If you want to retire earlier, take 30 days and do a “No-Spend-Month” to get your budget in check.
Getting a handle on your cash flow can be a huge help for your budget.
Obviously, you can’t literally have a month without spending any money. You can, however, curb spending on certain categories such as clothing, entertainment or dinners out. You can cut back to a bare bones grocery budget during a no-spend-month.
Design it however you like.
The purpose of this focused period of time is to give yourself a boost to budget for an important financial goal or test yourself to see what you can truly live on.
My husband and I are doing a no-spend-month for August. In our case, we have recently spent a lot: an early summer vacation to LA over Memorial Day Weekend, two special birthdays, a summer stay-cation that turned into a vacation when a lakeside cabin opened up and we bought an awesome leather couch from our neighbor.
Even though we’d saved up, we hate seeing the savings account balance drop. When my husband suggested, “Let’s cut $1,000 from our budget in August to bump up our savings account.”
Relieved we were on the same page, I said, ” I am in!”
How is a no-spend-month budget important to you?
1. A short-term hardship can build long-term wealth.
During a bank merger in the 90’s, my manager at the time told me, “You can do anything for four months.” Even though we had to work extra hard for a short time period, there was an end in sight. Knowing there was a reprieve coming soon, we were able to handle the workload.
Cutting spending drastically for a short period of time can have lasting financial benefits in a similar way. Build up your emergency fund, pay off debt, or invest for your future. By taking part in a no-spend-month once or twice a year, you can move the “net worth” needle significantly!
2. You don’t take yourself and your money so seriously.
When you make it a game rather than a hardship, spending less is fun rather than feeling deprived. When you don’t take your money so seriously, you’ll naturally want to spend more time studying and managing your finances.
3. You test your spending levels.
What do you need — really need — versus what you want? Do you really need that new pair of sandals or could you use a pair of shoes you already own? A no-spend-month helps you develop resistance to making unnecessary purchases. Understanding your needs versus wants is vital when you have to make choices — tradeoffs — later.
4. You develop a “frugal mode” budgeting skill.
Market fluctuations and economic cycles are part of financial planning. In retirement, if you are able to cut back on your living expenses during a recession or downturn in the market, you can withdraw less from your retirement accounts at important times. Then you are better prepared for the future.
5. Couples can get on the same page.
When cutting spending is a challenge you do together, its a goal rather than a necessity. As a couple, this exercise puts you and your partner on the same page. As we all know, spending is hugely important in managing your cash flow.
Here are some ways to prepare for a No-Spend-Month:
Some ideas from finance blogger Michelle Schroeder of Making Cents of Sense coupled with my notes what my husband and I are actually doing:
Think about what you want to cut out and not spend money on.
Nancy’s take — In our case, we’re going to trim our food bill and cut out unnecessary spending. We did an inventory of our freezer and cupboard and mapped out meals for two weeks. We’ll cut our fuel bill by skipping unnecessary trips and I’ll commute by bus an extra day a week. Our closets are full so we’ll wear what we have in our closets instead of buying any new clothing items.
Realize why you want to take part in a no spend challenge.
Nancy’s take — We want to test our spending level to see what we can live on and still enjoy life. We also want to replenish our savings account after having a fantastic summer.
Set a timeframe.
Nancy’s take – We picked the month of August and we’ll evaluate at the end of the month and make any changes in our budget going forward.
Decide on rules for yourself.
Nancy’s take — We chose a few categories to cut such as groceries, clothing, and fuel. We also went through our credit card statement and canceled services we aren’t using. For dining out and entertainment, we left a smaller but realistic budget amount.
We won’t end up cutting the $1K we initially set out to but will try to reduce our spending by $600.
No matter what your income level or expenses, you can try a no-spend-month to get a handle on your cash flow. It may seem silly to try to save $15/day by taking the bus to work but it’s not silly if, by all your efforts, you can cut $600/mo from your spending to build wealth.
Think about this, even if we did this twice a year, we’d have an extra $1,200. We’ll also have built powerful systems in managing cash flow — tracking spending, making the most of what we have, and resisting deals and sales for “wants’ and not “needs.” Putting those practices in place will help build wealth every week of the year.
Now here’s your challenge. In the next 30 days, do a no-spend-month budget challenge.
Pick a financial goal you want to fund, cut your spending and put the money toward that goal. Enroll your partner or a friend to do it with you then go check out what’s in your freezer!
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