If you need to improve your finances, one of the best ways to have a quick impact is to take a no spend challenge or a spending freeze (the same thing with two different names).
There are several reasons why you might want to try a no spend challenge, and we’ll look at those reasons in a minute. Conquering the challenge won’t be easy, but it can have a big and long-lasting impact on your finances.
What is a No Spend Challenge?
You may be wondering what a no spend challenge is, so before we go any further, let’s clear that up.
During a no spend challenge or a spending freeze, you will not spend any money on things that aren’t necessary. There will be a set time frame (like a week or a month) and you’ll need to avoid any expenses aside from things that are necessary during that time period.
Some people have chosen to spend no money at all, but 99.9% of the time that’s not practical or realistic. Some expenses are necessary, and you obviously don’t want to skip out on paying your mortgage or electric bill because of some challenge.
There’s also a lot of flexibility, which is one of the nice things about a no spend challenge. You can make up the rules and guidelines however you want, and we’ll look at that in more detail later in the article.
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Why Try a Spending Freeze?
This idea may seem extreme, but there are several reasons why you may want to give it a chance.
It Forces You to Be Disciplined with Your Spending
If you struggle with sticking to a budget or living within your means, financial discipline is probably part of the issue. Sometimes it’s hard to make the decision to save money instead of spending. If you find that discipline is an issue for you, it’s possible that you could benefit by taking a challenge.
Choosing to accept a no spend challenge or spending freeze can force you into the discipline that you need. Of course, you’ll still need some discipline to actually follow through, but there is something about taking a challenge that gives you some extra motivation to make those sacrifices.
Cut Your Expenses
Participating in a no spend challenge will obviously reduce your expenses during that time period. If you’ve tried to cut back in the past and struggled, making an extreme move like cutting out everything that isn’t necessary could the solution.
Build Up Your Savings Quickly
Spending less money means that you’ll have more to save. If you want or need to build up your savings quickly, this could be for you.
Regardless of whether you need to establish an emergency fund or save for some other specific reason, drastic measures to cut back on expenses will have a big impact.
Establish Good Habits
The no spend challenge or spending freeze will be for a specific length of time, but the impact can continue well after that time is over. Habits can be very powerful, in good ways and bad ways.
The no spend challenge can be really helpful for establishing some good habits that will stick with you.
Going through a spending freeze will probably open your eyes to the way that you’ve been using money. When you see positive results from the changes and sacrifices that you make, it’s likely that you’ll want to continue some of those things after the time period has ended. For example, if you stop buying your lunch at a restaurant every day for a month you may love how much extra money you have. Even after the challenge you may decide that you want to continue packing your lunch, or at least cut back on restaurant meals.
Learn What is Truly Necessary
Most of us, myself included, justify a lot of expenses because we feel that they are necessities. In reality, many of those purchase are really wants. Forcing yourself to cut out anything that isn’t absolutely necessary is a good way to train yourself about what is and what is not necessary.
Through the spending freeze, you’ll be forced to evaluate every expense or purchase to determine if it really is a need or a want. As you make cuts or sacrifices, you’ll see what it’s like to live without some of the things you’ve grown accustomed to. You may be surprised at how your opinion changes on what is a need vs. a want.
→ Related reading: 15 Frugal Living Tips to Save You Money
How to Do a No Spend Challenge
Now, let’s take a look at the steps you need to take if you want to try it for yourself.
1. Set a Time Frame
The no spend challenge will be temporary, only for a specified length of time. Here are a few popular options:
- Weekend – A good starting point, especially if you tend to spend a lot of money on the weekends.
- Week – A full week will be more challenging than just a weekend, but still very realistic and practical even for first-timers.
- Month – Going a month without spending on any wants will be more challenging, but is still doable and will have a bigger impact on your results.
As you choose a timeframe, keep in mind that you can build your way up. You can start small and then try something more aggressive later.
2. Establish the Rules
The best thing about a no spend challenge is that you can do it however you want! Although it is completely flexible, you should set the ground rules before you start. Make sure you know exactly what you are allowing yourself to spend money on, and what needs to be avoided or cut out.
If you don’t establish the rules or boundaries ahead of time, you may find yourself making excuses or cutting corners later, which defeats the purpose.
While the rules are up to you, here is a common approach that you could take.
Allowed Expenses (example):
- Personal care items (shampoo, soap, etc.)
- Necessary bills
- Medical expenses
- Gifts for other people
Expenses to Cut (example):
- Meals at restaurants
- Home goods (furniture, decor, etc.)
- Anything that isn’t a necessity
The above lists show what a lot of people choose to allow or not allow for a spending freeze, but it’s really up to you.
One option is to focus on specific expenses. For example, you could decide to spend no money at restaurants and no money on alcohol for a month. If those are areas where you typically spend a lot of money, you can have a big impact without cutting anything else.
Think about the things that you typically spend too much money on, and see if you can incorporate cuts in those areas into a spending freeze.
3. Make it Realistic
This is very important. A no spend challenge will not do you any good if it’s not realistic and you can’t stick to it. If you try something that’s not realistic, you’ll get discouraged when you fail and you’ll probably give up on it completely.
It’s far more effective to start with something that is challenging but still realistic. Don’t be afraid to start small if you need to.
4. Have a Plan for the Money That You’re Saving
As you cut out lots of unneeded expenses, you’ll be saving a significant amount of money. Before you start the challenge, you should think about what you’re going to do with the money.
The answer to this may be obvious, depending on your situation. For examp