Leah is a 29-year-old tech consultant in Austin, Texas. Despite having a good job with a low-six-figure salary, she can’t manage to save money. In fact, she finished the holiday season with a $1,200 carryover balance on her credit card — and there’s no one thing she can point to that caused it.
Leah is determined to turn her finances around in 2017. She wants to start saving money for a house, finish paying off her student loans, and get rid of her credit-card debt immediately, so she’s considering a “money diet” during the month of January, which involves eliminating all “nonessential” spending. She doesn’t want to cut out everything — drinks with friends are how she rewards herself after working long hours, and she’s already committed to two destination weddings in the coming year — so how should she go about doing this?
Like many self-improvement fads, the term “money diet” dates back to the early 1980s, when it was bandied about in magazine articles and books such as The Park Avenue Money Diet: How to Escape From the Middle Class Forever!, which was published in 1983 and featured photographs of a Rolls-Royce, a Cessna plane, and a Corum gold watch.
For the most part, today’s money diets have moved away from the Upper East Side and found their niche on the web, morphing into quasi–Biggest Loser phenomena in which participants vow to make drastic reductions in their expenses and track their progress on personal blogs, Facebook, or other online forums. At best, they can kick-start good habits to maintain for the rest of your life. At worst, they can facilitate unrealistic expectations that make you feel even more shame around your finances than you already do.
As a rule, I’m suspicious of any weight-loss metaphors being applied to money, particularly as they’re often leveled at women. Translating financial terminology into the language of physical standards strikes me as yet another tired pink-and-shrink tactic. Shouldn’t one’s bank account be a sanctuary from the body-image lexicon? Apparently not: In the past few months alone, one financial adviser told me to think about investing as “taking your money to the gym, so it can get buff,” while another drew parallels between weighing yourself and checking your credit score. A third likened unrealistic budgeting to restrictive diets — sure to nosedive, as most diets do. As a result, I rolled my eyes when I first heard of money diets. Great, I thought. The juice fasts of personal finance.
Extreme measures are particularly popular going into January, when lots of us wake up to bloated credit-card bills and feel the need to do something dramatic. A November survey by online loan marketplace LendingTree showed that 27 percent of Americans began 2016 saddled with holiday-related debt from last year, and 43 percent admitted to feeling guilty about their holiday expenses. Still, 56 percent planned to waive any sort of budget during the holiday season.
Taking a vacation from financial reality can be liberating during the month of December, but you can’t bank on a subsequent period of austerity to make up for it. “We do tend to see a drop in spending from our clients in the beginning of January,” said Alexa von Tobel, founder and CEO of LearnVest and author of Financially Fearless. “However, without a thoughtful plan as to how to pay down that holiday debt, a lot of people fail to make much progress.”
So, Leah, you’re in very good company, and your first step is to stop feeling bad about it. According to psychologist Brad Klontz, a certified financial planner and the co-founder of the Financial Psychology Institute, “We all feel shame around money — shame we have too much, shame we have too little — and it keeps us stuck. The thing I like to tell people is that your money problems aren’t the result of you being crazy, lazy, or stupid. Most of us are struggling with money.” In fact, it’s the biggest stressor in the lives of Americans, according to research from the American Psychological Association.
Also, beware the straightforward fix. Just like Dry January won’t help if you’re an alcoholic, no money diet will cure compulsive spending habits. Therapist Alycia DeGraff, an executive board member of the Financial Therapy Association, is wary of any set of rules that paint spending versus saving in black-and-white terms. “I can see how money diets could be a growing phenomenon,” she said. “But simple solutions cannot always solve complex financial challenges — so use with caution!” Leah, if you feel truly out of control, it’s worth asking for professional help (you can find therapists who specialize in financial issues through the Financial Therapy Association’s website here).
Of course, money diets — also known as “spending fasts” or “challenges,” depending on whose blog or book you read — are rooted in common sense. Similar to many food diets, they’re just a fresh coat of paint on the same old necessity of balancing your input and output. Everyone knows how to do it; the question is how to stick with it.
Denver-based photographer and blogger Anna Newell Jones embarked on her first money diet in 2010. “I called it a ‘spending fast,’ and it worked incredibly well. I was able to eliminate $23,605.10 in debt that I had been convinced I would die with.” She has since built her experience into a lifestyle website, AndThenWeSaved.com, which features a banner number of “total reader debt crushed” — $1,919,994.85 as of December 1 (she hopes they’ll break $2 million before the end of the year). Next to this figure is an illustration of a masked woman clad in a red leotard and socks, pouncing triumphantly onto a frowny-faced bill.
The backbone of Jones’s strategy is to divide one’s expenses into a “wants” and “needs” list. “The goal is to spend money only on the ‘needs’ side of the list, and as little on those ‘wants’ as possible,” she explained. What goes on each side is up to you. “For example, I had hair dye on the ‘needs’ side of my list, because it was a priority for me at the time.” She also emphasizes the importance of a supportive community, which she has built through private Facebook forums as well as cheerful posts on cheap recipes, DIY tips, and other money-saving suggestions. (Yes, it’s free to join her program, although her book, The Spender’s Guide to Debt-Free Living: How a Spending Fast Helped Me Get From Broke to Badass in Record Time, costs $9.54 on Amazon.)
Ruth Soukup, who lives in Florida and runs a website called Living Well Spending Less, instituted her first “spending freeze” in 2012. “It was more a personal challenge between my husband and me than anything else,” she said. “He was annoyed with me for shopping, and he didn’t think I’d be able to do it, which motivated me to prove him wrong.” The exercise was so successful that they branded it the “31 Days of Living Well & Spending Zero challenge” and have since enlisted thousands of Soukup’s readers to join in. And they still do it every January. “We cut out everything that isn’t an absolute necessity — eating out, clothes, books, entertainment, babysitting, etc.,” she explained. “After a month of no spending, I really miss beer! And Starbucks!”
What sets Soukup’s program apart is its focus on nesting. “The reality is that every time we leave the house, we spend money. The only way to really save is to spend more time at home,“ she said. “Our plan involves getting our homes in order, so that it’s actually a nice place to be.”
Both Jones and Soukup say they’ve integrated parts of their money diets into their regular lives, but their programs are not designed to be undertaken in perpetuity. While Soukup’s “challenge” lasts a month, Jones recommends trying her program for a year. “That way you change your habits,” she said, though she still dabbles in fasting to keep herself in check. “Now my money diets are more of a housekeeping thing where I do them as needed/wanted or if I find myself slipping.”
There are competing theories on how long it takes to create a new habit — studies show that it ranges from 18 days to almost a year or longer — and looking for shortcuts can undermine the process. “I hate the word diet,” said Klontz. “Even talking to you about it makes me want to go eat a cheeseburger. My advice is, don’t approach budgeting like a diet, because it’s going to create that same sense of deprivation, and it’ll make you crave the things you’ve sworn off.” It might show results at first, he said, “but that phase only lasts so long, and if it’s a deprivation diet — food- or money-wise — it will have an end point. Worst-case scenario, you’ll set yourself up to feel like a failure and get even more discouraged.”
A better outlook would be to see it as an experiment. “I think it’s a great idea for people who haven’t had any experience with consciously trying to cut down their spending in certain, specific areas, and track it,” said Klontz. “For example, trying not to eat out for a month and cook at home can be a great exercise, and you’re going to learn a ton. As an exposure technique, it might decrease anxiety around spending less. It could make you realize, You know, actually, we can do this.”
He also recommends using that early momentum to automate as many good habits as possible, which is one of the few proven methods to create lasting effects: “We’re all cognitively lazy, so if you set something in motion that requires more mental effort to change, you’re less likely to change it and more likely to continue it.”
Meanwhile, both DeGraff and Klontz advocate for creating “spending plans” rather than punitive measures of slashing large swaths of expenses. “‘Money diet’ and ‘budget’ sound like confining tools, but a spending plan creates a growth-oriented mind-set,” said DeGraff. Instead of deciding what you can’t have, figure out what you want to have. As Klontz describes it, “With a spending plan, you ask, ‘What’s most important to me, in terms of spending money? Let’s create a vision for that. Do I want to retire early? What will that look like? Where am I living?’ Whatever it is, get really excited about it, and come up with a plan to fund those things that mean the most to you, and then, in that spirit of fullness and abundance, reduce your spending on the stuff that doesn’t matter.”