is to determine your necessity expenses for that week, month, or specified time period and budget only for those expenses. First, you need to understand more about how you are spending your money-determine your discretionary expenses and those that are essential. So, you need to pull your statements and separate your expenses into two columns-discretionary and essential. Examples of discretionary expenses are dining at restaurants, buying or renting movies, and shopping of any kind except for food to survive. Examples of essential expenses are food, required loan payments, utilities, and gas to get to work.
Once you have your list, you need to revisit your essential list once more. Should anything be moved to discretionary?
Then you focus on the essential column. These are the only expenses you will have during your fast. No additional funds will be allocated outside this. You will now use this list to create your budget. For the variable expenses, like gas, utilities, and groceries you will use an average figure from the last three months. Ensure your fixed expenses also have a figure next to them. Add your total. This will be how much you are allocating to your financial fast. You may not spend anything over this total.
Step 4: Use the Wealtheo budgeting app. Now that you have that fasting figure, you need to track your spending to your budget. Using a tool to assist you along the way makes the process much easier. So, use the Wealtheo budgeting app. This app can help you track your spending and will help you stay on track while you fast your finances. The steps are quite simple, moving through the steps is not. This process will challenge you and you will be tempted to steer from your fast, but don’t. Keep your goal in mind and always remind yourself why you are doing this. In the next module, we are going to review why fasting your finances is so important.
Why Fasting Your Finances is Important
Fasting your finances is an activity that could jolt you from your habit of overspending and help you finally take control of your financial future. Beyond that, there are many other specific reasons fasting your finances is important. Let’s discuss those now.
Reduces overspending. The main goal of fasting your finances is to get over your overspending habit. The financial fast is the cure. The fast forces you to eliminate discretionary spending for a period of time with the goal of reducing your overspending. Overspending leads to debt, which leads to financial insecurity. By reducing or eliminating overspending you are setting yourself up for a better financial future that you are in control of.
Creates stability in your budget. Not only does fasting reduce your overspending, it helps create stability in your budget. Without extraneous spending, your spending now becomes very predictable. This not only creates stability in your budget, it makes the process of creating and reviewing your budget much simpler and faster.
Changes your mindset. Completing a financial fast makes you more conscious of how you spend your money. You are now more aware of when you are tempted to make purchases that you did not plan for in the budget and that are not a necessity. Now, instead of mindlessly spending $20 a day on coffee and snacks throughout the day, you are aware of the money you are spending. Now, you are able to make better decisions for your financial health and you are beginning to adopt the mindset of the wealthy.
Moves you closer to being in control of your finances. One exciting by-product of completing a fast is the extra money you find in your bank account. No, this money is not to be spent on a “congratulations, you made it to the end of the fast” present for yourself. This money is to show your proof that a fast will help you become financially stronger. This money should be used to move you closer to being in control of your finances-it should go to your debt. Seeing how your actions are helping to bring you closer to financial freedom is a wonderful motivator to keep moving you forward and helping you stick to your financial fast.
Reduces what you put on credit cards. While credit card debt levels are slowly decreasing, they are still at astronomical levels. American consumers have a lot of credit card debt. American consumers, on average, hold a little over $5,000 in credit card debt. We charge, charge, and charge more. With the benefit of rewards points and introductory rates luring consumers to spend, using a credit card for everyday transactions has become the norm. A rule of the financial fast is to not use your credit card for good reason. It is trying to break the habit of reaching for your credit card for each transaction.
Reduces temptation. Eliminating your ability to overspend by putting in place a fast will reduce your temptation to spend. Also, you will stop going places or to websites you frequently used to overspend at. Stop visiting the website, or don’t drive past the coffee shop on your way to work. You have removed the obstacle, reducing your temptation to spend.
There are many benefits to fasting your finances, but there are negative aspects you need to be aware of. You have to go into a fast understanding that certain things might trigger you when you are done. There is a real good chance you are going to feel tempted to go shopping after your fast is complete, which will leave you spiraling back out of control. Understand this is not a quick fix. There are years and years of bad habits ingrained in you. A few weeks might not change that. It might take a couple of times to really start changing your mindset. So, don’t do this one time and feel like you have to be perfect. Use it as a tool to tweak your habits until they are just right.
Tips to Successfully Completing a Financial Fast
The most difficult part of starting on a financial fast is getting to the end. Being committed to achieving financial freedom takes work. Making it across the finish line of the financial fast is not the end, but it is an important first step in taking back control of your financial destiny. Here are some tips to help you make it through to the end of the financial fast.
Do not skip your essential vs discretionary list. You need to really sit down and think about this. Everyone’s list is different. Everyone views essential vs discretionary differently and that is okay. You do not need to place undue stress on yourself by placing an item in discretionary when it should have fallen under essential. For instance, maybe you have a hair appointment set up during your fast. You figure it should be canceled and moved to your discretionary list but you decide to pause and think about this a little more. Why did you set that hair appointment? Maybe you set this because you are a professional that sees clients very often and it is important to portray that professional appearance the clients expect. You may then decide your hair appointment does in fact fall under the essential category. With that being said, don’t stretch your truth. Be honest with yourself.
You can learn more about essential and discretionary expenses in our comprehensive Debt Freedom course.
Find an accountability partner or group. Changing the way you handle your finances requires a huge change in the way you are living your life. It is hard. There will be days you will want to throw in the towel and return to your old ways. Those close to you might even encourage you to give it up because they don’t understand the process and benefits. This is normal. It is beneficial to search for a community, a partner, or a group that you can lean on to help you through this shift. You can use them to hold you accountable or they can use you to do the same. Sharing success stories or your worries and fears that have arisen during this process is a form of therapy to assist you to reach your best financial self. If you are unable to find an accountability group or partner, be sure to lean on yourself. Keep a journal of your thoughts and feelings throughout the process. Just having somewhere to release those feelings is sufficient to boost your willpower to continue.
Remove temptation. We touched on this briefly in the last module as a benefit of the fast, but you must take action to make that happen. You must remove the temptation. Delete websites you frequent for purchases from your favorites bar. Lock up your credit cards. A fast is a short period of time. It may feel like you are forever removing these items, but it is a necessary step until you have reached a strong level of control over your spending.
Know your triggers and plan for alternatives to spending. If you are anything like me, at the office I like to have a snack available at my desk throughout the day as an afternoon boost. I used to run down the street to our local Starbucks for a latte, egg bites, or a bagel, but I quickly ended that once I realized how much I was spending on snacks. Now, I plan for this during my grocery trip. I ensure I have a snack item, preferably on sale, on my grocery list for that week. This has saved me over $25 a week, and that figure is conservative. Maybe you enjoy a good movie night? Instead, search TV for a good movie or drag out your old DVDs. Is your morning latte a requirement? Switch to a homemade latte concoction instead.
Celebrate your successes. This does not mean that you should use all the money you saved on a nice little present for yourself. But, you should celebrate your achievement. Instead, consider a small gift or special treat. Or, take yourself out to dinner! Just make sure you get right back on track! The real gift is paying off that debt so you can start living your life of financial freedom soon!
Congratulations! You now know more about financial fasts and how to get started. Knowledge is power, and application is progress! Did you enjoy learning about fasting your finances? Check out other courses Wealtheo University™ and take control of your financial destiny.