Ten years. That’s how long I carried around my debt with me after leaving university. Indeed, for the first few years after graduation the pile actually got considerably bigger – not smaller. This was not through want of trying…
Every year I would make the same New Years Resolutions – “spend less”, “save more money” and “become debt free”.
And 12 months later there I’d be, admitting defeat, yet promising myself that THIS was the year I would succeed.
They say that the definition of insanity is doing the same thing over and over again, yet expecting a different result. If that’s true, then my finances were pretty insane for longer than I’d like to admit. But it also poses an interesting idea…
What if you’ve tried to get ahead financially and you failed? What if you didn’t manage to pay off your debt, or save for that house deposit, or spend less on groceries, or..? Perhaps it’s time to try something new?
A “reboot” is exactly that. Like restarting your computer when it’s running slowly or keeps crashing, a financial reboot aims to offer a short, sharp shock to kick-start your finances in the right direction. They might not be comfortable, but they’re only temporary. And they might just be exactly what you need to get the head-start you need.
If you’re fed up with floundering, and want this to be the year that things finally start going your way, here are some options to reboot your finances once and for all…
Many people find that money runs through their fingers like grains of sand; they feel they have little control over all those tiny expenses slowly and imperceptibly bleeding their account dry. While there’s nothing wrong with trying to downsize your spending and cut your costs where possible this is hardly a “reboot”.
While saving money may be a gentle, progressive process of spending less, a spending fast is a more extreme – and potentially effective – alternative.
As the name suggests, the principle is simple. You spend nothing apart from on the essentials (your rent or mortgage, outstanding debts etc). All the other expenses stop completely.
No take-out, no posh coffees, no new video games.
Even expenses you might think are reasonable can cease – at least temporarily. Don’t buy new clothes but instead wear all those items sitting unloved in your closet(yes, I know you have them!). Don’t go grocery shopping but instead use up everything in your freezer and cupboards. Cancel your cable TV. Become a hermit.
Painful? Quite possibly. Effective? Most certainly.
Quite how long your spending fast lasts is a matter of personal preference, though it hardly needs saying that the longer the period of time, the more impressive the results. Many people start with a no-spend month. Some go for longer periods, or regularly “reboot” with no-spend weeks or months throughout the year.
Whatever your own chosen regimen, be prepared to be quite impressed with just how much superfluous spending can be cut for short periods of time, and how quickly that savings account can grow in response.
Living in a consumer society, where multi-national corporations have become magicians at selling us the latest “must have” item it’s little wonder we have so many possessions. But every one of those represents expended capital – money which could be used for a financial reboot.
Liquidating these “assets” by selling them might be just what your finances need. If you’re serious about making headway this year, however, don’t just look at selling a handful of unused objects from your garage or loft. Instead, go all out. Be ruthless. Be decisive. Sell everything you think you can cope without. Consider barely-used kitchen gadgets, unworn items of clothing and perhaps even the second car sat rusting on your drive.
While eliminating these products from your life may seem a painful and extreme exercise, I have personally found it surprisingly freeing. Not only can you fund a healthy bank balance, but you realise just how much time and effort you were putting into caring for and maintaining belongings that – surprise, surprise – you really aren’t that bothered about.
Housing is typically the single largest expense that any of us have. As a result, this is one expense that – if trimmed – can make a huge difference to your finances. Even better, the positive impact isn’t just short-term, but continues on for many months into the future.
I’m very well aware that moving house is a major upheaval, and is therefore something that most people avoid, but allow me to tell a personal story for a moment. Some years ago an ex-girlfriend and I split up. She moved out of the decent-sized house that we rented together. I loved the house; the location, the size, the neighbours. So I decided to stay on and pay all the rent myself.
At first, things went smoothly. After a while, however, finances started to get tight. The constant chores – the cleaning, tidying and gardening – also started to grind me down. Somehow, it started to feel like the house owned me, rather than the other way around.
Eventually, with a heavy heart, I decided it was time to move out. But not just to a slightly cheaper property. No. If I was going to the effort of moving, I was going to make the most of it. I was going for a financial reboot.
I moved from a 3 bedroom house with a beautiful garden into a property shared with two other housemates. It was not a happy experience. Those first few days felt pretty lonely. I missed my personal space. I hated sharing a bathroom with strangers.
But within a few weeks this “funk” started to shift. I only had one third of my past cleaning responsibilities. My costs had been slashed by over 50%. My housemates weren’t so bad once I got used to them.
In summary, from barely being able to afford my housing I moved to a situation where I could afford a few treats now and again and *still* put a load of money into savings. So good was this, actually, that what initially was meant to last for a few months actually went on for almost two years. Two years of glorious saving and a minimum of responsibility.
Of course, moving into a shared house might be too much if you have a partner, or children, but there’s almost certainly *something* you can do. Such a “reboot” did wonders for my finances, and gave me far from freedom – both in terms of money and time – than I had expected.
Of the major expenses we all face, grocery shopping is normally one of the “top three”. Like housing, therefore, anything we can do do slash our food bill can have a marked impact on our finances.
Many of us understandably love our food. The idea of going without that steak dinner, or the pizza on a Friday night is unthinkable. But remember: the purpose of a reboot is that it is an extreme action that happens over a finite period of time. And we can all eat cheap food for a few weeks.
While rice and beans may not be your personal choice there are all sorts of ways to cut your grocery spending significantly. Give up meat. Or alcohol. Prepare your own packed lunches. Avoid take-out. Go for brandless products. Many foodies can slash their food budget by 50% or more without too much effort.
Just doing this for a single month could save many families several hundred dollars – and give your finances just the “reboot” they need to make this year your most successful yet.
Blogger J Money popularised the concept he calls “challenge everything”. The principle is simple; investigate every single expense that goes out of your account and look for ways to cut it. Swap to a cheaper tariff, buy it less frequently, move to a competitor. Or just eliminate it entirely. Even just a 10% cut to each expense represents a major chunk of spare change by the end of the month.
Sometimes the element holding us back from achieving our goals are the preparatory steps between here and there. When you decided that you wanted to learn to drive, for example, the actions weren’t just financial. You also needed to go to all the hassle of getting your learner drivers license. Of filling in the forms and getting your picture taken. Then you needed to find and choose a driving instructor who suited you.
All this took time and effort. In comparison, the process of actually learning to drive is reasonably easy for many people.
Don’t let those “intermediate” steps trip you up. Take action as quickly as possible, and there’ll be nothing to stop you. So book a day off work and make it a day for positive action. Open up that investment account you’ve been thinking about; you’ll find it a lot easier to start saving money into it when you’re getting regular statements.
Finally make the jump to a new bank. Switch your utility supplier. Sign up for that money management software you’ve been thinking of.
The sooner you’re “ready” to take control of your finances, the easier you’ll find it to take action – and finally make this year your best yet.
As I warned, the idea of a “financial reboot” is rarely a comfortable one. But it’s one that can rapidly fill your savings account. Just a few months of action can make all the difference,a allowing you to finally pay off that last bit of debt, get ahead on your mortgage payments or start to build an emergency fund. Sometimes, that’s all you need. A little “shove” in the right direction.
If you’re really serious about making a fresh start this year, why not combine two or more of these reboot ideas together? Open an investment account, take a no-spend month and sell your unwanted possessions. Combined, the impact can be even more spectacular.
Remember: the discomfort is only temporary, but failure can last a lifetime. Do something today that your future self will thank you for.