Imagine a month where you don’t spend any money on frivolous things. The task might sound impossible, but it could be exactly what you need to jumpstart your budget.
In a cost-of-living crisis, when inflation continues to reduce your purchasing power, a no-spend month can help you get back in control of your finances.
Here’s everything you need to know about a no-spend month and how to get started.
What Does a No-Spend Month Mean?
A no-spend month is simple: you don’t spend any money on non-essential or discretionary spending. The challenge strips your budget down to the basics.
Some people draw parallels between a no-spend month and a crash diet or detox. A detox program removes unhealthy or triggering foods from your diet in the hopes that you eliminate toxins from your body and lose weight.
While health professionals cast doubt on the safety or effectiveness of popular detoxes, a no-spend month shows more immediate benefits to your finances at no risk to your health. A no-spend month follows a similar program of elimination, but instead of removing snacks and processed foods from your diet, you remove junk spending from your budget.
What Should You Still Spend Money On?
A cash diet only removes discretionary spending from your budget.
So, what does that mean?
Discretionary expenses are things that you do not need to buy for your health or the operation of your home. These expenses include all the usual fun stuff, like streaming services, dining, travel, gadgets, and concerts. In other words, it’s all the stuff you can survive without.
Let’s look at the flip side of things: non-discretionary spending. Non-discretionary means you don’t have a choice in the matter. You must still cover all the essentials in your budget to ensure you keep your home, family, and finances in good standing.
The essentials typically include rent and mortgage payments, utilities, groceries, credit card bills, and personal loan payments. Missing these payments could jeopardize your finances, so you should always pay these bills on time.
You should also “spend” money on savings, tucking away some cash into an emergency fund. These emergency savings can help you out in a pinch when you forget to budget for something important. Whether it’s your anniversary gift or an urgent roof repair, you can tap your savings to cover the expense.
For most people these days, growing a savings account is difficult. In fact, most Canadians don’t have a lot of cash set aside. According to a Canadian Chartered Professional Accountants (CPA), roughly half of Canadians can’t scrounge up $2,500 in a pinch. According to an Angus Ried Institute survey, two-in-five people drained their savings to cover living expenses.
If you’re in a similar tough spot, a no-spend month can help you immensely. Your contributions will likely grow larger during a no-spend month, as you won’t be using your cash as usual; by cutting out the non-essentials, you’ll have more to save.
What if You Run into an Emergency During Your No-Spend Month?
You can plan to spend money only on your essential bills, but life has other plans. Your car can break down or your oven can stop working, delivering a big repair bill. In these emergencies, you can’t expect to follow your no-spend promise; you have to spend beyond the monthly essentials to repair your car or appliance.
With hope, your cash diet frees up money in your budget to use on these expenses. But don’t panic if it isn’t enough. You may put your emergency repairs on a credit card or line of credit, or you may even apply for a loan online. Plenty of people rely on online loans across the country to help them with unexpected expenses if they qualify and are approved.
Why Do People Follow a No-Spend Month?
A no-spend month is an extreme undertaking, so it’s not for everyone. You might find it more effective to pare back just some of your discretionary spending rather than eliminate it altogether.
However, a no-spend month might be up your alley for a variety of reasons:
To Take Back Control of Spending
If you have trouble controlling your spending, this all-or-nothing budgeting style can provide you with the guardrails you need to stop indulging in discretionary expenses. It can take the guesswork out of budgeting, so you don’t have to wonder which splurges are acceptable and which ones are irresponsible.
To Save up for an Important Purchase
You may also consider a no-spend month in the lead-up to a big expense. This cash diet can help you save toward a vacation, lower your household debt, or afford a splurge purchase.
To Fight Back Against Inflation
Lastly, you might want to test out a no-spend month if you are struggling to keep up with inflation. By limiting your spending, you can focus on essential expenses to ensure you can afford to keep the lights on and put food on the table.
To Re-Evaluate Your Relationship with Material Things
Paring back on your non-essential spending can put your consumption into perspective. Like many people, you might spend lots of money on décor items, toiletries, and gadgets that you don’t really need. Lowering your consumption can reduce the plastic and energy created by these unnecessary items.
Bottom Line:
A no-spend month can help you face financial challenges head-on. Whether you want to build an emergency fund, finance a vacation, or get a handle on everyday bills, this budget offers an opportunity to prioritize spending that matters to you.
Keep this in mind as you tweak your budget for your finances. Whether you choose to forego spending or not, do what works for you!