Money Musings đź’ When you need a spending reset
What you’ll find below:
Reflection: A powerful spending reset
Money Move: Prioritize your goals (step #1 of the goal-setting series)
You Gotta See This: A life insurance breakdown
Reel of the Week: Important New Year's message
If the end of the year felt like a spending free-for-all, you’re not alone. Between holiday expenses, travel and higher prices, many budgets (or lack thereof) are feeling completely out of whack.
Maybe you have some exciting New Year’s money goals but are feeling like you have to catch up (or stop the bleeding) before you can make progress.
I know the feeling.
Right after spendy times, expenses can continue to flow a little too easily and in higher than usual proportions.
You might think, my credit card bill is so high, what’s another [insert purchase here] going to matter?
Have you experienced this? Once you’re on a roll it can be hard to reel in.
If you’re feeling this, no matter what the extent, you probably will benefit from a spending reset.
Here’s how to reset your spending.
1. DO A QUICK MONEY CLEANSE.
For a day or a week, let go of all frivolous spending (as defined by you). This helps us differentiate between needs and wants while also serving as a reminder that we can let go of so many expenses and still enjoy ourselves.
2. KEEP A MONEY JOURNAL TO RECONNECT WITH WHERE YOUR MONEY IS GOING.
Write down everything you spend (no matter how small) in a notebook or in notes on your phone. While many of us might initially be hesitant to face the numbers, just knowing where you stand can take a tremendous weight off your shoulders.
3. SPEND ONLY IN CASH FOR ONE WEEK.
Aside from bills and automatic transfers to savings, commit to spending only in cash. The goal here is to reconnect with what we’re spending and have our bank account accurately reflect the amount of money we have. Credit cards have a delayed effect because we don’t have to reckon with our spending until we pay our credit card bill.
Spending in cash works great for many but is also completely impractical for others. Instead, you can also pay off your credit card each week to have your bank account reflect what's actually available.
4. IMPLEMENT THE 48-HOUR RULE.
We’ve all done it: we’ve purchased something on a whim only to later regret it. To prevent buyer’s remorse, implement the 48-hour rule. It takes the impulse out of spending and helps us be more intentional about where our money is going.
5. PLAN A SPENDING FAST (AND PLAN TO SOCIALIZE ACCORDINGLY).
Plan ahead for a day of no spending. This stops the cycle of spending and feeling guilty while also serving as a reset. There’s something extraordinary about a day where you don’t have to swipe your credit card or hand over any cash.
6. STOP THE PUNISHMENT.
If we’re punishing ourselves for our overspending it tends to perpetuate it. This might sound strange, but we rebel against ourselves. Sometimes the overspending itself is a self-inflicted punishment.
Have you found yourself in a cycle of overspending at all over the last year? What worked to get you back on track? Hit reply and let me know.
P.S. I have a new budgeting personality quiz. Take the quiz to get tips and tricks tailored to your budgeting personality.
MONEY MOVE OF THE WEEK
GOAL SETTING SERIES: STEP #1 - LIST OUT YOUR GOALS.
Set a timer for 5 (or even 10 minutes) and list out your goals for 2024. It’s okay if you need to narrow it down later. This is a brainstorming session.
Goals could be anything from building a rainy-day fund or paying down debt to buying a home, taking a dream vacation or starting a family.
While some goals might not seem financial, most goals require money in one way or another. So don’t be shy. List out the things you’d like to do, have and experience this year and in the future.
I give myself some time for this exercise so there’s space to dream. You might have some goals already top of mind and others that you haven't dreamed up yet!
You gotta see this
DEFINE LIFE INSURANCE TYPES.
Life insurance is important if someone depends on your income. Maybe you're a parent, you bought a home with a partner who wouldn’t be able to pay the mortgage on their own or you have debt that won’t be forgiven if you were to pass away.
There are two main types of life insurance: term and permanent.
DEFINE TERM LIFE INSURANCE. You choose your amount of coverage (i.e. the amount your beneficiary gets if you pass away) and in exchange, you pay a monthly premium for a certain number of years. You can typically choose 10, 20, or 30 years. After 30 years (or whatever you choose), you no longer have or pay for life insurance.
Term life insurance is the most cost effective option and makes the most sense for the vast majority of people.
DEFINE PERMANENT LIFE INSURANCE. It gets this name because you pay into it and once you pay into it enough (which is a lot), you have the insurance until you pass away. Term you get for the “term” and “permanent” you have forever. These policies are often VERY expensive, meaning they have very high premiums in relation to the insurance coverage you get, and insurance brokers make a very high commission when they sell you one.
Who should consider a permanent insurance policy? It can make sense for two categories of people. Those with:
A high value illiquid (non-cash) estate who are worried about the estate taxes that will be owed by those they leave behind. Examples? A family farm or multi-generational business where the assets being left aren’t in cash.
A child or family member who has special needs and will need expensive care throughout their life.
your weekly money wins
Here are all the amazing money moves you made this week
Joanna L: Always calling when my cable bill goes up to get it lowered again. They're sneaky...
Alli: Increased my 401(k) 2% more than last year and my HSA $50 more than last year
Rachel V: Low spend January to recover from the holidays, and setting up a sinking fund for next December!
Kara B: Used my bonus for a back door Roth contribution and savings!!!
Phoenix: Keeping cards paid off regardless of blunders
Jessica C: Had 5 no spend days so far this month
Becca W: No purchases (besides TP and recurring donations), including food for the first week of this year! Worked on eating fridge/freezer food instead, which also helps to finally clean/organize everything
Dani: I'm closing on my first home January 12th!
Amy S: I made my first sinking fund transfer and bumped up my 401K contribution to 7%! I set it up so that it increases by 1% every year until I max out.
Dedreiana: I paid off my car!!!