Most people shy away from the word “diet” because it’s usually associated with feelings of deprivation and limitations. We all know how hard it can be to stick to one to lose weight or live healthier.
A money diet, when done correctly, can produce phenomenal results. But it must be completed before you can truly appreciate it. The longer you follow through with the plan, the more you will feel the results. If a food diet can change your life, a money diet can do the same.
Unfortunately, many people have a knack for wasting money—and some may not even realize they are doing so. According to the Republic Bank of Chicago, the average American throws away about $18,000 per year!
Before purchasing items that only provide temporary happiness, it’s important to look at the big picture and determine if your spending habits are positively contributing to your financial situation.
After covering necessary expenses like rent/mortgage, bills, and groceries, where does your money go? If you spend it on unnecessary luxuries or “retail therapy,” following this type of plan is something worth considering—especially if you want to save up or pay off any debt.
What exactly is a money diet?
The big question is, what is a money diet? It is defined as making a commitment to only spend on the essentials. The website HappySimpleLiving.com provides a more in-depth explanation.
Going on a money diet consists of the following actions:
Cooking meals at home
While food delivery, take-out, and dining at restaurants can be convenient, it can easily derail your budget. Instead, consider learning how to make your favorite meals at home and find out just how much you can save. An added bonus is that you can also eat healthier this way.
Conducting a home scavenger hunt
If you have items lying around your house, see if there are any that can be put to better use. For example, you can save on back-to-school shopping if you find unused or good-as-new office supplies that your kids can use.
This is also an excellent opportunity to declutter if you find anything you can sell online in return for extra cash.
Checking out your local library
Did you know you can borrow more than just books at a library? In fact, many allow you to borrow musical instruments, gadgets, and technological tools like laptops and tablets.
A membership can also get you free admission into places like local museums, zoos, and public gardens. Check with your local library to see what benefits they offer.
Being on the lookout for freebies
Online marketplaces are a great place to find discounted or even free items that are in new or good condition. You can also share, lend, or trade with other sellers. Using coupons and taking advantage of special discounts aren’t necessarily free, but you could save significantly by paying a fraction of the retail price.
Finding ways to splurge
Money diets shouldn’t consist of depriving yourself of activities you enjoy. Just like food diets have occasional “cheat days” to reward yourself for the effort and self-discipline, you should do the same with your money. Just make sure you don’t overspend and let your hard work go to waste.
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How to go on a money diet
There are several ways a money diet can help improve your finances. But the bottom line is you will likely develop smart spending habits and make better life decisions. Of course, this is only possible if the plan is implemented correctly.
Just like any diet, you should find one that best fits your personal needs. A crash diet, for instance, may be effective in helping you lower your weight fast—but it is hardly effective when it comes to long-term weight management.
With a money diet, you have to consider your financial standing and your reason for following the strategy. What you choose will affect how much you have to spend on your lifestyle.
For instance, selling your car could be part of your plan if you can easily travel by bus, train or bicycle. While there are a lot of savings to be had, this will most likely not work if you have a family or live in an area with limited access to public transportation.
Therefore, it’s important to consider your specific conditions before forming a plan or budget.
Tips before starting your financial diet
It’s important to remember that this may require sacrifices, but the end result will make it worth it. Here are a few tips:
Define your target
Start by defining your goals and understanding why you are following this strategy. Being smart about finances involves setting realistic expectations.
These goals can serve as motivation while you face some sacrifices the diet will bring. The target will also help you gauge your progress.
Identify the time frame
Nobody can go on a diet forever. You might feel very passionate about it at first, but then it can start getting old. Once you feel burnt out by all the restrictions and limitations, you might end up going on a shopping spree – much like binge eating after a crash diet.
You can start by setting a time limit for how long you want to cut expenses. Taking a break is a smart way to remain consistent and focused.
Specify the rules
The next step is to clearly state the rules of your plan. Will you strictly refrain from making unnecessary purchases? Or will it be concentrated solely on dining out?
Perhaps you will refrain from using your credit card and pay with cash instead. Make sure you define the rules involved so that you don’t fall short.
You need to set a few milestones, not only to track your progress but also to celebrate. Even the smallest win should be celebrated because it can encourage you to look beyond the sacrifices you have made.
Establish a reward
Knowing that a reward is waiting for you at the end is another way to motivate yourself. Imagine being a marathon runner and pushing yourself to chase the golden medal waiting for you at the finish line.
However, make sure this reward does not compromise or eliminate all that hard work. For instance, if you have reached your savings goal, do not set a pricey reward like a new car or you may find yourself back at square one.
Finally, talk to a trusted friend or family member about your new spending strategy. They will likely offer the support you need to stay on track as you reach your goal(s).
Go for it!
All these tips should make you strong enough to withstand the struggles, temptations, and sacrifices involved in a financial diet.
If debt is holding you back from starting or completing your goals, debt settlement can make it simpler for you to pay it off and enjoy a fresh start. National Debt Relief could help you resolve your debt for less than you owe in as little as 24-48 months. Learn more here.