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Financial Detox: Steps to Reset Your Spending Habits

09 May 2024

Are your finances in need of a refresh? If so, you may have heard about a financial detox as one method to improve your financial outlook. As a step towards financial freedom, those who commit to a financial cleanse seek to be able to control spending habits and prioritise what truly matters – but what exactly is a financial detox and how easy is it to do?

We’re always interested in practical ways to save money that can help you achieve your financial goals, so here we’ll look at what it takes to detox financially and how you can try it for yourself. It is designed to help you assess your spending, eliminate unnecessary expenses, and redirect your money towards more fulfilling and essential things.

If you want to boost your savings pot, reduce debt, or simply want to live less cluttered by financial stress, a financial detox could be what you’re looking for.

What Is A Financial Cleanse?

A financial cleanse, or detox, is where you closely examine your finances to identify and cut unnecessary spending. It’s like a diet for your bank account – just as you might remove junk food to improve your physical health, this cleanse removes financial excesses that can impact your financial wellbeing. Whilst those New Year’s resolutions to improve your finances may not have lasted, a detox can be a more structured way to stay on track.

To detox well, you’ll need to map out everything you currently spend money on, from morning coffees to those many monthly subscriptions. This will give you a clear picture to start from, then the real work begins – deciding what’s essential and what’s not.

But it’s not just about cutting back on expensive  habits. A financial detox also focuses on realigning your spending with your values. Do your current expenses reflect what you truly value or care about? Many people worry about their finances, especially with the rising cost of living putting extra strain on our income. Around 54% of UK adults feel more anxious or stressed due to this and 11% have put off dealing with financial matters according to the Financial Conduct Authority (FCA). Being able to detox financially can help some of us to refocus and, ultimately, begin to take back control.

Where To Start When Looking To Detox Financially

So, as mentioned, a financial detox requires a structured approach if it is going to work. You’ll also need the willingness to thoroughly examine every aspect of your spending. It’s not light work and just like any sort of detox, it can be tough going, especially if you haven’t tried it before. However, the long-term benefits of doing so should outweigh the initial effort.

It doesn’t have to be done all at once, so it can be a good idea to spread out some of this planning over a few days or weeks to ease into it and avoid becoming overwhelmed too quickly – remember, it’s meant to motivate you to succeed rather than put you off!

 

Set Aside Time To Review Your Expenses

A good place to start is by gathering all your financial statements from at least the last three months. This will give you a good overview of your regular spending patterns. Everything from your bank statements to any credit card bills, and any cash receipts. You ideally want to be able to identify everything you’ve spent money on.

This can take a bit of time, so choose a day that you can sit down and go through this without too much interruption. The more focused you can be, the better. Using tools like Money Helper’s Budget Planner can help make this easier to do.

Evaluate Your Essential Spending vs. Non-Essentials

Next, categorise each expense and highlight any that are non-essential. You’ll then be able to separate all the essential outgoings (such as mortgage/rent, utility bills, debt repayments, groceries etc.) from everything else. The idea here is to identify where your money is going and pinpoint expenses that can be reduced or possibly eliminated altogether – you might be surprised with what you find or have forgotten about, such as unused subscriptions (gym membership, TV streaming services etc.), frequent dining out, and, of course, those impulse purchases.

Now that you have a clearer view of your spending patterns, separate what is necessary and what is not. Essentials for most people should include rent or mortgage payments, utility bills, groceries, and transportation costs, while non-essentials could be streaming services, daily takeaway coffees, or luxury items. This can differ for everyone, but you should have a good idea of what you must sustain each month and what isn’t as essential for daily life.

As it is a financial detox, you may want to try living without these non-essential expenses. The goal is to see what you can do without, however tempting they might be.

Create a Budget for All Priorities

Plan your budget around priority bills and things that matter the most. This could be putting funds towards emergency savings, reducing debt, or saving for a big event like a dream holiday or even a wedding.

If there are non-essentials that you truly miss and add value to your life, you can always consider reintroducing them in moderation during your financial detox. It’s all about creating a balanced budget that prioritises financial health and personal happiness without completely stripping away things that you enjoy doing.

Set Goals and Seek Accountability So You Can Stay On Track

You’ll also want to set some long-term financial goals. These could be saving for a house deposit, for example, or adding to your savings gradually over time. To help keep you on track, it can be helpful for those committing to a financial cleanse to share these plans with a trusted friend, family member, or even an independent financial advisor.

The idea of this is it makes the detox more ‘real’ so that you have someone who can help keep you accountable as well as provide support, making it less likely you will steer away from your financial wellness plan. It can be helpful to explore tools and apps that can assist in tracking your spending and savings progress. There are plenty of top budgeting apps that can make doing so effortless.

With this structured approach, it will help you understand your financial habits better and help you become more disciplined, showing you the importance of making informed choices.

What Are The Benefits Of A Financial Detox?

All this effort to map out your finances and create goals may leave you asking, is it worth it? Well, here are just some of the reasons people choose to detox financially:

Increased Financial Security – Reducing unnecessary expenses helps to build a stronger financial buffer, offering protection against life’s unexpected costs. It will also help to reduce the stress of feeling like you are living payday to payday, freeing up money for things you value the most.

Enhanced Awareness of Spending Habits – A financial detox will definitely heighten your awareness. It will help you identify and eliminate any wasteful spending habits you may have and ensure your money supports your life goals instead.

Debt Reduction – With fewer ‘frivolous’ expenses, more of your hard-earned money can be directed towards reducing any debt you may have accumulated. This will then help to improve your credit score, improving your chances of being approved if you apply for credit in future when you really need it for life goals such as applying for a mortgage.

Long-Term Savings Growth – By consistently saving this will accelerate your progress towards significant goals like saving for a house deposit, buying a new car, and planning for retirement.

Improved Quality of Life – Ultimately, detoxing can help you effectively manage your finances, reduce stress, and allow for a happier, more fulfilling life focused on meaningful experiences and relationships. A financial cleanse has more benefits than it does negatives, even though it may not feel like it to begin with.

How Long Should Your Financial Cleanse Last?

It can be difficult to plan how long your detox should last, especially if you want it to have long-lasting benefits. You may want to challenge yourself or just try it for a week or so. Generally, a 30 day financial detox is a good goal to set.

A 30 Day Financial Detox

This will provide plenty of time to observe your spending habits over a normal month after your salary date. Then you can make necessary adjustments, and see the initial effects of changes in your financial behaviour.

It’s not too long to become unmanageable and it allows you to cycle through a full set of monthly bills and expenses, giving you a good view of your financial activities over 4 weeks. It’s also long enough to help you develop new habits, such as budgeting and regular savings, which can then become part of your long-term financial strategy.

Detox Financially, Your End Result

Feeling inspired to try a financial detox yourself? Whichever approach you take with this, it can be a great starting point if you are looking to be proactive with your finances. Who knows, you may find it gives you a new outlook on your spending habits and you may even enjoy it.

Hopefully, you’ll stay clear of distractions along the way and quickly see the benefits of detoxing, helping you reach your financial goals faster.

For more insights, please visit our blog where you can discover unconventional savings strategies that actually work, and learn all about sustainable investing.

 

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