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A 21-day financial fast will improve your money management
The Color of Money"The Power to Prosper: 21 Days to Financial Freedom"Michelle Singletary's third book guides readers day by day through a 21-day financial fast. These are some of the personal examples of people who have taken up the challenge of the fast. Some have even repeated it.
MELLISSA C. JOHNSON: Johnson, a dental hygienist, has done the money fast three times. She saved about $250 the first time, and that was just by eliminating basic snackage such as morning breakfast treats and trips to fast-food restaurants.
GLORIA GATLING: Gatling, of Charlotte Hall, Md., has taken the fast twice and volunteers at her church to help others with their finances. "I had an issue that I realized when I did the fast," she said. "When my husband passed in September 2007, I found myself eating out too much because I didn't want to eat at home alone. I don't have a financial problem because I've been frugal all my life. But I realized I could save more." Gloria took the savings from meals out and began sending the money - $100 a month - to her granddaughter, now a college student. "I realized I could use that money better. Besides I saw my weight going up. I lost a few pounds, and she got some money."
LARRY AND TERRI AMES: "I hated the fast!" Terri Ames, a federal worker, said after her first financial fast. "Trying to keep my family on track was another challenge, especially my husband, Larry, who is obsessed with going to the market. Prior to the financial fast, he never took a list to the store or stuck to a budget. He believed that because food is a necessity, it's okay to spend whatever you want at the market. But all that work did pay off - literally. I saved $140 that month on lunch money alone. The fast really made me think about how I spend." TOOLBOX
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The banks know, and studies have shown, that even those of us who think we are using credit wisely are being duped. That's because when you use credit, you often spend more than you would have if you had used cash.
In one study aimed at marketers, Greg Davies at Britain's Warwick University found that customers using credit cards spend more than those paying with cash or checks in situations that are otherwise identical in every other respect. Davies concludes that credit cards boost spending because of the psychophysics of how our brains work. He found that credit cards reduce the pain of payment because we don't do the same mental accounting as we do when we pay with cash.
Why limit debit card use?
I've found that even debit card users, especially those without credit card debt -- still whip out the plastic far too easily and spend more than they would if they were limited to using only cash. Many debit card users who have participated in the fast argue that they can't spend more than what's in their checking account and that therefore it's the same as cash. But that's not true. If it were true, the banks wouldn't have introduced overdraft protection, a common debit card feature that allows banks to rake in billions (yes, that's with a b) in fees.
A debit card is a cousin to the credit card, and it poses a similar problem -- it allows people to buy stuff with cash they really don't have. People are quick to swipe their debit card, only to learn later after getting an overdraft notice that they didn't have the cash in their bank account to back the purchase in the first place.
Other rules
People find ways around the fast. I know that. For example, I tell people to spend money only on essential things. But one person's essential is another's want. I can easily go 21 days without going to the hair salon. I'll throw my hair in a ponytail in a minute. Other women who have done the fast say that if they went without visiting the hair salon they would look a "hot mess" and possibly jeopardize their employment.
Here's a quick overview of what you can buy:
-- Essential items such as food and medication.
-- Essential personal hygiene products.
-- Essential clothing items that would be required for your job, such as pantyhose, work shirts or a uniform. But you should not buy clothing simply because you think you need a new outfit for work. Make do with the clothes you own.
-- Essential items for your family, such as school supplies.
-- Essential items for your home, such as cleaning products. Sheets, pillows, lamps, curtains, etc., are not essential.
The following is a non-exhaustive list of what you shouldn't do:
