In this fast-paced world, the pressure of a consumptive lifestyle often makes a person unaware that his finances are in an unhealthy condition. Expenses that are greater than income, uncontrolled use of credit cards, and impulse spending habits are signs that you may need to do a financial detox.

Financial detox is a process of cleaning up bad habits in managing money so that finances become more organized and balanced. Just like your body needs detoxification from unhealthy food, your finances also need to be cleansed from wasteful habits and unwise financial decisions.

If applied correctly, financial detox not only preserves your finances, but also helps build strong and resilient finances.

What is Financial Detox?

Financial detox is the process of identifying, reducing, and eliminating unhealthy financial habits in daily life. The goal is to create a more controlled money management pattern. Financial detox is very useful for anyone who feels lost in personal finance or wants to start all over again.

Doing a financial detox not only means temporarily stopping spending, but also realizing harmful financial habits. Do you often buy things because they are on sale when you don’t need them? All these habits must be identified before making improvements.

Steps to Start Financial Detox

1. Evaluate Expenses and Financial Habits

The first step in financial detox is to conduct a thorough evaluation of expenses. Make a list of all expenses in the past month, both large and small. From there, you can see where your money is actually going.

Observe which expenses are actually not very important or even completely unnecessary. Do you often buy expensive coffee every day? Or subscriptions to streaming services that are rarely watched? By realizing this pattern, you can make more conscious decisions in spending money.

2. Create a New Budget and Financial Goals

The next step is to reorganize the budget. Make a budget that is realistic and in accordance with current conditions. Allocate funds for basic needs first, such as food, transportation, bills, and savings.

Don’t forget to set new financial targets. For example, saving an emergency fund for the next three months, paying off certain debts, or starting a long-term investment. A clear target will help you stay focused and motivated to undergo financial detox.

Also Read: What is Loud Budgeting? Get to know the Gen Z-style Financial Concept

3. Stop Unnecessary Spending

After recognizing unnecessary expenses, it’s time to take action. In the process, you are advised to take a break from non-urgent expenses. For example, by fasting shopping for two weeks, bringing lunch to the office, or turning off the auto-debit feature of entertainment services such as netflix to spotify.

The goal is to rest your finances from the pressure of an unproductive lifestyle. This method also gives you time to readjust your habits so that your finances become more stable and less impulsive in spending.

4. Build an Emergency Fund

One of the crucial steps in the financial detox process is building an emergency fund. This fund serves as a financial cushion in the event of unexpected events such as losing a job, falling ill, or other urgent needs. By having an emergency fund, you no longer need to rely on debt or cash out investments when a crisis comes.

Ideally, your emergency fund should be equal to three to six months of your regular expenses. To start, set aside at least 10 to 20 percent of your monthly income. Keep this fund in a separate account that is easily accessible, but not mixed with everyday accounts so that you are not tempted to use it for consumptive things.

5. Start Saving and Investing Consistently

Financial detox is not just about cutting expenses, but also about preparing for a better future. One of the wise steps you can take is to start saving and investing. After unimportant expenses have been reduced, use the remaining funds to fill savings or buy investment assets.

For example, you can start from investments that suit your risk profile. If you tend to be conservative, options such as time deposits or digital gold can be a safe start. Meanwhile, for those who are ready to face a little risk for the potential of higher returns, mutual funds or stocks can be an attractive alternative.

Financial detox is the first step to creating healthy and wise financial habits. Not only does it help to overcome overspending, but it also paves the way towards planning for a more secure future. If done consistently, this process will make you more aware of your financial priorities and long-term goals.

As the next step of financial detox, you can start investing in digital gold through Treasury. With capital starting from Rp5,000, you can already build a safe and profitable financial portfolio. Let’s utilize the results of your financial detox for a smart investment move with Treasury.