5 Steps to a Financial Reset

Quick Answer

A financial reset works well as part of a regular routine or as an occasional deep clean for your money. To reset your finances, start by reviewing your transactions. Then reset your budget, check your net worth and credit score and set new intentions.

Woman in yellow jacket reseting her finances while seated at the kitchen island.

Resetting your finances is all about taking stock of where you're at, erasing bad money habits and making room for more intentional action and financial progress going forward. Having regular financial reset appointments, such as monthly, quarterly or annually, can help you build check-ins into your routine and pivot your spending to better achieve your goals.

Financial resets can help you build financial stability and live your best financial life. Here are five actionable steps to reset your finances and get back on track to building wealth.

1. Review Your Spending

Before you reset your finances, look back at how you've been doing financially. If you're not already budgeting, take this time to gather details on your income and spending for the past few months. If you're already budgeting, look through your transactions to see how your actual spending has compared with your planned spending.

Think of this stage as an information-gathering stage, and try to suspend judgment for now while you focus on noticing patterns in your spending.

2. Reset Your Budget

Now that you've reviewed your transactions, get ready for a little budget housekeeping. After all, part of the purpose of a financial reset is out with the old, in with the new. If you aren't spending your money with a purpose and a plan, you may not get as far with your financial growth.

You can take this time to pivot if you've been overspending, cutting back anywhere that you're spending more than you'd like, revising your spending categories, putting more money toward your debts and increasing your savings.

Here are some specific tweaks you could make to reset your budget:

  • Cancel unused or rarely used subscriptions.
  • Vow to dine out one or two times less next month.
  • Adjust your planned spending to allocate more to a category where you tend to go over budget and less to purchases that are easier to cut back.
  • Increase the amount you're putting into savings to funnel more money away from spending and into saving for things like an emergency fund, retirement, a new car or house, a vacation or other goals.
  • Focus on paying off high-interest credit card debt by putting more money into a debt-payoff strategy.

3. Check Your Net Worth

Compare your liabilities with your assets to see where you stand. If you have student loans, a car payment, a mortgage or other types of debt, it isn't unusual for your net worth to be negative—but that's no reason to get discouraged.

Ultimately, the purpose of resetting your finances is to better manage your cash flow, increase savings, pay off debt and build wealth. So knowing where your net worth stands can help you plan for how you're going to improve your financial picture over time.

4. Check Your Credit Score

Reaching your financial goals more quickly often hinges on having good credit. Buying a home to build up equity and improve your net worth, accessing low auto loan rates and qualifying for favorable loan terms when you need other types of credit are easier and less expensive if you have a healthy credit score.

On the FICO® Score range of 300 to 850, any score of 670 or above is considered a good to excellent credit score. Check your credit score for free through Experian to see where you stand. Good credit habits like making on-time debt payments, keeping your credit utilization rate low and limiting how much credit you apply for in a given period of time can help you improve your score over time.

For personalized insights into your score, a feature that allows you to project how many points a given action will raise your score by, and continual credit monitoring and alerts, sign up to monitor your credit score.

5. Set New Intentions

When you reset your finances, you can set new intentions and goals for your money. Ask yourself how you feel about your spending and saving now—and how you'd like to feel in the future. What would your ideal relationship with money look like? And how can you get there?

Get specific about your desires and write them down. For example, you could write, "I will spend $100 less on dining out each month and put that money into my emergency fund." Or, "I'll learn to feel less guilt when I treat myself."

Or, you might focus your intentions on the financial future you want. For example, you could set an intention along the lines of "I will automatically invest 15% of my paycheck into a 401(k) to reach financial freedom in retirement." Remember, the more specific the goals you set, the better.

Visualize Success

Part of a financial reset is visualizing yourself refreshing your financial life and achieving your largest goals. Picture a future with an unstrained, streamlined financial life: You afford what you need, you save some of everything you earn, you have an emergency fund that can cover you when things go wrong and you've met or are on on your way to meeting large goals such as buying a home, returning to school or planning for retirement.

Of course, your perceptions about money are only one part of financial health, but opening yourself up to good money habits is part of the process.