A spending freeze is an excellent way to check for leaks in your budget.
No matter how vigilant you are, spending leaks happen. The coffee on the way to work that was an occasional treat (or first aid) and is now a habit. Ordering dinner in on Friday night, because, well… It’s Friday night. The bar of chocolate at 4pm because you need something, anything, to get you through the next hour or two of work. They might seem innocuous on their own but they add up. Big time.
A spending freeze will shine a very bright light on all these little habits that have slipped into your routine without you noticing.
So? Ready to give one a try? Your spending freeze can be as long or as short as you like. I usually attempt a full month although I’m cheeky and usually choose February.
If you’re ready to give your own spending freeze a shot, here are five tips to help you get through it without (too) much pain.
1. Be Prepared
A spending freeze doesn’t mean spending absolutely nothing for the period you decide on. It’s about not spending on anything beyond the basics. That means, you make do with your wardrobe as it is. No eating out. No trips to the movies. You will, however, be able to spend on fuel, basic groceries, health and medication, etc.
The object of the exercise is to gain a clear picture of your wants versus your needs. And, plug those leaks. So, before launching into a spending freeze, do a quick check of what’s not just in your cupboards but on the horizon, too. You’ll inevitably fail your spending freeze challenge if you plan it for the same week you’re heading out of town for a cousin’s wedding.
2. Set a Realistic Spending Freeze Time Frame
If this is your first time attempting a spending freeze be realistic about the length of your challenge. A week might be a more reasonable period than a month, especially if you’ve never tracked or challenged your spending before.
If you’ve just fallen off the frugal wagon and need a challenge to switch your mindset back to saving rather than spending, you’ll benefit from a full month.
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3. Challenge Every Spending Decision
This is the tough bit. Use this time to challenge every single cent you spend. Then write it down. If you track not just your spending but the money you chose not to spend, you’ll have a clear picture of how much those spending leaks are really costing you. That money could be used to pay down debt, add to your emergency fund or invest for your future.
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4. Be Creative
Being creative can be the best and worst part of this challenge. When you’re tired and tempted to eat out or order in, it’s a big ask to get creative (and enthusiastic) and cook a meal from scratch. But… Who says dinner can’t be scrambled eggs on toast or pancakes? If you feel you’re falling into the habit trap, look for a different solution. Shake up your routine.
Entertainment is an area that can suck great chunks out of your budget. If you usually socialise with a group, try suggesting they join you in your spending freeze so you can find free activities to enjoy as a group. Go on a picnic. Have a pot luck dinner together.
If you’re the solitary type, try watching a TED talk online instead of renting a movie or going to the movies. Most local libraries have DVDs members can borrow for free. If you’re not a member of your local library, join now.
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5. Apply What You Learn
A spending freeze can be a great short term fix to a budget deficit or it can be an amazing insight into the way you spend money and an opportunity to begin a new way of looking at your finances. If you take what you learn during your spending freeze and apply it to your future spending and saving plan you could find it frees up a large percentage of your income.
For example, if you work full-time and always buy a coffee on your way to work, plus lunch (even if it’s just a sandwich) and you indulge in a snack in the afternoon, you could easily be spending $15 per day. Per. DAY. $75 per week. And $3,600 over the course of a year (48 work weeks). Take lunch and a coffee from home plus a home made snack or two and you’ll easily save half that amount, probably more. What could you do with an extra $1,800 to $2,000 per year?
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I’m planning on kicking off an extended spending freeze in October. Yes, a full 31 days! Will you join me? Challenge yourself to a spending freeze and see what you discover about yourself and your spending.
Are you ready to challenge yourself and your spending habits?