If you spend more money than you make, you are not the only one. The consumer debt-to-income ratio in Canada is 181.66%. That means for each 1 CAD Canadians have in the bank, they owe more than 1.81 CAD in debts.
Luckily, experts have devised dozens of strategies for eliminating debt fast. One of our favorites is the no-spend challenge. So if you want to save more money this year, keep reading this guide to learn how this strategy can help.
What Is a No-Spend Challenge?
A no-spend challenge is a way to reduce unnecessary spending for a limited time. You only spend money on essentials like housing, transportation, food, and bills during this time.
No-spend challenges are the perfect way to reset your budget for the year. This is especially helpful for people who tend to overspend or spend impulsively. You can re-program your brain to tend toward saving rather than spending money.
Of course, no-spend challenges don’t last forever. But, at the same time, restricting your purchases for too long can be a major bummer. That’s why these brief, temporary challenges work so well.
The Benefits of No-Spend Challenges
The average Canadian household spends around $69,000 on goods and services each year. That amount is pretty alarming, considering the median Canadian household income is only $61,358 after taxes.
Clearly, we could all benefit from doing a no-spend challenge. Here’s why.
Save Money
The most obvious benefit of a no-spend challenge is increasing your cash flow. You will save money on non-essential purchases like clothing, dining out, and lottery tickets.
Saving money means you will have more funds to put toward your goals. This may mean putting back amounts for an upcoming vacation or a downpayment on your dream home.
Pay Off Debts
With a potential recession looming, there has never been a better time to pay off your debts. Unfortunately, financial institutions suffer just as much as consumers do during recessions, leading to a higher cost of borrowing funds.
You don’t want to end up paying exorbitant rates on your credit cards if the economy plummets. Use the money you save during your no-spend challenge to ensure you don’t have to.
Increase Investments
Saving more allows you to put your money to work for you. You can invest in exchange-traded funds, stocks, and even real estate with the money you save. There are countless other ways to up your investments, too.
For example, say you want to up your retirement fund. In that case, contributing just $12 more per week can add over $85,000 to your retirement savings.
How to Do a No-Spend Challenge
Are you convinced that a no-spend challenge is just what you need to reset your finances? If so, keep reading for our top tips for getting through your first challenge with ease.
Choose When to Stop Spending
As we mentioned earlier, no-spend challenges are meant to take place for a limited time. Choose a weekend, week, or even a no-spend month to cut back on unnecessary spending.
A weekend can be a great place to start, especially if you’re nervous about getting started. Succeeding at a no-spend weekend challenge can give you the confidence needed to challenge yourself for longer.
The gold standard for no-spend challenge timelines is a month. You’ll save the most money and have the highest potential to transform your spending habits. But it will take dedication and a little planning to get there.
Choose What You’ll Stop Spending On
It is up to you to decide where you want to cut back during your no-spend challenge. Consider the most important things you must spend money on, such as gas, groceries, and bills.
Meanwhile, some common expenditures you can most likely live without include:
- Dining out
- Buying new clothing
- Shopping online
- Going to the movies
- Getting your nails done
- Haircuts
- Cosmetic procedures
To help offset these spending cuts, plan free activities and at-home meals. Also, come up with a plan for how you will deal if unexpected expenses arise that are unavoidable.
Get an Accountability Partner
No-spend challenges aren’t called challenges for nothing. Make them easier by finding an accountability partner. Your accountability partner could be your spouse or significant other, a close friend, or even your social media followers.
If you go the latter route, consider spreading the word about no-spend challenges. You can encourage your followers and friends to participate with you for the ultimate support system.
No-spend challenges can be particularly difficult when you have kids. To make it easier on them, encourage them to participate in the challenge. Your kids can help you shop for groceries, cook meals, and plan free activities.
Reward Yourself for Meeting Your Goals
This tip may sound counterintuitive. But we believe in rewarding yourself for meeting your goals. So, set up a small but exciting reward each time you successfully complete a no-spend challenge.
Now, we aren’t saying you should spend all the money you just saved on a reward. Instead, choose something that doesn’t cost a lot and make it proportional to the length of your no-spend challenge.
For example, you could treat yourself to a bubble bath after a no-spend weekend. Buy a nice bottle of wine to treat yourself for a no-spend week. Or dine in at your favourite restaurant the weekend after a long no-spend month.
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A no-spend challenge is a way to cut back on unnecessary spending. You can do a challenge for as little as a weekend or up to a month. Use our no-spend tips to make it easier for you.
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