Millions of Americans start the New Year with a resolution to get their finances in order and one place they can start is by leaving their credit cards at home. Researchers find consumers spend 12 to 18 percent more, on average, when using credit instead of cash.
Michelle Singletary, a financial columnist for the Washington post, is challenging people to put away their credit cards for three weeks and start a "financial fast."
Singletary discussed her new book, "The 21-Day Financial Fast: Your Path to Financial Peace and Freedom," and the goal of being debt-free with the “CBS This Morning” co-hosts.
She explained that the first thing consumers need to do is to “stop using credit cards and stop going shopping.”
“On this fast, you can’t buy anything that is not a necessity – no getting your hair done, no nails, no eating out, no movies … and no shopping for entertainment,” she said. “I call the mall the ‘den of iniquity.’”
While it’s only three weeks, Singletary believes that just doing a brief financial diet for this short period of time is enough to put people on “the path to prosperity.”
“You aren’t going to get out of debt in 21 days unless you’re only $21 in debt, but the whole idea of this fast is to put you on a path to get your financial life in order,” she said. “It’s kind of like a financial diet. Now, diets alone don’t work, but if you apply the things that I talk about everyday in the book - saving, the evils of entitlement, love and money, teaching your kids about money, long-term care - all these things put together, will give you financial peace.”
Singletary told the co-hosts that she got the idea for the 21-day financial fast after doing a “Daniel’s fast” with her church, which is people eliminate meats and sweets for three weeks. She said that by the second week of that fast, she thought a similar set up would be a great way for people to get their finances in order.
“People make resolutions and then they can’t keep them because they do not have a plan and so I wanted to develop something that people could do to really get out of debt,” she said.
One of the themes in Singletary’s book is the goal of being debt-free. While it’s not always possible because many people carry a mortgage on their house or have student loans, she said that it’s important to get as close as you can to being debt-free because “when you’re a borrower, you’re a slave to the lender.”
“I call it the monkey on your back. Wouldn’t you want that monkey off your back? When you’re debt-free, it gives you choices,” she said. “I try to get people not to take on so much student loan debt, not to credit cards and really to pay your mortgage off early. You can live in retirement better, if you don’t have a mortgage.