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Taking Time to Recalibrate with a Financial Cleanse

   Posted On: January 5, 2017  |    Posted In: Personal Finance 101  |     Posted by: Broke Millennial®

With pen poised over a blank page, I struggled to ink my first goal for 2017. Granted, this may be partially attributed to the general pain I feel when marking the virgin pages of a fresh notebook. But I digress. I sat at my desk and tapped the pen against the paper while letting my mind daydream about seemingly unattainable goals for 2017.

I would obviously lose the weight I’d been talking about shedding for four years. I’d magically understand what it took to feel fashionable on the streets of New York City, but on a capsule wardrobe. My book would become a New York Times bestseller as soon as it hit shelves in May. The podcast I’m starting would become so popular that Gimlet, Panoply and WNYC would get into a bidding war to acquire my talents. I’d learn to meditate and be able to do inversions at yoga. Basically, I’d be a cross between Tim Ferriss, Blake Lively and any woman from a Lululemon print ad.

That’s not what I wrote down.

2016 turned out to be a successful year for me on paper. It started with a book deal and ended with me quitting my job to become a full-time freelancer. From the outside looking in, there’s little for me to complain about professionally (or personally). Yet, my transitions didn’t come without financial missteps.

  • I raided my savings far too often while trying to handle the move from full-time employee to self-employed.
  • After being invited to seven weddings in 2016 and agreeing to three major vacations in 2017, my travel and honey pot (emergency savings) account were in pitiful shape.
  • Personal and business funds are intertwined, which is not setting myself up for success.
  • I kept spending at my normal rate after transitioning to freelance, even though my monthly salary suddenly became uncertain.

Needless to say, even those of us who are financially fit screw up and need to recalibrate, which I why I’m participating in 30-day Financial Cleanse, hosted by Carrie Schwab-Pomerantz, daughter of investing icon and founder of Charles Schwab (aka Chuck Schwab). Carrie is a CFP® and serves as board chair and president of the Charles Schwab Foundation and helped found several financial education programs.

I started by writing down a few short-term and long-term goals for 2017 and beyond. Needless to say, I got a bit overzealous.

Short-term goals (within 3 months to the end of 2017)

  1. Reset my spending behaviors to align with my now unpredictable salary by challenging myself to a no-spend month.
  2. Set up a business account and learn how to pay myself a salary in order to have a business account and personal one.
  3. Set aside 40% of my paychecks for taxes and 10% for savings to hit other goals.
  4. Diversify income streams in order to better handle the uncertainty of projects and freelance writing.
  5. Sell 8,000 copies of my book.
  6. Get four paid speaking gigs with a comma in the paycheck (aka minimum of $1,000)
  7. Volunteer
  8. Create a new savings account to always have the amount of my health insurance deductible available ($6,850). I’m electing to have this separate from my emergency fund so the emergency fund is primarily for living expenses if I have a slow income month.

Medium-term goals (within 3 to 5 years)

  1. Create a passive revenue stream – it would be great if it were the book, but that’s not always a realistic goal.
  2. Have at least $65,000 set aside for the down payment on a home by age 30.
  3. Hit $1,000,000 in investments and savings by age 33 (five years from now).
  4. Help Peach pay off his student loans within two years of getting married – this is of course working under the assumption we get married in the next three to five years.

I know, it’s a lot of goals. Fortunately, the cleanse will help me focus and make these goals actionable, especially the short-term ones.

Cleanses are important for the financially fit

Despite a few missteps in 2016, I do consider myself financially fit. The paper version of myself has a 780 credit score, a healthy savings account, invests, has well-funded retirement savings accounts, and doesn’t live in a paycheck-to-paycheck cycle. But trust me, you need to refresh your commitment to healthy financial habits on occasion. Not unlike going back to eating loads of veggies and minimizing the sweets after the holidays (another thing I’m in desperate need of doing).

How it works

The 30-day Financial Cleanse is segmented into four weeks starting with taking a hard look at your daily expenses by utilizing a cash diet, picking one place to cut back for the month and recording transactions. No one said this was going to be painless!

Week two adds in your monthly expenses, not just tracking your daily purchases. Use this information to make a budget that can be annualized to include payments like your Amazon Prime subscription or insurance premiums. This provides a bird’s eye view of your financial situation and lets you know if you’re operating at a deficit each month – sometimes it helps to think of your life as a business and you’re the CFO.

Week three focuses on setting goals and then reprioritizing your spending and saving patterns to achieve them. Carrie recommends having one primary short-, medium- and long-term goal. I got a little trigger happy in that section as you already read.

Week four encourages you to take stock in the progress made in the last four months and apply the lessons learned to the rest of the year and beyond.

Join me on the financial cleanse

If you feel like recalibrating your financial life, or doing a complete overhaul, then join me on this 30-day financial cleanse challenge. Start by downloading (or even print out!) the PDF overview here. Then hold yourself accountable by declaring yourself a participant on Twitter with hashtag #financialcleanse.   Get encouragement from me by tagging @BrokeMillennial or from Carrie @CarrieSchwab.

You can also follow my own experience participating in the cleanse that I’ll share both on Twitter and here on the blog.

And don’t procrastinate starting because it’s towards the end of the week so you’ll just hold off until Monday. Just get going now!

This post was sponsored by Charles Schwab.

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18 responses to “Taking Time to Recalibrate with a Financial Cleanse

  1. Interesting idea, BM! I know lots of research suggests that dietary cleanses don’t often work (I still do them anyway, as they seem to bring positive results for me). I wonder what the body of research on financial cleanses has to say. . .

    You certainly have plenty of irons in the fire in 2017. Some people would be overwhelmed by it, but I’ve always viewed this phenomenon as more opportunities to win. Thanks for the challenging post!

    1. Hopefully financial cleanses prove to me more effective than a juice cleanse! Certainly painful in a different way, but the results could be seen more quickly. Best of luck with your 2017 goals too!

  2. This is a great post Erin. Love the transparency. I too made a lot of financial mistakes in 2016 with my spending accelering drastically (up 128% over 2015)! I’ve hit the reset button and recommitted to frugality for 2017 and have only spent $31 in the first 5 days of the New Year. I look forward to following your cleanse.

  3. I commingle business money and personal money too AHH!! That is definitely a goal for me in 2017. I tried to create a separate business bank account but I forget to deposit checks into it. I like the app for my primary bank account too much! Good luck with your goals in 2017. I think Tim Ferriss crossed with a Lululemon ad would definitely be on my list too =)

    1. I’m making good progress on a few of them already! Just need to keep momentum up. Best of luck with your short-term goals.

  4. Very informative post, Erin. Just downloaded the Financial Cleanse. I’m good at tracking my spending and budgeting, but I need a lot of work on my goal setting. So I imagine this tool should come in handy. Thanks again for sharing the Financial Cleanse and your experience with it. Oh, and you rock, by the way. A $1 million in investment and savings by the time you’re 33! Freakin’ awesome.

  5. Wow..i really loved your short term goals. Actually I am happy for you that you hit the road running as a freelance writer. And the volunteer sectors huh, you got that one. I will try to volunteer one or twice a month see where that takes me.

    A new reader here. I am glad to land on this blog at last.

    1. Volunteer is about to get checked off as I found a local animal shelter where I want to volunteer. It requires weekly commitment, which may feel like a lot at first but I know it’ll be good for me to get outside my own head and refocus energies on what matters.

  6. This read was so inspiring! I’m always looking to better my financial self (and every aspect of myself)! I love that this can be used in multiple areas of life. Thanks for sharing!

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