How to Determine Your Financial Age (3:12)
Summer is a great time to do a debt detox because it’s the midyear check-in point for our finances.
Believe it or not, many people are still in their holiday-debt hangover, so summertime is also a good time to get back on track financially.
If you want to get out of debt, save more money – and become healthier too – try my easy, five-step summer debt detox.
This debt detox plan is a seven-day jump-start to your financial success. Just like a food detox can jump-start weight loss and help you start eating healthier, this plan gives you better money habits to help you start spending healthier.
At the end of the seven days, you will be on the road to better money management, learning how to spend your money the right way to not only get out of debt now but also prevent debt in the future.
Step 1: Keep a Money Spending Journal for 7 Days
Just like people who keep daily food journals lose twice as much weight, people who track their spending have less debt.
So the first step is to write down everything – and I mean everything – that you’re spending money on each day: from filling your car with gas or buying a train ticket to buying a coffee or going out to dinner. You need to see where your money actually goes.
By the way, back in 2001, I was deep in debt. So I took this process one step further. Not only did I write down my spending, I also wrote down all of my debts. As it turned out, I had a whopping $100,000 in credit card bills!
Highlight everything that is not an essential expense. Your mortgage or rent, your car payment and utilities; those are all essential bills that must be paid.
I mean highlight the other stuff – like that latte, even if it can feel essential at 3 p.m.!
Then pick three items from the highlighted list and cross them off. You will eliminate them for one week! Just like you eliminate sugar and dairy on a food detox, you’re eliminating some of your habitual spending.
For most people, this single step will save hundreds if not thousands of dollars.
For instance, assume you eat out for lunch three times a week and you spend an average of $10 each time. If you can eliminate two of those weekly lunchtime trips, you’ll save $20 a week, or $80 a month.
Keep it up for a full 12 months and you’ll save $960. That’s nearly a thousand bucks that can go toward wiping out your debt or saving for some other important goal!
Now imagine doing that for three items that you eliminate – and the savings is even greater!
Step 2: Make Change Slowly
Even if you go on a diet detox, it’s not a smart idea to starve yourself. By the same token, I don’t want you to starve yourself when detoxing debt. So take it slowly and make your change happen gradually. That’s the way to promote sustainable, long-lasting change.
For one day: Do not spend any money.
Not one dollar. No morning coffee, no stopping to buy some gum, no going into your wallet for anything.
You can prove to yourself that this can be done. It’s jolt to your system, but it can be a wake-up call for people who are addicted to spending.
It’s also giving you a little extra padding. Saving for one day will put extra cash in your pocket.
Besides, if you can actually make it through one day, you will see how doable it is to cut back on unnecessary spending!