In last month’s blog on changing your financial habits, we told you that living with a financial plan would help you build your savings over time, and that with a little sacrifice and a lot of daily discipline, you can set yourself up for financial success by setting good financial habits. But what if you need to make a big purchase soon, or want to get that emergency fund set up quickly? How can you beef up your savings account fast without going broke? There is one strategy that can make this happen; it’s called having a “no spend” month.
What exactly is a “no spend” month? Before you can undertake one, you’ll have to have or create a budget. You must have a handle on how much money you spend every month and make sure you have all your bills accounted for, or this strategy won’t work. Blogger Jessi Fearon has experience with using this strategy to help get out of debt (she and her husband were able to pay off $5,000 of debt in one month, so she knows whereof she speaks!) and she describes a “no spend” month like this: “It’s a month where you spend no other money – outside your bills (like rent/mortgage, utilities, debt payments) and your transportation and groceries. So, here’s how it looks – you’ll still pay all your bills, buy groceries, and put gas in your car/pay bus fare but you’ll avoid purchasing a Red Bull while in the gas station. You’ll avoid ordering a pizza out and you’ll avoid going on adventures that cost money…for an entire month.”
This is a great strategy to help you curb impulse spending, if that’s a problem for you. While employing this strategy may take some discipline, you will soon find out just how many unplanned purchases you make without realizing the impact they have on your budget. Small sacrifices can make a huge difference, however. For instance, something as simple as getting up a few minutes earlier to make a cup of coffee before leaving the house can save you hundreds of dollars a month. According to a report from Acorns Money Matters, the average American spends approximately $1,100 a year, or $3 each day, on coffee. Most of us can pull that $3 out of our pockets and plunk it down on the counter without a second thought, but when you do the math, spending $5-$10 on a pound of coffee that can last a couple of weeks is a much better financial choice.
The “rules” for your “no spend” month, according to Fearon:
- Make a plan for the money (savings account, cash under the mattress, etc.)
- Use cash (put your debt card in a drawer and make a point to use only cash to avoid overspending)
- Decide what you can buy (this where you list the stuff that your family wants/needs to buy – like my husband’s cigarettes)
- Do not spend money on anything that has not been agreed upon.
- Do not be tempted to stock up on things the month before – defeats the whole purpose.
Fearon suggests you make a list of everything you plan to spend money on, and make sure you and your spouse both agree on the list before your “no spend” month starts. If possible, pick a month in which there aren’t a lot of special events like birthdays, holidays, back-to-school, etc. If there are, then include those costs as bills you plan to pay, set an amount you will spend on each event, and stick to it. If you want to save money in a hurry, get out of debt faster, change your impulse buying habits, or all of the above, consider adopting a “no spend” month as part of your financial success strategy.