Join me in NOT doing a no-spend challenge this January
Let’s stop trying to optimize ourselves
January is peak season for budget culture.
All that joy and comfort you experienced over the holidays? Those budget culture gremlins are just around the corner with a heaping dose of judgment and shame to snap you back into restriction and discipline.
Budgeting gurus are ready and waiting to scoop you up in this vulnerable moment and hand you a detox that promises to wash away your supposed sins and set you up for financial purity in the new year. A debt-payoff scheme. A side hustle. A brand-new budget. And the phoniest financial fix of them all: the no-spend challenge.
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Personal finance fanatics do no-spend challenges anytime, but January is prime time for rookies to try out a no-spend month. It’s a popular exercise in which you commit to not spend any money on “non-essentials” for thirty days. A no-spend month is like a Whole30 diet or a restrictive cleanse, but for your money.
It’s tough to resist the urge to overhaul your relationship with money at the start of a new year. Our culture presents this annual opportunity to think about where you’ve been and where you want to go next, and that inevitably includes naming your shortcomings and making a plan to fix them. (If you can’t think of any, don’t worry! There’s a guru or an influencer out there who can give you some ideas!) It’s tough to resist a financial detox this time of year.
But a no-spend challenge is nothing more than an ultra-restrictive budget, and like any budget, it does more harm than good for your money and your mental health.
Budgeting doesn’t work
As I looked into the effects of budgeting for my book, I couldn’t believe how little research exists on the subject. Despite a universal reliance on budgeting as good money management, research into its effectiveness is sparse. Most studies tend to make headlines out of whether participants budget, without noticing or sometimes even looking into budgeting’s effect on participants’ financial or overall well-being.
One set of researchers at the Association for Consumer Research at the University of Minnesota Duluth noticed this gap in our knowledge and designed studies to look into whether budgeting actually helps improve people’s financial situations.
These authors conclude, “Although budgeting is commonly recommended and many people do keep a budget, little systematic evidence exists on whether budgeting actually helps people achieve their financial goals over the long term.”
Over several experiments, including two over the Black Friday shopping weekend, the researchers found:
While a clear spending limit encourages people to restrict spending, it doesn’t prevent overspending in any case.
Budgeting adds pain to the act of spending, which discourages budgeting rather than discouraging spending.
People tend to compensate for spending under budget for a period by going over budget in the next period. This effect is stronger when someone actively tracks their budget.
“The net effect,” the researchers write, “was that budget trackers were no more likely to attain their financial goals than those who did not track their budgets.”
A better way to start the new year
Instead of taking this reflective time to judge and punish yourself for last year’s perfectly natural financial decisions, take time to celebrate and mine understanding from your past money moves.
Reflecting on your holiday finances
We know tracking and attempting to restrict your holiday spending is fruitless. So I recommend gaining awareness and understanding of your spending through a more holistic practice: a spending diary.
A spending diary is a tally of all the ways you use money — but it’s not just a list of transactions. It’s an exercise to reflect on your use of money and tap into how it aligns with your values, goals and best interests. Take a few minutes to jot down and reflect on your holiday spending, and focus on your experience, rather than the numbers.
Use these questions to reflect on each expense:
How much did I spend and where?
What did I get?
Why did I have this opportunity for spending?
How did I feel during and after the experience?
What impact did it have on my finances and life?
Use your answers to celebrate the ways you used money during the holidays and consider the stuff you want to change in the coming year.
Taking stock of your holiday gifts
Receiving gifts over the holidays is exciting at any age. As an adult, though, you have the added concern about what to do with gifts once the excitement settles.
Is this something you want in your home or life? Do you already have a better version of it? Do you know someone who’ll love it way more than you do?
Give your gifts a quick review to note how each of them adds or detracts from your life. Then consider how you’ll put it to use — will you keep it, regift it, donate it, sell it, repurpose it..?
Dealing with holiday debt
Much of the holiday hangover (aside from the actual hangover on Jan. 1) comes from finally coming up for air and receiving your first credit card bill of the year. Credit card spending peaks in November and December, and that debt comes calling in January.
Don’t freak out; you’re going to be OK.
Get the lay of the land. Know the debt you’re dealing with. Which cards have a balance, and how much is each balance? Do you know how to access your accounts for each card and call customer service if you need to make changes? If you’re dealing with old debts alongside holiday debt, use an app like Credit Karma to get an easy-to-read credit report that’ll let you see everything in one place.
Know the consequences. Before you panic about paying off all of your debt as fast as possible — breathe — and then give yourself permission to not do that. You’re under no obligation to eliminate debt; you can decide how you’ll deal with this debt to best support your life and financial goals. Start by understanding the consequences of carrying your debts. For credit cards, the main things to know are the APR (how fast you accrue interest), the minimum monthly payment and the penalties for late payment. How will those consequences impact your life? (e.g. Your credit score could go down, your balance could go up, you might field calls from debt collectors, you might run out of available credit.)
Make your plan. Decide which consequences you can live with and which you want to avoid, then explore your options for dealing with credit card debt. You might commit to making minimum payments for the foreseeable future, shunt savings into debt repayment for a while, consolidate the credit cards into lower-interest debt, let it go to collections and attempt a negotiation or file bankruptcy, for example.
Planning for holidays to come
After you’ve reviewed the spending, gifts, experiences and debt from this past holiday season, consider how you want the next one to look the same or different.
Maybe you’re happy to keep up the same amount of spending, but would find it less stressful if you plan ahead with a little bit of savings each month.
Maybe you’re overwhelmed by giving and receiving gifts, and you need a plan for avoiding gifts in the future (HUGE thank-you tofor these tips!).
Maybe the cost of travel was stressful without yielding much joy, and you want to work with loved ones to adjust those plans next year.
Maybe a big get-together isn’t your speed, and you just want to plan small dinners with people in your family individually.
Maybe folks bring up money in ways that don’t feel good to you, and you need to be better prepared for holiday money talk next year.
Instead of using this reflection as an opportunity to shame yourself, think of it as data. Take it in without judgment, and use what you know now to make fitting decisions for your next money moves.
You don’t need a fresh start
Let’s stop trying to optimize ourselves. You don’t need to hit restart every January and search for bugs to fix. You’ve been building a perfect you this whole time. Keep it up!
Tired of being shamed and blamed by budget culture?
My Budget-Free Fundamentals series gives you everything you need to gain a fresh perspective on your relationship with money. In a few short lessons, you’ll gain tools to use money the way you want without relying on restriction, succumbing to shame or following advice rooted in greed. Paid subscribers have full access to this and all Healthy Rich classes.
More advice fromat on reflecting with pride and celebration rather than shame and guilt:
Image by @NappyStock via Nappy