A spending freeze doesn't require you to put your checkbook and credit cards in a block of ice in your freezer – although that might help. A spending freeze refers to stopping all spending except the essentials, and Haagen-Dazs does not qualify.
Why would you do this? Because if you are having trouble saving money, this is an excellent way to jump-start this process, while at the same time gaining a fresh perspective on your financial priorities. Many budgeting experts say a freeze of 2-4 weeks is a good amount of time in which to produce this effect.
How do you implement a spending freeze? Follow these simple steps.
- Review Your Budget And Define Priorities – If you have never budgeted before, list all of your expenses and break them down into categories of needs and wants. Be realistic in your assessment. If you do have a budget, look it over again to see if any needs should be redefined as wants.
- Revise Your Budget – Reset your budget for the freeze period in detail, eliminating all wants. Make sure that the essential bills such as utilities and your credit card minimums are paid – but see if some things you consider essential can be delayed without harm. For example, you may be able to put a contract service on hold for a month without canceling it. Make sure you don't miss any required payments in doing this, as late payments can hurt your credit for years to come. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.
- Plan For Alternatives – Removing the wants requires finding alternatives for the freeze period. For example, eliminate all eating out and go through your pantry/refrigerator/freezer to plan meals. What is the lowest amount of extra purchases you can make to get through that period?
While frozen dinners may be cheaper, you may find that buying fresh produce and meats and cooking your own meals at home leaves you in both better financial and physical shape – especially if you cook a larger meal and use the leftovers for a second meal.
For entertainment, focus on free activities that you can walk to, or reach with minimal driving or mass transit expense. Avoid just sitting around the house watching TV or surfing the Internet, because temptations will become too great. Engage in distracting yet constructive activities.
Have friends over to your house for card games (with bring-your-own snacks) or run in the park with your dog. (If you don't have a dog, acquiring one does not count as a necessity.) Check your newspaper for free activities in your area, and choose a few that interest you the most. Read some good books. Organize your messy closet.
- Have a Goal – Through budgeting, you will know how much you should be able to save during the freeze period. Track your progress toward that goal, and have a purpose for the savings – an emergency cash fund, the initial money for opening an IRA, or some other tangible goal. This will help the sense of purpose and good feeling when you succeed. If you're not sure if your retirement savings are on track, let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle.
- Follow Through – As tempting as "want" purchases may be, don't give in. The first week will be the toughest. After a while, you will begin to build momentum and have an easier time dismissing the feeling that you are always missing out on something.
The point is to simplify your life and develop more frugal habits that you enjoy and that fit your lifestyle.
Once the freeze period is over, you will probably find that you have learned to budget more effectively, and you will see the positive effect on your bank account. Use your newfound priorities and sense of financial purpose to keep the momentum going. Soon you will have a decent emergency fund, have money available for investments and retirement – and to splurge in the occasional well-deserved container of Haagen-Dazs.