You can significantly improve your personal balance sheet in as little as 30 days. The key is what personal-finance experts call a no-spend month. Also called a buy-nothing month, it's a 30-day period of superfrugality in which you cut out all extras, buy only basic necessities and spend as little money as possible.
In 2008, Americans lost $7 trillion in wealth because of a plummeting stock market and an additional $1.2 trillion through tanking home values. From the start of the recession in December 2007 through September 2009, 7.2 million U.S. jobs have been lost.
With families facing so much economic uncertainty, it's more crucial than ever to beef up your emergency fund and pay off debt.
A no-spend month can be an effective short-term strategy to pad your savings account, free up extra money to tackle your debt, realign your spending with your values and generally cut financial fat.
'It was fine and even fun sometimes'
Doug and Rachel Meeks limited all family spending for food, entertainment, fuel and clothing -- anything that wasn't a regular monthly bill such as a mortgage or car payment -- to $250 in July 2008. The Meekses said they usually spend $350 a month on groceries alone.The Dallas-area family did it by cooking all meals from scratch, using basic fresh ingredients and food from their pantry, running multiple errands on each car trip and walking instead of driving whenever possible. Doug also took his lunch to work every day.
"Some days were hard, but overall it was fine and even fun sometimes," Rachel says.
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Shannon S., who requested anonymity, and her family of four in Michigan cut their budget to the bone and spent as little as possible for six weeks starting in November. She bought only eggs and milk, relying heavily on her pantry for meals. She used washable rags instead of paper towels, made her own laundry detergent and began using inexpensive homemade alternatives to household cleaners.
"This challenge forced me to do things I have wanted to do for a long time but never made the time," she says.
They lowered their weekly gasoline bill to $13 by using the car to drive to work only. She estimates her family's six-week superfrugal stint saved them about $600, which went to student loan debt. Before their buy-nothing month, Shannon had dedicated 25% of their income to savings and paying off debt. That number rose to 40% during their weeks of not spending.
In good position in case of calamity
"Anyone can do anything for 30 days," says MSN Money personal-finance columnist Liz Pulliam Weston, author of several books on managing money, including "Deal with Your Debt: The Right Way to Pay off Your Bills and Manage What You Owe."She estimates a 30-day spending diet could save families an average of $400 and put them in a better position should a job loss or other calamity occur. "If you do this, you have taught yourself what your (financial) weaknesses are, and you have already experienced the difference between a need and a want," Weston says.
If you want to try your hand at 30 days of superfrugality, there are several ways to structure your month of not spending.
- Set a dollar figure for spending for the month and stick to it.
- Cut out all luxuries without setting a dollar limit.
- Combine a 30-day short-term spending diet with an effort to boost your income.
Like the Meeks family, you could give yourself a set budget for the month and then try to fit all household purchases into that budget. Recurring monthly bills, such as your mortgage, student loan, car payments, utility bills and credit card bills should be excluded from this amount.
Video: Expenses NOT to trimJoy Pedersen Harkins, a new mom in central California, limited her spending to $300 in November. This covered gas, groceries, eating out, clothing, entertainment and any extras. To help her stick to her budget, Harkins paid cash for everything and wrapped her credit card in tape so she couldn't use it.
The limited-budget approach can require creativity. Harkins spent only $1 on entertainment for the entire month -- on four of Oprah's O magazines she found at a thrift store. Her biggest budget buster was meat from the grocery store. If she decides to do this again, Harkins says she plans to look for lower-cost alternatives to meat to stretch her grocery dollars.
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