Six Steps to Financially Detoxify With a Budget

Re-Energize Your Finances

You've heard of it, and some of you have even tried it -- detoxifying or cleansing your body by going on a strict diet for a few days, drinking only juices or ingesting herbs.

Some people swear by these treatments that promise to help us lose weight. Some folks even say they feel re-energized and fresh after going through such a regimen. But have you tried to detoxify your budget, getting rid of all the bad stuff that weighs you down financially and prevents you from achieving your financial goals?

Here's what experts say about how to detoxify your budget and put your money to work for you.

Start With a Basic Budget

We all know we need to budget, but the reality isn't as easy as it sounds. And who really has the time to stick to a strict money schedule and keep track of every little expense? Karen Lee, a CFP professional in Atlanta, has a few recommendations for people who would like to set up a budget, using this not-too-intimidating strategy.

Create an organizational chart by starting out with three columns: necessity, necessity with wiggle room and discretionary (expenses you want to make), Lee says.

Then, organize each item of your budget into one of the columns listed. Examples are rent, mortgage or car payments under necessities. These items are fixed and inflexible. Utilities and food would go under column two. You need them to live, but you can try to reduce these expenses.

Column three, or discretionary expenses, are items you can live without. These include entertainment, travel, hairstyling and nail care, and tickets to sports events.

Now the hard part: Start slashing items in column three, and search for ways to trim column two expenses.

"It can be done," Lee says.

Use Automated Tools to Execute Your Budget

Monique Harps, a money manager and financial coach in Tulsa, Okla., says that budgets are one of the most powerful tools you can use to achieve money goals, so it is important to make sure your budget is executed in alignment with a set of financial goals.

One way to execute a budget is to use online tools and services offered by most large banks and some smaller banks and credit unions to automate the execution process.

Use your bank's bill-pay service and similar services by utilities and cellphone companies to make automatic recurring payments for all fixed monthly bills. For savings, use your bank's funds transfer service to set up automatic recurring transfers to a savings account. For all other expenses, including gas, groceries, spending money, etc., leave money in the checking account and access it via debit card, or get cash from the bank and divide the money into envelopes.

Each envelope will contain the amount allocated in the budget, Harps says. For example, if you allocate $200 for spending money, place $200 cash in an envelope marked "spending money" each month. An alternative is to use a prepaid debit card or reusable gift cards. You can add the money to it, so you do not have the cash in your wallet.

But don't forget about the prepaid card. Nonuse can draw a fee after a certain period of time.

Utilize the '10/10/10' Formula for Savings

Most Americans overspend. Pamela Yellen, author of "Bank on Yourself," says they take on too much debt and fail to invest wisely for retirement. She suggests using the 10/10/10 savings formula year-round to help put you in control of your finances. Put 10% of your gross income aside for short-term needs such as a vacation and holiday gift-giving; 10% for anticipated midterm needs and potential emergencies such as a new car, major appliances, a new roof or college tuition; and 10% for retirement. This allows you to pay cash for both routine purchases and inevitable emergencies, and to avoid or curtail bank and credit card debt.

To help stay that course on a long-term basis, look into apps to help you monitor your finances.

"Let's face it, no one goes anywhere without their cellphone these days. Having all of your financial data a tap away makes it easy to keep track of spending and monitor where your money is going, even when you are on the go," says Karen Hoxmeier, owner of

Get a Partner

Travis Freeman, a CFP professional with Four Seasons Wealth Management in Creve Coeur, Mo., says many Americans are too busy to focus on personal finance and budgeting. If you need motivation to successfully carry out a new financial plan, get a partner to back you up.

"I always recommend an accountability partner. Just as having a personal trainer helps us stick to that New Year's resolution, having an accountability partner for our budgets helps us stick to smarter spending and saving," he says.

Freeman recommends a friend, co-worker or a parent. "If you do not feel comfortable with a novice helping you, I recommend a Certified Financial Planner (professional) or a money coach," he says.

These professionals not only help you to stay on track, they have a great deal of knowledge to help you beyond the budget. The key to these ideas is having a reasonable budget to begin with and sticking to it. Whether your partner is a friend, professional or even a software program, accountability equals effectiveness. Consider seeking a professional if your money problems are serious and you can't solve them without adding to your expenses.

What if You Need a Money Pro?

The type of professional you work with will depend on the services you are seeking and your financial situation, financial coach Harps says. Some professionals serve in more than one capacity, which adds great value for the client.

Financial coaches will work with clients to fully understand their financial situation, help them get organized and create a customized financial strategy. They teach clients how to make progress toward their goals by using resources that will help clients follow the strategy.

"For example, I refer my clients to an (investment professional) after they are debt-free and have three to six months' (worth of living expenses) in an emergency fund. At this time, they are in a position to comfortably contribute 10% to 15% to their retirement funds," Harp says.

Daily money managers, or DMMs, will take on managing your household finances. Just as a house-cleaning professional keeps your home organized, a money manager will keep your finances organized. DMMs help clients retain control of what happens with their money by paying bills, making transfers, creating and executing budgets, keeping records, managing trusts, and preparing information for the clients' tax professionals.

Once your finances are in order and you can afford to invest 10% to 15% of your income, you can meet with investment professionals to save money for retirement, college funding and wealth building, Harp says.

Tighten Your Belt During the Holidays

Yellen says the best way to budget during the holidays is to pay for holiday gifts with cash.

People paying with cash spend 20% less without feeling deprived, according to research by the National Foundation for Credit Counseling.

It's better than using a check or debit card, Yellen says. She says studies show that even the sight of a credit card logo excites consumers. So leave those cards at home under lock and key.

The gifts that people remember the longest are often free, Yellen says. Think about what you might give that is free or low-cost that would bring as much long-term pleasure.

"Can you remember what holiday gifts you received five years ago? If you're like me, you probably can't. But I still treasure the memory of a desert hike that our family took during one holiday years ago instead of exchanging gifts, and it was absolutely free!" Yellen says.