Every year, millions of Americans resolve to lose weight. A recent Harris Poll/HealthDay survey reveals that nearly 2 of every 3 U.S. adults (63%) plan to change their diet in 2022 either by eating less or by cutting back on specific foods.
Similar to how a successful weight loss plan may improve your health, a “weight loss plan” for your budget may do the same for your financial health. Have you ever considered going on a “money diet”? Slimming your spending through a money diet may strengthen your wallet, your retirement savings, or both.
Learn what a money diet is and how to make a money diet work for you.
What Is a Money Diet?
If you’ve ever gone on a food diet, then a money diet will seem familiar.
This is how the website of personal finance guru Clark Howard defines the idea: “Much like a nutritional diet where you change what you’re eating and take in less calories in order to lose weight, the idea [of a money diet] is to switch up your spending habits and significantly reduce the outflow of money going to superfluous items, so that more of your money stays where it belongs—in your pocket.”
How long should a money diet last? As long as you would like it to. It could be 30, 60, or 90 days, Howard’s website says. But just as with a food diet, a money diet should have a defined beginning and end. The goal: Adopt better financial habits that last beyond the period of the diet.
How to Start a Money Diet
You can take several steps to start a money diet, stay on a financial diet, and ultimately enjoy more financial success. Among them are:
Write down specific goals.
You might, for instance, want to consider reducing your credit card debt by $5,000, cut nonessential expenses like travel, and boost your retirement savings. In setting these goals, you’ll want to establish a deadline for accomplishing them. Howard’s website says your goals should be specific, time-sensitive, measurable, and realistic.
Seek ways to cut costs for both essential and nonessential items.
For instance, you might hunt for ways to reduce your grocery bill while also giving up restaurant meals. “The place I usually find excess fat in a client’s financial diet is actually a great overlap with physical wellness—bars [and] drinking,” says Nathaniel Hoskin, CFP®, the founder of investment management company Hoskin Capital. “Whether a client is 25 or 65, it’s incredibly common for them to overspend on alcoholic drinks and evenings out.”
Boost your income.
You might consider taking a part-time job or doing some contract work to bring in more money.
Sell what you don’t want or don’t use.
Maybe you have some electronic devices that work well but remain stashed in a drawer. People might be willing to pay good money for those devices. Comb through your closets, drawers, and other places to find items that may be of interest to somebody else, then post these items for sale on sites like Poshmark, Craigslist, OfferUp, Nextdoor, or Facebook Marketplace.
Review your retirement plan.
This review may turn up some changes that could put you in a better position to retire more comfortably when the time comes. For instance, you may realize that you’re not maxing out your employer’s matching contributions to your 401(k). Or you may see that your portfolio allocations could be shifted toward more alternative assets. For example, you may decide to increase your precious metals allocation by opening a self-directed IRA that holds gold and silver.
If your slimmed-down spending leaves some wiggle room for diversification, consider another retirement account to help you safeguard a portion of your savings and keep you from spending it before retirement. Request a FREE Gold IRA Information Kit from U.S. Money Reserve to learn more.