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Here's how to give yourself a "financial cleanse" in the New Year

Alexis Christoforous

How about a “financial cleanse” to go along with your health cleanse for the New Year? That’s what Carrie Schwab-Pomerantz recommends.

The certified financial planner and daughter of the brokerage legend Charles Schwab is also senior vice president of her father’s eponymous company.

She says detoxing your finances can help you avoid mindless spending. “I recommend going on a cashless diet for at least a week—and longer if you can.”

In the video above she explains that you should budget your expenses for the week, then take a trip to the ATM machine and withdraw the money you’ll need. Using cash is sure to help put the brakes on frivolous spending and impulse buying, like that candy bar at the checkout counter.

Of course, be careful which ATM you use. If your bank’s logo isn’t on the machine, you could be slapped with a whopping $4.57 fee to access your money from an out-of-network ATM.

Schwab-Pomerantz, who is also author of the book The Charles Schwab Guide to Finances After 50, says it’s never too early to start saving.

“30% of 50-plus-year-olds have no savings at all,” she says. “The sooner you start saving, the less catch-up you’ll be doing with your finances later in life.”

She recommends millennials save 10% of their income each year of their lifetimes to ensure a comfortable retirement.

But how do you know how much money you’ll need to retire comfortably? “We have the 25-times rule,” Schwab-Pomerantz says. “Figure out how much you’ll need at the time of retirement to supplement other income, such as social security, and then multiply that number by 25.”

So, if you believe you’ll need $40,000 a year in retirement in addition to other sources of income, then you will need to save a million dollars.

In addition to saving early, Schwab-Pomerantz says people should also be investing early. When she was in her 20s, Schwab-Pomerantz opened an IRA and asked her father what she should invest in. “

“He told me to invest in a couple of mutual funds—to participate in the market—and I’d do fine. “

Her famous father, who pioneered discount sales of Wall Street securities starting in 1975, also taught her about having a strong work ethic.

“Many people don’t realize that my father was a struggling business man until I was well into my 20s,” she said. At age 13, Schwab-Pomerantz babysat and had a paper route to earn money and started working at her father’s brokerage at 16.

“Being disciplined about saving your money and participating in equities is what’s going to give you the growth to obtain your financial goals later in life,” she says.

And finally, don’t forfeit your own retirement for your child’s college education. “It goes against the grain of parenting,” Schwab-Pomerantz says. “I’ve had people actually yell at me for saying that, but your child can get scholarships, grants, loans—you can’t get that for your retirement.”