Welcome to Cheques and Balances. I’m Michael Vincent and this is James Blair. This week we’re getting our finances ready for summer, it’s financial fasting.
We first heard of financial fasting from Frances Cook, financial journalist at Business Desk. See the video below
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Advantages to financial fasting
We love any time financial literacy is promoted in the mainstream media. Especially if you can make sorting your finances a little more exciting.
Creating a budget
The first step of a financial fast is to create a budget to understand the bare minimum you need to live. Creating awareness around your financial habits is a great advantage to financial fasting as it can often be a catalyst for change.
Reducing debt
We love financial fasting as a way to save money to pay off short term debt. By spending the bare minimum for a week once a month, you get the chance to save the proceeds and pay off any short term debt you may have. This can be effective for those who struggle to save already.
Taking control
Financial health habits are synonymous with fitness health habits in the way that there’s no one-size-fits-all solution for everyone. We’re big fans of people trying different things and finding out what works for them. If financial fasting results in more people taking control of their finances, we’re all for it!
Disadvantages to financial fasting
Serious debt
Unfortunately serious debt problems can’t be solved in a week. If you have significant high interest debt, there may be other avenues to explore that may help pay off the debt faster.
Lots of change
Financial fasting calls for a lot of change in a short amount of time. This can be off-putting for some, as they may prefer to take small steps towards financial control instead of regular fasting.
Fasts can backfire
Fasting, whether financial or health related can sometimes back-fire, with people splurging more than they normally would after the fast time. This can set people back further and undo the progress they have made.
How to do a financial fast
- Calculate the bare minimum you need to spend to live for a week.
- Block out one week every month and live on that bare minimum.
- Put that left over money into a savings or investment account and don’t touch it.
- Go back to regular spending for the rest of the month.
Tips for financial fasting
- Create a budget so you know exactly what your life costs you,
- On the fasting week, put your social life on pause.
- Avoid your spending triggers. E.g. if you know that you’re more likely to spend money when you visit Amazon, maybe avoid the website for that week.
- Make sure that the account you’re putting your savings into is fit for purpose. If it’s short term, it’s likely best in savings account, if long term, it should be in an investment account.
