No-Spend Challenge: Benefits And How-To Guide

When it comes to doing a reset on our financial behavior, a no-spend challenge is a smart choice for many people. Yes, it can help you save, but another benefit is to help you get an insight into your spending habits so you can take your newfound knowledge in order to better use your money.

Get started with your own no-spend challenge using the guidelines below.

What Is A No-Spend Challenge?

A no-spend challenge is when you don’t spend money on any nonessential items for a set period of time. The goal of this challenge is to limit your spending to basic living expenses to save money.

For example, you’ll still be able to buy groceries, but you’d skip the coffee shop. Or, you can replace your children’s school uniforms if they are damaged beyond repair, but you wouldn’t buy them clothes just because they’re cute.

What Can You Pay For During A No-Spend Challenge?

Costs you can still pay for during a no-spend challenge include living expenses, necessities and bills like:

• Rent or mortgage payments
• Household bills like on electricity, gas and internet
• Gas and transportation expenses
• Groceries
• Health care costs
• Debt obligations

If you have certain savings goals — like sinking funds for the holiday season — and you’ve set up automatic withdrawals to another account, you can continue with those, too.

What Should You Avoid Spending Money On?

Any expenses that aren’t necessities should be avoided during your no-spend challenge.

• Some of these items include:
• Clothes
• Home decor and furniture
• Takeout and restaurants, including coffee
• Online shopping Entertainment (like going to the movies)

Of course, there are exceptions, like if you really need to replace a chair in your dining room that broke. However, if it’s not an item you need right away, it’s best to avoid it during your no spend challenge. 

Benefits Of A No-Spending Challenge

A no-spend challenge is a great way to prioritize your saving habits and adjust them to achieve your financial goals. The extra money you save during this challenge could go towards paying off debt, help to start an emergency fund, or simply to bulk up your savings for that vacation you’ve always wanted to go on.

Highlight Your Spending Habits

Doing a no-spend challenge can help you identify potentially bad spending habits or instances of overspending. In doing so, it can serve as a motivation to make improvements with future spending.

Save More Money

Cutting unnecessary expenses for a time can help you save more money because, quite simply, you’re spending less. Therefore, more money is staying in your account and you can choose how to allocate it.

It’s also helpful in the long term, even after your challenge is over. You’re forcing yourself to see how much your lifestyle costs. Once you have this visibility into your spending, you may be able to reallocate some of your budget towards savings permanently.

Boost Your Retirement Savings

Participating in the no-spend challenge can help enhance your retirement savings. The money you haven’t spent could be an opportunity to contribute more money to a retirement fund, such as your individual retirement account (IRA). Or, as you adjust your budget, you can increase your monthly contributions to your employer-sponsored plan like your 401(k).

Revamp Your Budget

By not spending on non-necessities, you can get an insight into how you’ve been spending in the past. It can give you an opportunity to see if there are ways you can continue to spend less on certain categories and reorganize your existing budget to better meet your needs.

Pay Down Existing Debts

Participating in a no-spend challenge can give you the chance to pay down debts because the money you didn’t spend could go toward an extra credit card payment or personal loan payment.

How To Do A No-Spend Challenge

Participating and planning for a no-spend challenge is fairly straightforward. It’s important to prepare to ensure the best chance of success, and that it is part of your long-term plan to better your finances.

1. Determine Your Goals

Having a goal motivates you when you feel like buying that pair of shoes or eating out that night. Keeping the bigger picture in mind will help you focus when you get distracted by your normal spending urges. It’s useful to clearly communicate your goal (like writing it down), whether you want to achieve a specific savings goal or want to stop impulsive shopping when you feel down.

2. Set A Timeline For The Challenge

The no-spend challenge is completely self-guided, so if you want to try these rules for only the weekend or for a month, the length is up to you. The time limit is also dependent on your goal.

For instance, if you're saving up for a concert ticket, you might do the challenge for a month, while saving for a vacation might require a longer period. Many people start out with a week-long challenge, but do whatever works best for you. If you’re worried you won’t stick to it, try a no-spend day and go from there.

3. Establish Your Spending Guidelines 

Setting rules or guidelines for yourself ensures you’re in charge of your no-spend challenge and your financial future.

The guidelines you set will depend entirely on your spending habits and goals. What your necessities are can vary depending on what is important in your life, so evaluate where you need to restrict yourself and where you need leeway. The beauty of a no-spend challenge is that you can customize the guidelines to fit your life and priorities.

4. Create A Budget 

You don’t need to drastically change the way you spend on necessities, but having a budget in mind may help you. For instance, if you’re cutting back or not spending in certain categories, remove them from your budget. Then, stash that money away for something else, like your vacation fund.

5. Plan Meals, Entertainment And Other Activities

Planning your meals or other activities can help you from overspending. If you have plans, you’re not necessarily tempted to go out and spend money on entertainment, for instance, if you’re bored.

To make plans, consider creating weekly grocery lists and doing some research on free activities like library events that don’t involve spending money.

6. Track Your Progress

Tracking your progress will help keep you motivated and give you valuable insights into what changes you want to implement in your finances for the future. For instance, you can keep track of the amount of money you’re saving, helping you reevaluate how much you used to spend on entertainment or other budget categories.

Tracking your spending doesn’t need to take a lot of time. Apps like Rocket Money℠ help you keep track of the money you’re spending and saving.

7. Don’t Give Up

It’s hard to suddenly change your financial behavior (and totally understandable if you want to get that takeout coffee when you’re tired) and natural to want to give up. To help you keep going, you may want to keep a buffer in case you do end up spending on something you’re not “supposed” to. Even if you do stray from the spending guidelines, don’t feel like you’ve failed – try to reflect on the purchase and then move forward with the challenge.

No-Spend Challenge Ideas And Tips

Consider using the following ideas to help keep you motivated as you’re embarking on your no-spending challenge:

• Download a no-spend challenge tracker. By linking your accounts to apps like Rocket Money, you can easily keep track of your spending and categorize transactions to make sure they fit your no-spend rules.
• Take inventory of your belongings. Having a list of what you already have will help prevent you from buying items you don’t really need.
• Use gift cards. Spending money using gift cards means you’re not spending on your own as much.
• Remove banking information from your phone. Not having your credit card or banking information saved in your browser can make it less tempting for you to make impulsive purchases.
• Establish a reward. Having a reward if you successfully complete your no-spending challenge can help keep you motivated.
• Find someone to hold you accountable. Consider participating in a no-spend challenge with your friends or document your progress publicly (like on a social media platform) to help you to stay on track.

The Bottom Line

A no-spend challenge is a simple way to save money so that you can put it toward other financial goals or expenses. While completing the challenge alone is doable, getting others involved might make the journey easier.

Make it easier on yourself when creating a budget, monitor spending habits and achieve budgeting and savings goals. Consider downloading the Rocket Money mobile app and get started on your financial goals today.