If Financial Planning Were a Cleanse Diet

Cleanse DietDetoxification by means of dieting is pretty popular right now.

Some people focus on eating healthier. Others focus on a barebones diet. Still others fast for extreme amounts of time.

It got me thinking: What if people applied the same kind of zeal they have for getting rid of toxins in the body to personal finance? What would that look like?  What they be as excited to share their personal finance success?  Would they post on facebook about it?  Could #financialcleanse start to trend?

I imagine there would be three levels of cleanses: an easy cleanse, a moderate cleanse, and an extreme cleanse (very imaginative, I know!). Below, I included some important tasks that could be involved with each cleanse.

Which cleanse is right for you?

The Easy Cleanse

This cleanse is great for anyone just starting out trying to get their finances on track.

Whether you’re thousands of dollars in debt, are drowning in bills, or just want to know what’s happening with your money, these tasks represent a great starting place for a better life.

Figure Out Your Current Financial Situation

In order to get to where you’re going, you must know where you are. The same is true when it comes to financial planning.

Before I meet with clients for the first time, I ask them to bring the following information:

  • Most recent investment and retirement account statements
  • Most recent bank statements
  • Last two years of tax returns
  • Latest wills and estate planning documents
  • Most recent debt statements (mortgage, car, credit card, etc.)
  • Pension statements
  • Life, disability, and long-term care insurance policies
  • Business agreements (buy/sell, keyman, etc.)
  • Other critical documents

Having these pieces of information in front of you can help you and your financial advisor get a feel for your current financial situation.

For the sake of this cleanse, however, let’s just focus on your most recent bank statements.

How much are you spending? Take a look at one to three months of your bank statements and figure out how much you’re roughly spending per month. Then, categorize your expenses.

Now you know how much you’re spending – an important part of creating your budget.

Create Your Budget

While creating your budget is part of the “easy” cleanse, it’s actually one of the most psychologically difficult things I ask my clients to do.

There are two types of spending you should consider when you create your first budget:

  1. Fixed expenses – Expenses you pay the same amount for every month (mortgage, rent, car payment)
  2. Variable expenses – Expenses that you pay every month, but vary in value (gas, groceries, entertainment, coffee)

It’s pretty easy to budget for the fixed expenses. It’s the variable expenses that are the most difficult – but that’s where your categorized historical spending comes into play.

When you’re on the easy cleanse, don’t feel the need to cut your expenses right away. This cleanse is all about getting organized and getting some foundational pieces of your financial plan in place.

Start Paying Off Debt

Focus on paying off your bad debt, first. This includes car loans, school loans, credit cards, and personal loans.

Basically, everything besides your mortgage can be considered bad debt.

I recommend that you make minimum payments on everything except for your debt with the highest interest rate – put as much money as you can toward that. Then, when you pay that off, move on to the next highest interest rate debt.

Build an Emergency Fund

I recommend you have three to six months of living expenses saved in a FDIC insured, liquid account.

Instead of running to a credit card during an emergency, wouldn’t it be nice to have money saved up that you won’t have to pay back? Of course it would!

Don’t skip this tip. Your emergency fund will help keep you from going back into debt and will ensure you can address unexpected expenses when they happen – because trust me, they are going to happen.

Start Contributing Toward Retirement

Have a 401(k) at work? Does it have a match? It’s a great idea to start contributing toward your retirement!

If you’re not already doing this, ask yourself: “Why not?” The longer you wait to start investing, the less the wonder of compound interest can do for you. There are lots of retirement mistakes one can make, but not saving is perhaps the biggest one.

The Moderate Cleanse

Done with the easy cleanse? That’s great! Now it’s time to turn up the heat a bit. I recommend you only start on the moderate cleanse once you’ve completed the easy cleanse – you don’t want to launch into a new financial plan without a firm foundation.

Here’s what I recommend next . . . .

Continue Everything You Started

Perhaps you started to pay off your debt, but you fell off the wagon. Perhaps you started to build your emergency fund, but you don’t quite have enough saved. Perhaps you starting putting some money toward retirement, but not enough and you need to do some solid retirement planning.

You get the idea. Take everything you started in the easy cleanse and maintain it or jumpstart it. Don’t neglect the essentials!

Cut Out Wasteful Spending

In the easy cleanse, you started budgeting. But you haven’t lowered your expenses – yet. Now is the time.

Here’s a list of expenses that can be pretty wasteful:

  • Coffee at your favorite coffee shop (ouch, I know)
  • Eating out
  • Expensive cellphone plans
  • Going to the movie theater
  • Gambling (extremely wasteful)
  • Unnecessary drugs (tobacco, alcohol, and more)
  • Landscaping services
  • Cable television
  • Crazy-fast internet

Brainstorm a few more wasteful expenses. If cutting back your spending doesn’t hurt some, you’re not doing the moderate cleanse.

Streamline Your Money Management

If you’re budgeting on paper, consider finding some budgeting software that will help you streamline the process.

If you’re struggling paying your bills on time due to neglectfulness, create reminders on your computer to let you know when bills are due.

Instead of having to track every transaction in your budget, try using cash for discretionary and some variable expenses.

Part of the moderate cleanse is to ask yourself how you can streamline your money management so that it’s less of a burden on you. Evaluate every part of your financial system – what needs to stay and what needs to go?

Perhaps you need to consolidate various 401(k)s into another retirement account. Maybe you need to write down all your financial account usernames and passwords for quick access. Find ways to save time managing your money.

The Extreme Cleanse

This cleanse isn’t for lightweights. It’s extreme – and highly effective at helping people achieve their financial goals.

If you haven’t tried the easy or moderate cleanses, you’ll want to start with those before you climb this mountain.

Stop Spending Money on Everything Except Necessities

That’s right, stop spending money on anything except for the things you need for survival. Here’s your list of necessities:

  • Shelter
  • Food
  • Transportation
  • Clothing
  • Utilities

Shelter does not mean being able to live on a luxurious yacht. Food doesn’t mean eating at your favorite Thai restaurant. Transportation doesn’t mean owning a car made in the last seven years. Clothing doesn’t have to come from Nordstrom. Utilities doesn’t mean a subscription to the deluxe cable package.

This budget-cutting operation is extreme. It’s designed to help you knock out all your debt, fill that emergency fund up to the brim, and save for the future like nobody you know.

Pay Yourself First

The next part of this cleanse is to prioritize paying yourself. No, not for discretionary items, but rather for your future.

In your budget, make sure that after you have paid off your debt and built your emergency fund, that you max out your retirement plan. I suggest putting the maximum amount you can into your 401(k).

Your 401(k) is a fantastic place to put your retirement money not only because of the potential employer match, but because it’s “out of sight, out of mind.” Once you set this up, your extreme retirement saving is done automatically for you out of your paycheck.

Seek Accountability

Extreme cleanses are difficult to keep going. In order to do so, I recommend finding an accountability partner. Set up a meeting with a financial advisor – like myself – every month or find a trusted friend who can be there for you when you’re weak.

You know how you brush and floss your teeth really well before you visit the dentist? The same is hopefully true before each of your financial accountability meetings.

What’s Your Cleanse?

Financial cleanses, like dietary cleanses, aren’t actually compartmentalized. Optimized retirement saving depends on appropriate budgeting. Paying off debt relies on sufficient income or savings. Building an emergency fund depends on cutting expenses.

In fact, health and finances go hand in hand, too. A healthy body leads to a productive worker. A productive worker can afford healthier food. Stress levels affect your ability to think through a financial problem. Financial problems lead to stress.

Cause and effect can many times be swapped. Work on one cause, and its effect may end up affecting the original cause. That’s why I try to address every area of my life: finances and health included.

What’s your cleanse? How will it better your life – financially or otherwise? I encourage you to make some progress. Soon, you’ll reap rewards you didn’t even see coming.



  1. Groundhog Day – Weekly Market Thoughts | Percension Wealth Advisors, LLC - December 7, 2015

    […] if you approached financial planning like a cleanse diet? Daniel Zajac, CFP® with a unique […]

Leave a Reply