Money Monday and my mini series on how to detox your life in the New Year collide today as we take a look at detoxing your personal finances. The beginning of the year is a great time to re-evaluate your expenses, budget, income and beyond in order to set yourself up for financial success this year.

As I’ve gotten older, finances and the value of a dollar have become more and more important to me and something I focus quite a bit of attention on. I have paid off 2 of many college loans before the age of 30, I have a credit score of 837, I have made over $750 in supplemental income selling items on Poshmark, I bought a new Jeep at the end of summer [see tips for buying a new car here], and I have a savings account growing daily with minimal effort on my end for future investments and life down the road. My financial situation most certainly didn’t always look like this and is truly a continual work in progress. I used to throw around money like it was candy…like bartending in college and blowing every single dollar I made on clothes and going out [ugh, insert face palm emjoi here].

So without further ado, here are some realistic things you can implement to detox your finances and set yourself up for financial success in 2020!

STEP 1: CREATE A SPREADSHEET & WRITE EVERYTHING OUT

The first and most important step in detoxing your finances is to get everything organized so you can easily see everything as a whole, track things and make tweaks, and easily access it down the road. Whether its in the notes on your phone, in a spreadsheet or in a notebook, keeping things organized will be key to your success.

When I first started really focusing on my finances, I found that creating a spreadsheet with everything included was most helpful. I could see line by line what my money was going to, what areas I was spending too much on, and how much of my monthly income was going to fixed expenses like rent and loan payments vs variable expenses like coffee or Spotify Premium.

Now you can make this spreadsheet as fancy or as simple as you’d like, whatever works best for you! If color-coding and drop-down categories helps you visually see everything better, go that route. If just getting it all onto the spreadsheet and having the Excel formulas do the math works for you, then go that route. This may take some time and tweaks to see what is most effective for you personally but it’s best to start somewhere.

Think of this spreadsheet as a money journal. You want to track and document every penny of income and expense, from rent/mortgage to a pack of gum. I think it’s important to also track your debt, because eliminating that financial burden will open up endless possibilities for you down the road. Be realistic with yourself here and don’t leave anything out.

STEP 2: TRACK MONTHLY INCOME

For step 2, you are going to want to track your monthly income. If you have a job with a salary this will be easy to track and calculate but if you are freelance or self-employed and your income varies month to month, you will have to do some backtracking to try and find an average monthly income. Since the self-employed route is not my specialty, TheEvergirl has a great article on Budgeting for the Self-Employed you can check out.

I like to keep track of my total monthly income [net income, not gross], the frequency I’m paid [bi-weekly], and what my income is each pay period. With bills all having different due dates, this helps me see when the money is coming in and when I’m able to pay bills making sure they are paid on time.

Personally, I only track my salaried income and do not track any commission from TLSW or Poshmark sales as monthly income. Any money made from Poshmark goes directly into my savings no matter what. I keep track of anything blog related separate from my personal finances due to the nature of the “business.” Again, do what works best for you!

STEP 3: TRACK MONTHLY EXPENSES

Next, it’s time to figure out what exactly you are spending each month on both fixed and variable expenses. Fixed expenses are costs that do not fluctuate from month to month. Things like rent, mortgage, car payments, cable/internet, and loans would fall under fixed expenses. Variable expenses on the other hand do vary from month to month and include things like gas, groceries, entertainment and shopping.

When I’m tracking and noting fixed expenses, I like to also note their due dates. Again, this helps me figure out exactly when I can pay bills on time [aka early] based on the frequency of my income from step 2. For variable expenses, it is best to look back at the past 6 months to get an average of what you spend on these items. It can be eye opening for sure as you start calculating how much you spend on coffee each month or buying lunch instead of bringing, but remember this is the starting point! We’ll continue to edit and tweak things to make the best use of your monthly income.

At this step, it is also important to take inventory on any credit card or loan balances. You’ll usually have a monthly minimum to pay, so use that number…but every good budgeter knows that it’s important to overpay those minimums to help knock down the total and interest you’re paying.

STEP 4: DO THE MATH

After you’ve determined your monthly income and noted all of your monthly fixed and variable expenses, it’s time to do the math. This may seem pretty obvious but you’ll take your total monthly income and subtract your total monthly expenses [fixed and variable] to see where you stand. You’ll land in one of three categories: surplus, break-even or deficit.

If you fall in the surplus category, high fives to you! This means that your expenses are less than your income, meaning you could potentially be saving more or paying off loans/car payments more. If you fall in the break-even category - meaning your income and expenses are the same - you still get a high five but you may want to do some re-evaluating on the expense side to see if there are any items that can be cut or reduced. Lastly, if you fall into the deficit category…you have some major work to do. You really need to evaluate your monthly expenses to see where savings can be made and what variable expenses can be cut [bye bye, Spotify premium]. You may also want to consider a side hustle for additional income.

Now if you are just starting to focus attention on your monthly budget, this step might be a little shocking or eye opening…at least it was for me! This step is important though and you want to make sure all of those numbers are accurate. It’s time to be honest with yourself on your financial state. This is the starting point and there are plenty of ways to improve that, but we need to see the reality of where we are at this current point in time.

STEP 5: EVALUATE AND RE-EVALUATE

So you’ve figured out your monthly income and expenses, and have pretty accurate representation on where you are from a financial standpoint. This is such an important step that you don’t want to overlook!

Once you have everything outlined in your spreadsheet, it’s time to really go through things line by line and evaluate. Are your needs, or fixed expenses, too high? Are your wants and variable expenses too high? Has your savings account not seen any love in months or years? Are there any areas in which you can find savings? Are there things you haven’t been budgeting for in the past?

This can also be another tough step but it is time to be honest with yourself. Like yes, no ads on Spotify are great but can that $9.99 a month for premium be going toward something more financially smart? Remember, our goal here is to detox our finances and if our end goal is to be more financially smart, increase our savings and pay off our debt, some of those luxuries we’ve taken for granted may have to take a back seat for a while. I’m not saying you need to live your life rubbing pennies together and never doing anything fun or treating yourself, but dig deep and be honest with yourself as you evaluate and re-evaluate.

STEP 6: CHECK IN FREQUENTLY

No matter if you are a seasoned vet or just starting out, checking in frequently with your finances is so incredibly important. Whether it is weekly, monthly or maybe even every few days, find a system that works for you. If you are just starting out, continue to evaluate and re-evaluate your finances until you get them fine tuned. Make note if you are hitting your goals of say adding $500 to your savings each month or spending under $25 on coffee. Can you automate any of your bills and are you prioritizing needs vs wants? It certainly is not easy but I promise you will thank yourself for being financially prudent down the road!

And there you have it, how to detox all things finances in your life to kick off the new year. Do you have any financial tips or tricks that work well for you? Share below in the comments!

How To Detox Your Life in the New Year: Finances