If you’re one of the 340 million Americans saddled with consumer debt and ready to shed the weight and stress that comes along with it, a financial cleanse can be a powerful tool to achieve debt freedom. Whether you’re starting from scratch as a post-graduate with student loan debt or simply want to build healthier financial habits after being plagued with debt for years, a financial cleanse can help.
Why do a financial cleanse?
In short, a financial cleanse can help you create a roadmap for overcoming debt. But, above and beyond that, this holistic approach to improving your finances can set the stage for anyone to build long-term financial stability and give you peace of mind.
Jamila Souffrant, author, and host of the Journey To Launch Podcast, is a personal finance expert who offers practical guidance on budgeting and debt management through her course, The Budget Bootcamp. In partnership with Secret Deodorant’s No More [Financial] Secrets campaign, Souffrant is sharing her insights with Credello into how to create a strong budget mindset to break free from debt and achieve financial wellness.
“A financial cleanse involves taking a proactive and intentional approach to reset and improve your financial situation,” Souffrant says. Without the burden of debt weighing you down, you can build a healthy financial foundation to launch into the future.
First, assess your current financial state
Gaining an accurate overview of your finances can give you a realistic baseline for starting the financial cleanse process.
“You start a financial cleanse by assessing your current financial situation taking stock of your income, expenses, debts, and savings,” Souffrant explains. “This will help you to understand where your money is going and identify areas where you can make improvements.”
Reviewing your finances in their entirety sounds daunting, right? It definitely can be. But there are many ways to go about it, so you can pick the route that feels best for you to make things a little easier. You can go old-school with a spiral notebook and pen, writing everything down, or you could pop all of your financial information into a spreadsheet. Additionally, there are a myriad of apps and tools online to help get you started.
Next, create a clear path and goals
“Next you can set clear financial goals which can include paying off a specific amount of debt, building an emergency fund, or improving your credit score,” Souffrant says. “Having clear objectives helps guide your actions throughout the process.”
To engage fully with this step of the financial cleanse process, follow the golden rule of goal setting: be specific. For example, don’t simply list “save for the future” as a goal, but rather, “save $10,000 to create an emergency fund.” As Souffrant highlights, these specificities will serve as your guideline as you continue your financial cleanse journey.
It can also be helpful to rank your goals in order of importance. One important factor to note about debt is that once you break free from debt, the money you’re using to pay off your student loans or credit cards can be put toward other goals like saving for a down payment on a home or even a vacation. So, adding your specific debt payoff amount to the top of your goals list can help you achieve all of your financial aspirations faster.
Then, develop a strategic budget and tackle debt
Once you’ve completed an assessment of your finances and clearly stated your goals, it’s time to make a plan and work that plan. Souffrant’s suggestion is to “create a budget and action steps that help you reach your goals.”
Just like when you’re assessing your finances, there are several routes to take when it comes to budgeting. The important thing here is to track your income and expenses in a way that makes sense to you so that you’ll stick to it. Apps and tools are helpful, and simple budgeting methods like cash stuffing (yes, like from TikTok!) can be great for those just starting on a budgeting journey.
Budgeting can help you reign in spending habits and cut down on your expenses to increase the funds you’ll use to pay off debt. Pick a budgeting method and stick to it — even when it’s hard. Your discipline (including ditching non-essentials like streaming services or takeout when needed) will pay off in the form of financial wellness and debt freedom.
When paying off debt, you also need to get specific about the total amount you’re paying off. Credello’s debt payoff calculator can help with that. The tool enables you to calculate your debt-free date or monthly payments and gives you a breakdown of the interest and loan amount. It’s an easy and simple way to get clarity about how quickly you can pay off your debt and the amount you can realistically put toward debt repayment each month. You can use it for student loans, personal loans, auto loans, mortgages, and other types of fixed loans to compare debt repayment plans like the debt snowball and avalanche method to see which works best for you.
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Finally, maintain healthy financial habits to stay on track
Just like with other kinds of cleanses, when you complete a financial cleanse, there will be some level of maintenance to keep up with. Think of a financial cleanse like a clean slate. This clean slate is now the foundation to build healthier financial habits going forward.
Depending on what you identified during the assessment phase of your cleanse, you might need to dive deeper into different areas of your finances to keep from slipping back into old habits. For example, if you found that you were prone to impulse spending, you’ll want to be mindful of your purchases going forward. Regularly checking in to track your finances and adjust your strategies as needed is key.
Regardless of your starting point or past struggles, using a financial cleanse to help you break free from debt can be transformational. Building a healthier financial future is possible with dedication and discipline. With this proactive approach and a positive attitude, you’re well on your way to a debt-free future.