April is finally here! The first month of the second quarter of the year. Just as most of you did, I set lots of goals for 2017 and a lot of them were financial goals. However, while performing my quarterly review of my financial position (in other words I reviewed my financial accounts e.g bank statements; I’m an accountant I can’t help it), I noticed that I am NOWHERE near accomplishing my goals. NOT CLOSE. I still need a ‘few’ hundred dollars to get to the point I need to be at.
Since I would like to be lying on a beach sipping margaritas this summer, I need to act fast! I realized that the only way to salvage this situation is to go on a financial fast for the month of April at least! If you are in the same position, I invite you to come on this journey with me so we can get our financial lives back on track.
So how can you get started with the financial fast?
Step #1: Build your (weekly) bare bones budget
To start off you should build your budget for the month and break this down into a weekly budget. This is essentially your guideline or map to show you how you should be spending your money during the financial fast. This is absolutely the most important step of this challenge, thankfully it’s pretty easy to create a bare bones budget!
Using your already existing budget, you can quickly create a Bare Bones Budget by:
- Removing your non-essential expenses (in other words your want/ things you can live without) from your budget.
- Totaling your expenses. This will show you the minimum amount of money you need to survive and still stay on top of all your bills and loans.
Use the following tips to ensure that your bare bones budget is effective:
- Take the time to do your research and reflect: You need to reflect to see if you can really live without an expense. For example, I never watched cable at home so I canceled it (thank God for Netflix). You also need to do a lot of research to see if you would be able to find better deals for your utilities, phone bills, car insurance and other expenses.
- Make sure you have your emergency fund set up: Life happens so make sure you have your emergency fund set up with the cash easily accessible in case there’s an emergency.
- Don’t cross out all the fun from your life: For example, you can still feed your habit of reading books by borrowing books from your public library instead of buying new books all the time. You can also take part in free entertainment activities, such as free movie screenings; you can organize picnics at the park or take part in potlucks with food you prepared at home.
Taking part in a financial fast does not mean you have to be miserable.
Also, be sure to use apps like Mint or just Excel to keep track of your spending habits.
Step #2: Be clear about your goals
It is important to know what you will use the extra money for.
Writing down your plans for the extra money saved will be a huge help for you when you start losing motivation. Will you use the money for a new laptop, for a car payment, to fund your retirement account? Or will this financial fast just help you build better habits? Whatever the case may be, the important thing is being clear about your goals!
Personally, doing this challenge will help me save about $500 (more on this in another blog post). I plan on using this extra cash for my vacation. Although my flight and accommodation have already been paid for, I will use this extra money saved for fun activities.
Knowing this will motivate me to be ‘good’ even when all I want is to buy a really nice pair of shoes because they are on sale!
Write down what you will use the extra money for.
Step #3: Give yourself some breathing room
Withdraw some cash which will be your ‘allowance’ for when you’re being really naughty. It could be a simple weekly sum of $20 for example. The way I see it, this will keep you motivated and you won’t feel too bad if you don’t meet your target given that this financial fast is INTENSE! This works for me from my experience because when I “cheat” on my diet I cancel the whole thing altogether. So giving myself some breathing room (of $20 each week) will allow me to keep up even though I make an unexpected purchase for example. I will still end up saving more money this way.
However, if you find that you’re a “give you an inch and you will take a mile” type of person then I suggest you just stick to the financial fast! In other words, if you think the “breathing room” will motivate you to not commit to the fast then you can choose not to do this!
Step #4: Keep yourself accountable
Share this with your friends, parents or your accountability group before starting this challenge. It serves many purposes:
- Your friends will be less likely to invite you to places where you will spend money when they are aware of your goals.
- If you share your goals with them they will likely keep you in check when you try to go on crazy spending sprees, for example.
- It is a good way to keep yourself in check. Personally, I find that sharing my goals with people makes me 100 times more guilty about doing something I am not supposed to be doing even when there’s no chance of them finding out.
To help keep yourself accountable: Go on the Investment Conversations Facebook page and post updates about your “Financial Fast”. The post can be anything from what you’re doing this week to save more money or it could be about how much you’ve saved so far.
You will also find me there posting updates about my progress.
Stay tuned for the next post about ways you can save more money and tips to help you with your “Financial Fast Challenge” this month.