How To Reset Your Personal Finances
Whether it’s the beginning of a new year, a new month or simply a self-proclaimed restart, now is a great time for a reset of your personal finances.
Login to all your accounts. Take inventory.
Often the toughest part of personal finances is acknowledging what you’re spending. It’s not unusual to go months without looking at any of your bank or credit card statements. This is because, for most people, reading their statement gives them that sinking feeling in their stomach when they see how much they’ve really been spending. Accountability, however, is a great first step towards your financial reset.
You can take it slow. Perhaps look at one or two statements a day over the course of a week. Or rip off the bandaid and do an inventory day. Either way, you need to login to all of your accounts and see what’s going on. By that, I mean:
Are there any subscriptions you forgot about?
How much are you really spending on eating out?
Did a recurring expense increase or decrease by an alarming amount?
Were you able to add to your savings?
Anything else that stands out?
Confronting some tough questions like this will help you take accountability for your spending habits. Once you’ve taken inventory of your accounts, you can then start to pinpoint any habits you want to change and make a plan to do so.
Change habits. Make a goal.
If you’re looking to do a personal finance reset, there’s likely an underlying reason why. You might want to start saving for a big purchase. Perhaps you want to break some bad money habits. Maybe you want to set a good example for your children. Use your “why” to determine which habits you want to break and any goals you want to set.
Starting small will help you gain momentum. Once you start to see small successes, you’ll want to keep going. So, start with one monthly goal. It could be a certain amount of money you want to save. Write that down and post it somewhere where you’ll see it every day. If you want to get more granular, your goal could be something like, “I want to limit eating out to once per week.” or “I will only go out for coffee two times per month rather than once a week.”
Be sure you’re able to measure success at the end of the month. A goal that is more vague like, “I want to spend less on food.” is not as black and white when it comes to determining success. If you add some parameters like an amount less you want to spend and a timeframe, that would be a measurable goal. “I want to spend $100 less on food this month.” is a great goal.
Consider a “minimalist month.”
If you’re ready to jump in with both feet or you’ve been doing a reset for a few months, you might be ready for something more intensive. A “minimalist month” is a financial challenge that gets rid of all the fluff in your spending. This type of challenge entails only spending money on the necessities for one month. Now, defining necessities will be up to you, but utilities, food, rent/mortgage and other bills would be considered necessities.
Make it fun! Think about what motivates you and use that as your reward for completing your challenge. Maybe you get to treat yourself to your favorite coffee shop at the end. Or you get to spend $20 on whatever you want. Having some sort of motivator is nice, but the success of seeing how much money you save at the end of the month is the best prize.
The goal of this type of challenge is to snap out of bad habits quickly. Once you’ve gotten back into the groove of spending your money wisely or sticking to a budget, keep it going! Don’t revert back to your old ways after your reset. See if you can do the challenge for two months, three months and then six months. By then, you’ll have the natural motivator of seeing your savings account increasing.
Build on your small wins.
It might be tough to envision what your personal finances could look like in a year or five years, but looking ahead at small wins will be more manageable. Weekly, monthly or even daily financial goals are a great place to start. Once you achieve one goal, keep that going and add on another. After each success, add on another goal.
Taking accountability, setting goals and building momentum are all keys to changing your financial behavior over time. From my experience, this formula is an approachable way to get your finances back on track. It’s all about celebrating those small wins!
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