washingtonpost.com
A 21-day financial fast will improve your money management

By Michelle Singletary
Sunday, January 3, 2010; G01

I'm inviting you to take a 21-day financial fast in which you will buy only necessities. The fast is really about curbing the need to consume. It doesn't matter whether you're a good steward or a spendthrift; all of us consume more than we need.

This fast is for you if you're at your financial wit's end. This fast is for you if the stress of money is causing pain in your relationship with your spouse, friends or family. It's for you if you're worried about your retirement portfolio or saving enough to send your children to college. It's for you if you're not sure whether you'll have enough money to carry you through a long, prosperous retirement. If you have more month than money, this fast is designed just for you.

Whatever your financial situation, I challenge you to spend the next 21 days fasting. The path to prosperity begins by breaking the yoke to buy and buy and then buy some more.

What is a financial fast?

This isn't some gimmick. The 21-day financial fast has been field-tested for several years in my home church, First Baptist Church of Glenarden in Prince George's County.

I introduced the fast several years ago as part of a volunteer program called Prosperity Partners Ministry. In this ministry, men and women who are good stewards over their personal finances become accountability partners for members who are struggling.

During this fast, you will not shop or use your credit cards. For three weeks you must refrain from buying anything that is not a necessity. And by necessity, I mean the bare essentials, such as food and medicine.

You will refrain from going to the mall or retail stores. Even window shopping is off-limits.

No restaurant meals -- fast food or otherwise. This includes buying breakfast or lunch at work. You can't stop for coffee. Make it at home instead.

You are not permitted to buy gifts or gift cards. I often get a lot of objections on this last rule. People are hesitant to show up empty-handed at a birthday party or wedding. So they ask if they can tell the birthday person or bride and groom that they'll get a gift for them later. No.

Instead, use this opportunity to share with the honored person why you are fasting. Then find a way to bless them without purchasing something. This may be particularly hard if you have children. As any parent knows, birthday parties have become grand coronations, with children expecting a table full of presents. At one party, in lieu of gifts, the mother asked partygoers to bring books to exchange. I loved that idea. Your child can make a gift from supplies you have at home or make a wonderful handmade birthday card.

I want you to internalize that you can celebrate life's greatest occasions without having to bring or receive a gift. I know this will be tough, but what in the world do most of us need anyway? Find a way to give of yourself without spending.

The perils of plastic

Curtailing your consumption is just one part of the fast. The second part is eliminating the use of plastic, both credit and debit. There's a real danger in relying on credit even if you pay off your bill every month. Paying with plastic just makes buying too easy. Swipe, and within seconds you can be mired in debt. Let's consider the example of purchasing a flat-screen television. If you had to stand at a cash register and count out bill after bill after bill after bill to pay the hundreds, if not thousands, of dollars for a television, you certainly would contemplate whether the purchase made financial sense. You might even do some mental accounting to calculate what debts you could pay down or pay off instead. Plastic doesn't allow for that deliberation.

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:

-- Don't window-shop. A major objective is to stop using shopping as a form of entertainment. Just don't go there. Don't let your children go, either. Don't let them "hang out" at the mall.

-- Don't shop online. (Yes, Internet shopping counts!)

-- Don't browse through retail catalogues. Put them away so they won't tempt you.

-- Don't go to the movies or to see a play or spend any money on entertainment. You can go out and have fun, but you can't spend any money while you're doing it.

-- Use cash.

-- Don't allow yourself to buy things you know you shouldn't. Be accountable to yourself. If overspending on your beautification (hair, manicures, pedicures, makeup purchases, etc.) is the yoke you know you have to break, then the answer is no, you can't get your hair (or nails, or feet or whatever) done during the fast.

Budget basics

So on to the hard work. Yup, you have to do a budget. If you have a budget already, that's wonderful, but is it written down either on paper or on your computer? You need to realize that budgeting isn't about you. It's about good stewardship and managing resources well. Budget well and you can save for a home, a car, a college education and retirement. Budget well and you bring order to your financial life.

I know you won't follow through and set up a budget unless you see the benefit. So let me ask you this: How's not having a budget working for you?

One important part of budgeting is understanding how your spending compares with your net income (the amount you take home). What percentage of your net income are you spending on housing? Do you know what percentage you should be spending on a place to live?

In general, you should not spend more than 36 percent of your take-home pay on housing. That, of course, is an ideal situation. I know that in high-cost-of-living areas, people may spend 40 to 50 percent of their net pay on housing. But when you begin to reach those percentage levels it becomes difficult, if not impossible, to save and invest. If half of your pay is going to this one expense category, then you have to do something to bring that percentage down -- get a roommate (or roommates), earn extra income or move. I know, I know. That's easier said than done. But unless you do something to keep your spending in various areas in line with certain percentage ranges, you will always be broke.

'The Debt Dash Plan'

Debt is dangerous. When you are in debt, you are beholden to someone else. There are a number of ways to pay down your debt, but I've found one way in particular that has helped people keep on track. I call it "The Debt Dash Plan." On this plan, your effort to pay down debt is like running a 100-meter dash. I want to show you how to jump-start your debt reduction by paying off some debt quickly.

People on debt-reduction plans often fail because they don't feel as if they're making progress right away, so they give up. The key is to pay off your lowest debt first. Getting rid of that debt fast -- like a runner in a dash -- gives you a quick rush and motivates you to stay the course and tackle your other debts.

With this strategy you ignore interest rates. You list your debts starting with the lowest balance. Then you take the extra money you make from cutting your expenses, a second job or both and apply it to that debt, while making the minimum payments on the other debts. When you've paid off the first debt, apply the full payment amount from the first debt to the one with the next-lowest balance until that one is paid. Continue with the third, and so on.

By attacking the lowest-balance debt first, you'll be able to pay off smaller bills in a matter of months. That, in turn, can motivate you to aggressively cut back your expenses and find more cash to throw at your debts.

Here's how you get started:

-- Forgive yourself. Things happen. You've made mistakes, and now you're trying to make up for them. If you've been beating yourself up, stop!

-- Gather up all your bills, credit card statements and so on. You can't turn things around if you continue to ignore what you owe.

-- List all your debts, starting with the one carrying the lowest balance.

-- Identify any extra cash you can make by cutting your expenses, getting another job or both. Put it all toward paying down the debt with the lowest balance. Be sure you inform the lender that the extra payments are to be put toward the principal and not counted as an extra payment.

Most important, make a commitment to keep your debts to a minimum.

The good stewards

Prosperity gives us the power to bless others. This fast was designed in part to help those who have mismanaged money to become good stewards, and to strengthen the financial skills of those who are managing well what they have. If you're already a good steward, think of the fast as a checkup, much like getting required maintenance on your car.

No matter where you were financially, participating in the fast should help you with everything from addressing serious problems to making the small adjustments that keep your finances running well. You might even consider doing the fast over and over again, perhaps once a year.

There is one thing I can say for sure about the many people who complete this fast. Those who stick with it do become better stewards over their money. Those who repeatedly do the fast continue to be challenged and learn something about themselves. They see their financial lives improve because they've shown they can be trusted with what they have.

I pray that you will not limit your definition of what it means to be rich. It can mean having a lot of material things, but it also, and more importantly, means learning to live with less so that you can live your life more abundantly. It means having financial peace, which is priceless.

Taken from "The Power to Prosper" by Michelle Singletary. Copyright 2010 by Michelle Singletary. Used by permission of Zondervan (www.zondervan.com).

View all comments that have been posted about this article.

© 2010 The Washington Post Company