Financial Fast Takeaways

For those of you who don't know, I came up with an experiment in the middle of January to do a "Financial Fast". I excitedly told my wife about the proposed experiment, and, with incredible patience, she agreed to participate. This article is to document the reason for our fast, the process, and the results. I also added some key take-aways at the bottom of the article to summarize the most memorable points.

Background:

Growing up, and continuing into adulthood, I have practiced a monthly fast for self-mastery and spiritual development. In the Church of Jesus Christ of Latter-Day Saints, we are encouraged to go without food for 24 hours once a month. We are taught that from the time of Adam, God's people have fasted to help them draw nearer to Him and worship Him. While fasting, we are encouraged to pray often, with a purpose. A person can fast for many reasons. In the past, I have fasted that a friend or loved one will overcome an illness. I have also fasted to receive answers and guidance when faced with difficult decisions, or for help overcoming a weakness or to further develop a Christlike attribute.

The Benefits:

In my mind, the greatest benefit to fasting and prayer is coming closer to Heavenly Father, but there are several other temporal and spiritual benefits as well. Fasting draws God's power down into one's life. Fasting teaches self-control and creates spiritual power. As the physical body is weakened, the spirit becomes stronger.

There is a new trend that I learned about nearly a year ago called intermittent fasting. The technique is to periodically go without food for an extended period. Some people only eat within an 8-hour period, every single day. Others do multiple-day fasts once a week or month, drinking water only. There are many ways to do it, but they all aim to achieve the same benefits. Studies have found that after about 8 hours without food the body starts cleaning and renewing itself. Weak or old cells are metabolized and replaced. Hormones are rebalanced, and digestive organs are given a break.

It stands to reason that if there are so many benefits to going without food, there must be similar benefits to going without certain material possessions as well. It is no wonder that I have recently seen many people decide to go for weeks at a time without social media or video games to simplify their lives and refocus on what is most important. I have talked to tons of people who have done this, and all reported positive results and experiences. I decided to give it a try in my own way, and thus the Financial Fast was born.

Applying Fasting to Finances:

The idea of a financial fast is the same as any other fast. By cutting expenses, my goal was to see how much money we spend every month on non-essentials and come up with a plan to reduce them in the short and long term. I wanted to re-focus my financial life on what is important: the stability and financial freedom of my family.

From February 1 to February 28, we did everything we could to live within our means and cut expenses. We watched what we ate, didn't go out to see movies, and looked at our debt to see what we could get rid of to save money in the long term. We also looked at recurring subscriptions for things like car insurance, cellular service, and Netflix. I spent hours researching different insurance companies, phone carriers, and thinking of ways to optimize the pathway to our financial independence. I'm sure there was more that we could have done, but we made strides in the right direction.

The Results:

We ended up having less cash at the end of this month, but that's not a bad thing because we ended up spending more money on things that will help make us more money in the future.

After finishing my CMA in January, I decided to pull the trigger on buying a CPA exam review course and paying the Nevada State Board of Accountancy and NASBA fees. In total, I paid approximately $2,030.

Overall, our cash decreased by about $1,205 this month, but if we take out this unusual expense, we came out ahead by about $825 this month compared to prior months. We also made the decision to sell our boat. (See video for announcement.)

Selling the boat was a tough decision. As I mentioned in the video, we broke even on the boat for 2018 by renting it out during the busy season, but on the off-season, it is quite the drain on our cash flow. Getting rid of the boat will save us almost $900 a month from September to May.

We will be able to afford one in the future, so it is only a temporary sacrifice. This month we brought it to a dealer to be sold, so beginning in March we will be saving $300 a month on our slip and storage until it is sold, at which point we will save a full $900 per month.

We also paid down quite a bit of debt, and therefore our net-worth increased as well. Between student loans, two car payments, and our boat payment, we made principal payments totaling $2,484 and paid interest totaling $475.

We also made payments into our 401k and PERS accounts totaling $825.

A lot of the credit card payments are for monthly expenses including food, gas, phone, and insurance. So, if we factor those out, our net worth increased by approximately $2,100. ($1,283 +$825= $2,108)

We were able to spend about $800 a month less in February. In March, I expect us to spend a little more because we won't be as strict with ourselves, but I think we will still be able to continue to spend about $400 a month less on eating out and entertainment. Also, we will be saving an additional $300 a month from removing the boat, and hopefully $600 more a month once it is sold.

From the actions we took in February, we will have an additional $700 a month to use towards increasing our net worth (investing and paying off debt). Once the boat is sold, that number will increase to $1,300 a month. I think those are some good results.

Additional Areas of Improvement

Some things that I tried to do this month, but simply didn't happen include:

• Changing cellphone carriers - it seemed like such a pain to switch. Even though there were cheaper prices available, it didn't seem like the service would be adequate. I considered options like Google Fi and Visible but am worried there will be problems with each. If anyone has any suggestions in this area, let me know.
• Getting quotes on cheaper auto insurance. I used to sell car insurance, so I know that price is the name of the game here. I also know that companies give some rewards for loyalty. We were going through a claim this month, and our current company treated us well. For now, we are happy where we are, and even if we could save $30 a month, it seems like we have a good price, and I'm not sure I would switch. Maybe the next time there is a rate hike it will be time to go.

I'm sure these will be things I assess more in the future, but for now they are going to sit on the back burner until futher notice.

Key Takeaways

1. We spend a lot of money on interest. Although we never pay interest on a credit card, we still spent almost $500 in interest in February. This year our goal is to pay off most of our debt. Selling the boat will be a big step in that direction. The next goal is to pay off the student loan (4.5% interest) and then the second car (1.9% interest). I know we can get a bigger return in the market, which makes the goal of paying off debt seem counter-intuitive to me, but we are trying to prepare to have kids. Having a lower monthly liability by paying down our debt will give us more flexibility in the future.
2. We spend a lot of money on things we don't need. There are lots of little ways to save money. This month we spent about thirty dollars less per day than average. Saving just $30 a day added up to over $800 by the end of the month, a pretty big savings. We will probably bump our spending up a little bit in the next months, but we will definitely have room to put an extra $400 a month towards our debts and continue to live comfortably.
3. We might be almost ready to buy a house. Seeing how much we currently spend on interest is unnerving, so paying $1,200 a month on mortgage interest seems even worse. On the other side of the coin, knowing that not a penny of our rent payment is increasing our net worth is also a little crazy. We have been holding back on buying a house because we value flexibility, especially so early in our careers. HOWEVER, we will always be able to sell the house or rent it out if our circumstances change. There are definitely some advantages to home ownership: especially if we can keep our payments close to what we are already paying for rent.
4. Tracking expenses is good, but tracking net worth is more exciting. The most exciting aspect of this experience was not the amount of money we saved, but how much we grew. It is exciting to see growth, so for me saving is much more bearable if I am able to focus on what I am achieving, and not what I am sacrificing.

Conclusion

I would recommend this exercise to everyone who wants to improve their financial position. I liked it because it wasn't permanent, and it gave me a lot of perspective. Over the last year or so I got comfortable with my lifestyle, and doing this exercise helped me reevaluate my goals and see that it really isn't that bad living on a little less.

Sources:

1. https://www.lds.org/manual/gospel-principles/chapter-25-fasting?lang=eng