Even for those with steady jobs and regular income, spending money can be a stressful event. At least it is for me, particularly when my home or car needs sudden maintenance that I wasn't expecting.
Sure, my wife and I have the cash savings to handle these expenses as they pop up, but it still stings a little bit each time. And we both feel this way.
Luckily, over the past couple of years, we've found a way to rebound from this financial stress. Today, I'm back to write about personal spending freezes, how they work, and how you may find them beneficial.
What is a personal spending freeze?
A personal spending freeze is an exercise where an individual, couple, or household opts to eliminate spending for a period of time. Under most freezes, all discretionary spending is eliminated, leaving the only acceptable spending to cover those necessary monthly and recurring bills, including:
Expenses for things like dining out, take-out, entertainment, shopping, and travel are typically limited or prohibited entirely. There is no set spending freeze timeline, though many individuals opt for certain timelines either out of necessity or out of comfort level.
In online communities such as Facebook Groups, 30-day spending freezes end to be quite popular, but some Americans may pursue freezes as long as one year in length.
When to consider a spending freeze
Spending freezes typically come about for one of two reasons:
Out of necessity
Out of choice
We implement them a few times a year by choice, mainly to catch up on our savings after encountering any large purchases we weren't expecting. We have a trip to Italy, France, and Spain planned for this summer, so our intent was to save money to spend and enjoy while overseas.
But there are signs that you'll need to implement a spending freeze, like:
You're having trouble paying your monthly bills.
You're dipping into savings to pay for entertainment and discretionary expenses.
Your savings continuously decline.
How to freeze your spending
So you want to have a successful spending freeze. Here are five steps that my wife and I use each time we decide to challenge ourselves to stop spending money.
Take a look at your budget
Start your spending freeze
Reflect and learn
1. Take a look at your budget
Start by taking a look at your existing monthly budget, if you have one. Your goal here is to identify your mandatory recurring expenses and compare it to your income. Include things like your rent/mortgage, car bill, utilities, groceries, insurance, and other like expenses.
Then, bump it up against your post-tax income. This will help you to set goals for your spending freeze. For example:
If you are able to pay your bills and save for the future, you'll be able to pick any goal you want to help move towards your financial goals.
If you're struggling to afford your bills, you must freeze your spending in order to avoid taking on debt.
If you're struggling to afford your bills and are already in debt, you'll need to freeze your spending until you're out of debt.
My wife and I are comfortably able to meet our monthly obligations on our income, yet we still take on their challenges to move towards important financial goals more quickly. In this way, it becomes easier to rationalize cutting discretionary income if you know the reward at the end of it is a vacation you've always wanted to take, to name one example.
2. Set rules
If you're competing with a spouse or significant other, like I commonly am (and even if you're not), it is important to set ground rules on what types of spending are acceptable. For instance, we typically establish rules of the game like:
No personal shopping
No take-out, drive throughs, or delivery
No spending for our house on anything other than maintenance
No entertainment expenses unless they fall below a certain dollar amount and we both agree
Only by setting rules like these can you expect your personal spending freeze to be successful.
3. Set a spending freeze goal
Now that you know why you either want or need to freeze your spending, it is time to set your goals. I recommend setting your goals based off of either a time or date frame, but it can be even better if you use both.
For instance, you may opt to save $1,000 as quickly as possible and continue cutting spending for 3 months if you get there quickly. By the way, it is not uncommon to save $1,000 or more in a relatively short period of time.
But setting your goal serves a few main purposes.
First, it helps give you a barometer from which to base any future spending freezes off of. Secondly, setting goals will help provide you with a sense of accomplishment if you're successful, as well as provide you with a sense of responsibility and disappointment if you come up short. In other words, you'll be more likely to follow through until the end.
4. Avoid temptation
One of biggest factors in determining whether your spending freeze will be successful or not is whether you can avoid temptation. Let's face it - we are surrounded by ways in which to spend money. Take going to work, for instance.
Each day you go to the office, you'll combat temptations like:
Stopping for a Starbucks coffee on the way in
Whether to pack or buy your breakfast/lunch
Paying to park closer to the office
And depending on your role and whether you are busy or not, you may even have to say no the temptations of online shopping, all while you are at the office.
In a spending freeze, you have to be prepared to say no to every one of these temptations.
My wife goes into the office three days a week and battles this much more than I do. She says it is helpful to have something to look forward to. For example, vowing to buy a fancy coffee once per week allows you to look forward to something, while avoiding budget pandemonium.
But unfortunately, this temptation can come from more places than just work. At home, for example, the temptations of consistently eating out, buying new furniture/decorations, and spontaneously booking vacations/weekend getaways oftentimes loom large.
It is important to avoid all of it for as long as possible. Luckily, there are strategies to help here too. Things like sleeping on financial decisions, comparison shopping, and reading reviews all may help you to avoid costly financial decisions that jeopardize your spending freeze.
5. Reflect and learn
At the end of each spending freeze, it is really important to evaluate how things went. Think back (and take notes) on:
How much temptation you felt
How easy or hard it felt to not spend money each day
How your savings and financial position has improved as a result
The important part is to take learnings. Each learning that you take, both good and bad, can only help you in the future should you decide to take on a similar exercise at any point in the future.
Tips to have a successful spending freeze
Thankfully, there are a number of tips that you can use in order to make sure that your spending freeze is successful. For instance, my wife and I regularly:
Find free activities: Not all of the best things in life require payment. Depending on your interests and where you live, you may be able to visit fairs, museums, and other cool venues, all without spending any money!
Find alternate gratification: If the idea of retail therapy is always something that makes you feel better, take a moment or two to think about why this is. By doing so, you may be able to strategize other ways to feel this way, potentially for free! Many people shop, for instance, as a way to relieve stress. The key is finding another outlet that helps you in the same way!
Plan our next getaway or trip after the freeze is over: Spending freezes obviously don't last forever. So while you're in the midst of one, it can be a good idea to plan out what is next for you afterwards! We always do this.
Set a spending freeze challenge: It isn't likely to always be fun, but it can be better if you set a challenge or competition with your significant other or friend. Going through challenges like these is more bearable when you have somebody else to hold you accountable!
Frequently asked questions
I know that there is a chance that this premise is new to you. If so, here are some answers to questions probably on your mind.
1. What can I do to lower expenses during a freeze?
Remember - spending freezes as I've covered them here are designed to help you curb your discretionary spending for as long as you're able. But there are also ways to lower your recurring variable expenses too!
For example, you can lower your electric bill by keeping your heat cooler or air conditioning warmer. Likewise, you can spend less on groceries by going through your pantry and freezer and eating all of the old food in there.
2. Will it be difficult?
It likely will be difficult at first. But by surrounding yourself with a support system, you will have a successful spending freeze, and you will be better off financially for it.
Spending freezes can be a great way to cut expenses and save money in a short period of time. They take a good amount of mental strength, but they can absolutely be worth it.
Have you ever gone on a spending freeze? If so, how much money were you able to save?
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