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The No-Spend Challenge

How to decrease expenses and increase savings.

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Most people are familiar with the saying, “It’s not what you make, but what you keep that matters.” It definitely rings true when it comes to money matters like spending, saving, and investing.

So if you earn a healthy income but also spend a lot, the contributions to your savings may be much smaller than someone who earns less but sets more aside for the future. Over time, those seemingly small deposits (along with their corresponding growth) can really add up!

With so many demands on your money, it may be difficult to find any “extra” dollars to save or invest. But by taking a look at things differently, a solution can sometimes be found. Take, for instance, using “the no-spend challenge” to decrease the amount of outgo and at the same time increase the money that you save or invest for retirement.

How Can The No-Spend Challenge Increase Savings?

While you may have come across savings plans that require you to eliminate all but the bare-minimum expenses, the no-spend challenge does not require you to part with everything you love and reside in a tent with no running water.

Rather, this savings strategy focuses on simply cutting out some of your non-essential expenses—and in many cases, doing so only on a temporary basis. For instance, you can still keep your heater on in the winter and continue to purchase groceries, but you will need to step back from making various unneeded “impulse” purchases such as Starbucks coffee and streaming services. You could also cook more at home and bring your lunch to work rather than going out for meals.

When you do so, keep track of the amount of money that you would have spent on these items, and move those dollars into a savings or investment account instead. With the no-spend challenge, no amount is considered “too small” to save. And over time, you may notice that your nest egg is growing nicely.

Implementing a No-Spend Strategy

Just like other strategies that are available for saving and investments, there are different ways to go about implementing a no-spend challenge, based on what works best for your particular objectives. (You could even start out with one of these no-spend challenge plans and then switch to another one later).

No-spend challenge options include:

• Banning your spending for a pre-set period of time. Using this no-spend approach, you will continue to pay your essential living expenses but stop any type of non-essential spending such as purchasing junk food or new clothes.

• Having certain “no-spending days” and then tracking your progress. Easing into the no-spend challenge may work best for some people, as it only requires you to implement these new habits some of the time (similar to dieters having a few “cheat days”).

• Targeting your spending weaknesses. Most people have certain weaknesses like purchasing new (but unneeded) shoes or clothing. By targeting just these areas in the no-spend challenge, you could find that your spending decreases significantly.

• Freezing your spending on special occasions. We all know that holidays or birthdays lead to higher spending. So by cutting back on these occasions, you will spend less while at the same time you find other ways to celebrate.

In addition to these easy-to-get-started options, another nice feature about the no-spend challenge is that it can work for both seasoned investors and those who are just starting to save—either for retirement or for a special goal like a new iPad or phone.

In either case, though, the no-spend challenge can help you to “find” money that can benefit you in the long term—versus letting it slip away on impulse and other unnecessary purchases.

As another added bonus, taking the no-spend challenge could also be a catalyst for making long-lasting changes to your spending, saving, and investing habits, as well as for providing you with a regular stream of contributions to your savings and investment plan.

How Can I Start the Challenge Now?

There are many ways to enhance your retirement savings, and some are much easier to implement than others. The no-spend challenge gives you several different options for getting started and seeing results right away.

If you’re ready to put your no-spend challenge in place to start enhancing your savings, it can help to work with a financial professional who may offer you suggestions and strategies that will work best for your specific objectives. That way, you’ll have a customized no-spend challenge plan in place that can be followed and revised in the future if your income or savings situation changes.

This article appears in the February 2021 edition of OutSmart magazine.

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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