6 steps to financial detox

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Detoxing is having a moment. Juice cleanses after New Years, spring-cleaning with Marie Kondo, and escaping toxic relationships. It’s time to detox the aspect of your life that affects all other aspects – your finahonces.
Use this this list as your action guide, or your playbook. We have gone in depth into get of these topics in other articles, but have you executed your plan yet? Now is the time. Not another day, not another hour; now is the time to align your finances with your values and your goals. Just take it step by step.
Create a spending plan
If you caught our post directed towards new graduates, this may look familiar to you. Unfortunately, creating a spending plan is something that many adults were either never taught or have failed to implement, and yet it is essential to your financial freedom – and peace of mind.
Although spending plans are most commonly referred to as a budgets, this term can make most of us feel restricted. A spending plan is something that you devise (with your spouse if you’re married) that allocates where your income is going to go before the bills arrive, in order to cover basic needs and get you to your goals faster. It may take a few months before you get into the groove and anticipate all your expenditures, but do not lose heart.
There are tons of options of free templates online that you can download, or apps that will help you track your spending based on your goals. Mint offers both, and gives you an idea how to get started if you’ve never created a spending plan before. Knowing where your money is going each month takes the stress off when the bills come and allows you to spend money without guilt because you’ve already determined the amount.

Determine your PYF percentage
PYF stands for Pay Yourself First, because this is the percentage you are going to set aside for your future before you do anything else. Often this percentage will be invested through your employer or your company, making it tax efficient and removing any temptation to spend it.
Find a fiduciary partner
As you probably know by now, a fiduciary is legally required to put your needs above their own – unlike brokers and wealth advisors who are only required to give you “suitable” advice. (If you didn’t know that, see here.) Registered investment advisors (RIAs) MUST give you transparent advice and investment solutions that protect you from marketing “noise.”

Sell your crappy mutual funds
Now that you have a partner who is looking out for your financial best interests, you’ll want to tell him or her that you want to sell those mutual funds with their high fees and low returns. The research is clear: over the long run, active management just isn’t worth the expense. Instead, look for low-cost index funds that allow you to own the market and diversify your portfolio across risk so you’re ready no matter what happens in the markets.
Know your risk tolerance
Speaking of risk, know what your personal risk factor is – it varies with each individual. Find an asset allocation that will grow your personal wealth and allow you to sleep well at night.
Live abundantly
One of the clearest indicators that someone has an abundant mindset is that they give freely. When we live in a tight-fisted, hoarding manner, it’s clear that we are giving into our fear and living with a scarcity mindset. The secret to living is giving. And giving can literally change the world.


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